Exhibit
10.4


 


THE
WASHINGTON SAVINGS BANK, F.S.B.


 


2001
STOCK OPTION AND INCENTIVE PLAN


 


The Washington Savings
Bank, F.S.B. (the “Company”) sets forth herein the terms of the Company’s 2001
Stock Option and Incentive Plan (the “Plan”) as follows:


 


1.             PURPOSE


 


The purpose of the Plan
is to enhance the Company’s ability to attract, retain, and compensate highly
qualified officers, key employees, directors and other persons, and to motivate
such officers, key employees, directors and other persons to serve the Company
and its affiliates (as defined herein) and to expend maximum effort to improve
the business results and earnings of the Company, by providing to such
officers, key employees, directors and other persons an opportunity to acquire
or increase a direct proprietary interest in the operations and future success
of the Company and with other financial incentives. To this end, the Plan
provides for the grant of stock options, stock appreciation rights, restricted
stock, restricted stock units, deferred stock awards, unrestricted stock
awards, performance stock awards, dividend equivalent rights, performance
awards and annual incentive awards in accordance with the terms hereof. Stock
options granted under the Plan may be non-qualified stock options or incentive
stock options, as provided herein.


 


2.             DEFINITIONS


 


For purposes of
interpreting the Plan and related documents (including Award Agreements), the
following definitions shall apply:


 


2.1           “Affiliate” of, or
person “affiliated” with, a person means any company or other trade or business
that controls, is controlled by or is under common control with such person
within the meaning of Rule 405 of Regulation C under the Securities Act.


 


2.2           “Annual Incentive Award”
means a conditional right granted to a Grantee under Section 18.4.3 hereof to
receive a cash payment, Stock or other Award, unless otherwise determined by
the Committee, after the end of a specified fiscal year.


 


2.3           “Award” means a grant
of an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock
Unit, Deferred Stock, Unrestricted Stock, Performance Stock, Dividend
Equivalent Rights, Performance or Annual Incentive Awards under the Plan.


 

















 


2.4           “Award Agreement” means
the stock option agreement, stock appreciation rights agreement, restricted
stock agreement, restricted stock unit agreement, deferred stock award
agreement, unrestricted stock award agreement, performance stock award
agreement, dividend equivalent rights agreement, performance award agreement,
annual incentive award agreement or other written agreement between the Company
and a Grantee that evidences and sets out the terms and conditions of an Award.


 


2.5           “Benefit Arrangement”
shall have the meaning set forth in Section 19 hereof.


 


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


 


2.7           “Change in Control”
means any of the following transactions: (i) any consolidation, merger or other
corporate reorganization of the Company with or into any other corporate
organization, if as a result of the transaction, the stockholders of the
Company immediately before the transaction, would not be able to elect a
majority of the members of the Board or would not be the beneficial owners,
directly or indirectly, of 51% or more of the combined voting power of the
resulting corporation’s then outstanding voting securities; (ii) any
acquisition (by purchase, lease or otherwise) of all or substantially all of
the assets of the Company by any person, firm or corporation or group thereof
acting jointly; or (iii) any purchase by any person, firm, or corporation or
group thereof acting jointly (who was not a controlling stockholder of the
Company on the date this Plan is adopted by the Company) of 25% or more of the
combined voting power of the Company; or (iv) the first purchase of shares of
the Company stock pursuant to a tender offer or an exchange offer (other than
one made by the Company) for all or part of the Company stock.


 


2.8           “Code” means the
Internal Revenue Code of 1986, as now in effect or as hereafter amended.


 


2.9           “Committee” means a
committee of, and designated from time to time by resolution of, the Board,
which shall consist of no fewer than two members of the Board, none of whom
shall be an officer or other salaried employee of the Company or any affiliate
of the Company.


 


2.10         “Company” means The
Washington Savings Bank, F.S.B.


 


2.11         “Covered
Employee” means a Grantee who is a Covered Employee within the meaning of
Section 162(m)(3) of the Code.


 

















 


2.12         “Deferred
Stock” means a right, granted to a Grantee under Section 14  hereof,
to receive Stock, cash or a combination thereof at the end of a specified
deferral period.


 


2.13         “Dividend
Equivalent” means a right, granted to a Grantee under Section 17 hereof, to
receive cash, Stock, other Awards or other property equal in value to dividends
paid with respect to a specified number of shares of Stock, or other periodic
payments.


 


2.14         “Effective
Date” means September 19, 2001, the date on which the Plan was adopted by the
Board.


 


2.15         “Exchange
Act” means the Securities Exchange Act of 1934, as now in effect or as
hereafter amended.


 


2.16         “Family
Member” means person who is a spouse, child, stepchild, grandchild,
parent, stepparent, grandparent, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships, of the Grantee, any person sharing the
Grantee’s household (other than a tenant or employee), a trust in which these
persons have more than fifty percent of the beneficial interest, a foundation
in which these persons (or the Grantee) control the management of assets, and
any other entity in which these persons (or the Grantee) own more than fifty
percent of the voting interests.


 


2.17         “Fair Market Value” means
the value of a share of Stock, determined as follows:  if on the Grant Date or other determination
date the Stock is listed on an established national or regional stock exchange,
is admitted to quotation on the NASDAQ National Market, or is publicly traded
on an established securities market, the Fair Market Value of a share of Stock
shall be the closing price of the Stock on such exchange or in such market (the
highest such closing price if there is more than one such exchange or market)
on the Grant Date or such other determination date (or if there is no such
reported closing price, the Fair Market Value shall be the mean between the
highest bid and lowest asked prices or between the high and low sale prices on
such trading day) or, if no sale of Stock is reported for such trading day, on
the next preceding day on which any sale shall have been reported. If the Stock
is not listed on such an exchange, quoted on such system or traded on such a
market, Fair Market Value shall be the value of the Stock as determined by the
Board in good faith.


 


2.18         “Grant Date” means, as
determined by the Board or authorized Committee, (i) the date as of which
the Board or such Committee approves an Award, (ii) the date on which the
recipient of such Award first became an employee of or otherwise entered into a
relationship with the Company or an affiliate of the Company or (iii) such
other date as may be specified by the Board or such Committee.


 

















 


2.19         “Grantee” means a person
who receives or holds a grant of an Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Deferred Stock, Unrestricted Stock, Performance
Stock, Performance or Annual Incentive Awards, or Dividend Equivalent Rights
under the Plan.


 


2.20         “Incentive Stock Option”
means an “incentive stock option” within the meaning of Section 422 of the
Code, or the corresponding provision of any subsequently enacted tax statute,
as amended from time to time.


 


2.21         “Option” means an option
to purchase one or more shares of Stock pursuant to the Plan.


 


2.22         “Option Period” means the
period during which Options may be exercised as set forth in Section 10
hereof.


 


2.23         “Option Price” means the
purchase price for each share of Stock subject to an Option.


 


2.24         “Other Agreement” shall
have the meaning set forth in Section 19 hereof.


 


2.25         “Outside Director” means
a member of the Board who is not an officer or employee of the Company.


 


2.26         “Performance
Stock Award” means Awards granted pursuant to Section 16.


 


2.27         “Plan” means this The
Washington Savings Bank, F.S.B. 2001 Stock Option and Incentive Plan.


 


2.28         “Reporting Person” means
a person who is required to file reports under Section 16(a) of the
Exchange Act.


 


2.29         “Restricted Period” means
the period during which Restricted Stock or Restricted Stock Units are subject
to restrictions or conditions pursuant to Section 13.2 hereof.


 


2.30         “Restricted Stock” means
shares of Stock, awarded to a Grantee pursuant to Section 13 hereof, that are
subject to restrictions and to a risk of forfeiture.


 


2.31         “Restricted Stock Unit”
means a unit awarded to a Grantee pursuant to Section 13 hereof, which
represents a conditional right to receive a share of Stock in the future, and
which is subject to restrictions and to a risk of forfeiture.


 


2.32         “Securities Act” means
the Securities Act of 1933, as now in effect or as hereafter amended.


 

















 


2.33         “Service Provider” means
a consultant or adviser to the Company, a manager of the Company’s properties
or affairs, or other similar service provider or affiliate of the Company, and
employees of any of the foregoing, as such persons may be designated from time
to time by the Board pursuant to Section 6 hereof.


 


2.34         “Stock” means the common
stock, par value $1.00 per share, of the Company.


 


2.35         “Stock
Appreciation Rights” or “SAR” means a right granted to a Grantee under Section
11 hereof.


 


2.36         “Subsidiary” means any “subsidiary
corporation” of the Company within the meaning of Section 424(f) of the Code.


 


2.37         “Termination Date” shall
be the date upon which an Option shall terminate or expire, as set forth in
Section 10.2 hereof.


 


2.38         “Unrestricted
Stock Award” means any Award granted pursuant to Section 15.


 


3.             ADMINISTRATION
OF THE PLAN


 


3.1.         Board.


 


The Board shall have such powers and authorities
related to the administration of the Plan as are consistent with the Company’s
charter and by-laws and applicable law. The Board shall have full power and
authority to take all actions and to make all determinations required or
provided for under the Plan, any Award or any Award Agreement, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the
Plan that the Board deems to be necessary or appropriate to the administration
of the Plan, any Award or any Award Agreement. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in
writing in accordance with the Company’s charter and by-laws and applicable law.
The interpretation and construction by the Board of any provision of the Plan,
any Award or any Award Agreement shall be final and conclusive. As permitted by
law, the Board may delegate its authority under the Plan to a member of the
Board of Directors or an executive officer of the Company.


 

















 


3.2.         Committee.


 


The Board from time to
time may delegate to a Committee such powers and authorities related to the
administration and implementation of the Plan, as set forth in Section 3.1
above and in other applicable provisions, as the Board shall determine,
consistent with the charter and by-laws of the Company and applicable law. In
the event that the Plan, any Award or any Award Agreement entered into
hereunder provides for any action to be taken by or determination to be made by
the Board, such action may be taken or such determination may be made by the
Committee if the power and authority to do so has been delegated to the
Committee by the Board as provided for in this Section. Unless otherwise
expressly determined by the Board, any such action or determination by the
Committee shall be final, binding and conclusive. As permitted by law, the
Committee may delegate its authority under the Plan to a member of the Board of
Directors or an executive officer of the Company.


 


3.3          Awards.


 


Subject to the other
terms and conditions of the Plan, the Board shall have full and final authority
(i) to designate Grantees, (ii) to determine the type or types of Awards
to be made to a Grantee, (iii) to determine the number of shares of Stock
to be subject to an Award, (iv) to establish the terms and conditions of
each Award (including, but not limited to, the exercise price of any Option,
the nature and duration of any restriction or condition (or provision for lapse
thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award
or the shares of Stock subject thereto, and any terms or conditions that may be
necessary to qualify Options as Incentive Stock Options), (v) to prescribe
the form of each Award Agreement evidencing an Award, and (vi) to amend,
modify, or supplement the terms of any outstanding Award. Such authority
specifically includes the authority, in order to effectuate the purposes of the
Plan but without amending the Plan, to modify Awards to eligible individuals
who are foreign nationals or are individuals who are employed outside the
United States to recognize differences in local law, tax policy, or custom.
As a condition to any subsequent Award, the Board shall have the right, at its
discretion, to require Grantees to return to the Company Awards previously made
under the Plan. Subject to the terms and conditions of the Plan, any such new
Award shall be upon such terms and conditions as are specified by the Board at
the time the new Award is made.


 


3.4.         No
Liability.


 


No member of the Board or
of the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Award or Award Agreement.


 

















 


4.             STOCK
SUBJECT TO THE PLAN


 


Subject to adjustment as provided in
Section 22 hereof, the number of shares of Stock available for issuance under
the Plan shall be Five Hundred Thousand (500,000), no more than One Hundred
Thousand (100,000) of which may be issued pursuant to awards of other than
Options. Stock issued or to be issued under the Plan shall be authorized but
unissued shares. If any shares covered by an Award are not purchased or are
forfeited, or if an Award otherwise terminates without delivery of any Stock
subject thereto, then the number of shares of Stock counted against the
aggregate number of shares available under the Plan with respect to such Award
shall, to the extent of any such forfeiture or termination, again be available
for making Awards under the Plan.


 


5.             EFFECTIVE
DATE AND TERM OF THE PLAN


 


5.1.         Effective
Date.


 


The Plan shall be
effective as of the Effective Date, subject to approval of the Plan within one
year of the Effective Date, by a majority of the votes cast on the proposal at
a meeting of stockholders, provided that the total votes cast represent a
majority of all shares entitled to vote. Upon approval of the Plan by the
stockholders of the Company as set forth above, all Awards made under the Plan
on or after the Effective Date shall be fully effective as if the stockholders
of the Company had approved the Plan on the Effective Date. If the stockholders
fail to approve the Plan within one year after the Effective Date, any Awards
made hereunder shall be null and void and of no effect.


 


5.2.         Term.


 


The Plan has no
termination date; however, no Incentive Stock Option may be granted on or after
the tenth anniversary of the Effective Date.


 

















 


6.             OPTION
GRANTS


 


6.1.         Company or
Subsidiary Employees; Service Providers; Other Persons.


 


Subject to Section 7,
Awards may be made under the Plan to: (i) 
any director or employee of, or a Service Provider to, the Company or of
any Subsidiary, including any such employee who is an officer or director of
the Company or of any Subsidiary, as the Board shall determine and designate
from time to time, and (ii) any other individual whose participation in the
Plan is determined to be in the best interests of the Company by the Board.


 


6.2.         Successive
Awards.


 


An eligible person may
receive more than one Award, subject to such restrictions as are provided
herein.


 


6.3.         Reload
Options.


 


At
the discretion of the Board and subject to such restrictions, terms and
conditions as the Board may establish, Options granted under the Plan may
include a “reload” feature pursuant to which a Grantee exercising an Option by
the delivery of a number of shares of Stock in accordance with
Section 10.8 hereof would automatically be granted an additional Option
(with an exercise price equal to the Fair Market Value of the Stock on the date
the additional Option is granted and with such other terms as the Board may
provide) to purchase that number of shares of Stock equal to the number
delivered to exercise the original Option with an Option term equal to the
remainder of the original Option term unless the Board otherwise determines in
the Option Award Agreement for the original
grant.


 


7.             LIMITATIONS
ON GRANTS


 


7.1.         Limitation
on Shares of Stock Subject to Awards.


 


During any time when the
Company has a class of equity security registered under Section 12 of the
Exchange Act, the maximum number of shares of Stock subject to Options that can
be awarded under the Plan to any person eligible for an Award under Section 6
hereof is Seventy Five Thousand (75,000) per year. During any time when the
Company has a class of equity security registered under Section 12 of the
Exchange Act, the maximum number of shares that can be awarded under the Plan,
other than pursuant to an Option to any person eligible for an Award under
Section 6 hereof is twenty five


 

















 


thousand (25,000) per
year. The maximum amount that may be earned as an Annual Incentive Award or
other cash Award in any fiscal year by any one Grantee shall be $300,000 and
the maximum amount that may be earned as a Performance Award or other cash
award in respect of a performance period by any one Grantee shall be $600,000.


 


7.2.         Limitations
on Incentive Stock Options.


 


An Option shall
constitute an Incentive Stock Option only (i) if the Grantee of such Option is
an employee of the Company or any Subsidiary of the Company; (ii) to the extent
specifically provided in the related Award Agreement; and (iii) to the extent
that the aggregate Fair Market Value (determined at the time the Option is
granted) of the shares of Stock with respect to which all Incentive Stock
Options held by such Grantee become exercisable for the first time during any
calendar year (under the Plan and all other plans of the Grantee’s employer and
its affiliates) does not exceed $100,000. This limitation shall be applied by
taking Options into account in the order in which they were granted.


 


8.             AWARD
AGREEMENT


 


Each Award granted
pursuant to the Plan shall be evidenced by an Award Agreement, to be executed
by the Company and by the Grantee, in such form or forms as the Board shall
from time to time determine. Award Agreements granted from time to time or at
the same time need not contain similar provisions but shall be consistent with
the terms of the Plan. Each Award Agreement evidencing an Award of Options
shall specify whether such Options are intended to be non-qualified stock
options or Incentive Stock Options, and in the absence of such specification
such options shall be deemed non-qualified stock options.


 


9.             OPTION PRICE


 


The Option Price of each
Option shall be fixed by the Board and stated in the Award Agreement evidencing
such Option. The Option Price shall be the aggregate Fair Market Value on the
Grant Date of the shares of Stock subject to the Option; provided, however,
that in the event that a Grantee would otherwise be ineligible to receive an
Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and
424(d) of the Code (relating to ownership of more than ten percent of the
Company’s outstanding Stock), the Option Price of an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall be not less than
the greater of the par value of a share of Stock or 110 percent of the Fair
Market Value of a share of Stock on the Grant Date. In no case shall the Option
Price of any Option be less than the par value of a share of Stock.


 

















 


10.          VESTING,
TERM AND EXERCISE OF OPTIONS


 


10.1        Vesting and
Option Period.


 


Subject to Sections 10.2
and 22.3 hereof, each Option granted under the Plan shall become exercisable at
such times and under such conditions as shall be determined by the Board and
stated in the Award Agreement. For purposes of this Section 10.1, fractional
numbers of shares of Stock subject to an Option shall be rounded down to the
next nearest whole number. The period during which any Option shall be
exercisable shall constitute the “Option Period” with respect to such Option.


 


10.2.       Term.


 


Each Option granted under
the Plan shall terminate, and all rights to purchase shares of Stock thereunder
shall cease, upon the expiration of ten years from the date such Option is
granted, or under such circumstances and on such date prior thereto as is set
forth in the Plan or as may be fixed by the Board and stated in the Award
Agreement relating to such Option (the “Termination Date”); provided, however,
that in the event that the Grantee would otherwise be ineligible to receive an
Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and
424(d) of the Code (relating to ownership of more than ten percent of the
outstanding Stock), an Option granted to such Grantee that is intended to be an
Incentive Stock Option shall not be exercisable after the expiration of five
years from its Grant Date.


 


10.3.       Acceleration.


 


Any limitation on the
exercise of an Option contained in any Award Agreement may be rescinded,
modified or waived by the Board, in its sole discretion, at any time and from
time to time after the Grant Date of such Option, so as to accelerate the time
at which the Option may be exercised. Notwithstanding any other provision of
the Plan, no Option shall be exercisable in whole or in part prior to the date
the Plan is approved by the stockholders of the Company as provided in Section
5.1 hereof.


 


10.4.       Termination
of Employment or Other Relationship.


 


Upon the termination of a
Grantee’s employment or other relationship with the Company other than by
reason of death or “permanent and total disability” (within the meaning of
Section 22(e)(3) of the Code), any Option or portion thereof held by such
Grantee that has not vested in accordance


 

















 


with the provisions of
Section 10.1 hereof shall terminate immediately, and any Option or portion
thereof that has vested in accordance with the provisions of Section 10.1
hereof but has not been exercised shall terminate at the close of business on
the 90th day following the Grantee’s termination of employment or other
relationship, unless the Board, in its discretion, extends the period during
which the Option may be exercised (which period may not be extended beyond the
original term of the Option). Upon termination of an Option or portion thereof,
the Grantee shall have no further right to purchase shares of Stock pursuant to
such Option or portion thereof. Whether a leave of absence or leave on military
or government service shall constitute a termination of employment or other
relationship for purposes of the Plan shall be determined by the Board, which
determination shall be final and conclusive. For purposes of the Plan, a
termination of employment, service or other relationship shall not be deemed to
occur if the Grantee is immediately thereafter a director of the Company.


 


10.5.       Rights in
the Event of Death.


 


If a Grantee dies while
employed by or providing services to the Company, all Options granted to such
Grantee shall fully vest on the date of death, and the executors or Boards or
legatees or distributees of such Grantee’s estate shall have the right, at any
time within one year after the date of such Grantee’s death (or such longer
period as the Board, in its discretion, may determine prior to the expiration
of such one-year period) and prior to termination of the Option pursuant to
Section 10.2  above, to exercise any Option
held by such Grantee at the date of such Grantee’s death.


 


10.6.       Rights in
the Event of Disability.


 


Unless otherwise stated
in the applicable Award Agreement, if a Grantee terminates employment or other
relationship with the Company by reason of the “permanent and total disability”
(within the meaning of Section 22(e)(3) of the Code) of such Grantee, such
Grantee’s Options shall continue to vest, and shall be exercisable to the
extent that they are vested, for a period of one year after such termination of
employment or service (or such longer period as the Board, in its discretion,
may determine prior to the expiration of such one-year period), subject to
earlier termination of the Option as provided in Section 10.2 above. Whether a
termination of employment or service is to be considered by reason of “permanent
and total disability” for purposes of the Plan shall be determined by the
Board, which determination shall be final and conclusive.


 


10.7        Limitations
on Exercise of Option.


 


Notwithstanding
any other provision of the Plan, in no event may any Option be exercised, in
whole or in part, prior to the date the Plan is approved by the stockholders of
the Company as provided herein, or after ten years following the date upon
which the Option is granted, or after the occurrence of an event referred to in
Section 22 hereof which results in termination of the Option.


 

















 


10.8.       Method of
Exercise.


 


An Option that is
exercisable may be exercised by the Grantee’s delivery to the Company of
written notice of exercise on any business day, at the Company’s principal
office, addressed to the attention of the Board. Such notice shall specify the
number of shares of Stock with respect to which the Option is being exercised
and shall be accompanied by payment in full of the Option Price of the shares
for which the Option is being exercised. The minimum number of shares of Stock
with respect to which an Option may be exercised, in whole or in part, at any
time shall be the lesser of (i) 100 shares or such lesser number set forth in
the applicable Award Agreement and (ii) the maximum number of shares
available for purchase under the Option at the time of exercise. Payment of the
Option Price for the shares purchased pursuant to the exercise of an Option
shall be made (i) in cash or in cash equivalents; (ii) through the
tender to the Company of shares of Stock, which shares, if acquired from the
Company, shall have been held for at least six months and which shall be
valued, for purposes of determining the extent to which the Option Price has
been paid thereby, at their Fair Market Value on the date of exercise; or (iii)
by a combination of the methods described in (i) and (ii). The Board may
provide, by inclusion of appropriate language in an Award Agreement, that
payment in full of the Option Price need not accompany the written notice of
exercise provided that the notice of exercise directs that the certificate or
certificates for the shares of Stock for which the Option is exercised be
delivered to a licensed broker acceptable to the Company as the agent for the
individual exercising the Option and, at the time such certificate or
certificates are delivered, the broker tenders to the Company cash (or cash
equivalents acceptable to the Company) equal to the Option Price for the shares
of Stock purchased pursuant to the exercise of the Option plus the amount (if
any) of federal and/or other taxes which the Company may in its judgment, be
required to withhold with respect to the exercise of the Option. An attempt to
exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. Unless otherwise stated in the applicable
Award Agreement, an individual holding or exercising an Option shall have none
of the rights of a stockholder (for example, the right to receive cash or
dividend payments or distributions attributable to the subject shares of Stock
or to direct the voting of the subject shares of Stock ) until the shares of
Stock covered thereby are fully paid and issued to him. Except as provided in
Section 22 hereof, no adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date of
such issuance.


 


10.9.       Delivery of Stock
Certificates.


 


Promptly after the
exercise of an Option by a Grantee and the payment in full of the Option Price,
such Grantee shall be entitled to the issuance of a stock certificate or
certificates evidencing his or her ownership of the shares of Stock subject to
the Option.


 

















 


11.          STOCK
APPRECIATION RIGHTS


 


The Board is authorized
to grant SARs to Grantees on the following terms and conditions:


 


11.1.       Right to Payment.


 


An SAR shall confer on
the Grantee to whom it is granted a right to receive, upon exercise thereof,
the excess of (A) the Fair Market Value of one share of Stock on the date of
exercise over (B) the grant price of the SAR as determined by the Board. The
grant price of an SAR shall not be less than the Fair Market Value of a share
of Stock on the date of grant except as provided in Section 18.1.


 


11.2.       Other Terms.


 


The Board shall determine
at the date of grant or thereafter, the time or times at which and the
circumstances under which an SAR may be exercised in whole or in part
(including based on achievement of performance goals and/or future service
requirements), the time or times at which SARs shall cease to be or become
exercisable following termination of employment or upon other conditions, the
method of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed to be
delivered to Grantees, whether or not an SAR shall be in tandem or in
combination with any other Award, and any other terms and conditions of any SAR.
SARs may be either freestanding or in tandem with other Awards.


 


12.          TRANSFERABILITY
OF OPTIONS


 


12.1        Transferability
of Options.


 


Except as provided in Section 12.2, during the
lifetime of a Grantee, only the Grantee (or, in the event of legal incapacity
or incompetency, the Grantee’s guardian or legal representative) may exercise
an Option. Except as provided in Section 12.2, no Option shall be assignable or
transferable by the Grantee to whom it is granted, other than by will or the
laws of descent and distribution.


 


12.2        Family
Transfers.


 


If authorized in the applicable Award Agreement, a
Grantee may transfer, not for value, all or part of an Option which is not an
Incentive Stock Option to any Family Member. For the purpose of this Section
12.2, a “not for value” transfer is a transfer which is (i) a gift, (ii) a
transfer under a domestic relations order in settlement of marital property
rights; or (iii) a transfer to an entity in which more than fifty percent of
the voting interests are owned by Family Members (or the Grantee) in exchange
for an interest in that entity. Following a transfer under this Section 12.2,
any such Option


 

















 


shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer. Subsequent transfers of transferred
Options are prohibited except to Family Members of the original Grantee in
accordance with this Section 12.2 or by will or the laws of descent and
distribution. The events of termination of employment or other relationship of
Section 10.4 hereof shall continue to be applied with respect to the original
Grantee, following which the Option shall be exercisable by the transferee only
to the extent, and for the periods specified in Sections 10.4, 10.5, or 10.6.


 


13.          RESTRICTED
STOCK


 


13.1.       Grant of
Restricted Stock or Restricted Stock Units.


 


The Board may from time
to time grant Restricted Stock or Restricted Stock Units to persons eligible to
receive Awards under Section 6 hereof, subject to such restrictions, conditions
and other terms as the Board may determine.


 


13.2.       Restrictions.


 


At the time a grant of
Restricted Stock or Restricted Stock Units is made, the Board shall establish a
period of time (the “Restricted Period”) applicable to such Restricted Stock or
Restricted Stock Units. Each Award of Restricted Stock or Restricted Stock
Units may be subject to a different Restricted Period. The Board may, in its
sole discretion, at the time a grant of Restricted Stock or Restricted Stock
Units is made, prescribe restrictions in addition to or other than the
expiration of the Restricted Period, including the satisfaction of corporate or
individual performance objectives, which may be applicable to all or any
portion of the Restricted Stock or Restricted Stock Units in accordance with
Section 18.4.1. and 18.4.2. Neither Restricted Stock nor Restricted Stock Units
may be sold, transferred, assigned, pledged or otherwise encumbered or disposed
of during the Restricted Period or prior to the satisfaction of any other
restrictions prescribed by the Board with respect to such Restricted Stock or
Restricted Stock Units.


 


13.3.       Restricted
Stock Certificates.


 


The Company shall issue,
in the name of each Grantee to whom Restricted Stock has been granted, stock
certificates representing the total number of shares of Restricted Stock
granted to the Grantee, as soon as reasonably practicable after the Grant Date.
The Board may provide in an Award Agreement that either (i)  the Secretary of the Company shall hold such
certificates for the Grantee’s benefit until such time as the Restricted Stock
is forfeited to the Company or the restrictions lapse, or (ii)  such certificates shall be delivered to the
Grantee, provided, however, that such certificates


 

















 


shall bear a legend or
legends that complies with the applicable securities laws and regulations and
makes appropriate reference to the restrictions imposed under the Plan and the
Award Agreement.


 


13.4.       Rights of
Holders of Restricted Stock.


 


Unless the Board
otherwise provides in an Award Agreement, holders of Restricted Stock shall
have the right to vote such Stock and the right to receive any dividends
declared or paid with respect to such Stock. The Board may provide that any
dividends paid on Restricted Stock must be reinvested in shares of Stock, which
may or may not be subject to the same vesting conditions and restrictions
applicable to such Restricted Stock. All distributions, if any, received by a
Grantee with respect to Restricted Stock as a result of any stock split, stock
dividend, combination of shares, or other similar transaction shall be subject
to the restrictions applicable to the original Grant.


 


13.5.       Rights of
Holders of Restricted Stock Units.


 


Unless the Board
otherwise provides in an Award Agreement, holders of Restricted Stock Units
shall have no rights as stockholders of the Company. The Board may provide in
an Award Agreement evidencing a grant of Restricted Stock Units that the holder
of such Restricted Stock Units shall be entitled to receive, upon the Company’s
payment of a cash dividend on its outstanding Stock, a cash payment for each
Restricted Stock Unit held equal to the per-share dividend paid on the Stock. Such
Award Agreement may also provide that such cash payment will be deemed
reinvested in additional Restricted Stock Units at a price per unit equal to
the Fair Market Value of a share of Stock on the date that such dividend is
paid.


 


13.6.       Termination
of Employment or Other Relationship.


 


Upon the termination of a
Grantee’s employment or other relationship with the Company other than by
reason of death or “permanent and total disability” (within the meaning of
Section 22(e)(3) of the Code), any Restricted Stock or Restricted Stock Units
held by such Grantee that has not vested, or with respect to which all
applicable restrictions and conditions have not lapsed, shall immediately be
deemed forfeited, unless the Board, in its discretion, determines otherwise. Upon
forfeiture of Restricted Stock or Restricted Stock Units, the Grantee shall
have no further rights with respect to such Grant, including but not limited to
any right to vote Restricted Stock or any right to receive dividends with
respect to shares of Restricted Stock or Restricted Stock Units. Whether a
leave of absence or leave on military or government service shall constitute a
termination of employment or other relationship for purposes of the Plan shall
be determined by the Board, which determination shall be final and conclusive. For
purposes of the Plan, a termination of employment, service or other
relationship shall not be deemed to occur if the Grantee is immediately
thereafter a director of the Company.


 

















 


13.7.       Rights in
the Event of Death.


 


Unless otherwise provided
in the Award Agreement, if a Grantee dies while employed by the Company, all
Restricted Stock or Restricted Stock Units granted to such Grantee shall fully
vest on the date of death, and the shares of Stock represented thereby shall be
deliverable in accordance with the terms of the Plan to the executors,
administrators, legatees or distributees of the Grantee’s estate.


 


13.8.       Rights in
the Event of Disability.


 


Unless otherwise provided
in the Award Agreement, if a Grantee terminates employment or other
relationship with the Company by reason of the “permanent and total disability”
(within the meaning of Section 22(e)(3) of the Code) of such Grantee, such
Grantee’s Restricted Stock or Restricted Stock Units shall continue to vest in
accordance with the applicable Award Agreement for a period of one year after
such termination of employment or service (or such longer period as the Board,
in its discretion, may determine prior to the expiration of such one-year
period), subject to the earlier forfeiture of such Restricted Stock or
Restricted Stock Units in accordance with the terms of the applicable Award
Agreement. Whether a termination of employment or service is to be considered
by reason of “permanent and total disability” for purposes of the Plan shall be
determined by the Board, which determination shall be final and conclusive.


 


13.9.       Delivery of
Stock and Payment Therefor.


 


Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Board, the restrictions applicable to shares of
Restricted Stock or Restricted Stock Units shall lapse, and, unless otherwise
provided in the Award Agreement, upon payment by the Grantee to the Company, in
cash or by check, of the aggregate par value of the shares of Stock represented
by such Restricted Stock or Restricted Stock Units (or such other higher
purchase price determined by the Board), a stock certificate for such shares
shall be delivered, free of all such restrictions, to the Grantee or the
Grantee’s beneficiary or estate, as the case may be.


 


14.          DEFERRED
STOCK AWARDS


 


14.1.       Nature of
Deferred Stock Awards.


 


A
Deferred Stock Award is an Award of phantom stock units to a Grantee, subject
to restrictions and conditions as the Board may determine at the time of grant.
Conditions may be based on continuing employment (or other business
relationship) and/or achievement of pre-established performance goals and
objectives. The grant of


 

















 


a
Deferred Stock Award is contingent on the Grantee executing the Deferred Stock
Award Agreement. The terms and conditions of each such agreement shall be
determined by the Board, and such terms and conditions may differ among
individual Awards and Grantees. At the end of the deferral period, the Deferred
Stock Award, to the extent vested, shall be paid to the Grantee in the form of
shares of Stock.


 


14.2.       Election to
Receive Deferred Stock Awards in Lieu of Compensation.


 


The Board may, in its sole discretion, permit a
Grantee to elect to receive a portion of the cash compensation or Restricted
Stock Award otherwise due to such Grantee in the form of a Deferred Stock Award.
Any such election shall be made in writing and shall be delivered to the
Company no later than the date specified by the Board and in accordance with
rules and procedures established by the Board. The Board shall have the sole
right to determine whether and under what circumstances to permit such
elections and to impose such limitations and other terms and conditions thereon
as the Board deems appropriate.


 


14.3.      Rights as a Stockholder.


 


During the deferral period, a Grantee shall have no
rights as a Stockholder; provided, however, that the Grantee may be credited
with Dividend Equivalent Rights with respect to the phantom Stock units
underlying his Deferred Stock Award, subject to such terms and conditions as
the Board may determine.


 


14.4.       Restrictions.


 


A Deferred Stock Award may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of during the deferral
period.


 


14.5.       Termination.


 


Except as may otherwise be provided by the Board
either in the Award Agreement or, in writing after the Award Agreement is
issued, a Grantee’s right in all Deferred Stock Awards that have not vested
shall automatically terminate upon the Grantee’s termination of employment or
other relationship with the Company for any reason.


 


15.          UNRESTRICTED
STOCK AWARDS


 


The Board may, in its sole discretion, grant (or sell
at par value or such other higher purchase price determined by the Board) an
Unrestricted Stock Award to any Grantee pursuant to which such Grantee may
receive shares of Stock free of any restrictions (“Unrestricted Stock”) under
the Plan. Unrestricted Stock Awards may be granted or sold as described in the
preceding sentence in respect of past services or other valid consideration, or
in lieu of any cash compensation due to such Grantee.


 
















 


16.          PERFORMANCE
STOCK AWARDS


 


16.1.       Nature of Performance Stock
Awards.


 


A Performance Stock Award is an Award entitling the
recipient to acquire shares of Stock upon the attainment of specified
performance goals. The Board may make Performance Stock Awards independent of
or in connection with the granting of any other Award under the Plan. The Board
in its sole discretion shall determine whether and to whom Performance Stock
Awards shall be made, the performance goals applicable under each such Award,
the periods during which performance is to be measured, and all other
limitations and conditions applicable to the awarded Performance Stock;
provided, however, that the Board may rely on the performance goals and other
standards applicable to other performance unit plans of the Company in setting
the standards for Performance Stock Awards under the Plan.


 


16.2.       Rights as a Stockholder.


 


A Grantee receiving a Performance Stock Award shall
have the rights of a Stockholder only as to shares actually received by the
Grantee under the Plan and not with respect to shares subject to the Award but
not actually received by the Grantee. A Grantee shall be entitled to receive a
Stock certificate evidencing the acquisition of Stock under a Performance Stock
Award only upon satisfaction of all conditions specified in the written
instrument evidencing the Performance Stock Award (or in a performance plan
adopted by the Board).


 


16.3.       Termination.


 


Except as may otherwise be provided by the Board
either in the Award Agreement in writing after the Award Agreement is issued, a
Grantee’s rights in all Performance Stock Awards shall automatically terminate
upon the Grantee’s termination of employment or other relationship with the
Company and its Subsidiaries for any reason.


 


16.4.       Acceleration, Waiver, Etc.


 


At any time prior to the
Grantee’s termination of employment (or other business relationship) by the
Company and its Subsidiaries, the Board may in its sole discretion accelerate,
waive or amend any or all of the goals, restrictions or conditions imposed
under any Performance Stock Award.


 

















 


17.          DIVIDEND
EQUIVALENT RIGHTS


 


17.1.       Dividend
Equivalent Rights.


 


A Dividend Equivalent Right is an Award entitling the
recipient to receive credits based on cash distributions that would have been
paid on the shares of Stock specified in the Dividend Equivalent Right (or
other award to which it relates) if such shares had been issued to and held by
the recipient. A Dividend Equivalent Right may be granted hereunder to any
Grantee as a component of another Award or as a freestanding award. The terms
and conditions of Dividend Equivalent Rights shall be specified in the grant. Dividend
Equivalents credited to the holder of a Dividend Equivalent Right may be paid
currently or may be deemed to be reinvested in additional shares of Stock,
which may thereafter accrue additional equivalents. Any such reinvestment shall
be at Fair Market Value on the date of reinvestment. Dividend Equivalent Rights
may be settled in cash or Stock or a combination thereof, in a single
installment or installments, all determined in the sole discretion of the Board.
A Dividend Equivalent Right granted as a component of another Award may provide
that such Dividend Equivalent Right shall be settled upon exercise, settlement,
or payment of, or lapse of restrictions on, such other award, and that such
Dividend Equivalent Right shall expire or be forfeited or annulled under the
same conditions as such other award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from
such other award.


 


17.2.       Interest Equivalents.


 


Any Award under this Plan that is settled in whole or
in part in cash on a deferred basis may provide in the grant for interest
equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.


 


17.3.       Termination.


 


Except as may otherwise be provided by the Board
either in the Award Agreement or in writing after the Award Agreement is
issued, a Grantee’s rights in all Dividend Equivalent Rights or interest
equivalents shall automatically terminate upon the Grantee’s termination of
employment or other relationship with the Company and its Subsidiaries for any
reason.


 


18.          CERTAIN
PROVISIONS APPLICABLE TO AWARDS


 


18.1.       Stand-Alone, Additional,
Tandem, and Substitute Awards.


 


Awards granted under the Plan may, in the discretion
of the Board, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under
another plan of the Company, any Subsidiary, or any business entity to be
acquired by the Company or a Subsidiary, or any other right of a Grantee to
receive payment from the Company or any Subsidiary. Such additional, tandem,
and substitute or exchange Awards may be granted at any time. If


 

















 


an Award is granted in substitution or exchange for another Award, the
Board shall require the surrender of such other Award in consideration for the
grant of the new Award. In addition, Awards may be granted in lieu of cash
compensation, including in lieu of cash amounts payable under other plans of
the Company or any Subsidiary, in which the value of Stock subject to the Award
is equivalent in value to the cash compensation (for example, Deferred Stock or
Restricted Stock), or in which the exercise price, grant price or purchase
price of the Award in the nature of a right that may be exercised is equal to
the Fair Market Value of the underlying Stock minus the value of the cash
compensation surrendered (for example, Options granted with an exercise price “discounted”
by the amount of the cash compensation surrendered).


 


18.2.       Term of Awards.


 


The term of each Award shall be for such period as may
be determined by the Board; provided that in no event shall the term of any
Option or SAR exceed a period of ten years (or such shorter term as may be
required in respect of an Incentive Stock Option under Section 422 of the
Code).


 


18.3.       Form and Timing of Payment
Under Awards; Deferrals.


 


Subject to the terms of
the Plan and any applicable Award Agreement, payments to be made by the Company
or a Subsidiary upon the exercise of an Option or other Award or settlement of
an Award may be made in such forms as the Board shall determine, including,
without limitation, cash, Stock, other Awards or other property, and may be
made in a single payment or transfer, in installments, or on a deferred basis. The
settlement of any Award may be accelerated, and cash paid in lieu of Stock in
connection with such settlement, in the discretion of the Board or upon
occurrence of one or more specified events. Installment or deferred payments
may be required by the Board or permitted at the election of the Grantee on
terms and conditions established by the Board. Payments may include, without
limitation, provisions for the payment or crediting of a reasonable interest
rate on installment or deferred payments or the grant or crediting of Dividend
Equivalents or other amounts in respect of installment or deferred payments
denominated in Stock.


 


18.4.                     Performance
and Annual Incentive Awards Performance Conditions.


 


18.4.1.    Performance
Conditions.


 


The right of a Grantee
to exercise or receive a grant or settlement of any Award, and the timing
thereof, may be subject to such performance conditions as may be specified by
the Board. The Board may use such business criteria and other measures of
performance as it may deem appropriate in establishing any performance conditions,
and may exercise its discretion to reduce the amounts payable under any


 

















 


Award subject to performance conditions,
except as limited under Sections 18.4.2 and 18.4.3 hereof in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m). If and to the extent required under Code Section 162(m), any
power or authority relating to a Performance Award or Annual Incentive Award
intended to qualify under Code Section 162(m), shall be exercised by the
Committee and not the Board.


 


18.4.2.                                                           Performance
Awards Granted to Designated Covered Employees.


 


If and to the extent
that the Committee determines that a Performance Award to be granted to a
Grantee who is designated by the Committee as likely to be a Covered Employee
should qualify as “performance-based compensation” for purposes of Code Section
162(m), the grant, exercise and/or settlement of such Performance Award shall
be contingent upon achievement of preestablished performance goals and other
terms set forth in this Section 18.4.2.


 


(i)                                     Performance Goals Generally. The
performance goals for such Performance Awards shall consist of one or more
business criteria and a targeted level or levels of performance with respect to
each of such criteria, as specified by the Committee consistent with this
Section 18.4.2. Performance goals shall be objective and shall otherwise meet
the requirements of Code Section 162(m) and regulations thereunder including
the requirement that the level or levels of performance targeted by the
Committee result in the achievement of performance goals being “substantially
uncertain.”  The Committee may determine
that such Performance Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the performance
goals must be achieved as a condition to grant, exercise and/or settlement of
such Performance Awards. Performance goals may differ for Performance Awards
granted to any one Grantee or to different Grantees.


 


(ii)                                  Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or specified
subsidiaries or business units of the Company (except with respect to the total
stockholder return and earnings per share criteria), shall be used exclusively
by the Committee in establishing performance goals for such Performance Awards:
(1) total stockholder return; (2) such total stockholder return as compared to
total return (on a comparable basis) of a publicly available index such as, but
not limited to, the Standard & Poor’s


 

















 


500 Stock Index; (3) net
income; (4) pretax earnings; (5) earnings before interest expense, taxes,
depreciation and amortization; (6) pretax operating earnings after interest
expense and before bonuses, service fees, and extraordinary or special items;
(7) operating margin; (8) earnings per share; (9) return on equity; (10) return
on assets; (11) return on investment; (12) operating earnings; (13) working
capital; and (14) ratio of debt to stockholders’ equity. One or more of the
foregoing business criteria shall also be exclusively used in establishing
performance goals for Annual Incentive Awards granted to a Covered Employee
under Section 18.4.3 hereof that are intended to qualify as                   “performance-based
compensation” under Code Section 162(m).


 


(iii)                               Performance Period; Timing For Establishing Performance Goals. Achievement
of performance goals in respect of such Performance Awards shall be measured
over a performance period of up to ten years, as specified by the Committee. Performance
goals shall be established not later than 90 days after the beginning of any
performance period applicable to such Performance Awards, or at such other date
as may be required or permitted for “performance-based compensation” under Code
Section 162(m).


 


(iv)                              Performance Award Pool. The Committee may establish a Performance
Award pool, which shall be an unfunded pool, for purposes of measuring Company
performance in connection with Performance Awards. The amount of such Performance
Award pool shall be based upon the achievement of a performance goal or goals
based on one or more of the business criteria set forth in Section 18.4.2(ii)
hereof during the given performance period, as specified by the Committee in
accordance with Section 18.4.2(iii) hereof. The Committee may specify the
amount of the Performance Award pool as a percentage of any of such business
criteria, a percentage thereof in excess of a threshold amount, or as another
amount which need not bear a strictly mathematical relationship to such
business criteria.


 


(v)                                 Settlement of Performance Awards; Other Terms. Settlement
of such Performance Awards shall be in cash, Stock, other Awards or other
property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in
connection with such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid


 

















 


or forfeited in the
event of termination of employment by the Grantee prior to the end of a
performance period or settlement of Performance Awards.


 


18.4.3.                                                           Annual
Incentive Awards Granted to Designated Covered Employees.


 


If and to the extent
that the Committee determines that an Annual Incentive Award to be granted to a
Grantee who is designated by the Committee as likely to be a Covered Employee
should qualify as “performance-based compensation” for purposes of Code Section
162(m), the grant, exercise and/or settlement of such Annual Incentive Award shall
be contingent upon achievement of pre-established performance goals and other
terms set forth in this Section 18.4.3.


 


(i)                                     Annual Incentive Award Pool. The
Committee may establish an Annual Incentive Award pool, which shall be an
un-funded pool, for purposes of measuring Company performance in connection
with Annual Incentive Awards. The amount of such Annual Incentive Award pool
shall be based upon the achievement of a performance goal or goals based on one
or more of the business criteria set forth in 18.4.2(ii) hereof during the
given performance period, as specified by the Committee in accordance with
18.4.2 (iii) hereof. The Committee may specify the amount of the Annual
Incentive Award pool as a percentage of any such business criteria, a percentage
thereof in excess of a threshold amount, or as another amount which need not
bear a strictly mathematical relationship to such business criteria.


 


(ii)                                  Potential Annual Incentive Awards. Not later
than the end of the 90th day of each fiscal year, or at such other date as may
be required or permitted in the case of Awards intended to be “performance-based
compensation” under Code Section 162(m), the Committee shall determine the
Eligible Persons who will potentially receive Annual Incentive Awards, and the
amounts potentially payable thereunder, for that fiscal year, either out of an
Annual Incentive Award pool established by such date under Section 18.4.3(i)
hereof or as individual Annual Incentive Awards. In the case of individual
Annual Incentive Awards intended to qualify under Code Section 162(m), the
amount potentially payable shall be based upon the achievement of a performance
goal or goals based on one or more of the business criteria set forth in
Section 18.4.2(ii) hereof in the given performance year, as specified by the
Committee; in other cases,


 

















 


such amount shall be
based on such criteria as shall be established by the Committee. In all cases,
the maximum Annual Incentive Award of any Grantee shall be subject to the
limitation set forth in Section 7.1 hereof.


 


(iii)                               Payout of Annual Incentive Awards. After the
end of each fiscal year, the Committee shall determine the amount, if any, of
(A) the Annual Incentive Award pool, and the maximum amount of potential Annual
Incentive Award payable to each Grantee in the Annual Incentive Award pool, or
(B) the amount of potential Annual Incentive Award otherwise payable to each
Grantee. The Committee may, in its discretion, determine that the amount
payable to any Grantee as an Annual Incentive Award shall be reduced from the
amount of his or her potential Annual Incentive Award, including a
determination to make no Award whatsoever. The Committee shall specify the
circumstances in which an Annual Incentive Award shall be paid or forfeited in
the event of termination of employment by the Grantee prior to the end of a
fiscal year or settlement of such Annual Incentive Award.


 


18.4.4.    Written
Determinations.


 


All determinations by
the Committee as to the establishment of performance goals, the amount of any
Performance Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under Section
18.4.2, and the amount of any Annual Incentive Award pool or potential
individual Annual Incentive Awards and the amount of final Annual Incentive
Awards under Section 18.4.3, shall be made in writing in the case of any Award
intended to qualify under Code Section 162(m). To the extent required to comply
with Code Section 162(m), the Committee may delegate any responsibility
relating to such Performance Awards or Annual Incentive Awards.


 


18.4.5.           Status of
Section 18.4.3 and Section 18.4.2 Awards Under Code


Section 162(m).


 


It is the intent of the
Company that Performance Awards and Annual Incentive Awards under Section
18.4.2 and Section 18.4.3 hereof granted to persons who are designated by the
Committee as likely to be Covered Employees within the meaning of Code Section
162(m) and regulations thereunder shall, if so designated by the Committee, constitute
“qualified performance-based compensation” within the meaning of Code Section
162(m) and regulations thereunder. Accordingly, the terms of Section 18.4.2  and  Section
18.4.3, including the definitions of Covered Employee and other terms used
therein, shall be interpreted in a manner consistent with Code Section 162(m)
and regulations thereunder. The foregoing notwithstanding, because the


 

















 


Committee cannot determine with certainty
whether a given Grantee will be a Covered Employee with respect to a fiscal
year that has not yet been completed, the term Covered Employee as used herein
shall mean only a person designated by the Committee, at the time of grant of
Performance Awards or an Annual Incentive Award, as likely to be a Covered
Employee with respect to that fiscal year. If any provision of the Plan or any
agreement relating to such Performance Awards or Annual Incentive Awards does
not comply or is inconsistent with the requirements of Code Section 162(m) or
regulations thereunder, such provision shall be construed or deemed amended to
the extent necessary to conform to such requirements.


 


19.          PARACHUTE
LIMITATIONS


 


Notwithstanding any other
provision of this Plan or of any other agreement, contract, or understanding
heretofore or hereafter entered into by a Grantee with the Company or any
Subsidiary, except an agreement, contract, or understanding hereafter entered
into that expressly modifies or excludes application of this paragraph (an “Other
Agreement”), and notwithstanding any formal or informal plan or other
arrangement for the direct or indirect provision of compensation to the Grantee
(including groups or classes of Grantees or beneficiaries of which the Grantee
is a member), whether or not such compensation is deferred, is in cash, or is in
the form of a benefit to or for the Grantee (a “Benefit Arrangement”), if the
Grantee is a “disqualified individual,” as defined in Section 280G(c) of
the Code, any Option, Restricted Stock or Restricted Stock Unit held by that
Grantee and any right to receive any payment or other benefit under this Plan
shall not become exercisable or vested (i) to the extent that such right
to exercise, vesting, payment, or benefit, taking into account all other
rights, payments, or benefits to or for the Grantee under this Plan, all Other
Agreements, and all Benefit Arrangements, would cause any payment or benefit to
the Grantee under this Plan to be considered a “parachute payment” within the
meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute
Payment”) and (ii) if, as a result of receiving a Parachute
Payment, the aggregate after-tax amounts received by the Grantee from the
Company under this Plan, all Other Agreements, and all Benefit Arrangements
would be less than the maximum after-tax amount that could be received by the
Grantee without causing any such payment or benefit to be considered a
Parachute Payment. In the event that the receipt of any such right to exercise,
vesting, payment, or benefit under this Plan, in conjunction with all other
rights, payments, or benefits to or for the Grantee under any Other Agreement
or any Benefit Arrangement would cause the Grantee to be considered to have
received a Parachute Payment under this Plan that would have the effect of
decreasing the after-tax amount received by the Grantee as described in
clause (ii) of the preceding sentence, then the Grantee shall have the
right, in the Grantee’s sole discretion, to designate those rights, payments,
or benefits under this Plan, any Other Agreements, and any Benefit Arrangements
that should be reduced or eliminated so as to avoid having the payment or
benefit to the Grantee under this Plan be deemed to be a Parachute Payment.


 

















 


20.          REQUIREMENTS
OF LAW


 


20.1.       General.


 


The Company shall not be
required to sell or issue any shares of Stock under any Award if the sale or
issuance of such shares would constitute a violation by the Grantee, any other
individual exercising an Option, or the Company of any provision of any law or
regulation of any governmental authority, including without limitation any
federal or state securities laws or regulations. If at any time the Company
shall determine, in its discretion, that the listing, registration or
qualification of any shares subject to an Award upon any securities exchange or
under any governmental regulatory body is necessary or desirable as a condition
of, or in connection with, the issuance or purchase of shares hereunder, no
shares of Stock may be issued or sold to the Grantee or any other individual
exercising an Option pursuant to such Award unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company, and any delay caused thereby
shall in no way affect the date of termination of the Award. Specifically, in
connection with the Securities Act, upon the exercise of any Option or the
delivery of any shares of Stock underlying an Award, unless a registration
statement under such Act is in effect with respect to the shares of Stock
covered by such Award, the Company shall not be required to sell or issue such
shares unless the Board has received evidence satisfactory to it that the
Grantee or any other individual exercising an Option may acquire such shares
pursuant to an exemption from registration under the Securities Act. Any
determination in this connection by the Board shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the Securities Act. The Company shall
not be obligated to take any affirmative action in order to cause the exercise
of an Option or the issuance of shares of Stock pursuant to the Plan to comply
with any law or regulation of any governmental authority. As to any
jurisdiction that expressly imposes the requirement that an Option shall not be
exercisable until the shares of Stock covered by such Option are registered or
are exempt from registration, the exercise of such Option (under circumstances
in which the laws of such jurisdiction apply) shall be deemed conditioned upon
the effectiveness of such registration or the availability of such an
exemption.


 


20.2.       Rule 16b-3.


 


During any time when the
Company has a class of equity security registered under Section 12 of the
Exchange Act, it is the intent of the Company that Awards pursuant to the Plan
and the exercise of Options granted hereunder will qualify for the exemption
provided by Rule 16b-3 under the Exchange Act. To the extent that any provision
of the Plan or action by the Board does not comply with the requirements of
Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and
deemed advisable by the Board, and shall not affect the validity of the Plan. In
the event that Rule 16b-3 is revised or replaced, the Board may exercise its
discretion to modify this Plan in any respect necessary to satisfy the
requirements of, or to take advantage of any features of, the revised exemption
or its replacement.


 

















 


21.          AMENDMENT
AND TERMINATION OF THE PLAN


 


The Board may, at any
time and from time to time, amend, suspend, or terminate the Plan as to any
shares of Stock as to which Awards have not been made; provided, however,
that the Board shall not, without approval of the Company’s stockholders, amend
the Plan such that it does not comply with the Code. The Company may retain the
right in an Award Agreement to cause a forfeiture of the gain realized by a
Grantee on account of the Grantee taking actions in “competition with the
Company,” as defined in the applicable Award Agreement. Furthermore, the
Company may annul an Award if the Grantee is an employee of the Company or an
affiliate and is terminated “for cause” as defined in the applicable Award
Agreement. Except as permitted under this Section 21  or
Section 22 hereof, no amendment, suspension, or termination of the Plan
shall, without the consent of the Grantee, alter or impair rights or
obligations under any Award theretofore awarded under the Plan.


 


22.          EFFECT
OF CHANGES IN CAPITALIZATION


 


22.1        Changes in Stock.


 


If the number of
outstanding shares of Stock is increased or decreased or the shares of Stock
are changed into or exchanged for a different number or kind of shares or other
securities of the Company on account of any recapitalization, reclassification,
stock split, reverse split, combination of shares, exchange of shares, stock
dividend or other distribution payable in capital stock, or other increase or
decrease in such shares effected without receipt of consideration by the
Company occurring after the Effective Date, the number and kinds of shares for
which grants of Options and other Awards may be made under the Plan shall be
adjusted proportionately and accordingly by the Company. In addition, the
number and kind of shares for which Awards are outstanding shall be adjusted
proportionately and accordingly so that the proportionate interest of the
Grantee immediately following such event shall, to the extent practicable, be
the same as immediately before such event. Any such adjustment in outstanding
Options shall not change the aggregate Option Price payable with respect to
shares that are subject to the unexercised portion of an Option outstanding but
shall include a corresponding proportionate adjustment in the Option Price per
share.


 


22.2        Reorganization
in Which the Company Is the Surviving Entity and in Which No Change in Control
Occurs.


 


Subject to
Section 22.3 hereof, if the Company shall be the surviving entity in any
reorganization, merger, or consolidation of the Company with one or more other
entities in which no Change in Control Occurs, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares


 

















 


of Stock subject to such
Option would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger, or consolidation. Subject
to any contrary language in an Award Agreement evidencing an Award, any
restrictions applicable to such Award shall apply as well to any replacement
shares received by the Grantee as a result of the reorganization, merger or
consolidation.


 


22.3.       Reorganization,
Sale of Assets or Sale of Stock Which Involves a Change in Control.


 


Upon the dissolution or
liquidation of the Company or upon any transaction approved by the Board that
results in a Change in Control, (i) all outstanding shares subject to Awards
shall be deemed to have vested, and all restrictions and conditions applicable
to such shares subject to Awards shall be deemed to have lapsed, immediately
prior to the occurrence of such event, and (ii) all Options outstanding
hereunder shall become immediately exercisable for a period of fifteen days
immediately prior to the scheduled consummation of the event. Any exercise of
an Option during such fifteen-day period shall be conditioned upon the
consummation of the event and shall be effective only immediately before the
consummation of the event. Upon consummation of any such event, the Plan and
all outstanding but unexercised Options shall terminate, except to the extent
provision is made in writing in connection with such transaction for the
continuation of the Plan or the assumption of such Options theretofore granted,
or for the substitution for such Options of new options covering the stock of a
successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares or units and exercise prices,
in which event the Plan and Options theretofore granted shall continue in the
manner and under the terms so provided. The Board shall send written notice of
an event that will result in such a termination to all individuals who hold
Options not later than the time at which the Company gives notice thereof to
its stockholders.


 


22.4.       Adjustments.


 


Adjustments under this
Section 22 related to shares of Stock or securities of the Company shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. No fractional shares or other securities shall be
issued pursuant to any such adjustment, and any fractions resulting from any
such adjustment shall be eliminated in each case by rounding downward to the
nearest whole share.


 


22.5.       No
Limitations on Company.


 


The making of Awards
pursuant to the Plan shall not affect or limit in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations, or changes
of its capital or business structure or to merge, consolidate, dissolve, or
liquidate, or to sell or transfer all or any part of its business or assets.


 

















 


23.          POOLING


 


In the event any
provision of the Plan or the Award Agreement would prevent the use of pooling
of interests accounting in a corporate transaction involving the Company and
such transaction is contingent upon pooling of interests accounting, then that
provision shall be deemed amended or revoked to the extent required to preserve
such pooling of interests. The Company may require in an Award Agreement that a
Grantee who receives an Award under the Plan shall, upon advice from the Company,
take (or refrain from taking, as appropriate) all actions necessary or
desirable to ensure that pooling of interests accounting is available.


 


24.          DISCLAIMER
OF RIGHTS


 


No provision in the Plan
or in any Award or Award Agreement shall be construed to confer upon any
individual the right to remain in the employ or service of the Company or any
affiliate, or to interfere in any way with any contractual or other right or
authority of the Company either to increase or decrease the compensation or
other payments to any individual at any time, or to terminate any employment or
other relationship between any individual and the Company. In addition,
notwithstanding anything contained in the Plan to the contrary, unless
otherwise stated in the applicable Award Agreement, no Award granted under the
Plan shall be affected by any change of duties or position of the Grantee, so
long as such Grantee continues to be a director, officer, consultant or
employee of the Company. The obligation of the Company to pay any benefits
pursuant to this Plan shall be interpreted as a contractual obligation to pay
only those amounts described herein, in the manner and under the conditions
prescribed herein. The Plan shall in no way be interpreted to require the
Company to transfer any amounts to a third party trustee or otherwise hold any
amounts in trust or escrow for payment to any Grantee or beneficiary under the
terms of the Plan. No Grantee shall have any of the rights of a stockholder
with respect to the shares of Stock subject to an Option except to the extent
the certificates for such shares of Stock shall have been issued upon the
exercise of the Option.


 


25.          NONEXCLUSIVITY
OF THE PLAN


 


Neither the adoption of
the Plan nor the submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations upon the right and
authority of the Board to adopt such other incentive compensation arrangements
(which arrangements may be applicable either generally to a class or classes of
individuals or specifically to a particular individual or particular
individuals) as the Board in its discretion determines desirable, including,
without limitation, the granting of stock options otherwise than under the
Plan.


 

















 


26.          WITHHOLDING
TAXES


 


The Company or a
Subsidiary, as the case may be, shall have the right to deduct from payments of
any kind otherwise due to a Grantee any Federal, state, or local taxes of any
kind required by law to be withheld with respect to the vesting of or other
lapse of restrictions applicable to an Award or upon the issuance of any shares
of Stock upon the exercise of an Option or pursuant to an Award. At the time of
such vesting, lapse, or exercise, the Grantee shall pay to the Company or the
Subsidiary, as the case may be, any amount that the Company or the Subsidiary
may reasonably determine to be necessary to satisfy such withholding obligation.
Subject to the prior approval of the Company or the Subsidiary, which may be
withheld by the Company or the Subsidiary, as the case may be, in its sole
discretion, the Grantee may elect to satisfy such obligations, in whole or in
part, (i) by causing the Company or the Subsidiary to withhold shares of
Stock otherwise issuable to the Grantee or (ii) by delivering to the Company
or the Subsidiary shares of Stock already owned by the Grantee. The shares of
Stock so delivered or withheld shall have an aggregate Fair Market Value equal
to such withholding obligations. The Fair Market Value of the shares of Stock
used to satisfy such withholding obligation shall be determined by the Company
or the Subsidiary as of the date that the amount of tax to be withheld is to be
determined. A Grantee who has made an election pursuant to this Section 26
may satisfy his or her withholding obligation only with shares of Stock that
are not subject to any repurchase, forfeiture, unfulfilled vesting, or other
similar requirements.


 


27.          CAPTIONS


 


The use of captions in this Plan or any Award
Agreement is for the convenience of reference only and shall not affect the
meaning of any provision of the Plan or such Award Agreement.


 


28.          OTHER
PROVISIONS


 


Each Award granted under
the Plan may contain such other terms and conditions not inconsistent with the
Plan as may be determined by the Board, in its sole discretion.


 


29.          NUMBER
AND GENDER


 


With respect to words
used in this Plan, the singular form shall include the plural form, the
masculine gender shall include the feminine gender, etc., as the context
requires.


 

















 


30.          SEVERABILITY


 


If any provision of the
Plan or any Award Agreement shall be determined to be illegal or unenforceable
by any court of law in any jurisdiction, the remaining provisions hereof and
thereof shall be severable and enforceable in accordance with their terms, and
all provisions shall remain enforceable in any other jurisdiction.


 


31.          GOVERNING
LAW


 


The validity and
construction of this Plan and the instruments evidencing the Awards granted
hereunder shall be governed by the laws of the State of Maryland (without
giving effect to the choice of law provisions thereof).


 


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