**EXHIBIT 10.1**
**CLAIRE’S STORES, INC.**
**AMENDED AND RESTATED**
**1996 INCENTIVE COMPENSATION PLAN**
 
 
 
 
 
 

 

**CLAIRE’S STORES, INC.**
**1996 INCENTIVE COMPENSATION PLAN**
     1. *Purpose; Effective Date*. The purpose of this 1996 INCENTIVE COMPENSATION PLAN (the “Plan”)is to assist CLAIRE’S STORES, INC., a Florida corporation (the “Company”) and its Related Entitiesin attracting, motivating, retaining and rewarding high-quality executives and other Employees,officers, Directors, and Consultants by enabling such persons to acquire or increase a proprietaryinterest in the Company in order to strengthen the mutuality of interests between such persons andthe Company’s shareholders, and providing such persons with annual and long term performanceincentives to expend their maximum efforts in the creation of shareholder value. The Plan isintended to qualify certain compensation awarded under the Plan for tax deductibility under Section162(m) of the Code (as hereafter defined) to the extent deemed appropriate by the Committee (or anysuccessor committee) of the Board of Directors of the Company.
          The Plan first became effective upon approval of the same by the Board of Directors of theCompany on August 13, 1996 (the “Effective Date”), and was also approved by the shareholders of theCompany at their 1997 annual shareholders meeting. The Plan was subsequently amended on February16, 2000 to increase the number of shares of Common Stock available for grant hereunder, which wasapproved by the shareholders of the Company at their 2001 annual shareholders meeting. In aneffort to expand the types of incentive compensation awards that may be granted under this Plan,the Board of Directors of the Company adopted this amended and restated Plan on March 12, 2003 (the“Amended Plan”). In the discretion of the Committee, Awards (as defined below) may be made toCovered Employees (as defined below) which are intended to constitute qualified performance-basedcompensation under Section 162(m) of the Code (as defined below). Any such Awards shall becontingent upon the shareholders having approved the Amended Plan.
     2. *Definitions*. For purposes of the Plan, the following terms shall be defined as set forthbelow, in addition to such terms defined in Section 1 hereof.
          (a) “Annual Incentive Award” means a conditional right granted to a Participant under Sections8(a) and (c) hereof to receive a cash payment, Stock or other Award, unless otherwise determined bythe Committee, after the end of a specified fiscal year.
          (b) “Award” means any Option, Stock Appreciation Right (including Limited Stock AppreciationRight), Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another award,Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual Incentive Award, togetherwith any other right or interest, granted to a Participant under the Plan.
          (c) “Beneficiary” means the person, persons, trust or trusts which have been designated by aParticipant in his or her most recent written beneficiary designation filed with the Committee toreceive the benefits specified under the Plan upon such Participant’s death or to which Awards orother rights are transferred if and to the extent permitted under Section 10(b) hereof. If, upon aParticipant’s death, there is no designated Beneficiary or surviving designated
 

 

Beneficiary, then the term Beneficiary means the person, persons, trust or trusts entitled bywill or the laws of descent and distribution to receive such benefits.
          (d) “Beneficial Owner”, “Beneficially Owning” and “Beneficial Ownership” shall have themeanings ascribed to such terms in Rule 13d-3 under the Exchange Act and any successor to suchRule.
          (e) “Board” means the Company’s Board of Directors.
          (f) “Change in Control” means a Change in Control as defined with related terms in Section 9of the Plan.
          (g) “Change in Control Price” means the amount calculated in accordance with Section 9(c) ofthe Plan.
          (h) “Code” means the Internal Revenue Code of 1986, as amended from time to time, includingregulations thereunder and successor provisions and regulations thereto.
          (i) “Committee” means a committee designated by the Board to administer the Plan; provided,however, that the Committee shall consist of at least two directors, and, in the event the Companyis or becomes a Publicly Held Corporation (as hereinafter defined), each member of which shall be(i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, unlessadministration of the Plan by “non-employee directors” is not then required in order for exemptionsunder Rule 16b-3 to apply to transactions under the Plan, and (ii) an “outside director” within themeaning of Section 162(m) of the Code, unless administration of the Plan by “outside directors” isnot then required in order to qualify for tax deductibility under Section 162(m) of the Code.
          (j) “Consultant” means any person (other than an Employee or a Director, solely with respectto rendering services in such person’s capacity as a director) who is engaged by the Company or anyRelated Entity to render consulting or advisory services to the Company or such Related Entity.
          (k) “Continuous Service” means uninterrupted provision of services to the Company in anycapacity of Employee, Director, or Consultant. Continuous Service shall not be considered to beinterrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, anyRelated Entities, or any successor entities, in any capacity of Employee Director, or Consultant,or (iii) any change in status as long as the individual remains in the service of the Company or aRelated Entity in any capacity of Employee, Director, or Consultant (except as otherwise providedin the Option Agreement). An approved leave of absence shall include sick leave, military leave,or any other authorized personal leave.
          (l) “Corporate Transaction” means a Corporate Transaction as defined in Section 9(b)(i) of thePlan.
          (m) “Covered Employee” means an Eligible Person who is a Covered Employee as specified inSection 8(e) of the Plan.
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          (n) “Deferred Stock” means a right, granted to a Participant under Section 6(e) hereof, toreceive Stock, cash or a combination thereof at the end of a specified deferral period.
          (o) “Director” means a member of the Board or the board of directors of any Related Entity.
          (p) “Disability” means a permanent and total disability (within the meaning of Section 22(e)of the Code), as determined by a medical doctor satisfactory to the Committee.
          (q) “Dividend Equivalent” means a right, granted to a Participant under Section 6(g) hereof,to receive cash, Stock, other Awards or other property equal in value to dividends paid withrespect to a specified number of shares of Stock, or other periodic payments.
          (r) “Effective Date” means the effective date of the Plan, which shall be August 13, 1996.
          (s) “Eligible Person” means each Executive Officer of the Company (as defined under theExchange Act) and other officers, Directors and Employees of the Company or of any Related Entity,and Consultants with the Company or any Related Entity. The foregoing notwithstanding, onlyemployees of the Company, the Parent, or any Subsidiary shall be Eligible Persons for purposes ofreceiving any Incentive Stock Options. An Employee on leave of absence may be considered as stillin the employ of the Company or a Related Entity for purposes of eligibility for participation inthe Plan.
          (t) “Employee” means any person, including an officer or Director, who is an employee of theCompany or any Related Entity. The Payment of a director’s fee by the Company or a Related Entityshall not be sufficient to constitute “employment” by the Company.
          (u) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time,including rules thereunder and successor provisions and rules thereto.
          (v) “Executive Officer” means an executive officer of the Company as defined under theExchange Act.
          (w) “Fair Market Value” means the fair market value of Stock, Awards or other property asdetermined by the Committee or the Board, or under procedures established by the Committee or theBoard. Unless otherwise determined by the Committee or the Board, the Fair Market Value of Stockas of any given date after which the Company is a Publicly Held Corporation shall mean the “ClosingPrice” (as defined below) of the Common Stock on the business day immediately preceding the date ofreference. For the purpose of determining Fair Market Value, the “Closing Price” of the CommonStock on any business day shall be (i) if the Common Stock is listed or admitted for trading on anyUnited States national securities exchange, or if actual transactions are otherwise reported on aconsolidated transaction reporting system, the last reported sale price of Common Stock on suchexchange or reporting system, as reported in any newspaper of general circulation, (ii) if theCommon Stock is quoted on the National Association of Securities Dealers Automated QuotationsSystem (“NASDAQ”), or any similar system of automated dissemination of quotations of securitiesprices in common use, the last reported sale price of Common Stock on such system or, if salesprices are not reported, the
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mean between the closing high bid and low asked quotations for such day of Common Stock onsuch system, as reported in any newspaper of general circulation or (iii) if neither clause (i) or(ii) is applicable, the mean between the high bid and low asked quotations for the Common Stock asreported by the National Quotation Bureau, Incorporated if at least two securities dealers haveinserted both bid and asked quotations for Common Stock on at least five of the ten preceding days.If neither (i), (ii), or (iii) above is applicable, then Fair Market Value shall be determined bythe Committee or the Board in a fair and uniform manner.
          (x) “Incentive Stock Option” means any Option intended to be designated as an incentive stockoption within the meaning of Section 422 of the Code or any successor provision thereto.
          (y) “Incumbent Board” means the Incumbent Board as defined in Section 9(b)(ii) of the Plan.
          (z) “Limited Stock Appreciation Right” means a right granted to a Participant under Section6(c) hereof.
          (aa) “Option” means a right granted to a Participant under Section 6(b) hereof, to purchaseStock or other Awards at a specified price during specified time periods.
          (bb) “Optionee” means a person to whom an Option or Incentive Stock Option is granted underthis Plan or any person who succeeds to the rights of such person under this Plan.
          (cc) “Other Stock-Based Awards” means Awards granted to a Participant under Section 6(h)hereof.
          (dd) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined inSection 424(e) of the Code.
          (ee) “Participant” means a person who has been granted an Award under the Plan which remainsoutstanding, including a person who is no longer an Eligible Person.
          (ff) “Performance Award” means a right, granted to an Eligible Person under Sections 8(a) and(b) hereof, to receive Awards based upon performance criteria specified by the Committee or theBoard.
          (gg) “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the ExchangeAct and used in Sections 13(d) and 14(d) thereof, and shall include a “group” as defined in Section13(d) thereof.
          (hh) “Publicly Held Corporation” shall mean a publicly held corporation as that term is usedunder Section 162(m)(2) of the Code.
          (ii) “Restricted Stock” means Stock granted to a Participant under Section 6(d) hereof, thatis subject to certain restrictions and to a risk of forfeiture.
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          (jj) “Rule 16b-3” and “Rule 16a-1(c)(3)” means Rule 16b-3 and Rule 16a-1(c)(3), as from timeto time in effect and applicable to the Plan and Participants, promulgated by the Securities andExchange Commission under Section 16 of the Exchange Act.
          (kk) “Stock” means the Company’s Common Stock, and such other securities as may be substituted(or resubstituted) for Stock pursuant to Section 10(c) hereof.
          (ll) “Stock Appreciation Right” means a right granted to a Participant under Section 6(c)hereof.
          (mm) “Subsidiary” means a “subsidiary corporation” whether now or hereafter existing, asdefined in Section 424(f) of the Code.
     3. *Administration*.
          (a) *Authority of the Committee*. The Plan shall be administered by the Committee; provided,however, that except as otherwise expressly provided in this Plan or, during the period that theCompany is a Publicly Held Corporation, in order to comply with Code Section 162(m) or Rule 16b-3under the Exchange Act, the Board may exercise any power or authority granted to the Committeeunder this Plan. The Committee or the Board shall have full and final authority, in each casesubject to and consistent with the provisions of the Plan, to select Eligible Persons to becomeParticipants, grant Awards, determine the type, number and other terms and conditions of, and allother matters relating to, Awards, prescribe Award agreements (which need not be identical for eachParticipant) and rules and regulations for the administration of the Plan, construe and interpretthe Plan and Award agreements and correct defects, supply omissions or reconcile inconsistenciestherein, and to make all other decisions and determinations as the Committee or the Board may deemnecessary or advisable for the administration of the Plan. In exercising any discretion granted tothe Committee or the Board under the Plan or pursuant to any Award, the Committee or the Boardshall not be required to follow past practices, act in a manner consistent with past practices, ortreat any Eligible Person in a manner consistent with the treatment of other Eligible Persons.
          (b) *Manner of Exercise of Committee Authority*. As long as the Company is a Publicly HeldCorporation, the Committee, and not the Board, shall exercise sole and exclusive discretion on anymatter relating to a Participant then subject to Section 16 of the Exchange Act with respect to theCompany to the extent necessary in order that transactions by such Participant shall be exemptunder Rule 16b-3 under the Exchange Act. Any action of the Committee or the Board shall be final,conclusive and binding on all persons, including the Company, its Related Entities, Participants,Beneficiaries, transferees under Section 10(b) hereof or other persons claiming rights from orthrough a Participant, and shareholders. The express grant of any specific power to the Committeeor the Board, and the taking of any action by the Committee or the Board, shall not be construed aslimiting any power or authority of the Committee or the Board. The Committee or the Board maydelegate to officers or managers of the Company or any Related Entity, or committees thereof, theauthority, subject to such terms as the Committee or the Board shall determine, (i) to performadministrative functions, (ii) with respect to Participants not subject to Section 16 of theExchange Act, to perform such other functions as the Committee or the Board may determine, and(iii) with respect to Participants subject to Section 16, to perform such other functions of theCommittee or the Board as the Committee or the
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Board may determine to the extent performance of such functions will not result in the loss ofan exemption under Rule 16b-3 otherwise available for transactions by such persons, in each case tothe extent permitted under applicable law and subject to the requirements set forth in Section8(d). The Committee or the Board may appoint agents to assist it in administering the Plan.
          (c) *Limitation of Liability*. The Committee and the Board, and each member thereof, shall beentitled to, in good faith, rely or act upon any report or other information furnished to him orher by any Executive Officer, other officer or Employee, the Company’s independent auditors,Consultants or any other agents assisting in the administration of the Plan. Members of theCommittee and the Board, and any officer or Employee acting at the direction or on behalf of theCommittee or the Board, shall not be personally liable for any action or determination taken ormade in good faith with respect to the Plan, and shall, to the extent permitted by law, be fullyindemnified and protected by the Company with respect to any such action or determination.
     4. *Stock Subject to Plan*.
          (a) *Limitation on Overall Number of Shares Subject to Awards*. Subject to adjustment asprovided in Section 10(c) hereof, the total number of shares of Stock reserved and available fordelivery in connection with Awards under the Plan shall be 4,000,000 (plus the number of sharesunused or recaptured under the Company’s 1991 Stock Option Plan). If any Awards previously grantedunder the Plan terminate without being exercised, expire, are forfeited or canceled, or aresurrendered in payment of any Awards or any tax withholding with regard thereto, new Awards maythereafter be granted covering such shares of Stock. Any shares of Stock delivered under the Planmay consist, in whole or in part, of authorized and unissued shares or treasury shares. Subject toadjustment as provided in Section 10(c) hereof, the number of shares of Stock which may be issuedpursuant to Incentive Stock Options shall not exceed 4,000,000 shares.
          (b) *Application of Limitations*. The limitation contained in Section 4(a) shall apply not onlyto Awards that are settleable by the delivery of shares of Stock but also to Awards relating toshares of Stock but settleable only in cash (such as cash-only Stock Appreciation Rights). TheCommittee or the Board may adopt reasonable counting procedures to ensure appropriate counting,avoid double counting (as, for example, in the case of tandem or substitute awards) and makeadjustments if the number of shares of Stock actually delivered differs from the number of sharespreviously counted in connection with an Award.
     5. *Eligibility; Per-Person Award Limitations*. Awards may be granted under the Plan only toEligible Persons. In each fiscal year during any part of which the Plan is in effect, an EligiblePerson may not be granted Awards relating to more than 500,000 shares of Stock, subject toadjustment as provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g),6(h), 8(b) and 8(c). In addition, the maximum amount that may be earned as an Annual IncentiveAward or other cash Award in any fiscal year by any one Participant shall be $1,000,000, and themaximum amount that may be earned as a Performance Award or other cash Award in respect of aperformance period by any one Participant shall be $5,000,000.
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     6. *Specific Terms of Awards*.SpecificTermsofAwards.
          (a) *General*. Awards may be granted on the terms and conditions set forth in this Section 6.In addition, the Committee or the Board may impose on any Award or the exercise thereof, at thedate of grant or thereafter (subject to Section 10(e)), such additional terms and conditions, notinconsistent with the provisions of the Plan, as the Committee or the Board shall determine,including terms requiring forfeiture of Awards in the event of termination of Continuous Service bythe Participant and terms permitting a Participant to make elections relating to his or her Award.The Committee or the Board shall retain full power and discretion to accelerate, waive or modify,at any time, any term or condition of an Award that is not mandatory under the Plan. Except incases in which the Committee or the Board is authorized to require other forms of considerationunder the Plan, or to the extent other forms of consideration must be paid to satisfy therequirements of Florida law, no consideration other than services may be required for the grant(but not the exercise) of any Award.
          (b) *Options*. The Committee and the Board each is authorized to grant Options to Participantson the following terms and conditions:
     (i) *Exercise Price*. The exercise price per share of Stock purchasable under anOption shall be determined by the Committee or the Board, provided that suchexercise price shall not, in the case of Incentive Stock Options, be less than 100%of the Fair Market Value of the Stock on the date of grant of the Option and shallnot, in any event, be less than the par value of a share of Stock on the date ofgrant of such Option. If an employee owns or is deemed to own (by reason of theattribution rules applicable under Section 424(d) of the Code) more than 10% of thecombined voting power of all classes of stock of the Company or any ParentCorporation or Subsidiary and an Incentive Stock Option is granted to such employee,the option price of such Incentive Stock Option (to the extent required by the Codeat the time of grant) shall be no less than 110% of the Fair Market Value of theStock on the date such Incentive Stock Option is granted.
     (ii) *Time and Method of Exercise*. The Committee or the Board shall determinethe time or times at which or the circumstances under which an Option may beexercised in whole or in part (including based on achievement of performance goalsand/or future service requirements), the time or times at which Options shall ceaseto be or become exercisable following termination of Continuous Service or uponother conditions, the methods by which such exercise price may be paid or deemed tobe paid (including in the discretion of the Committee or the Board a cashlessexercise procedure), the form of such payment, including, without limitation, cash,Stock, other Awards or awards granted under other plans of the Company or a RelatedEntity, or other property (including notes or other contractual obligations ofParticipants to make payment on a deferred basis), and the methods by or forms inwhich Stock will be delivered or deemed to be delivered to Participants.
     (iii) *Incentive Stock Options*. The terms of any Incentive Stock Option grantedunder the Plan shall comply in all respects with the provisions of Section
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422 of the Code. Anything in the Plan to the contrary notwithstanding, no termof the Plan relating to Incentive Stock Options (including any Stock AppreciationRight in tandem therewith) shall be interpreted, amended or altered, nor shall anydiscretion or authority granted under the Plan be exercised, so as to disqualifyeither the Plan or any Incentive Stock Option under Section 422 of the Code, unlessthe Participant has first requested the change that will result in suchdisqualification. Thus, if and to the extent required to comply with Section 422 ofthe Code, Options granted as Incentive Stock Options shall be subject to thefollowing special terms and conditions:
          (A) the Option shall not be exercisable more than ten years after the date suchIncentive Stock Option is granted; provided, however, that if a Participant owns oris deemed to own (by reason of the attribution rules of Section 424(d) of the Code)more than 10% of the combined voting power of all classes of stock of the Company orany Parent Corporation and the Incentive Stock Option is granted to suchParticipant, the term of the Incentive Stock Option shall be (to the extent requiredby the Code at the time of the grant) for no more than five years from the date ofgrant; and
          (B) The aggregate Fair Market Value (determined as of the date the IncentiveStock Option is granted) of the shares of stock with respect to which IncentiveStock Options granted under the Plan and all other option plans of the Company orits Parent Corporation during any calendar year exercisable for the first time bythe Participant during any calendar year shall not (to the extent required by theCode at the time of the grant) exceed $100,000.
     (iv) *Repurchase Rights*. The Committee and the Board shall have the discretionto grant Options which are exercisable for unvested shares of Common Stock. Shouldthe Optionee’s Continuous Service cease while holding such unvested shares, theCompany shall have the right to repurchase, at the exercise price paid per share,any or all of those unvested shares. The terms upon which such repurchase rightshall be exercisable (including the period and procedure for exercise and theappropriate vesting schedule for the purchased shares) shall be established by theCommittee or the Board and set forth in the document evidencing such repurchaseright.
          (c) *Stock Appreciation Rights*. The Committee and the Board each is authorized to grant StockAppreciation Right’s to Participants on the following terms and conditions:
     (i) *Right to Payment*. A Stock Appreciation Right shall confer on theParticipant to whom it is granted a right to receive, upon exercise thereof, theexcess of (A) the Fair Market Value of one share of stock on the date of exercise(or, in the case of a “Limited Stock Appreciation Right” that may be exercised onlyin the event of a Change in Control, the Fair Market Value determined by referenceto the Change in Control Price, as defined under Section 9(c) hereof), over (B) thegrant price of the Stock Appreciation Right as determined by the Committee or theBoard. The grant price of a Stock Appreciation Right shall not
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be less than the Fair Market Value of a share of Stock on the date of grantexcept as provided under Section 7(a) hereof.
     (ii) *Other Terms*. The Committee or the Board shall determine at the date ofgrant or thereafter, the time or times at which and the circumstances under which aStock Appreciation Right may be exercised in whole or in part (including based onachievement of performance goals and/or future service requirements), the time ortimes at which Stock Appreciation Rights shall cease to be or become exercisablefollowing termination of Continuous Service or upon other conditions, the method ofexercise, method of settlement, form of consideration payable in settlement, methodby or forms in which Stock will be delivered or deemed to be delivered toParticipants, whether or not a Stock Appreciation Right shall be in tandem or incombination with any other Award, and any other terms and conditions of any StockAppreciation Right. Limited Stock Appreciation Rights that may only be exercised inconnection with a Change in Control or other event as specified by the Committee orthe Board, may be granted on such terms, not inconsistent with this Section 6(c), asthe Committee or the Board may determine. Stock Appreciation Rights and LimitedStock Appreciation Rights may be either freestanding or in tandem with other Awards.
          (d) *Restricted Stock*. The Committee and the Board each is authorized to grant RestrictedStock to Participants on the following terms and conditions:
     (i) *Grant and Restrictions*. Restricted Stock shall be subject to suchrestrictions on transferability, risk of forfeiture and other restrictions, if any,as the Committee or the Board may impose, or as otherwise provided in this Plan.The restrictions may lapse separately or in combination at such times, under suchcircumstances (including based on achievement of performance goals and/or futureservice requirements), in such installments or otherwise, as the Committee or theBoard may determine at the date of grant or thereafter. Except to the extentrestricted under the terms of the Plan and any Award agreement relating to theRestricted Stock, a Participant granted Restricted Stock shall have all of therights of a shareholder, including the right to vote the Restricted Stock and theright to receive dividends thereon (subject to any mandatory reinvestment or otherrequirement imposed by the Committee or the Board). During the restricted periodapplicable to the Restricted Stock, subject to Section 10(b) below, the RestrictedStock may not be sold, transferred, pledged, hypothecated, margined or otherwiseencumbered by the Participant.
     (ii) *Forfeiture*. Except as otherwise determined by the Committee or the Boardat the time of the Award, upon termination of a Participant’s Continuous Serviceduring the applicable restriction period, the Participant’s Restricted Stock that isat that time subject to restrictions shall be forfeited and reacquired by theCompany; provided that the Committee or the Board may provide, by rule or regulationor in any Award agreement, or may determine in any individual case, thatrestrictions or forfeiture conditions relating to Restricted Stock shall be waivedin whole or in part in the event of terminations resulting
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from specified causes, and the Committee or the Board may in other cases waivein whole or in part the forfeiture of Restricted Stock.
     (iii) *Certificates for Stock*. Restricted Stock granted under the Plan may beevidenced in such manner as the Committee or the Board shall determine. Ifcertificates representing Restricted Stock are registered in the name of theParticipant, the Committee or the Board may require that such certificates bear anappropriate legend referring to the terms, conditions and restrictions applicable tosuch Restricted Stock, that the Company retain physical possession of thecertificates, and that the Participant deliver a stock power to the Company,endorsed in blank, relating to the Restricted Stock.
     (iv) *Dividends and Splits*. As a condition to the grant of an Award ofRestricted Stock, the Committee or the Board may require that any cash dividendspaid on a share of Restricted Stock be automatically reinvested in additional sharesof Restricted Stock or applied to the purchase of additional Awards under the Plan.Unless otherwise determined by the Committee or the Board, Stock distributed inconnection with a Stock split or Stock dividend, and other property distributed as adividend, shall be subject to restrictions and a risk of forfeiture to the sameextent as the Restricted Stock with respect to which such Stock or other propertyhas been distributed.
          (e) *Deferred Stock*. The Committee and the Board each is authorized to grant Deferred Stock toParticipants, which are rights to receive Stock, cash, or a combination thereof at the end of aspecified deferral period, subject to the following terms and conditions:
     (i) *Award and Restrictions*. Satisfaction of an Award of Deferred Stock shalloccur upon expiration of the deferral period specified for such Deferred Stock bythe Committee or the Board (or, if permitted by the Committee or the Board, aselected by the Participant). In addition, Deferred Stock shall be subject to suchrestrictions (which may include a risk of forfeiture) as the Committee or the Boardmay impose, if any, which restrictions may lapse at the expiration of the deferralperiod or at earlier specified times (including based on achievement of performancegoals and/or future service requirements), separately or in combination, ininstallments or otherwise, as the Committee or the Board may determine. DeferredStock may be satisfied by delivery of Stock, cash equal to the Fair Market Value ofthe specified number of shares of Stock covered by the Deferred Stock, or acombination thereof, as determined by the Committee or the Board at the date ofgrant or thereafter. Prior to satisfaction of an Award of Deferred Stock, an Awardof Deferred Stock carries no voting or dividend or other rights associated withshare ownership.
     (ii) *Forfeiture*. Except as otherwise determined by the Committee or the Board,upon termination of a Participant’s Continuous Service during the applicabledeferral period thereof to which forfeiture conditions apply (as provided in theAward agreement evidencing the Deferred Stock), the Participant’s Deferred Stockthat is at that time subject to deferral (other than a deferral at the election ofthe Participant) shall be forfeited; provided that the
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Committee or the Board may provide, by rule or regulation or in any Awardagreement, or may determine in any individual case, that restrictions or forfeitureconditions relating to Deferred Stock shall be waived in whole or in part in theevent of terminations resulting from specified causes, and the Committee or theBoard may in other cases waive in whole or in part the forfeiture of Deferred Stock.
     (iii) *Dividend Equivalents*. Unless otherwise determined by the Committee orthe Board at date of grant, any Dividend Equivalents that are granted with respectto any Award of Deferred Stock shall be either (A) paid with respect to suchDeferred Stock at the dividend payment date in cash or in shares of unrestrictedStock having a Fair Market Value equal to the amount of such dividends, or (B)deferred with respect to such Deferred Stock and the amount or value thereofautomatically deemed reinvested in additional Deferred Stock, other Awards or otherinvestment vehicles, as the Committee or the Board shall determine or permit theParticipant to elect.
          (f) *Bonus Stock and Awards in Lieu of Obligations*. The Committee and the Board each isauthorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of Companyobligations to pay cash or deliver other property under the Plan or under other plans orcompensatory arrangements, provided that, in the case of Participants subject to Section 16 of theExchange Act, the amount of such grants remains within the discretion of the Committee to theextent necessary to ensure that acquisitions of Stock or other Awards are exempt from liabilityunder Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall be subject tosuch other terms as shall be determined by the Committee or the Board.
          (g) *Dividend Equivalents*. The Committee and the Board each is authorized to grant DividendEquivalents to a Participant entitling the Participant to receive cash, Stock, other Awards, orother property equal in value to dividends paid with respect to a specified number of shares ofStock, or other periodic payments. Dividend Equivalents may be awarded on a free-standing basis orin connection with another Award. The Committee or the Board may provide that Dividend Equivalentsshall be paid or distributed when accrued or shall be deemed to have been reinvested in additionalStock, Awards, or other investment vehicles, and subject to such restrictions on transferabilityand risks of forfeiture, as the Committee or the Board may specify.
          (h) *Other Stock-Based Awards*. The Committee and the Board each is authorized, subject tolimitations under applicable law, to grant to Participants such other Awards that may bedenominated or payable in, valued in whole or in part by reference to, or otherwise based on, orrelated to, Stock, as deemed by the Committee or the Board to be consistent with the purposes ofthe Plan, including, without limitation, convertible or exchangeable debt securities, other rightsconvertible or exchangeable into Stock, purchase rights for Stock, Awards with value and paymentcontingent upon performance of the Company or any other factors designated by the Committee or theBoard, and Awards valued by reference to the book value of Stock or the value of securities of orthe performance of specified Related Entities or business units. The Committee or the Board shalldetermine the terms and conditions of such Awards. Stock delivered pursuant to an Award in thenature of a purchase right granted under this Section 6(h) shall be purchased for suchconsideration (including without limitation loans from the Company or a Related Entity), paid forat such times, by such methods, and in such
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forms, including, without limitation, cash, Stock, other Awards or other property, as theCommittee or the Board shall determine. The Committee and the Board shall have the discretion togrant such other Awards which are exercisable for unvested shares of Common Stock. Should theOptionee’s Continuous Service cease while holding such unvested shares, the Company shall have theright to repurchase, at the exercise price paid per share, any or all of those unvested shares.The terms upon which such repurchase right shall be exercisable (including the period and procedurefor exercise and the appropriate vesting schedule for the purchased shares) shall be established bythe Committee or the Board and set forth in the document evidencing such repurchase right. Cashawards, as an element of or supplement to any other Award under the Plan, may also be grantedpursuant to this Section 6(h).
     7. *Certain Provisions Applicable to Awards*.
          (a) *Stand-Alone, Additional, Tandem, and Substitute Awards*. Awards granted under the Planmay, in the discretion of the Committee or the Board, be granted either alone or in addition to, intandem with, or in substitution or exchange for, any other Award or any award granted under anotherplan of the Company, any Related Entity, or any business entity to be acquired by the Company or aRelated Entity, or any other right of a Participant to receive payment from the Company or anyRelated Entity. Such additional, tandem, and substitute or exchange Awards may be granted at anytime. If an Award is granted in substitution or exchange for another Award or award, the Committeeor the Board shall require the surrender of such other Award or award in consideration for thegrant of the new Award. In addition, Awards may be granted in lieu of cash compensation, includingin lieu of cash amounts payable under other plans of the Company or any Related Entity, in whichthe value of Stock subject to the Award is equivalent in value to the cash compensation (forexample, Deferred Stock or Restricted Stock), or in which the exercise price, grant price orpurchase price of the Award in the nature of a right that may be exercised is equal to the FairMarket Value of the underlying Stock minus the value of the cash compensation surrendered (forexample, Options granted with an exercise price “discounted” by the amount of the cash compensationsurrendered).
          (b) *Term of Awards*. The term of each Award shall be for such period as may be determined bythe Committee or the Board; provided that in no event shall the term of any Option or StockAppreciation Right exceed a period of ten years (or such shorter term as may be required in respectof an Incentive Stock Option under Section 422 of the Code).
          (c) *Form and Timing of Payment Under Awards; Deferrals*. Subject to the terms of the Plan andany applicable Award agreement, payments to be made to the Company or a Related Entity upon theexercise of an Option or other Award or settlement of an Award may be made in such forms as theCommittee or the Board shall determine, including, without limitation, cash, other Awards or otherproperty, 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 withsuch settlement, in the discretion of the Committee or the Board or upon occurrence of one or morespecified events (in addition to a Change in Control). Installment or deferred payments may berequired by the Committee or the Board (subject to Section 10(e) of the Plan) or permitted at theelection of the Participant on terms and conditions established by the Committee or the Board.Payments may include, without limitation, provisions for the payment or crediting of a reasonableinterest rate on
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installment or deferred payments or the grant or crediting of Dividend Equivalents or otheramounts in respect of installment or deferred payments denominated in Stock.
          (d) *Exemptions from**Section 16(b)**Liability*. If and to the extent that the Company is orbecomes a Publicly Held Corporation, it is the intent of the Company that this Plan comply in allrespects with applicable provisions of Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary toensure that neither the grant of any Awards to nor other transaction by a Participant who issubject to Section 16 of the Exchange Act is subject to liability under Section 16(b) thereof(except for transactions acknowledged in writing to be non-exempt by such Participant).Accordingly, if any provision of this Plan or any Award agreement does not comply with therequirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any such transaction, suchprovision will be construed or deemed amended to the extent necessary to conform to the applicablerequirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall avoid liability underSection 16(b). In addition, the purchase price of any Award conferring a right to purchase Stockshall be not less than any specified percentage of the Fair Market Value of Stock at the date ofgrant of the Award then required in order to comply with Rule 16b-3.
     8. *Performance and Annual Incentive Awards*.
          (a) *Performance Conditions*. The right of a Participant to exercise or receive a grant orsettlement of any Award, and the timing thereof, may be subject to such performance conditions asmay be specified by the Committee or the Board. The Committee or the Board may use such businesscriteria and other measures of performance as it may deem appropriate in establishing anyperformance conditions, and may exercise its discretion to reduce the amounts payable under anyAward subject to performance conditions, except as limited under Sections 8(b) and 8(c) hereof inthe case of a Performance Award or Annual Incentive Award intended to qualify under Code Section162(m). At such times as the Company is a Publicly Held Corporation, if and to the extent requiredunder Code Section 162(m), any power or authority relating to a Performance Award or AnnualIncentive Award intended to qualify under Code Section 162(m), shall be exercised by the Committeeand not the Board.
          (b) *Performance Awards Granted to Designated Covered Employees*. If and to the extent that theCommittee determines that a Performance Award to be granted to an Eligible Person who is designatedby the Committee as likely to be a Covered Employee should qualify as “performance-basedcompensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of suchPerformance Award shall be contingent upon achievement of preestablished performance goals andother terms set forth in this Section 8(b).
     (i) *Performance Goals Generally*. The performance goals for such PerformanceAwards shall consist of one or more business criteria and a targeted level or levelsof performance with respect to each of such criteria, as specified by the Committeeconsistent with this Section 8(b). Performance goals shall be objective and shallotherwise meet the requirements of Code Section 162(m) and regulations thereunderincluding the requirement that the level or levels of performance targeted by theCommittee result in the achievement of performance goals being “substantiallyuncertain.” The Committee may determine that such Performance Awards shall begranted, exercised and/or settled upon achievement
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of any one performance goal or that two or more of the performance goals mustbe achieved as a condition to grant, exercise and/or settlement of such PerformanceAwards. Performance goals may differ for Performance Awards granted to any oneParticipant or to different Participants.
     (ii) *Business Criteria*. One or more of the following business criteria for theCompany, on a consolidated basis, and/or specified Related Entities or businessunits of the Company (except with respect to the total shareholder return andearnings per share criteria), shall be used exclusively by the Committee inestablishing performance goals for such Performance Awards: (1) total shareholderreturn; (2) such total shareholder return as compared to total return (on acomparable basis) of a publicly available index such as, but not limited to, theStandard & Poor’s 500 Stock Index or the S&P Specialty Retailer Index; (3) netincome; (4) pretax earnings; (5) earnings before interest expense, taxes,depreciation and amortization; (6) pretax operating earnings after interest expenseand before bonuses, service fees, and extraordinary or special items; (7) operatingmargin; (8) earnings per share; (9) return on equity; (10) return on capital; (11)return on investment; (12) operating earnings; (13) working capital or inventory;(14) ratio of debt to shareholders’ equity; (15) comparable store sales; (16)inventory turn; (17) markdowns as a percentage of sales; and (18) selling generaland administrative expenses as a percentage of sales. One or more of the foregoingbusiness criteria shall also be exclusively used in establishing performance goalsfor Annual Incentive Awards granted to a Covered Employee under Section 8(c) hereofthat are intended to qualify as “performance-based compensation under Code Section162(m).
     (iii) *Performance Period; Timing For Establishing Performance Goals*.Achievement of performance goals in respect of such Performance Awards shall bemeasured over a performance period of up to ten years, as specified by theCommittee. Performance goals shall be established not later than 90 days after thebeginning of any performance period applicable to such Performance Awards, or atsuch 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 Awardpool, which shall be an unfunded pool, for purposes of measuring Company performancein connection with Performance Awards. The amount of such Performance Award poolshall be based upon the achievement of a performance goal or goals based on one ormore of the business criteria set forth in Section 8(b)(ii) hereof during the givenperformance period, as specified by the Committee in accordance with Section8(b)(iii) hereof. The Committee may specify the amount of the Performance Awardpool as a percentage of any of such business criteria, a percentage thereof inexcess of a threshold amount, or as another amount which need not bear a strictlymathematical relationship to such business criteria.
     (v) *Settlement of Performance Awards; Other Terms*. Settlement of suchPerformance Awards shall be in cash, Stock, other Awards or other property,
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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 suchPerformance Awards. The Committee shall specify the circumstances in which suchPerformance Awards shall be paid or forfeited in the event of termination ofContinuous Service by the Participant prior to the end of a performance period orsettlement of Performance Awards.
          (c) *Annual Incentive Awards Granted to Designated Covered Employees*. The Committee may,within its discretion, grant one or more Annual Incentive Awards to any Eligible Person, subject tothe terms and conditions set forth in this Section 8(c).
     (i) *Annual Incentive Award Pool*. The Committee may establish an AnnualIncentive Award pool, which shall be an unfunded pool, for purposes of measuringCompany performance in connection with Annual Incentive Awards. In the case ofAnnual Incentive Awards intended to qualify as “performance-based compensation” forpurposes of Code Section 162(m), the amount of such Annual Incentive Award poolshall be based upon the achievement of a performance goal or goals based on one ormore of the business criteria set forth in Section 8(b)(ii) hereof during the givenperformance period, as specified by the Committee in accordance with Section8(b)(iii) hereof. The Committee may specify the amount of the Annual IncentiveAward pool as a percentage of any such business criteria, a percentage thereof inexcess of a threshold amount, or as another amount which need not bear a strictlymathematical relationship to such business criteria.
     (ii) *Potential Annual Incentive Awards*. Not later than the end of the 90th dayof each fiscal year, or at such other date as may be required or permitted in thecase of Awards intended to be “performance-based compensation” under Code Section162(m), the Committee shall determine the Eligible Persons who will potentiallyreceive Annual Incentive Awards, and the amounts potentially payable thereunder, forthat fiscal year, either out of an Annual Incentive Award pool established by suchdate under Section 8(c)(i) hereof or as individual Annual Incentive Awards. In thecase of individual Annual Incentive Awards intended to qualify under Code Section162(m), the amount potentially payable shall be based upon the achievement of aperformance goal or goals based on one or more of the business criteria set forth inSection 8(b)(ii) hereof in the given performance year, as specified by theCommittee; in other cases, such amount shall be based on such criteria as shall beestablished by the Committee. In all cases, the maximum Annual Incentive Award ofany Participant shall be subject to the limitation set forth in Section 5 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 Awardpool, and the maximum amount of potential Annual Incentive Award payable to eachParticipant in the Annual Incentive Award pool, or (B) the amount of potentialAnnual Incentive Award otherwise payable to each Participant. The Committee may, inits discretion, determine that the amount payable to any Participant as an AnnualIncentive Award shall be reduced from
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the amount of his or her potential Annual Incentive Award, including adetermination to make no Award whatsoever. The Committee shall specify thecircumstances in which an Annual Incentive Award shall be paid or forfeited in theevent of termination of Continuous Service by the Participant prior to the end of afiscal year or settlement of such Annual Incentive Award.
          (d) *Written Determinations*. All determinations by the Committee as to the establishment ofperformance goals, the amount of any Performance Award pool or potential individual PerformanceAwards and as to the achievement of performance goals relating to Performance Awards under Section8(b), and the amount of any Annual Incentive Award pool or potential individual Annual IncentiveAwards and the amount of final Annual Incentive Awards under Section 8(c), shall be made in writingin the case of any Award intended to qualify under Code Section 162(m). The Committee may notdelegate any responsibility relating to such Performance Awards or Annual Incentive Awards if andto the extent required to comply with Code Section 162(m).
          (e) *Status of**Section 8(b)**and**Section 8(c)**Awards Under Code Section 162(m)*. It is theintent of the Company that Performance Awards and Annual Incentive Awards under Section 8(b) and8(c) hereof granted to persons who are designated by the Committee as likely to be CoveredEmployees within the meaning of Code Section 162(m) and regulations thereunder shall, if sodesignated by the Committee, constitute “qualified performance-based compensation” within themeaning of Code Section 162(m) and regulations thereunder. Accordingly, the terms of Sections8(b), (c), (d) and (e), 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 agiven Participant will be a Covered Employee with respect to a fiscal year that has not yet beencompleted, the term Covered Employee as used herein shall mean only a person designated by theCommittee, at the time of grant of Performance Awards or an Annual Incentive Award, as likely to bea Covered Employee with respect to that fiscal year. If any provision of the Plan or any agreementrelating to such Performance Awards or Annual Incentive Awards does not comply or is inconsistentwith the requirements of Code Section 162(m) or regulations thereunder, such provision shall beconstrued or deemed amended to the extent necessary to conform to such requirements.
     9. *Change in Control.*
          (a) *Effect of “Change in Control.”*If and to the extent provided in the Award, in the eventof a “Change in Control,” as defined in Section 9(b):
     (i) The Committee may, within its discretion, accelerate the vesting andexercisability of any Award carrying a right to exercise that was not previouslyvested and exercisable as of the time of the Change in Control, subject toapplicable restrictions set forth in Section 10(a) hereof;
     (ii) The Committee may, within its discretion, accelerate the exercisability ofany limited Stock Appreciation Rights (and other Stock Appreciation Rights if soprovided by their terms) and provide for the settlement
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of such Stock Appreciation Rights for amounts, in cash, determined by referenceto the Change in Control Price;
     (iii) The Committee may, within its discretion, lapse the restrictions,deferral of settlement, and forfeiture conditions applicable to any other Awardgranted under the Plan and such Awards may be deemed fully vested as of the time ofthe Change in Control, except to the extent of any waiver by the Participant andsubject to applicable restrictions set forth in Section 10(a) hereof; and
     (iv) With respect to any such outstanding Award subject to achievement ofperformance goals and conditions under the Plan, the Committee may, within itsdiscretion, deem such performance goals and other conditions as having been met asof the date of the Change in Control.
          (b) *Definition of “Change in Control.*A “Change in Control” shall be deemed to have occurredupon:
               (i) Approval by the shareholders of the Company of a reorganization, merger, consolidation orother form of corporate transaction or series of transactions, in each case, with respect to whichpersons who were the shareholders of the Company immediately prior to such reorganization, mergeror consolidation or other transaction do not, immediately thereafter, own more than 50% of thecombined voting power entitled to vote generally in the election of directors of the reorganized,merged or consolidated company’s then outstanding voting securities, or a liquidation ordissolution of the Company or the sale of all or substantially all of the assets of the Company(unless such reorganization, merger, consolidation or other corporate transaction, liquidation,dissolution or sale (any such event being referred to as a “Corporate Transaction”) is subsequentlyabandoned);
               (ii) Individuals who, as of the date on which the Award is granted, constitute the Board (the“Incumbent Board”) cease for any reason to constitute at least a majority of the Board, providedthat any person becoming a director subsequent to the date on which the Award was granted whoseelection, or nomination for election by the Company’s shareholders, was approved by a vote of atleast a majority of the directors then comprising the Incumbent Board (other than an election ornomination of an individual whose initial assumption of office is in connection with an actual orthreatened election contest relating to the election of the Directors of the Company) shall be, forpurposes of this Agreement, considered as though such person were a member of the Incumbent Board;or
               (iii) the acquisition (other than from the Company) by any person, entity or “group”, withinthe meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act, of more than 50% ofeither the then outstanding shares of the Company’s Common Stock or the combined voting power ofthe Company’s then outstanding voting securities entitled to vote generally in the election ofdirectors (hereinafter referred to as the ownership of a “Controlling Interest”) excluding, forthis purpose, any acquisitions by (1) the Company or a Related Entity, (2) any person, entity or“group” that as of the date on which the Award is granted owns beneficial ownership (within themeaning of Rule 13d-3 promulgated under the Securities
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Exchange Act) of a Controlling Interest or (3) any employee benefit plan of the Company aRelated Entity.
          (c) *Definition of “Change in Control Price.”*The “Change in Control Price” means an amount incash equal to the higher of (i) the amount of cash and fair market value of property that is thehighest price per share paid (including extraordinary dividends) in any Corporate Transactiontriggering the Change in Control under Section 9(b)(i) hereof or any liquidation of sharesfollowing a sale of substantially all of the assets of the Company, or (ii) the highest Fair MarketValue per share at any time during the 60-day period preceding and the 60-day period following theChange in Control.
     10. *General Provisions*.
          (a) *Compliance With Legal and Other Requirements*. The Company may, to the extent deemednecessary or advisable by the Committee or the Board, postpone the issuance or delivery of Stock orpayment of other benefits under any Award until completion of such registration or qualification ofsuch Stock or other required action under any federal or state law, rule or regulation, listing orother required action with respect to any stock exchange or automated quotation system upon whichthe Stock or other Company securities are listed or quoted, or compliance with any other obligationof the Company, as the Committee or the Board, may consider appropriate, and may require anyParticipant to make such representations, furnish such information and comply with or be subject tosuch other conditions as it may consider appropriate in connection with the issuance or delivery ofStock or payment of other benefits in compliance with applicable laws, rules, and regulations,listing requirements, or other obligations. The foregoing notwithstanding, in connection with aChange in Control, the Company shall take or cause to be taken no action, and shall undertake orpermit to arise no legal or contractual obligation, that results or would result in anypostponement of the issuance or delivery of Stock or payment of benefits under any Award or theimposition of any other conditions on such issuance, delivery or payment, to the extent that suchpostponement or other condition would represent a greater burden on a Participant than existed onthe 90th day preceding the Change in Control.
          (b) *Limits on Transferability; Beneficiaries*. No Award or other right or interest of aParticipant under the Plan, including any Award or right which constitutes a derivative security asgenerally defined in Rule 16a-1(c) under the Exchange Act, shall be pledged, hypothecated orotherwise encumbered or subject to any lien, obligation or liability of such Participant to anyparty (other than the Company or a Subsidiary), or assigned or transferred by such Participantotherwise than by will or the laws of descent and distribution or to a Beneficiary upon the deathof a Participant, and such Awards or rights that may be exercisable shall be exercised during thelifetime of the Participant only by the Participant or his or her guardian or legal representative,except that Awards and other rights (other than Incentive Stock Options and Stock AppreciationRights in tandem therewith) may be transferred to one or more Beneficiaries or other transfereesduring the lifetime of the Participant, and may be exercised by such transferees in accordance withthe terms of such Award, but only if and to the extent such transfers and exercises are permittedby the Committee or the Board pursuant to the express terms of an Award agreement (subject to anyterms and conditions which the Committee or the Board may impose thereon, and further subject toany prohibitions or restrictions on such transfers pursuant to Rule 16b-3). A Beneficiary,transferee, or other person claiming any rights
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under the Plan from or through any Participant shall be subject to all terms and conditions ofthe Plan and any Award agreement applicable to such Participant, except as otherwise determined bythe Committee or the Board, and to any additional terms and conditions deemed necessary orappropriate by the Committee or the Board.
          (c) *Adjustments*.
               (i) *Adjustments to Awards.*In the event that any dividend or other distribution (whether inthe form of cash, Stock, or other property), recapitalization, forward or reverse split,reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange,liquidation, dissolution or other similar corporate transaction or event affects the Stock and/orsuch other securities of the Company or any other issuer such that a substitution, exchange, oradjustment is determined by the Committee or the Board to be appropriate, then the Committee or theBoard shall, in such manner as it may deem equitable, substitute, exchange or adjust any or all of(A) the number and kind of shares of Stock which may be delivered in connection with Awards grantedthereafter, (B) the number and kind of shares of Stock by which annual per-person Award limitationsare measured under Section 5 hereof, (C) the number and kind of shares of Stock subject to ordeliverable in respect of outstanding Awards, (D) the exercise price, grant price or purchase pricerelating to any Award and/or make provision for payment of cash or other property in respect of anyoutstanding Award, and (E) any other aspect of any Award that the Committee or Board determines tobe appropriate.
               (ii) *Adjustments in Case of Certain Corporate Transactions.*In the event of a proposed saleof all or substantially all of the Company’s assets or any reorganization, merger, consolidation,or other form of corporate transaction in which the Company does not survive, or in which theshares of Stock are exchanged for or converted into securities issued by another entity, then thesuccessor or acquiring entity or an affiliate thereof may, with the consent of the Committee or theBoard, assume each outstanding Option or substitute an equivalent option or right. If thesuccessor or acquiring entity or an affiliate thereof, does not cause such an assumption orsubstitution, then each Option shall terminate upon the consummation of sale, merger,consolidation, or other corporate transaction. The Committee or the Board shall give writtennotice of any proposed transaction referred to in this Section 10(c)(ii) a reasonable period oftime prior to the closing date for such transaction (which notice may be given either before orafter the approval of such transaction), in order that Optionees may have a reasonable period oftime prior to the closing date of such transaction within which to exercise any Options that arethen exercisable (including any Options that may become exercisable upon the closing date of suchtransaction). An Optionee may condition his exercise of any Option upon the consummation of thetransaction.
               (iii) *Other Adjustments.*In addition, the Committee (and the Board if and only to the extentsuch authority is not required to be exercised by the Committee to comply with Code Section 162(m))is authorized to make adjustments in the terms and conditions of, and the criteria included in,Awards (including Performance Awards and performance goals, and Annual Incentive Awards and anyAnnual Incentive Award pool or performance goals relating thereto) in recognition of unusual ornonrecurring events (including, without limitation, acquisitions and dispositions of businesses andassets) affecting the Company, any Related Entity or any business unit, or the financial statementsof the Company or any Related Entity, or in response to changes in applicable laws, regulations,accounting principles, tax rates and
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regulations or business conditions or in view of the Committee’s assessment of the businessstrategy of the Company, any Related Entity or business unit thereof, performance of comparableorganizations, economic and business conditions, personal performance of a Participant, and anyother circumstances deemed relevant; provided that no such adjustment shall be authorized or madeif and to the extent that such authority or the making of such adjustment would cause Options,Stock Appreciation Rights, Performance Awards granted under Section 8(b) hereof or Annual IncentiveAwards granted under Section 8(c) hereof to Participants designated by the Committee as CoveredEmployees and intended to qualify as “performance-based compensation” under Code Section 162(m) andthe regulations thereunder to otherwise fail to qualify as “performance-based compensation” underCode Section 162(m) and regulations thereunder.
          (d) *Taxes*. The Company and any Related Entity are authorized to withhold from any Awardgranted, any payment relating to an Award under the Plan, including from a distribution of Stock,or any payroll or other payment to a Participant, amounts of withholding and other taxes due orpotentially payable in connection with any transaction involving an Award, and to take such otheraction as the Committee or the Board may deem advisable to enable the Company and Participants tosatisfy obligations for the payment of withholding taxes and other tax obligations relating to anyAward. This authority shall include authority to withhold or receive Stock or other property andto make cash payments in respect thereof in satisfaction of a Participant’s tax obligations, eitheron a mandatory or elective basis in the discretion of the Committee.
          (e) *Changes to the Plan and Awards*. The Board may amend, alter, suspend, discontinue orterminate the Plan, or the Committee’s authority to grant Awards under the Plan, without theconsent of shareholders or Participants, except that any amendment or alteration to the Plan shallbe subject to the approval of the Company’s shareholders not later than the annual meeting nextfollowing such Board action if such shareholder approval is required by any federal or state law orregulation (including, without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of anystock exchange or automated quotation system on which the Stock may then be listed or quoted, andthe Board may otherwise, in its discretion, determine to submit other such changes to the Plan toshareholders for approval; provided that, without the consent of an affected Participant, no suchBoard action may materially and adversely affect the rights of such Participant under anypreviously granted and outstanding Award. The Committee or the Board may waive any conditions orrights under, or amend, alter, suspend, discontinue or terminate any Award theretofore granted andany Award agreement relating thereto, except as otherwise provided in the Plan; provided that,without the consent of an affected Participant, no such Committee or the Board action maymaterially and adversely affect the rights of such Participant under such Award. Notwithstandinganything in the Plan to the contrary, if any right under this Plan would cause a transaction to beineligible for pooling of interest accounting that would, but for the right hereunder, be eligiblefor such accounting treatment, the Committee or the Board may modify or adjust the right so thatpooling of interest accounting shall be available, including the substitution of Stock having aFair Market Value equal to the cash otherwise payable hereunder for the right which caused thetransaction to be ineligible for pooling of interest accounting.
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          (f) *Limitation on Rights Conferred Under Plan*. Neither the Plan nor any action takenhereunder shall be construed as (i) giving any Eligible Person or Participant the right to continueas an Eligible Person or Participant or in the employ of the Company or a Related Entity; (ii)interfering in any way with the right of the Company or a Related Entity to terminate any EligiblePerson’s or Participant’s Continuous Service at any time, (iii) giving an Eligible Person orParticipant any claim to be granted any Award under the Plan or to be treated uniformly with otherParticipants and Employees, or (iv) conferring on a Participant any of the rights of a shareholderof the Company unless and until the Participant is duly issued or transferred shares of Stock inaccordance with the terms of an Award.
          (g) *Unfunded Status of Awards; Creation of Trusts*. The Plan is intended to constitute an“unfunded” plan for incentive and deferred compensation. With respect to any payments not yet madeto a Participant or obligation to deliver Stock pursuant to an Award, nothing contained in the Planor any Award shall give any such Participant any rights that are greater than those of a generalcreditor of the Company; provided that the Committee may authorize the creation of trusts anddeposit therein cash, Stock, other Awards or other property, or make other arrangements to meet theCompany’s obligations under the Plan. Such trusts or other arrangements shall be consistent withthe “unfunded” status of the Plan unless the Committee otherwise determines with the consent ofeach affected Participant. The trustee of such trusts may be authorized to dispose of trust assetsand reinvest the proceeds in alternative investments, subject to such terms and conditions as theCommittee or the Board may specify and in accordance with applicable law.
          (h) *Nonexclusivity of the Plan*. Neither the adoption of the Plan by the Board nor itssubmission to the shareholders of the Company for approval shall be construed as creating anylimitations on the power of the Board or a committee thereof to adopt such other incentivearrangements as it may deem desirable including incentive arrangements and awards which do notqualify under Code Section 162(m).
          (i) *Payments in the Event of Forfeitures; Fractional Shares*. Unless otherwise determined bythe Committee or the Board, in the event of a forfeiture of an Award with respect to which aParticipant paid cash or other consideration, the Participant shall be repaid the amount of suchcash or other consideration. No fractional shares of Stock shall be issued or delivered pursuantto the Plan or any Award. The Committee or the Board shall determine whether cash, other Awards orother property shall be issued or paid in lieu of such fractional shares or whether such fractionalshares or any rights thereto shall be forfeited or otherwise eliminated.
          (j) *Governing Law*. The validity, construction and effect of the Plan, any rules andregulations under the Plan, and any Award agreement shall be determined in accordance with the lawsof the State of Florida without giving effect to principles of conflicts of laws, and applicablefederal law.
          (k) *Amended Plan Effective Date and Shareholder Approval; Termination of Plan*. The Planbecame effective on the Effective Date. The Amended Plan became effective as of March 12, 2003,subject to subsequent approval within 12 months by the shareholders of the Company eligible to votein the election of directors, by a vote sufficient to meet the requirements of Code Sections 162(m)(if applicable) and 422, Rule 16b-3 under the ExchangeAct (if applicable), applicable NASDAQ requirements, and other laws, regulations, andobligations of the Company applicable to the Plan. Awards may be granted subject to shareholderapproval, but may not be exercised or otherwise settled in the event shareholder approval is notobtained. The Amended Plan shall terminate at such time as no shares of Common Stock remainavailable for issuance under the Amended Plan and the Company has no further rights or obligationswith respect to outstanding Awards under the Amended Plan.
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