EXHIBIT 10.18


 


ARCHIPELAGO HOLDINGS

2004 STOCK INCENTIVE PLAN


 


ARTICLE I


 


GENERAL


 


1.1                                 Purpose


 


The purpose of The Archipelago Holdings 2004 Stock Incentive Plan is to
attract, retain and motivate officers, directors, employees, consultants and
others who may perform services for Archipelago Holdings, L.L.C. and its
successors (the “Company”) and its subsidiaries and affiliates, to compensate
them for their contributions to the long-term growth and profits of the
Company, and to encourage them to acquire a proprietary interest in the success
of the Company.


 


1.2                                 Definitions of
Certain Terms


 


1.2.1 “2000 LTIP” means The Archipelago Holdings, L.L.C. 2000 Long-Term
Incentive Plan.


 


1.2.2 “2003 LTIP” means The Archipelago Holdings, L.L.C. 2003 Long-Term
Incentive Plan.


 


1.2.3 “Award” means an award made pursuant to the Plan.


 


1.2.4 “Award Agreement” means the written document by which each Award
is evidenced.


 


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


 


1.2.6 “Certificate” means a stock certificate (or other appropriate
document or evidence of ownership) representing shares of Common Stock.


 


1.2.7 “Code” means the Internal Revenue Code of 1986, as amended from
time to time, and the applicable rulings and regulations thereunder.


 


1.2.8 “Committee” means the committee appointed by the Board to
administer the Plan pursuant to Section 1.3.


 


1.2.9 “Common Stock” means common stock of the Company.


 


1.2.10 “Employment” means a grantee’s performance of services for the
Company or its subsidiaries or affiliates, as determined by the Committee. The
terms “employ” and “employed” shall have their correlative meanings.


 


1.2.11 “Exchange Act” means the Securities Exchange Act of 1934, as
amended from time to time, and the applicable rules and regulations thereunder.


 

















 


1.2.12 “Fair Market Value” means, with respect to a share of Common
Stock on any day, the closing price of the Common Stock on the principal
securities exchange on which the shares of Common Stock are then traded, or, if
not traded, the price set by the Committee.


 


1.2.13 “IPO Date” means the date of the commencement of the initial
public offering of shares of Common Stock.


 


1.2.14 “Plan” means The Archipelago Holdings 2004 Stock Incentive Plan,
as described herein and as hereafter amended from time to time.


 


1.3                                 Administration


 


1.3.1 Subject to Section 1.3.4, the Plan shall be administered by
the Compensation Committee of the Board. To the extent required for
transactions under the Plan to qualify for the exemptions available under Rule
16b-3 promulgated under the Exchange Act, all actions relating to Awards to
persons subject to Section 16 of the Exchange Act may be taken by the
Board or a committee or subcommittee of the Board composed of three (3) or more
members, each of whom is a “non-employee director” within the meaning of
Exchange Act Rule 16b-3. To the extent required for compensation realized from
Awards under the Plan to be deductible by the Company pursuant to
Section 162(m) of the Code, such Awards may be granted by a committee or subcommittee
of the Board composed of three (3) or more members, each of whom is an “outside
director” within the meaning of Code Section 162(m).


 


1.3.2 The Committee shall have complete control over the administration
of the Plan and shall have the authority in its sole discretion to (a) exercise
all of the powers granted to it under the Plan, (b) construe, interpret and
implement the Plan and all Award Agreements, (c) prescribe, amend and rescind
rules and regulations relating to the Plan, including rules governing its own
operations, (d) make all determinations necessary or advisable in administering
the Plan, (e) correct any defect, supply any omission and reconcile any
inconsistency in the Plan, (f) amend the Plan to reflect changes in applicable
law, (g) grant Awards and determine who shall receive Awards, (h) amend any
outstanding Award Agreement to accelerate the time or times at which the Award
becomes vested, unrestricted or may be exercised, or to waive or amend any
goals, restrictions or conditions set forth in such Award Agreement, or reflect
a change in the grantee’s circumstances (e.g., a change to part-time employment
status), and (i) determine whether, to what extent and under what circumstances
and method or methods (1) Awards may be (A) settled in cash, shares of Common
Stock, other securities, other Awards or other property, (B) exercised or (C)
canceled, forfeited or suspended (including, without limitation, canceling
underwater options without any payment to the grantee), (2) shares of Common Stock,
other securities, other Awards or other property and other amounts payable with
respect to an Award may be deferred either automatically or at the election of
the grantee thereof or of the Committee and (3) Awards may be settled by the
Company, any of its subsidiaries or affiliates or any of its or their
designees.


 


1.3.3 Actions of the Committee may be taken by the vote of a majority
of its members present at a meeting (which may be held telephonically). Any 


 


2

















 


action may be taken by a written instrument signed by a majority of the
Committee members, and action so taken shall be fully as effective as if it had
been taken by a vote at a meeting. The determination of the Committee on all
matters relating to the Plan or any Award Agreement shall be final, binding and
conclusive. The Committee may allocate among its members and delegate to any
person who is not a member of the Committee any of its administrative
responsibilities.


 


1.3.4 Notwithstanding anything to the contrary contained herein, the
Board may, in its sole discretion, at any time and from time to time, grant
Awards or administer the Plan. The Board shall have all of the authority and
responsibility granted to the Committee herein.


 


1.3.5 No Liability


 


No member of the Board or the Committee or any employee of the Company
or its subsidiaries or affiliates (each such person, a “Covered Person”) shall
have any liability to any person (including any grantee) for any action taken
or omitted to be taken or any determination made in good faith with respect to
the Plan or any Award. Each Covered Person shall be indemnified and held
harmless by the Company against and from (a) any loss, cost, liability or
expense (including attorneys’ fees) that may be imposed upon or incurred by
such Covered Person in connection with or resulting from any action, suit or
proceeding to which such Covered Person may be a party or in which such Covered
Person may be involved by reason of any action taken or omitted to be taken
under the Plan or any Award Agreement and (b) any and all amounts paid by such
Covered Person, with the Company’s approval, in settlement thereof, or paid by
such Covered Person in satisfaction of any judgment in any such action, suit or
proceeding against such Covered Person, provided that the Company shall have
the right, at its own expense, to assume and defend any such action, suit or
proceeding and, once the Company gives notice of its intent to assume the
defense, the Company shall have sole control over such defense with counsel of
the Company’s choice. The foregoing right of indemnification shall not be
available to a Covered Person to the extent that a court of competent
jurisdiction in a final judgment or other final adjudication, in either case
not subject to further appeal, determines that the acts or omissions of such
Covered Person giving rise to the indemnification claim resulted from such
Covered Person’s bad faith, fraud or willful criminal act or omission. The
foregoing right of indemnification shall not be exclusive of any other rights
of indemnification to which Covered Persons may be entitled under the Company’s
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or
any other power that the Company may have to indemnify such persons or hold
them harmless.


 


1.4                                 Persons Eligible
for Awards


 


Awards under the Plan may be made to such officers, directors,
employees, consultants and other individuals who may perform services for the
Company and its subsidiaries and affiliates, as the Committee may select.


 


3

















 


1.5                                 Types of Awards
Under Plan


 


Awards may be made under the Plan in the form of (a) options, (b) stock
appreciation rights, (c) dividend equivalent rights, (d) restricted stock, (e)
restricted stock units and (f) other equity-based or equity-related Awards
which the Committee determines to be consistent with the purpose of the Plan
and the interests of the Company.


 


1.6                                 Shares
Available for Awards


 


1.6.1 Total shares available. Subject to adjustment pursuant to
Section 1.6.2, the total number of shares of Common Stock which may be
delivered pursuant to Awards granted under the Plan shall not exceed the sum of
(i) 5.5 million shares plus (ii) any shares of Common Stock that are subject to
grant under the 2000 LTIP or the 2003 LTIP and remain available for grant under
such plans (including shares of Common Stock subject to awards under the 2000
LTIP or the 2003 LTIP that expire unexercised or that are forfeited, terminated
or canceled and shares of Common Stock that are surrendered or withheld from
any award under such plans to satisfy a participant’s income tax withholding)
will be available for grants and awards under the Plan after the IPO Date.
After the IPO Date, no new awards will be granted under the 2000 LTIP and the
2003 LTIP. If, on or after the IPO Date, any Award is forfeited or otherwise
terminates or is canceled without the delivery of shares of Common Stock or
shares of Common Stock are surrendered or withheld from any Award to satisfy a
grantee’s income tax or other withholding obligations, then the shares covered
by such forfeited, terminated or canceled Award or which are equal to the
number of shares surrendered or withheld shall again become available to be
delivered pursuant to Awards granted or to be granted under this Plan.
Notwithstanding the foregoing, but subject to adjustment pursuant to
Section 1.6.2, no more than 4 million shares of Common Stock shall be
delivered pursuant to the exercise of incentive stock options. The maximum
number of shares of Common Stock with respect to which options and stock
appreciation rights may be granted to an individual grantee in any calendar
year is 1.5 million shares of Common Stock, subject to adjustment pursuant to
Section 1.6.2. To the extent the deduction limits under
Section 162(m) of the Code become applicable to Awards paid under the
Plan, the maximum number of shares of Common Stock with respect to which
restricted stock, restricted stock units or performance shares that are
intended to qualify as performance-based compensation under Section 162(m)
of the Code may be granted to an individual grantee in any calendar year is
600,000 shares of Common Stock, subject to adjustment pursuant to Section 1.6.2.
Any shares of Common Stock (a) delivered by the Company, (b) with respect to
which Awards are made by the Company and (c) with respect to which the Company
becomes obligated to make Awards, in each case through the assumption of, or in
substitution for, outstanding awards previously granted by an acquired entity,
shall not be counted against the shares of Common Stock available for Awards
under this Plan. Shares of Common Stock which may be delivered pursuant to
Awards may be authorized but unissued Common Stock or authorized and issued
Common Stock held in the Company’s treasury or otherwise acquired for the
purposes of the Plan. The 5.5 million, 4 million, 1.5 million and 600,000 share
figures referred to above shall be adjusted based upon any conversion rate applicable
to the shares of Archipelago Holdings, L.L.C. in connection with an initial
public offering of shares of Common Stock.


 


1.6.2 Adjustments. The Committee shall have the authority (but not the
obligation) to adjust the number of shares of Common Stock authorized pursuant
to Section 1.6.1


 


4

















 


and to adjust (including, without limitation, by payment of cash) the
terms of any outstanding Awards (including, without limitation, the number of
shares of Common Stock covered by each outstanding Award, the type of property
to which the Award relates and the exercise or strike price of any Award), in
such manner as it deems appropriate to prevent the enlargement or dilution of
rights, or otherwise deems it appropriate, for any increase or decrease in the
number of issued shares of Common Stock (or issuance of shares of stock other
than shares of Common Stock) resulting from a recapitalization, stock split,
reverse stock split, stock dividend, spinoff, splitup, combination or
reclassification or exchange of the shares of Common Stock, merger,
consolidation, rights offering, separation, reorganization or any other change
in corporate structure or event the Committee determines in its sole discretion
affects the capitalization of the Company, including any extraordinary dividend
or distribution. After any adjustment made pursuant to this Section 1.6.2,
the number of shares of Common Stock subject to each outstanding Award shall be
rounded up or down to the nearest whole number, as determined by the Committee.


 


1.6.3 Except as provided in this Section 1.6 or under the terms of
any applicable Award Agreement, there shall be no limit on the number or the
value of shares of Common Stock that may be subject to Awards to any individual
under the Plan.


 


1.6.4 There shall be no limit on the amount of cash, securities (other
than shares of Common Stock as provided in Section 1.6.1, as adjusted by
1.6.2) or other property that may be delivered pursuant to any Award.


 


ARTICLE II


 


AWARDS UNDER THE PLAN


 


2.1                                 Agreements
Evidencing Awards


 


Each Award granted under the Plan shall be evidenced by an Award
Agreement which shall contain such provisions and conditions as the Committee
deems appropriate. The Committee may grant Awards in tandem with or in
substitution for any other Award or Awards granted under this Plan or any award
granted under any other plan of the Company. By accepting an Award pursuant to
the Plan, a grantee thereby agrees that the Award shall be subject to all of
the terms and provisions of the Plan and the applicable Award Agreement.


 


2.2                                 No
Rights as a Shareholder


 


No grantee of an Award (or other person having rights pursuant to an
Award) shall have any of the rights of a shareholder of the Company with
respect to shares of Common Stock subject to an Award until the delivery of
such shares. Except as otherwise provided in Section 1.6.2, no adjustments
shall be made for dividends or distributions (whether ordinary or
extraordinary, and whether in cash, Common Stock, other securities or other
property) on, or other events relating to, shares of Common Stock subject to an
Award for which the record date is prior to the date such shares are delivered.


 


5

















 


2.3                                 Grant
of Options and Stock Appreciation Rights


 


The Committee may grant (a) options to purchase shares of Common Stock
from the Company and (b) stock appreciation rights, in such amounts and subject
to such terms and conditions as the Committee may determine.


 


2.4                                 Exercise
of Options and Stock Appreciation Rights


 


2.4.1 Any acceptance by the Committee of an optionee’s written notice
of exercise of an option shall be conditioned upon payment for the shares being
purchased. Such payment may be made in cash or by such other method as the
Committee may from time to time prescribe.


 


2.4.2 After receiving payment from the optionee of the full option
exercise price, or after receiving notice from the grantee of the exercise of a
stock appreciation right for which payment will be made by the Company partly
or entirely in shares of Common Stock, the Company shall, subject to the
provisions of the Plan or any Award Agreement, deliver the shares of Common
Stock.


 


2.5                                 Grant
of Restricted Stock


 


The Committee may grant or offer for sale restricted shares of Common
Stock in such amounts and subject to such terms and conditions as the Committee
shall determine. Upon the delivery of such shares, the grantee shall have the
rights of a shareholder with respect to the restricted stock, subject to any
restrictions and conditions as the Committee may include in the applicable
Award Agreement. In the event that a Certificate is issued in respect of
restricted shares of Common Stock, such Certificate may be registered in the
name of the grantee but shall be held by the Company or its designated agent
until the time the restrictions lapse.


 


2.6                                 Grant of Restricted
Stock Units


 


The Committee may grant Awards of restricted stock units in such
amounts and subject to such terms and conditions as the Committee shall
determine. A grantee of a restricted stock unit will have only the rights of a
general unsecured creditor of the Company until delivery of shares of Common
Stock, cash or other securities or property is made as specified in the
applicable Award Agreement. On the delivery date, the grantee of each
restricted stock unit not previously forfeited shall receive one share of
Common Stock, or cash, securities or other property equal in value to a share
of Common Stock or a combination thereof, as specified by the Committee.


 


2.7                                 Other Stock-Based
Awards


 


The Committee may grant other types of equity-based or equity-related
Awards (including the grant or offer for sale of unrestricted shares of Common 


 


6

















 


Stock and performance shares) in such amounts and subject to such terms
and conditions, as the Committee shall determine. Such Awards may entail the
transfer of actual shares of Common Stock to Plan participants, or payment in
cash or otherwise of amounts based on the value of shares of Common Stock.


 


2.8                                 Grant of Dividend
Equivalent Rights


 


The Committee may include in the Award Agreement with respect to any
Award a dividend equivalent right entitling the grantee to receive amounts
equal to all or any portion of the dividends that would be paid on the shares
of Common Stock covered by such Award if such shares had been delivered
pursuant to such Award. The grantee of a dividend equivalent right will have
only the rights of a general unsecured creditor of the Company until payment of
such amounts is made as specified in the applicable Award Agreement. In the
event such a provision is included in an Award Agreement, the Committee shall
determine whether such payments shall be made in cash, in shares of Common
Stock or in another form, whether they shall be conditioned upon the exercise
of the Award to which they relate, the time or times at which they shall be
made, and such other terms and conditions as the Committee shall deem
appropriate.


 


2.9                                 Performance Goals


 


The Committee may establish performance goals with respect to any Award
using one or more of the following goals: (a) market share (including, without
limitation, the market share of trading volume in certain types of securities),
(b) earnings, (c) earnings per share, (d) operating profit, (e) operating
margin, (f) return on equity, (g) return on assets, (h) total return to
stockholders, (i) technology improvements, (j) return on investment capital,
(k) revenue growth, (l) cash flow and (m) reliability. In addition, Awards may
be subject to comparisons of the performance of other companies, such
performance to be measured by one or more of the foregoing business criteria.


 


ARTICLE III


 


MISCELLANEOUS


 


3.1                                 Amendment of the
Plan


 


The Board may from time to time suspend, discontinue, revise or amend
the Plan in any respect whatsoever, provided, however, that no amendment shall
materially adversely affect a grantee without such person’s prior written
consent.


 


3.2                                 Tax
Withholding


 


3.2.1 As a condition to the delivery of any shares of Common Stock,


 


7

















 


other property or cash pursuant to any Award or the lifting or lapse of
restrictions on any Award, or in connection with any other event that gives
rise to a federal or other governmental tax withholding obligation on the part
of the Company or any of its subsidiaries or affiliates relating to an Award
(including, without limitation, FICA tax), (a) the Company may deduct or
withhold (or cause to be deducted or withheld) from any payment or distribution
to a grantee whether or not pursuant to the Plan or (b) the Committee shall be
entitled to require that the grantee remit cash to the Company or any of its
subsidiaries or affiliates (through payroll deduction or otherwise), or (c) the
Company or any its of subsidiaries or affiliates may enter into any other
suitable arrangements to withhold in each case in an amount sufficient in the
opinion of the Company to satisfy such withholding obligation.


 


3.2.2 If the event giving rise to the withholding obligation involves a
transfer of shares of Common Stock, then, unless the applicable Award Agreement
provides otherwise, at the discretion of the Committee, the grantee may satisfy
the withholding obligation described under Section 3.2.1 by electing to
have the Company withhold shares of Common Stock (which withholding will be at
a rate not in excess of the statutory minimum rate) or by tendering previously
owned shares of Common Stock, in each case having a Fair Market Value equal to
the amount of tax to be withheld (or by any other mechanism as may be required
or appropriate to conform with local tax and other rules). For this purpose,
Fair Market Value shall be determined as of the date on which the amount of tax
to be withheld is determined (and the Company may cause any fractional share
amount to be settled in cash).


 


3.3                                 Required
Consents and Legends


 


3.3.1 If the Committee shall at any time determine that any consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any Award, the delivery of shares of Common
Stock or the delivery of any cash, securities or other property under the Plan,
or the taking of any other action thereunder (each such action being hereinafter
referred to as a “plan action”), then such plan action shall not be taken, in
whole or in part, unless and until such consent shall have been effected or
obtained to the full satisfaction of the Committee. The Committee may direct
that any Certificate evidencing shares delivered pursuant to the Plan shall
bear a legend setting forth such restrictions on transferability as the
Committee may determine to be necessary or desirable, and may advise the
transfer agent to place a stop order against any legended shares.


 


3.3.2 The term “consent” as used herein with respect to any plan action
includes (a) any and all listings, registrations or qualifications in respect
thereof upon any securities exchange or under any federal, state, or local law,
or law, rule or regulation of a jurisdiction outside the United States, (b) any
and all written agreements and representations by the grantee with respect to
the disposition of shares, or with respect to any other matter, which the
Committee may deem necessary or desirable to comply with the terms of any such
listing, registration or qualification or to obtain an exemption from the
requirement that any such listing, qualification or registration be made, (c)
any and all other consents, clearances and approvals in respect of a plan
action 


 


8

















 


by any governmental or other regulatory body or any stock exchange or
self-regulatory agency, (d) any and all consents by the grantee to (i) the
Company’s supplying to any third party recordkeeper of the Plan such personal
information as the Committee deems advisable to administer the Plan, (ii) the
Company, or its applicable subsidiary or affiliate, deducting amounts from the
grantee’s wages, or another arrangement satisfactory to the Committee, to
reimburse the Company, or its applicable subsidiary or affiliate, for advances
made on the grantee’s behalf to satisfy certain withholding and other tax
obligations in connection with an Award and (iii) the Company imposing sales
and transfer procedures and restrictions and hedging restrictions on shares of
Common Stock delivered under the Plan and (e) any and all consents or
authorizations required to comply with, or required to be obtained under,
applicable local law or otherwise required by the Committee. Nothing herein
shall require the Company to list, register or qualify the shares of Common
Stock on any securities exchange.


 


3.4                                 Right
of Offset


 


The Company and its subsidiaries and affiliates shall have the right to
offset against its obligation to deliver shares of Common Stock (or other
property or cash) under the Plan or any Award Agreement any outstanding amounts
(including, without limitation, travel and entertainment or advance account
balances, loans, repayment obligations under any Awards, or amounts repayable
to the Company or its subsidiaries or affiliates pursuant to tax equalization,
housing, automobile or other employee programs) the grantee then owes to the
Company or its subsidiaries or affiliates and any amounts the Committee otherwise
deems appropriate pursuant to any tax equalization policy or agreement.


 


3.5                                 Nonassignability


 


Except to the extent otherwise expressly provided in the applicable
Award Agreement, no Award (or any rights and obligations thereunder) granted to
any person under the Plan may be sold, exchanged, transferred, assigned,
pledged, hypothecated, fractionalized, hedged or otherwise disposed of
(including through the use of any cash-settled instrument), whether voluntarily
or involuntarily, other than by will or by the laws of descent and
distribution, and all such Awards (and any rights thereunder) shall be
exercisable during the life of the grantee only by the grantee or the grantee’s
legal representative. Notwithstanding the preceding sentence, the Committee may
permit, under such terms and conditions that it deems appropriate in its sole
discretion, a grantee to transfer any Award to any person or entity that the
Committee so determines. Any sale, transfer, assignment, pledge, hypothecation,
fractionalization, hedge or other disposition in violation of the provisions of
this Section 3.5 shall be void. All of the terms and conditions of this
Plan and the Award Agreements shall be binding upon any such permitted
successors and assigns.


 


9

















 


3.6                                 Requirement of
Consent and Notification of Election Under Section 83(b) of the Code or
Similar Provision


 


No election under Section 83(b) of the Code (to include in gross
income in the year of transfer the amounts specified in Code
Section 83(b)) or under a similar provision of the law of a jurisdiction
outside the United States may be made unless expressly permitted by the terms
of the Award Agreement or by action of the Committee in writing prior to the
making of such election. If a grantee of an Award, in connection with the
acquisition of shares of Common Stock under the Plan or otherwise, is expressly
permitted under the terms of the Award Agreement or by such Committee action to
make any such election and the grantee makes the election, the grantee shall
notify the Committee of such election within ten (10) days of filing notice of
the election with the Internal Revenue Service or other governmental authority,
in addition to any filing and notification required pursuant to regulations
issued under Code Section 83(b) or other applicable provision.


 


3.7                                 Requirement of
Notification Upon Disqualifying Disposition Under Section 421(b) of the
Code


 


If any grantee shall make any disposition of shares of Common Stock
delivered pursuant to the exercise of an incentive stock option under the
circumstances described in Section 421(b) of the Code (relating to certain
disqualifying dispositions), such grantee shall notify the Company of such
disposition within ten (10) days thereof.


 


3.8                                 Change
in Control


 


3.8.1 The Committee may provide in any Award Agreement for provisions
relating to a “change in control” of the Company or any of its subsidiaries or
affiliates (as such term is defined by the Committee in any such Award
Agreement), including, without limitation, the acceleration of the
exercisability of, or the lapse of restrictions or deemed satisfaction of goals
with respect to, any outstanding Awards.


 


3.8.2 Unless otherwise provided in the applicable Award Agreement, and
except as otherwise determined by the Committee in the event of a merger,
consolidation, mandatory share exchange or other similar business combination
of the Company with or into any other entity (“successor entity”) or any
transaction in which another person or entity acquires all of the issued and
outstanding Common Stock of the Company, or all or substantially all of the
assets of the Company, outstanding Awards may be assumed or a substantially
equivalent Award may be substituted by such successor entity or a parent or
subsidiary of such successor entity, and such an assumption or substitution
shall not be deemed to violate this Plan or any provision of any Award
Agreement.


 


10

















 


3.9                                 Right
of Discharge Reserved


 


Neither the grant of an Award nor any provision in the Plan or in any
Award Agreement shall confer upon any grantee the right to continued Employment
by the Company or any of its affiliates or subsidiaries or affect any right
that the Company or its subsidiaries or affiliates may have to terminate or
alter the terms and conditions of the grantee’s Employment.


 


3.10                           Nature of Payments


 


3.10.1 Any and all grants of Awards and deliveries of shares of Common
Stock, cash, securities or other property under the Plan shall be in
consideration of services performed or to be performed for the Company or its
subsidiaries or affiliates by the grantee. Awards under the Plan may, in the
sole discretion of the Committee, be made in substitution in whole or in part
for cash or other compensation otherwise payable to an Employee. Deliveries of
shares of Common Stock may be rounded to avoid fractional shares. In addition,
the Company may pay cash in lieu of fractional shares.


 


3.10.2 All grants of Awards and deliveries of shares of Common Stock,
cash or other property under the Plan shall constitute a special discretionary
incentive payment to the grantee and shall not be required to be taken into
account in computing the amount of salary or compensation of the grantee for
the purpose of determining any contributions to or any benefits under any
pension, retirement, profit-sharing, bonus, life insurance, severance or other
benefit plan of the Company or its subsidiaries or affiliates or under any
agreement with the grantee, unless the Company or its subsidiaries or
affiliates specifically provides otherwise.


 


3.11                           Non-Uniform
Determinations


 


None of the Committee’s determinations under the Plan and Award
Agreements need to be uniform, and any such determination may be made by it selectively
among persons who receive, or are eligible to receive, Awards under the Plan
(whether or not such persons are similarly situated). Without limiting the
generality of the foregoing, the Committee shall be entitled, among other
things, to make non-uniform and selective determinations under Award
Agreements, and to enter into non-uniform and selective Award Agreements, as to
(a) the persons to receive Awards, (b) the terms and provisions of Awards, (c)
whether a grantee’s Employment has been terminated for purposes of the Plan and
(d) any adjustments to be made to Award pursuant to Section 1.6.2 or
otherwise.


 


3.12                           Other Payments or Awards


 


Nothing contained in the Plan shall be deemed in any way to limit or
restrict the Company or its subsidiaries or affiliates from making any award or
payment to any person under any other plan, arrangement or understanding,
whether now existing or hereafter in effect.


 


11

















 


3.13                           Plan Headings


 


The headings in this Plan are for the purpose of convenience only and
are not intended to define or limit the construction of the provisions hereof.


 


3.14                           References
to Laws, Rules or Regulations


 


Any reference in this Plan to any law, rule or regulation shall be
deemed to include any amendments, revisions or successor provisions to such
law, rule or regulation.


 


3.15                           Adoption
Date, Effective Date, and Term of Plan


 


The Plan was adopted on February 26, 2004. The Plan shall become
effective on the day prior to the IPO Date. In the event that the IPO Date has
not occurred by December 31, 2004, the Plan shall expire and be null and
void without any force or effect. Unless sooner terminated by the Board, the
provisions of the Plan which address the grant of incentive stock options shall
terminate on the day before the tenth anniversary of the date the Plan was
adopted, and no incentive stock options shall thereafter be granted under the
Plan. Unless sooner terminated by the Board, the provisions of
Section 1.6.1 which provide that shares of Common Stock that are withheld
from Awards of restricted stock upon vesting to satisfy a grantee’s income tax
or other withholding obligations shall be added back to the total shares that
may be delivered pursuant to Awards granted under the Plan shall terminate on
the day before the tenth anniversary of the date the Plan was approved by
shareholders. The Board reserves the right to terminate the Plan at any time;
provided, however, that all Awards made under the Plan prior to its termination
shall remain in effect until such Awards have been satisfied or terminated in
accordance with the terms and provisions of the Plan and the applicable Award
Agreements.


 


3.16                           Governing
Law


 


ALL RIGHTS AND OBLIGATIONS UNDER THE PLAN AND EACH AWARD AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.


 


3.17                           Arbitration


 


Any dispute, controversy or claim between the Company and any
participant arising out of or relating to or concerning the provisions of the
Plan shall be finally settled by arbitration in Chicago, Illinois before, and
in accordance with, the rules then obtaining of the American Arbitration
Association (the “AAA”) in accordance with the commercial arbitration rules of
the AAA. Prior to arbitration, all disputes, controversies or claims maintained
by any participant must first be submitted to the Committee in accordance with 


 


12

















 


claim procedures determined by the Committee in its sole discretion.


 


3.18                           Severability;
Entire Agreement


 


If any of the provisions of this Plan or any Award Agreement is finally
held to be invalid, illegal or unenforceable (whether in whole or in part),
such provision shall be deemed modified to the extent, but only to the extent,
of such invalidity, illegality or unenforceability and the remaining provisions
shall not be affected thereby; provided that, if any of such provisions is
finally held to be invalid, illegal, or unenforceable because it exceeds the
maximum scope determined to be acceptable to permit such provision to be
enforceable, such provision shall be deemed to be modified to the minimum
extent necessary to modify such scope in order to make such provision
enforceable hereunder. The Plan and any Award Agreements contain the entire
agreement of the parties with respect to the subject matter thereof and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations and warranties between them, whether written or
oral with respect to the subject matter thereof.


 


3.19                           No
Third Party Beneficiaries


 


Except as expressly provided in an Award Agreement, neither the Plan
nor any Award Agreement shall confer on any person other than the Company and
the grantee of the Award any rights or remedies thereunder; provided that the
exculpation and indemnification provisions of Section 1.3.5 shall inure to
the benefit of a Covered Person’s estate, beneficiaries and legatees.


 


3.20                           Successors
and Assigns of the Company


 


The terms of this Plan shall be binding upon and inure to the benefit
of the Company and its successors and assigns.


 


13