Exhibit 10.s


 


LONGS DRUG STORES CORPORATION


NON-EXECUTIVE LONG-TERM
INCENTIVE PLAN


(As amended on February 25,
2003)


 


1.             PURPOSE


 


The purpose of the Non-Executive Long-Term Incentive
Plan is to provide a means through which Longs Drug Stores Corporation, a
Maryland Corporation, and its Subsidiaries, may attract and retain the
employment of able persons and to provide a means whereby such persons can
acquire and maintain stock ownership thereby strengthening their commitment to
the welfare of the Company.  A further
purpose of the Plan is to provide certain non-executive employees, especially
store management, with incentive and reward opportunities designed to enhance
the profitable growth of the Company.


 


2.             DEFINITIONS


 


The following definitions shall be applicable throughout
the Plan:


 


a.             “Award”
means, individually or collectively, any Option, Stock Appreciation Right
(SAR), Restricted Stock Award or Performance Share Award.


 


b.             “Award
Period” means a period of not less than three years and relates to Performance
Share Awards.


 


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


 


d.             “Change
in Corporate Control” except as may otherwise be provided in the Award
agreement or other applicable agreement, means the occurrence of any of the
following:


I.                                         The consummation of a merger or consolidation of the Company with or into
another entity or any other corporate reorganization, if more than 50% of the
combined voting power of the continuing or surviving entity’s securities
outstanding immediately after such merger, consolidation or other
reorganization is owned by persons who are not part of the same controlled
group of the Company immediately prior to such merger, consolidation or other
reorganization, and who directly or indirectly in the aggregate owned less than
25% of the Company’s combined voting power represented by the Company’s
outstanding securities immediately prior to such merger, consolidation or other
reorganization;


II.                                     The sale, transfer or other disposition of all or substantially all of
the Company’s assets;


III.                                 A change in the composition of the Board over a period of 24 consecutive
months or less such that a majority of the members of the Board (rounded up to
the next 


 

















 


whole number) cease, by reason of one or more
proxy contests for the election of directors, to be comprised of individuals
who either (i) have been directors continuously since the beginning of such
period or (ii) have been elected, or nominated for election, as directors
during such period by at least a majority of the directors described in clause
(i) who were still in office at the time such election or nomination was
approved by the Board; or


IV.                                The shareholders of the Company approve the dissolution or liquidation of
the Company or the commencement by or against the Company of a case under the
federal bankruptcy laws or any other proceeding under any other laws relating
to bankruptcy, insolvency, reorganization, arrangement, debt adjustment or
debtor relief or there is an involuntary dissolution of the Company; or


V.                                    Any transaction as a result of which any person becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934
(“Exchange Act”)), directly or indirectly, of securities of the Company
representing at least 50% of the total voting power represented by the
Company’s then outstanding voting securities. 
For purposes of this Paragraph (v), the term “person” shall have the
same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but
shall exclude:


(A)          A
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or a Subsidiary of the Company;


(B)           A
corporation owned directly or indirectly by the shareholders of the Company in
substantially the same proportions as their ownership of the common stock of
the Company;


(C)           The
Company; and


(D)          Longs
Drug Stores California, Inc.


A transaction shall not
constitute a Change in Corporate Control if its sole purpose is to change the
state of the Company’s incorporation or to create a holding company that will
be owned in substantially the same proportions by the persons who held the
Company’s securities immediately before such transaction.


 


e.             “Code”
means the Internal Revenue Code of 1986, as amended from time to time.
Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section.


 


f.             “Committee”
means the committee of the Board appointed to administer the Plan as referred
to in

Section 4.


 


g.             “Company”
means Longs Drug Stores Corporation.


 

















 


h.             “Date
of Grant” means the date on which the granting of an Award is authorized by the
Committee or such later date as may be specified by the Committee in such
authorization.


 


i.              “Disability”
means a disability that totally and permanently disables the Holder and
entitles the Holder to receive long-term disability plan sponsored or
maintained by the Company or a Subsidiary.


 


j.              “Eligible
Employee” means any person who satisfies the 
requirements of Section 6.


 


k.             “Fair
Market Value” means the fair market value of a share of Stock, to be determined
as follows:


 


(1)                                           For
Options and SARs, it shall be the closing price on the New York Stock Exchange
(“NYSE”) as reported in the Pacific Edition of the Wall Street Journal on a
specified date.


(2)                                           For
Performance Share Awards, it shall be the average of the closing prices of the
Stock reported in the Pacific Edition of the Wall Street Journal on the NYSE
for the 30 consecutive trading days prior to the “Valuation Date.”  The “Valuation Date” for the purpose of
granting Performance Share Awards shall be the first day of the year in which
the Award is made.  The “Valuation Date”
for the purpose of Performance Share Payments shall be the first business day following
the end of the Award Period.


(3)           If
the Stock is not regularly traded on the NYSE, then “Fair Market Value” shall
be determined by the Committee on a uniform basis in good faith.


 


l.              “Holder”
means a person who has been granted an Option, an SAR, a Restricted Stock
Award, or a Performance Share Award or who has succeeded to such Award.


 


m.                                            “Normal
Retirement” means, unless the Award agreement or other applicable agreement
provides otherwise, Termination by resignation of employment with the Company
and any Subsidiary after attaining age 65 or Termination by resignation of
employment with the Company and any Subsidiary after attaining age 55 with 10
or more years of employment with the Company or any Subsidiary.  With respect to members of the Board who are
not also employees of the Company or a Subsidiary, “Normal Retirement” shall
have the meaning under the Board policy, if any, applicable to the Board.


n.             “Option”
means an Award granted under Section 7 of the Plan.


 


o.             “Performance
Share” means an Award granted under Section 9 of the 


 


 

















 


 


Plan.


 


p.             “Plan”
means this Non-Executive Long-Term Incentive Plan.


 


q.             “Restricted
Stock Award” means an Award granted under Section 10 of the Plan.


 


r.              “SEC”
means the Securities and Exchange Commission.


 


s.             “Service”
means employment with the Company or a Subsidiary or service as a member of the
Board.


 


t.              “Stock”
means Common Shares of the Company and, after substitution, such other stock as
shall be substituted therefor as provided in Section 12.


 


u.             “Stock  Appreciation Right” (SAR) means an Award
granted under Section 8, whether or not granted in conjunction with an Option.


 


v.             “Subsidiary”
means any “subsidiary corporation” as defined in Code Section 424(f).  Subsidiary also includes any entity of which
the Company and/or one or more Subsidiaries own not less than 50%.


 


w.            “Termination”
means, with respect to any person, ceasing to be an employee of the Company or
any Subsidiary.


 


3.             EFFECTIVE
DATE, DURATION AND BOARD APPROVAL


 


This Plan, as amended and restated herein, shall become
effective as of the date of approval of this amended Plan by the Board.  Subject to the provisions of Section 13,
Awards may be made as provided herein for a period of ten (10) years from the
date this Plan is so approved by the Board. 
The Plan shall continue in effect until all matters relating to the
payment of Awards and administration of the Plan have been settled.


 


4.             ADMINISTRATION


 


a.         COMMITTEE COMPOSITION.  A Committee appointed by the Board shall
administer the Plan.  Unless the Board
determines otherwise, the Board’s Compensation Committee shall be the
Committee.  Members of the Committee
shall serve for such period of time as the Board may determine and shall be
subject to removal by the Board at any time. 
The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.


b.         AUTHORITY OF THE COMMITTEE.  Subject to the provisions of the Plan, the
Committee shall have full authority and discretion to take any actions it deems
necessary or advisable for the administration of the Plan.  Such actions shall include:


 

















 


(i)            selecting
Eligible Employees who are to receive Awards under the Plan;


(ii)                                  determining the type, number, vesting requirements and other features and
conditions of such Awards;


(iii)          interpreting
the Plan;


(iv)          making
all other decisions relating to the operation of the Plan; and


(v)           establishing
such plans or sub-plans under the Plan for the purpose of facilitating Awards to
Eligible Employees who are not United States citizens or taxpayers.


The Committee may adopt such
rules or guidelines, as it deems appropriate to implement the Plan.  The Committee’s determinations under the
Plan shall be final and binding on all persons.


 


5.                                       GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS, RESTRICTED STOCK AWARDS, AND
PERFORMANCE SHARE AWARDS; SHARES SUBJECT TO THE PLAN


 


The Committee may, from time to time, grant Awards to
one or more persons determined by it to be eligible for participation in the
Plan in accordance with the provisions of Section 6; provided however that:


 


a.             TOTAL
SHARES.  Subject to adjustment pursuant
to Section 12, the aggregate number of shares of Stock made subject to Awards
may not exceed Three Million (3,000,000) shares.


b.             USE
OF SHARES.  Such shares shall be deemed
to have been used in payment of Performance Shares and SARs only if actually
delivered or the Fair Market Value equivalent of such shares is paid in cash.
To the extent that an Award lapses or the rights of its Holder terminate, any
shares of Stock subject to such Award shall again be available for the grant of
an Award.


 


c.             ELIGIBLE
SHARES.  Stock delivered by the Company
in settlement under the Plan may be authorized and unissued Stock or Stock held
in the treasury of the Company or may be purchased on the open market or by
private purchase.


 


6.             ELIGIBILITY


 


Employees of the Company or a Subsidiary who, in the
opinion of the Committee, are not officers, directors or otherwise “insiders”
(for purposes of Section 16 of the Securities Exchange Act of 1934) and are
responsible for the continued growth and development and financial success of
the business of the Company or any Subsidiary shall be eligible to be granted
Awards under the Plan.


 


7.             STOCK
OPTIONS


 

















 


One or more Options can be granted to any Eligible
Employee.  Options shall be nonqualified
stock options (Incentive Stock Options are not authorized to be issued) and
shall be subject to the following conditions:


 


a.             OPTION
PRICE.  The option price per share of
Stock shall be set by the grant.


 


b.             FORM
OF PAYMENT. At the time of the exercise of the Option, the option price shall
be payable in cash and/or shares of Stock valued at the Fair Market Value at
the time the Option is exercised, and at the discretion of and on terms
acceptable to the Committee, by any other legal means.


c.             OTHER
TERMS AND CONDITIONS. Each Option shall become exercisable in cumulative
installments in such manner and within such period or periods, not to exceed 10
years from its Date of Grant, as set forth in the Stock Option Agreement. No
Option shall be exercisable after the expiration of ten years from the date it
is granted. Except as set forth below, an Option shall terminate in the event
of the Holder’s Termination.


Unless otherwise provided in the Stock Option Agreement,
in the event of a Termination, the Holder shall have the right to exercise the
Option for the following periods after such Termination, but only to the extent
that the Option was exercisable at the date of the Termination and does not
otherwise expire by its terms.


 


(1)                                           In
the event of Normal Retirement, three years after the date of Termination.


(2)           In
the event of (a) discharge by the Company or any Subsidiary (except for Cause)
within two years after the date of a Change in Corporate Control, or (b)
resignation of the Holder within the period commencing 180 days after the date
of a Change in Corporate Control and ending two years from the date of a Change
in Corporate Control, one year after the date of Termination.


(3)           In
the event of the Holder’s Termination (except as provided in Section 7c(2)
hereof) with the prior written consent of the Company or any Subsidiary or by
the Company (or Subsidiary) without Cause, ninety (90) days after the date of
such Termination.  Such prior written
consent may be given only by the Chief Executive Officer of the Company or any
Subsidiary or any such officer delegated by the Chief Executive Officer (other
than the resigning person) and must specify that it is given for the purpose of
the Holder’s exercise of the Option.


(4)           In
the event of (a) discharge by the Company or any Subsidiary with Cause (except
as provided in Section 7c(2), hereof), or (b) resignation without the prior
written consent of the Company or any Subsidiary, on the date of such discharge
or resignation.


 

















 


For purposes of this Plan,
unless otherwise provided for in the Award agreement or other applicable
agreement, “Cause” shall mean a commission of any act of fraud, embezzlement or
dishonesty; any unauthorized use or disclosure of confidential information or
trade secrets of the Company (or any Subsidiary); or any other intentional
misconduct adversely affecting the business or affairs of the Company (or any
Subsidiary) in a material manner.  In
the event of Holder’s Termination due to death, or death within three months of
a Normal Retirement, the Option may be exercised for a period of one year after
the date of Holder’s death or, if shorter, the remaining term of the Option.


 


d.             STOCK
OPTION AGREEMENT.  Each Option granted
under the Plan shall be evidenced by a “Stock Option Agreement” between the
Company and the  Holder of the Option
containing provisions not inconsistent with the Plan, as determined by the
Committee, and shall be subject to the following additional terms and
conditions:


 


(1)           Any Option or portion thereof that is exercisable shall be
exercisable for the full amount or for any part thereof, except as otherwise
determined by the Stock Option Agreement.


 


(2)           Each Option shall cease to be exercisable, as to any
share, when the Holder purchases the share or exercises a related SAR or when
the Option lapses.


 


(3)           Leaves of absence, approved by the Company or a
Subsidiary, shall not constitute the Termination of the Holder.


 


e.             EXPIRED
OPTIONS.  If any Options awarded under
the Plan shall be forfeited, cancelled, or not exercised in full, the Stock
subject to such Options may again be awarded under the Plan.


 


f.              TENDER
OFFER OR MERGER.  Notwithstanding any
other provision, in the event of a public tender offer for all or any portion
of the Stock or in the event that a proposal to merge, consolidate, or
otherwise combine with, or sell all or a substantial portion of the assets of
the Company or a Subsidiary to, another company is submitted for shareholder
approval, the Committee may in its sole discretion declare any or all
previously granted Options to be immediately exercisable.


 


8.             STOCK
APPRECIATION RIGHTS


 


Any Option granted under the Plan may include an SAR,
either at the time of grant or by amendment. 
SARs may also be granted to an Eligible Employee independent of any
prior or contemporaneous Option grant and shall be exercisable as provided
therein without regard to any Option. 
In addition to such terms and conditions not inconsistent with the Plan
as the Committee shall impose, SARs shall be subject to the following terms:


 

















 


a.             RIGHT
TO EXERCISE.  An SAR granted with an
Option shall be exercisable to the extent and only to the extent the Option is
exercisable.  An SAR not included in an
Option shall have a “purchase price” ascribed thereto by the Committee in
granting such SAR, which shall not be less than the Fair Market Value of the
Stock on the Date of Grant.


 


b.             PAYMENT.  An exercisable SAR shall entitle the Holder
to surrender unexercised the SAR or the Option in which it is included, as the
case may be, or any portion thereof, and, to receive in exchange therefore that
number of shares of Stock having an aggregate Fair Market Value, as hereinafter
defined, equal to the excess of the Fair Market Value of one share over the
purchase price per share specified in such SAR or Option times the number of
shares called for by the SAR or Option, or portion thereof, which is so
surrendered. The Committee shall be entitled to elect to settle the Company’s
obligation arising out of the exercise of an SAR by the payment of cash or
partially by the payment of cash and partially by the delivery of shares, the
total value of which shall be in either case equal to the aggregate Fair Market
Value of the shares it would otherwise be obligated to deliver.  The Committee shall also have the right to
place such limitations and restrictions on the obligation to make such cash
payments or deliver shares under SARs as it, in its sole discretion, deems to
be in the best interest of the Company. 
The Fair Market Value for SAR exercise purposes of shares shall be
determined on the basis of prices on the trading day next preceding the date on
which the SAR is exercised.  To the
extent that an SAR included in an Option is exercised, such Option shall be
deemed to have been exercised, and shall not be deemed to have lapsed.


 


c.             SPECIAL
RULES GOVERNING SARS.  An SAR not
included in an Option shall be evidenced by an agreement between the Company
and the Holder in a form approved by the Committee.  Any SAR granted under the Plan shall be subject to such terms and
conditions not inconsistent with the Plan as the Committee shall impose,
including the following:


 


(1)           The SAR will lapse no later than the underlying Option for
SARs accompanying an Option or, for freestanding SARs, no later than 10 years
from its Date of Grant;


 


(2)           An SAR accompanying an Option may be exercised only when
the Fair Market Value of the Stock exceeds the option price of the Stock
subject to the SAR.


 


d.             OTHER
LIMITATIONS.  An SAR shall be subject to
such other limitations as the Committee shall impose.


 


9.             PERFORMANCE
SHARES


 


One or more Awards of Performance Shares may be made to
an Eligible Employee.  Performance
Shares shall be credited to a Performance Share account to be maintained for
each such Holder.  Each Performance
Share shall be deemed to be the 


 

















 


equivalent of one share of Stock of the Company.  The Award of Performance Shares under the
Plan shall not entitle the Holder to any interest in or to any dividend,
voting, or other rights of a shareholder. 
The value of the Performance Shares in a Holder’s Performance Share
account at the time of Award or the time of payment shall be the Fair Market
Value at any such time of an equivalent number of shares of Stock (subject to
the limitation provided in Section 9c).


 


If any Performance Shares awarded under the Plan shall
be forfeited, cancelled, or not paid out in full, such Performance Shares may
again be awarded under the Plan.  Shares
of Stock delivered upon payment of Performance Shares may be either treasury
shares, shares purchased for the account of the Holder or authorized and
unissued shares, or any combination thereof.


 


a.             AWARD
GRANTS.  Grants of  Performance Shares may be made by the
Committee in any fiscal year during the term of the Plan.  Such shares will be paid out in full or in
part on the basis of the Company’s performance of such criteria as may be
determined by the Committee.  In
determining the size of Awards, the Committee shall take into account a
Holder’s responsibility level, performance, potential, cash compensation level,
and the Fair Market Value of the Stock at the time of Awards, as well as such
other considerations as it deems appropriate.


 


Unless the Award agreement or
applicable agreement provides otherwise, in the event there is a Termination of
the Holder during an Award Period, payout would be as follows:


1.                                             Normal
Retirement.  Payout would be at the
end of the Award Period and prorated for service during the Award Period.


2.                                             Resignation
or discharge. For resignation with the prior written consent of the Company or
a Subsidiary, the payout would be at the end of the Award Period and prorated
for service during the Award Period. 
For resignation other than with such consent (and not constituting
Normal Retirement) or for discharge with or without Cause, the Award would be
completely forfeited.


3.                                             Death
or Disability.  Payout would be at the
end of the Award Period and prorated for service during the Award Period.


b.             RIGHT
TO PAYMENT OF PERFORMANCE SHARES. Following the end of the Award Period, the
Holder of a Performance Share shall be entitled to receive payment of an amount
based on terms of the applicable Award agreement and the achievement of the
performance measures for such Award Period, as determined by the Committee.


 


c.             FORM
AND TIMING OF PAYMENT.  No payment of
Performance Shares shall be made prior to the end of an Award Period.  Payment therefore shall be made as soon as
practicable after the receipt of audited financial statements relating to the
last year of such period.


 

















 


The payment to which a Holder shall be entitled at the
end of an Award Period shall be a dollar amount equal to the Fair Market Value
at the Valuation Date (as defined in Section 2k(2) hereof) of the number of
shares of Stock equal to the number of Performance Shares earned and payable to
him/her in accordance with Section 9b. 
Payment shall normally be made one-half in cash and one-half in Stock;
however, the Committee may authorize payment in such other combinations of cash
and Stock or all in cash or all in Stock, as it deems appropriate.  Issuance of the Stock shall be subject to
the authorization of the Board.


 


The number of shares of Stock
to be paid in lieu of cash will be based on the quotient of the portion of the
payment not paid in cash and the Fair Market Value of a share of Stock on the
date of entitlement.


d.             TENDER
OFFER OR MERGER. Notwithstanding any other provision of the Plan, in the event
of any public tender offer for all or any portion of the Stock or in the event
that a proposal to merge, consolidate or otherwise combine with, or sell all or
a substantial portion of the assets of the Company or a Subsidiary to, another
company is submitted for shareholder approval, the Committee may in its sole
discretion declare any Award Period ended as of a specific date and accelerate
full payments of such awards accordingly.


 


10.           RESTRICTED
STOCK AWARDS


 


a.             RESTRICTION
PERIOD TO BE ESTABLISHED BY THE COMMITTEE. One or more Awards of Restricted
Stock may be made to an Eligible Employee. 
At the time a Restricted Stock Award is made, the Committee shall
establish a period of time (the “Restriction Period”) applicable to such Award
which shall be not less than one (1) year. Each Restricted Stock Award may have
a different Restriction Period, at the discretion of the Committee. In the
event of a public tender offer for all or any portion of the Stock or in the
event that any proposal to merge, consolidate or otherwise combine with, or
sell all or a substantial portion of the assets of the Company or a Subsidiary
to, another company is submitted for approval, the Committee may in its sole
discretion change or eliminate the Restriction Period. Except as permitted
above or pursuant to Section 12, the Restriction Period applicable to a
particular Restricted Stock Award shall not be changed.


 


b.             OTHER
TERMS AND CONDITIONS.  Stock awarded
pursuant to a Restricted Stock Award shall be represented by a stock
certificate registered in the name of the Holder of such Restricted Stock
Award.  The Holder shall have the right
to enjoy all shareholder rights during the Restriction Period with the
exception that:


 


(1)           The Holder shall not be entitled to delivery of the stock
certificate until the Restriction Period shall have expired and arrangements
satisfactory to the Company for the satisfaction of applicable tax or other
withholding shall have been made.


 

















 


(2)           The Company may either issue shares subject to such
restrictive legends and/or stop-transfer instructions as it deems appropriate
or provide for retention of custody of the Stock during the Restriction Period.


 


(3)           A breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Award shall cause an immediate
forfeiture of the Restricted Stock Award, and any dividends withheld thereon.


 


(4)           Cash and stock dividends may be either currently paid or
withheld by the Company for the Holder’s account until the Restriction Period
expires.  At the discretion of the
Committee, interest may be paid on the amount of cash dividends withheld,
including cash dividends on stock dividends, at a rate and subject to such
terms as determined by the Committee.


 


c.             FORFEITURE PROVISIONS. 
In the event there is a Termination of Holder during a Restriction
Period, unless the Award agreement or other applicable agreement provides
otherwise, an Award would be forfeited as follows:


 


(1)           Normal Retirement. 
The Award would be prorated for service during the period and would be
received as soon as practicable following retirement.


 


(2)           Resignation
or discharge. For resignation with the prior written consent of the Company
or a Subsidiary, the Award would be prorated for service during the Award
Period and received as soon as practicable following resignation.  For resignation other than with such consent
(and not constituting Normal Retirement) or for discharge with or without
Cause, the Award would be completely forfeited.


(3)                                           Death
or Disability.  The Award would be
prorated for service during the Award Period and received as soon as
practicable following death or Disability.


Dividends withheld by the Company on Restricted Stock
that is forfeited shall be retained by the Company.


 


d.             PAYMENT
FOR RESTRICTED STOCK.  A Holder may or
may not be required to make any payment for Stock received pursuant to a
Restricted Stock Award.


 


11.           GENERAL


 


a.             GOVERNMENT
AND OTHER REGULATIONS. The obligation of the Company to make payment of Awards
in Stock or otherwise shall be subject to all applicable laws, rules, and
regulations, and to such approvals by governmental agencies 


 

















 


as may be required. The Company shall be under no
obligation to register under the Securities Act of 1933, as amended (“Act”),
any of the shares of Stock issued under the Plan. If the shares issued under
the Plan may in certain circumstances be exempt from registration under the
Act, the Company may restrict the transfer of such shares in such manner as it
deems advisable to ensure the availability of any such exemption.


 


b.             TAX
WITHHOLDING. The Company or a Subsidiary, as appropriate, shall have the right
to deduct from all Awards paid in cash any federal, state or local taxes as
required by law to be withheld with respect to such cash payments. In the case
of Awards paid in Stock, the employee or other person receiving such Stock may
be required to pay to the Company or a Subsidiary, as appropriate, the amount
of any such taxes which the Company or Subsidiary is required to withhold with
respect to such Stock.  Stock withholding
may be permitted in the discretion of the Committee to cover minimum
withholding requirements.


c.                                             CLAIM
TO AWARDS AND EMPLOYMENT RIGHTS. No employee or other person shall have any
claim or right to be granted an Award under the Plan. Neither this Plan nor any
action taken hereunder shall be construed as giving any employee any right to
be retained in the employ of the Company or a Subsidiary or limit the right of
the Company or any Subsidiary to terminate an employee at anytime, with or
without cause.  A holder of any right
hereunder to receive cash or Stock in respect of any Award shall have no rights
other than those of a general unsecured creditor of the Company. Awards
represent unfunded and unsecured obligations of the Company, subject to the
terms and conditions of the applicable Award.


d.             BENEFICIARIES.  To the extent that the Committee allows
beneficiary designations, any payment of Awards due under this Plan to a
deceased Holder shall be paid to the beneficiary duly designated by the Holder
in accordance with the Company’s practices. If no such beneficiary has been
designated or survives the Holder, payment shall be made to the Holder’s legal
representative. A beneficiary designation may be changed or revoked by a Holder
at any time provided the change or revocation is filed with the Committee.


e.             NONTRANSFERABILITY.  Unless otherwise permitted in the Award
agreement and then only to the extent allowable by applicable law, a person’s
rights and interests under the Plan, including any Award previously made to
such person or any amounts payable under the Plan, may not be assigned,
pledged, or transferred except, in the event of a Holder’s death, to a
designated beneficiary as provided in the Plan, or in the absence of such
designation, by will or the laws of descent and distribution, or, for any Award
other than an ISO (or an SAR granted in tandem with an ISO), pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder.


 


f.              INDEMNIFICATION.  Each person who is or shall have been a
member of the Committee or of the Board shall be indemnified and held harmless
by the 


 

















 


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


 


                g.             RELIANCE ON REPORTS.  Each member of the Committee and each member
of the Board shall be fully justified in relying or acting in good faith upon
any report made by the independent public accountant of the Company and its
Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than himself. In no event shall any person
who is or shall have been a member of the Committee or of the Board be liable
for any determination made or other action taken or any omission to act in
reliance upon any such report or information or for any action taken, including
the furnishing of information, or failure to act, if in good faith.


 


h.             RELATIONSHIP
TO OTHER BENEFITS.  No payment under the
Plan shall be taken into account in determining any benefits under any pension,
retirement, profit sharing, group insurance or other benefit plan of the
Company or any Subsidiary.


 


i.              EXPENSES.  The expenses of administering the Plan shall
be borne by the Company and its Subsidiaries.


 


j.              PRONOUNS.  Masculine pronouns and other words of
masculine gender shall refer to both men and women.


 


k.             TITLES
AND HEADINGS.  The titles and headings
of the sections in the Plan are for convenience of reference only, and in the
event of any conflict, the text of the Plan, rather than such titles or
headings, shall control.


 


12.                                 CHANGES IN CAPITAL STRUCTURE


Options, SARs, Restricted
Stock Awards, Performance Share Awards and any agreements evidencing such
Awards shall be subject to adjustment by the Committee as to the number and
type (or class) and price per share of Stock or other considerations subject to
such Awards in the event of changes in the outstanding Stock by reason of stock
dividends, stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the Date of Grant of any such Awards. In the
event of any such change in the outstanding Stock, the aggregate number and
type (or class) of shares available under the Plan (and pursuant to individual
to Award limits) shall be appropriately adjusted by the Committee, 

















 


whose determination shall be conclusive.


13.                                 AMENDMENTS AND TERMINATION


The Board may at any time and
for any reason terminate the Plan or, with the express written consent of a
Holder for any changes that are detrimental to such Holder, cancel or reduce or
otherwise alter his outstanding Awards thereunder if, in its judgment, the tax,
accounting, or other effects of the Plan or potential payouts thereunder would
not be in the best interest of the Company. The Board may, at any time, or from
time to time, amend or suspend and, if suspended, reinstate, the Plan in whole
or in part, provided, however, that any amendment of the Plan shall be subject
to the approval of the Company’s shareholders to the extent required by
applicable laws, regulations or rules. 
The Committee may permit Awards to be granted in exchange for the
cancellation of other Awards.  The
Committee may permit the amendment of Awards, subject to the express written
consent of a Holder for any changes that are detrimental to such Holder.


14.                                 GOVERNING LAW


The Plan shall be governed by,
and construed in accordance with, the laws of the State of California (except
its choice-of-law provisions). 
Capitalized terms shall have the meaning provided in Section 2 unless
otherwise provided in this Plan or applicable Award agreement.