exv10w5



 





Exhibit 10.5




EAGLE MATERIALS INC.



INCENTIVE PLAN


NON-QUALIFIED STOCK OPTION AGREEMENT



     This option agreement (the “Option Agreement” or “Agreement”) entered into between Eagle
Materials Inc., a Delaware corporation (the “Company”), and ___(the
“Optionee”), an employee of the Company or its Affiliates, with respect to a right (the “Option”)
awarded to the Optionee under the Eagle Materials Inc. Incentive Plan, as amended (the “Plan”), on
June 20, 2007, (the “Award Date”) to purchase from the Company up to but not exceeding in the
aggregate ___shares of the Company’s common stock, par value $0.01 per share (the “Common
Stock”), at a price of $47.525 per share (the “Exercise Price”), such number of shares and such
price per share being subject to adjustment as provided in the Plan, and further subject to the
following terms and conditions:



     1. Relationship to Plan



     This Option is subject to all of the terms, conditions and provisions of the Plan and
administrative interpretations thereunder, if any, which have been adopted by the Company’s
Compensation Committee (“Committee”) and are in effect on the date hereof. Except as defined
herein, capitalized terms shall have the same meanings ascribed to them under the Plan. For
purposes of this Option Agreement:



          (a) “Disability” shall have the meaning assigned to such term under the Plan, however,
in the case of a Director, for purposes of this Agreement, Disability shall be determined by the
Committee.




          (b) “Operating Earnings” for any fiscal year means the Company’s Earnings Before
Income Taxes adjusted for Interest Expense, Net and Corporate General Expenses, as certified by the
Committee.




          (c) “Earnings Per Share” for any fiscal year means the Company’s Earnings Per Share
(diluted) as for such fiscal year, as certified by the Committee.




          (d) “Retirement” means the cessation of employment with the Company and all of its
Affiliates: (i) on or after age 62 with at least 10 years of service, provided that the employee
has given notice in writing at least 2 years in advance of such cessation of employment; or (ii)
under other circumstances approved by the Committee.




          (e) “Vesting Date” means March 31 of any given fiscal year in which the Option Shares
(as defined below) vest, if any, in accordance with Section 2(a) hereof.




          (f) “Vesting Period” means the period commencing on April 1, 2007 and ending on March
31, 2014.




     2. Vesting and Exercise Schedules.



          (a) Vesting Schedule. The shares of Common Stock covered by this Option (the “Option
Shares”) shall vest based on the financial targets measured by Operating Earnings and Earnings




 









 




Per Share, as more particularly described in the matrix (the “Vesting Matrix”) attached to
this Agreement as Exhibit A.




          The exact vesting percentage attained from the Vesting Matrix shall be calculated based on
straight-line interpolation between the percentages shown in the Vesting Matrix with fractional
percentages rounded to the nearest tenth of one percent.




          If the Operating Earnings and Earnings Per Share for any fiscal year subsequent to the initial
fiscal year within the Vesting Period results in a vesting percentage, the applicable percentage of
Option Shares which shall vest on the applicable Vesting Date shall equal: (i) the vesting
percentage derived from the Vesting Matrix for the given fiscal year-end less (ii) the vesting
percentage previously attained in prior fiscal year(s), if any. At the end of the Vesting Period,
if any Option Shares remain unvested, such Option Shares shall be forfeited.




          Except as expressly set forth herein, the Optionee must be in continuous employment with the
Company or any of its Affiliates or serve as a Director from the Award Date through the Vesting
Date in order for the Option Shares to vest as provided in this Section 2(a).




          (b) Exercisability. The Option Shares that vest in accordance with the provisions of
Section 2(a) shall become exercisable as soon as administratively practicable following the
applicable Vesting Date.




          The Optionee must be in continuous employment with the Company or any of its Affiliates or
serve as a Director from the Award Date through the date the portion of the Option Shares would
otherwise become exercisable in order for the Option to become exercisable with respect to
additional Option Shares, unless Optionee’s employment and service as a Director terminates by
reason of Retirement, otherwise such Option Shares shall be forfeited. In the event Optionee’s
employment and service as a Director terminates by reason of death or Disability, the then
exercisable Option Shares shall continue to be exercisable as if the Optionee had remained employed
or continued to serve as a Director for a period of two years following the Optionee’s death or
Disability. All remaining Option Shares will be forfeited. In the event Optionee’s employment and
service as a Director terminates by reason of Retirement, this Option shall remain in effect so
that any then exercisable Option Shares shall continue to be exercisable and any unvested Option
Shares shall continue to have the opportunity to vest as if the Optionee had remained employed or
continued to serve as a Director, until the expiration of this Agreement.




          To the extent the Option becomes exercisable, such Option may be exercised in whole or in part
(at any time or from time to time, except as otherwise provided herein) until expiration of the
Option pursuant to the terms of this Agreement or the Plan.




          (c) Calculations. The Committee shall have the sole authority to approve the
calculation of the Operating Earnings and Earnings Per Share for purposes of vesting, and its
approval of such calculations shall be final, conclusive, and binding on all parties.




          (d) Change in Control. This Option shall become fully vested and exercisable, without
regard to the limitations set forth in subparagraph (a) above, provided that the Optionee has been
in continuous employment with the Company or any of its Affiliates or served as a Director since
the Award Date, upon the occurrence of a Change in Control (as defined in Exhibit B to this
Agreement), with respect to any Option Shares which have not been theretofore forfeited, unless
either (i) the Committee determines that the terms of the transaction giving rise to the Change in
Control




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provide that the Option is to be replaced within a reasonable time after the Change in Control
with an option of equivalent value to purchase shares of the surviving parent corporation or (ii)
the Option is to be settled in cash in accordance with the last sentence of this subparagraph (d).
Upon a Change in Control, pursuant to Section 16 of the Plan, the Company may, in its discretion,
settle the Option by a cash payment equal to the difference between the Fair Market Value per share
of Common Stock on the settlement date and the Exercise Price for the Option, multiplied by the
number of shares then subject to the Option.




     3. Termination of Option.



     The Option hereby granted shall terminate and be of no force and effect with respect to any
shares of Common Stock not previously purchased by the Optionee at the earliest time specified
below:



          (a) the seventh anniversary of the Award Date;




          (b) if Optionee’s employment with the Company and its Affiliates and service as a Director is
terminated by the Company or a Subsidiary for “cause” (as determined by the Committee) at any time
after the Award Date, then the Option shall terminate immediately upon such termination of
Optionee’s employment;




          (c) if Optionee’s employment with the Company and its Affiliates and service as a Director is
terminated for any reason other than death, Retirement, Disability or termination for “cause,” then
the Option shall terminate on the first business day following the expiration of the 90-day period
beginning on the date of termination of Optionee’s employment and service as a Director; or




          (d) if Optionee’s employment with the Company and its Affiliates and service as a Director is
terminated due to the death or Disability of the Optionee at any time after the Award Date and
while in the employ of the Company or its Affiliates or service as Director, or within 90 days
after termination of such employment or service for reasons other than “cause”, then the Option
shall terminate on the first business day following the expiration of the two-year period which
began on the date of Optionee’s death or Disability. If Optionee’s employment with the Company and
its Affiliates and service as a Director is terminated due to the Retirement of the Optionee at any
time after the Award Date and while in the employ of the Company or its Affiliates or service as
Director, then the Option shall terminate on the seventh anniversary of the Award Date.




          In the event the Option remains exercisable for a period of time following the date of
termination of Optionee’s employment and service as a Director, the portion of the Option not
exercisable upon termination, unless such termination is due to Retirement, shall terminate and be
of no force and effect upon the date of the Optionee’s termination of employment and service as a
Director.




     4. Exercise of Option.



     Subject to the limitations set forth herein and in the Plan, this Option may be exercised by
notice provided to the Company as set forth in Section 5. The payment of the Exercise Price for
the Common Stock being purchased pursuant to the Option shall be made (a) in cash, by check or cash
equivalent, (b) by tender to the Company, or attestation to the ownership, of Common Stock owned by
the Optionee having a Fair Market Value (as determined by the Company without regard to any
restrictions on transferability applicable to such Common Stock by reason of federal or state
securities laws or agreements with an underwriter for the Company) not less than the Exercise
Price, (c) by delivery of a properly executed notice together with irrevocable instructions to a
broker providing for the assignment



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to the Company of the proceeds of a sale or loan with respect to some or all of the shares
being acquired upon the exercise of the Option (including, without limitation, through an exercise
complying with the provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System), (d) by such other consideration as may be approved by the
Board from time to time to the extent permitted by applicable law, or (e) by any combination
thereof. Such notice shall be accompanied by cash or Common Stock in the full amount of all
federal and state withholding or other employment taxes applicable to the taxable income of such
Optionee resulting from such exercise (or instructions to satisfy such withholding obligation by
withholding Option Shares in accordance with Section 8). For the purpose of determining the
amount, if any, of the purchase price satisfied by payment in Common Stock, such Common Stock shall
be valued at its Fair Market Value on the date of exercise.




     If the Optionee desires to pay the purchase price for the Option Shares by tendering Common
Stock using the method of attestation, the Optionee may, subject to any such conditions and in
compliance with any such procedures as the Committee may adopt, do so by attesting to the ownership
of Common Stock of the requisite value, in which case the Company shall issue or otherwise deliver
to the Optionee upon such exercise a number of Option Shares equal to the result obtained by
dividing (a) the excess of the aggregate Fair Market Value of the total number shares of Common
Stock subject to the Option for which the Option (or portion thereof) is being exercised over the
purchase price payable in respect of such exercise by (b) the Fair Market Value per share of Common
Stock subject to the Option, and the Optionee may retain the shares of Common Stock the ownership
of which is attested.



     Notwithstanding anything to the contrary contained herein, the Optionee agrees that he will
not exercise the Option granted pursuant hereto, and the Company will not be obligated to issue any
Option Shares pursuant to this Option Agreement, if the exercise of the Option or the issuance of
such shares would constitute a violation by the Optionee or by the Company of any provision of any
law or regulation of any governmental authority or any stock exchange or transaction quotation
system. The Optionee agrees that, unless the options and shares covered by the Plan have been
registered pursuant to the Securities Act of 1933, as amended (the “Act”), the Company may, at its
election, require the Optionee to give a representation in writing in form and substance
satisfactory to the Company to the effect that he is acquiring such shares for his own account for
investment and not with a view to, or for sale in connection with, the distribution of such shares
or any part thereof.



     If any law or regulation requires the Company to take any action with respect to the shares
specified in such notice, the time for delivery thereof, which would otherwise be as promptly as
reasonably practicable, shall be postponed for the period of time necessary to take such action.



     5. Notices.



     Notice of exercise of the Option must be made in the following manner, using such forms as the
Company may from time to time provide:



          (a) by electronic means as designated by the Committee, in which case the date of exercise
shall be the date when receipt is acknowledged by the Company;




          (b) by registered or certified United States mail, postage prepaid, to Eagle Materials Inc.,
Attention: Secretary, 3811 Turtle Creek, Suite 1100, Dallas, Texas 75219, in which case the date of
exercise shall be the date of mailing; or




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          (c) by hand delivery or otherwise to Eagle Materials Inc., Attention: Secretary, 3811 Turtle
Creek, Suite 1100, Dallas, Texas 75219, in which case the date of exercise shall be the date when
receipt is acknowledged by the Company.




     Notwithstanding the foregoing, in the event that the address of the Company is changed prior
to the date of any exercise of this Option, notice of exercise shall instead be made pursuant to
the foregoing provisions at the Company’s current address.



     Any other notices provided for in this Agreement or in the Plan shall be given in writing or
by such electronic means, as permitted by the Committee, and shall be deemed effectively delivered
or given upon receipt or, in the case of notices delivered by the Company to the Optionee, five
days after deposit in the United States mail, postage prepaid, addressed to the Optionee at the
address specified at the end of this Agreement or at such other address as the Optionee hereafter
designates by written notice to the Company.



     6. Assignment of Option.



     Except as otherwise permitted by the Committee, the rights of the Optionee under the Plan and
this Award Agreement are personal; no assignment or transfer of the Optionee’s rights under and
interest in this Option may be made by the Optionee otherwise than by will, by beneficiary
designation, by the laws of descent and distribution or by a qualified domestic relations order;
and this Option is exercisable during his lifetime only by the Optionee, except as otherwise
expressly provided in this Agreement.



     After the death of the Optionee, exercise of the Option shall be permitted only by the
Optionee’s designated beneficiary or, in the absence of a designated beneficiary, the Optionee’s
executor or the personal representative of the Optionee’s estate (or by his assignee, in the event
of a permitted assignment) to the extent that the Option is exercisable on or after the date of the
Optionee’s death, as set forth in Sections 2(b) and 3(d) hereof.



     7. Stock Certificates.



     Certificates representing the Common Stock issued pursuant to the exercise of the Option will
bear all legends required by law and necessary or advisable to effectuate the provisions of the
Plan and this Option. The Company may place a “stop transfer” order against shares of the Common
Stock issued pursuant to the exercise of this Option until all restrictions and conditions set
forth in the Plan or this Agreement and in the legends referred to in this Section 7 have been
complied with.



     8. Withholding.



     No certificates representing shares of Common Stock purchased hereunder shall be delivered to
or in respect of an Optionee unless the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the issuance of such shares
of Common Stock has been remitted to the Company or unless provisions to pay such withholding
requirements have been made to the satisfaction of the Committee. The Committee may make such
provisions as it may deem appropriate for the withholding of any taxes which it determines is
required in connection with this Option. The Optionee may pay all or any portion of the taxes
required to be withheld by the Company or paid by the Optionee in connection with the exercise of
all or any portion of this Option by delivering cash, or, pursuant to Committee — approved
procedures, by electing to have the Company withhold shares of Common Stock, or by delivering
previously owned shares of Common Stock, having



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a Fair Market Value equal to the amount required to be withheld or paid. The Optionee must
make the foregoing election on or before the date that the amount of tax to be withheld is
determined.




     9. Shareholder Rights.



     The Optionee shall have no rights of a shareholder with respect to shares of Common Stock
subject to the Option unless and until such time as the Option has been exercised and ownership of
such shares of Common Stock has been transferred to the Optionee.



     10. Successors and Assigns.



     This Agreement shall bind and inure to the benefit of and be enforceable by the Optionee, the
Company and their respective permitted successors and assigns (including personal representatives,
heirs and legatees), except that the Optionee may not assign any rights or obligations under this
Agreement except to the extent and in the manner expressly permitted herein.



     11. No Employment Guaranteed.



     No provision of this Option Agreement shall confer any right upon the Optionee to continued
employment with the Company or any Subsidiary.



     12. Governing Law.



     This Option Agreement shall be governed by, construed and enforced in accordance with the laws
of the State of Texas.



     13. Amendment.



     This Agreement cannot be modified, altered or amended except by an agreement, in writing,
signed by both the Company and the Optionee.



	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	EAGLE MATERIALS INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date:

	 	 
	 	 
	 	By:
	 	 
	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Steven R. Rowley	 	 
	 

	 	 	 	 	 	Title:
	 	President and CEO	 	 






     The Optionee hereby accepts the foregoing Option Agreement, subject to the terms and
provisions of the Plan and administrative interpretations thereof referred to above.



	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	OPTIONEE:	 	 
	Date:

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Eagle Materials Inc.	 	 
	 	 	 	 	 	 	3811 Turtle Creek Blvd.	 	 
	 	 	 	 	 	 	Suite 1100	 	 
	 	 	 	 	 	 	Dallas, Texas 75219	 	 






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EXHIBIT A




VESTING MATRIX




     Option Shares will commence vesting at the percentage indicated in the Vesting Matrix when the
Operating Earnings and Earnings Per Share levels can be placed within the charted points on the
Vesting Matrix. When the percentage is determined, a number of Option Shares corresponding to the
Vesting Matrix percentage will vest as of March 31 of the fiscal year just ended. Whether a
vesting has occurred will be determined by the Compensation Committee following the end of such
fiscal year.



     In the event the Company makes an acquisition or disposition (e.g. assets, stock or other
equity interest), then the Compensation Committee may, in its discretion, make any adjustments to:
(1) the method of calculating the Operating Earnings and/or Earnings per Share; or (2) the
structure of Vesting Matrix, as it deems appropriate to fulfill the intents and purposes of the
vesting criteria, taking into consideration the effect of the acquisition or disposition on vesting
opportunities.



A-1 









 





VESTING MATRIX



(Vesting Percentage)



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating Earnings ($ Millions)	 
	EPS	 	320	 	 	340	 	 	360	 	 	380	 	 	400	 	 	420	 	 	440	 	 	460	 	 	480	 	 	500	 	 	520	 	 	540	 	 	560	 	 	580	 	 	600	 
	4.0
	 	 	10.0	 	 	 	15.0	 	 	 	20.0	 	 	 	25.0	 	 	 	30.0	 	 	 	35.0	 	 	 	40.0	 	 	 	45.0	 	 	 	50.0	 	 	 	55.0	 	 	 	60.0	 	 	 	65.0	 	 	 	70.0	 	 	 	75.0	 	 	 	80.0	 
	4.5
	 	 	12.5	 	 	 	17.5	 	 	 	22.5	 	 	 	27.5	 	 	 	32.5	 	 	 	37.5	 	 	 	42.5	 	 	 	47.5	 	 	 	52.5	 	 	 	57.5	 	 	 	62.5	 	 	 	67.5	 	 	 	72.5	 	 	 	77.5	 	 	 	82.5	 
	5.0
	 	 	15.0	 	 	 	20.0	 	 	 	25.0	 	 	 	30.0	 	 	 	35.0	 	 	 	40.0	 	 	 	45.0	 	 	 	50.0	 	 	 	55.0	 	 	 	60.0	 	 	 	65.0	 	 	 	70.0	 	 	 	75.0	 	 	 	80.0	 	 	 	85.0	 
	5.5
	 	 	17.5	 	 	 	22.5	 	 	 	27.5	 	 	 	32.5	 	 	 	37.5	 	 	 	42.5	 	 	 	47.5	 	 	 	52.5	 	 	 	57.5	 	 	 	62.5	 	 	 	67.5	 	 	 	72.5	 	 	 	77.5	 	 	 	82.5	 	 	 	87.5	 
	6.0
	 	 	20.0	 	 	 	25.0	 	 	 	30.0	 	 	 	35.0	 	 	 	40.0	 	 	 	45.0	 	 	 	50.0	 	 	 	55.0	 	 	 	60.0	 	 	 	65.0	 	 	 	70.0	 	 	 	75.0	 	 	 	80.0	 	 	 	85.0	 	 	 	90.0	 
	6.5
	 	 	22.5	 	 	 	27.5	 	 	 	32.5	 	 	 	37.5	 	 	 	42.5	 	 	 	47.5	 	 	 	52.5	 	 	 	57.5	 	 	 	62.5	 	 	 	67.5	 	 	 	72.5	 	 	 	77.5	 	 	 	82.5	 	 	 	87.5	 	 	 	92.5	 
	7.0
	 	 	25.0	 	 	 	30.0	 	 	 	35.0	 	 	 	40.0	 	 	 	45.0	 	 	 	50.0	 	 	 	55.0	 	 	 	60.0	 	 	 	65.0	 	 	 	70.0	 	 	 	75.0	 	 	 	80.0	 	 	 	85.0	 	 	 	90.0	 	 	 	95.0	 
	7.5
	 	 	27.5	 	 	 	32.5	 	 	 	37.5	 	 	 	42.5	 	 	 	47.5	 	 	 	52.5	 	 	 	57.5	 	 	 	62.5	 	 	 	67.5	 	 	 	72.5	 	 	 	77.5	 	 	 	82.5	 	 	 	87.5	 	 	 	92.5	 	 	 	97.5	 
	8.0
	 	 	30.0	 	 	 	35.0	 	 	 	40.0	 	 	 	45.0	 	 	 	50.0	 	 	 	55.0	 	 	 	60.0	 	 	 	65.0	 	 	 	70.0	 	 	 	75.0	 	 	 	80.0	 	 	 	85.0	 	 	 	90.0	 	 	 	95.0	 	 	 	100.0	 
	8.5
	 	 	32.5	 	 	 	37.5	 	 	 	42.5	 	 	 	47.5	 	 	 	52.5	 	 	 	57.5	 	 	 	62.5	 	 	 	67.5	 	 	 	72.5	 	 	 	77.5	 	 	 	82.5	 	 	 	87.5	 	 	 	92.5	 	 	 	97.5	 	 	 	 	 
	9.0
	 	 	35.0	 	 	 	40.0	 	 	 	45.0	 	 	 	50.0	 	 	 	55.0	 	 	 	60.0	 	 	 	65.0	 	 	 	70.0	 	 	 	75.0	 	 	 	80.0	 	 	 	85.0	 	 	 	90.0	 	 	 	95.0	 	 	 	100.0	 	 	 	 	 
	9.5
	 	 	37.5	 	 	 	42.5	 	 	 	47.5	 	 	 	52.5	 	 	 	57.5	 	 	 	62.5	 	 	 	67.5	 	 	 	72.5	 	 	 	77.5	 	 	 	82.5	 	 	 	87.5	 	 	 	92.5	 	 	 	97.5	 	 	 	 	 	 	 	 	 
	10.0
	 	 	40.0	 	 	 	45.0	 	 	 	50.0	 	 	 	55.0	 	 	 	60.0	 	 	 	65.0	 	 	 	70.0	 	 	 	75.0	 	 	 	80.0	 	 	 	85.0	 	 	 	90.0	 	 	 	95.0	 	 	 	100.0	 	 	 	 	 	 	 	 	 
	10.5
	 	 	42.5	 	 	 	47.5	 	 	 	52.5	 	 	 	57.5	 	 	 	62.5	 	 	 	67.5	 	 	 	72.5	 	 	 	77.5	 	 	 	82.5	 	 	 	87.5	 	 	 	92.5	 	 	 	97.5	 	 	 	 	 	 	 	 	 	 	 	 	 
	11.0
	 	 	45.0	 	 	 	50.0	 	 	 	55.0	 	 	 	60.0	 	 	 	65.0	 	 	 	70.0	 	 	 	75.0	 	 	 	80.0	 	 	 	85.0	 	 	 	90.0	 	 	 	95.0	 	 	 	100.0	 	 	 	 	 	 	 	 	 	 	 	 	 
	11.5
	 	 	47.5	 	 	 	52.5	 	 	 	57.5	 	 	 	62.5	 	 	 	67.5	 	 	 	72.5	 	 	 	77.5	 	 	 	82.5	 	 	 	87.5	 	 	 	92.5	 	 	 	97.5	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	12.0
	 	 	50.0	 	 	 	55.0	 	 	 	60.0	 	 	 	65.0	 	 	 	70.0	 	 	 	75.0	 	 	 	80.0	 	 	 	85.0	 	 	 	90.0	 	 	 	95.0	 	 	 	100.0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 






NOTE:





The Vesting Percentage relates to the Company’s Operating Earnings and Earnings Per Share in
any fiscal year during the term of the option beginning with Fiscal Year 2008.



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EXHIBIT B




CHANGE IN CONTROL




     For the purpose of this Agreement, a “Change of Control” shall mean the occurrence of any of
the following events:



     (a) The acquisition by any Person of beneficial ownership of securities of the Company
(including any such acquisition of beneficial ownership deemed to have occurred pursuant to Rule
13d-5 under the Exchange Act) if, immediately thereafter, such Person is the beneficial owner of
(i) 50% or more of the total number of outstanding shares of any single class of Company Common
Stock or (ii) 40% or more of the total number of outstanding shares of all classes of Company
Common Stock, unless such acquisition is made (a) directly from the Company in a transaction
approved by a majority of the members of the Incumbent Board or (b) by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation controlled by the
Company;



     (b) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease
for any reason to constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or nomination for
election by the Company’s stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (or who is otherwise designated as a member of the
Incumbent Board by such a vote) shall be considered as though such individual were a member of the
Incumbent Board, except that any such individual shall not be considered a member of the Incumbent
Board if his or her initial assumption of office occurs as a result of either an actual or
threatened election contest (as such term is used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board;



     (c) The consummation of a Business Combination, unless, immediately following such Business
Combination, (i) more than 50% of both the total number of then outstanding shares of common stock
of the parent corporation resulting from such Business Combination and the combined voting power of
the then outstanding voting securities of such parent corporation entitled to vote generally in the
election of directors will be (or is) then beneficially owned, directly or indirectly, by all or
substantially all of the Persons who were the beneficial owners, respectively, of the outstanding
shares of Company Common Stock immediately prior to such Business Combination in substantially the
same proportions as their ownership immediately prior to such Business Combination of the
outstanding shares of Company Common Stock, (ii) no Person (other than any employee benefit plan
(or related trust) of the Company or any corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 40% or more of the total number of then outstanding
shares of common stock of the corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) at least a majority of the members of the board of
directors of the parent corporation resulting from such Business Combination were members of the
Incumbent Board immediately prior to the consummation of such Business Combination; or



     (d) Approval by the Board and the shareholders of the Company of (i) a complete liquidation or
dissolution of the Company or (ii) a Major Asset Disposition (or, if there is no such approval by
shareholders, consummation of such Major Asset Disposition) unless,



B-1 









 





     (e) immediately following such Major Asset Disposition, (A) Persons that were beneficial
owners of the outstanding shares of Company Common Stock immediately prior to such Major Asset
Disposition beneficially own, directly or indirectly, more than 50% of the total number of then
outstanding shares of common stock and the combined voting power of the then outstanding shares of
voting stock of the Company (if it continues to exist) and of the Acquiring Entity in substantially
the same proportions as their ownership immediately prior to such Major Asset Disposition of the
outstanding shares of Company Common Stock; (B) no Person (other than any employee benefit plan (or
related trust) of the Company or such entity) beneficially owns, directly or indirectly, 40% or
more of the then outstanding shares of common stock or the combined voting power of the then
outstanding voting securities of the Company (if it continues to exist) and of the Acquiring Entity
entitled to vote generally in the election of directors and (C) at least a majority of the members
of the Board of the Company (if it continues to exist) and of the Acquiring Entity were members of
the Incumbent Board at the time of the execution of the initial agreement or action of the Board
providing for such Major Asset Disposition.



     For purposes of the foregoing,




	 	(i)	 	the term “Person” means an individual, entity or group;
	 
	 	(ii)	 	the term “group” is used as it is defined for purposes
of Section 13(d)(3) of the Exchange Act;
	 
	 	(iii)	 	the terms “beneficial owner”, “beneficial ownership”
and “beneficially own” are used as defined for purposes of Rule 13d-3
under the Exchange Act;
	 
	 	(iv)	 	the term “Business Combination” means (x) a merger,
consolidation or share exchange involving the Company or its stock or
(y) an acquisition by the Company, directly or through one or more
subsidiaries, of another entity or its stock or assets;
	 
	 	(v)	 	the term “Company Common Stock” shall mean the Common
Stock, par value $.01 per share, of the Company;
	 
	 	(vi)	 	the term “Exchange Act” means the Securities Exchange
Act of 1934, as amended.
	 
	 	(vii)	 	the phrase “parent corporation resulting from a
Business Combination” means the Company if its stock is not acquired or
converted in the Business Combination and otherwise means the entity
which as a result of such Business Combination owns the Company or all
or substantially all of the Company’s assets either directly or through
one or more subsidiaries;
	 
	 	(viii)	 	the term “Major Asset Disposition” means the sale or other disposition
in one transaction or a series of related transactions of 50% or more of
the assets of the Company and its subsidiaries on a consolidated basis;
and any specified percentage or portion of the assets of the Company
shall be based on fair market value, as determined by a majority of the
members of the Incumbent Board;





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	 	(ix)	 	the term “Acquiring Entity” means the entity that acquires the
largest portion of the assets sold or otherwise disposed of in a Major
Asset Disposition (or the entity, if any, that owns a majority of the
outstanding voting stock of such acquiring entity entitled to vote
generally in the election of directors or members of a comparable
governing body); and
	 
	 	(x)	 	the phrase “substantially the same proportions,” when
used with reference to ownership interests in the parent corporation
resulting from a Business Combination or in an Acquiring Entity, means
substantially in proportion to the number of shares of Company Common
Stock beneficially owned by the applicable Persons immediately prior to
the Business Combination or Major Asset Disposition, but is not to be
construed in such a manner as to require that the same ratio or number
of shares of such parent corporation or Acquiring Entity be issued, paid
or delivered in exchange for or in respect of the shares of each class
of Company Common Stock.






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