**Exhibit 10.1**

** **

**AS ADOPTED**

**BY THE BOARD OF DIRECTORS OF**

**PZENA INVESTMENT MANAGEMENT, INC.**

**ON OCTOBER 24, 2007**

**(AMENDED AS OF MAY 19, 2009)**

 

**Pzena Investment Management, Inc.**

**Equity Incentive Plan**

 

1.                                       PURPOSE; TYPESOF AWARDS; CONSTRUCTION.

 

The purposes of the Pzena Investment Management, Inc.Equity Incentive Plan are to attract, motivate and retain (a) employees ofthe Company and any Subsidiary or Affiliate, (b) independent contractorswho provide significant services to the Company, any Subsidiary or Affiliateand (c) nonemployee directors of the Company, any Subsidiary or anyAffiliate.  The Plan is also designed toencourage stock ownership by such persons, thereby aligning their interest withthose of the Company’s stockholders and to permit the payment of compensationthat qualifies as performance-based compensation under Section 162(m) ofthe Code.  Pursuant to the provisionshereof, there may be granted stock options (including “incentive stock options”and “non-qualified stock options”), and other stock-based awards, including butnot limited to restricted stock, restricted stock units, dividend equivalents,performance units, Stock Appreciation Rights (payable in cash or shares) andother long-term stock-based or cash-based Awards.  Notwithstanding any provision of the Plan, tothe extent that any Award would be subject to Section 409A of the Code, nosuch Award may be granted if it would fail to comply with the requirements setforth in Section 409A of the Code and any regulations or guidance promulgatedthereunder.

 

2.                                       DEFINITIONS.  For purposes of the Plan, the following termsshall be defined as set forth below:

 

(a)           “Affiliate” means an affiliate of theCompany, as defined in Rule 12b-2 promulgated under Section 12 of theExchange Act.

 

(b)           “Award” means individually orcollectively, a grant under the Plan of Options, Restricted Stock, RestrictedStock Units or Other Stock-Based Awards or Other Cash-Based Awards.

 

(c)           “Award Terms” means any writtenagreement, contract, or other instrument or document evidencing an Award.

 

(d)           “Beneficial Owner” shall have themeaning set forth in Rule 13d-3 under the Exchange Act.

 

(e)           “Board” means the Board of Directorsof the Company.

 

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(f)            “Cause” shall mean, with respect toa Grantee, (a) such Grantee being charged or indicted for a felonyinvolving the Company or any Affiliate’s business, or being convicted of anyother felony (or guilty plea, or nolo contendere plea in connection therewith),(b) such Grantee’s willfully and materially defrauding the Company or anyAffiliate, or (c) such Grantee’s committing a willful and material breachof such Grantee’s obligations to protect the Company or any Affiliate’sconfidential information, such Grantee’s obligation of loyalty to the Companyor any Affiliate or such Grantee’s obligation to comply with the Company or anyAffiliate’s Code of Ethics or any other compliance regulations, policies orprocedures, (d) the gross negligence or willful misconduct of such Granteein the performance of such Grantee’s duties which gross negligence or willfulmisconduct has the purpose, or the reasonable likely effect, of causingmaterial harm to the Company or any Affiliate, or (e) such Grantee failsto maintain in good standing any and all licenses, registrations or otherpermits necessary for the performance of his duties hereunder.  For purposes of the definition of Cause, “materially,”and “material” shall mean damages caused to the Company or any Affiliate inexcess of $100,000 or any significant damage to the reputation of the Companyor any Affiliate.

 

(g)           “Change in Control” shall have themeaning set forth in Section 7(b) hereof.

 

(h)           “Code” means the Internal RevenueCode of 1986, as amended from time to time.

 

(i)            “Committee” means the CompensationCommittee of the Board.  Unless otherwisedetermined by the Board, the Committee shall be comprised solely of directorswho are (a) “nonemployee directors” under Rule 16b-3 of the ExchangeAct, (b) “outside directors” under Section 162(m) of the Code and (c) “independentdirectors” pursuant to New York Stock Exchange requirements.

 

(j)            “Company” means Pzena InvestmentManagement, Inc., a corporation organized under the laws of the State ofDelaware, or any successor corporation.

 

(k)           “Covered Employee” shall have themeaning set forth in Section 162(m)(3) of the Code.

 

(l)            “Effective Date” means the date thatthe Plan was adopted by the Board.

 

(m)          “Exchange Act” means the SecuritiesExchange Act of 1934, as amended from time to time, and as now or hereafterconstrued, interpreted and applied by regulations, rulings and cases.

 

(n)           “Excise Tax” shall have the meaningset forth in Section 7(d) hereof.

 

(o)           “Fair Market Value” means, withrespect to Stock or other property, the fair market value of such Stock orother property determined by such methods or procedures as shall be establishedfrom time to time by the Committee. Unless otherwise determined by the Committee in good faith, the pershare Fair Market Value of Stock as of a particular date shall mean (i) ifthe Stock is listed for trading on the New York Stock Exchange, the closingsale price per share of Stock on the New York Stock Exchange on that date (or,if no closing sale price is reported, the last reported sale price), (ii) ifthe Stock is not listed for trading on the New York Stock Exchange, the closingsale price (or, if no closing sale price is reported, the last reported

 

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sale price) as reported onthat date in composite transactions for the principal national securitiesexchange registered pursuant to Section 6(g) of the Exchange Act onwhich the Stock is listed, (iii) if the Stock is not so listed on anational securities exchange, the last quoted bid price for the Stock on thatdate in the over-the-counter market as reported by Pink Sheets LLC or a similarorganization, or (iv) if the Stock is not so quoted by Pink Sheets LLC ora similar organization such value as the Committee, in its sole discretion,shall determine in good faith.

 

(p)           “Grantee” means a person who, as anemployee of or independent contractor or nonemployee director with respect tothe Company, a Subsidiary or an Affiliate, has been granted an Award under thePlan.

 

(q)           “IPO” means the initial publicoffering of Stock, as contemplated in the Company’s prospectus, dated October 24,2007.

 

(r)            “ISO” means any Option intended tobe and designated as an incentive stock option within the meaning of Section 422of the Code.

 

(s)           “NQSO” means any Option that isdesignated as a nonqualified stock option.

 

(t)            “Option” means a right, granted to aGrantee under Section 6(b)(i), to purchase shares of Stock. An Option maybe either an ISO or an NQSO.

 

(u)           “Other Cash-Based Award” means anAward granted to a Grantee under Section 6(b)(iv) hereof, including cashawarded as a bonus or upon the attainment of Performance Goals or otherwise aspermitted under the Plan.

 

(v)           “Other Stock-Based Award” means anAward granted to a Grantee pursuant to Section 6(b)(iv) hereof, thatmay be denominated or payable in, valued in whole or in part by reference to,or otherwise based on, or related to, Stock including but not limited toperformance units, Stock Appreciation Rights (payable in cash or shares) ordividend equivalents, each of which may be subject to the attainment ofPerformance Goals or a period of continued employment or other terms andconditions as permitted under the Plan.

 

(w)          “Performance Goals” means performancegoals based on one or more of the following criteria: (i) earningsincluding operating income, earnings before or after taxes, earnings before orafter interest, depreciation, amortization, or extraordinary or special itemsor book value per share (which may exclude nonrecurring items); (ii) pre-taxincome or after-tax income; (iii) earnings per common share (basic ordiluted); (iv) operating profit; (v) revenue, revenue growth or rateof revenue growth; (vi) return on assets (gross or net), return oninvestment, return on capital, or return on equity; (vii) returns on salesor revenues; (viii) operating expenses; (ix) stock priceappreciation; (x) cash flow, free cash flow, cash flow return oninvestment (discounted or otherwise), net cash provided by operations, or cashflow in excess of cost of capital; (xi) implementation or completion ofcritical projects or processes; (xii) economic value created; (xiii) cumulativeearnings per share growth;  (xiv)operating margin or profit margin; (xv) common stock price or total stockholderreturn; (xvi) cost targets, reductions and savings, productivity and efficiencies;(xvii) strategic business criteria, consisting of one or more objectives basedon meeting specified market penetration, geographic business expansion,customer satisfaction, employee satisfaction, human resources management,supervision of

 

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litigation, informationtechnology, and goals relating to acquisitions, divestitures, joint venturesand similar transactions, and budget comparisons; (xviii) personal professionalobjectives, including any of the foregoing performance goals, theimplementation of policies and plans, the negotiation of transactions, thedevelopment of long-term business goals, formation of joint ventures, researchor development collaborations, and the completion of other corporatetransactions; and (xix) any combination of, or a specified increase in, any ofthe foregoing.  Where applicable, thePerformance Goals may be expressed in terms of attaining a specified level ofthe particular criteria or the attainment of a percentage increase or decreasein the particular criteria, and may be applied to one or more of the Company, aSubsidiary or Affiliate, or a division or strategic business unit of theCompany, or may be applied to the performance of the Company relative to a marketindex, a group of other companies or a combination thereof, all as determinedby the Committee.  The Performance Goalsmay include a threshold level of performance below which no payment will bemade (or no vesting will occur), levels of performance at which specifiedpayments will be made (or specified vesting will occur), and a maximum level ofperformance above which no additional payment will be made (or at which fullvesting will occur). Each of the foregoing Performance Goals shall bedetermined in accordance with generally accepted accounting principles, ifapplicable, and shall be subject to certification by the Committee; providedthat, to the extent an Award is intended to satisfy the performance-basedcompensation exception to the limits of Section 162(m) of the Codeand then to the extent consistent with such exception, the Committee shall havethe authority to make equitable adjustments to the Performance Goals inrecognition of unusual or non-recurring events affecting the Company or any Subsidiaryor Affiliate or the financial statements of the Company or any Subsidiary orAffiliate, in response to changes in applicable laws or regulations, or toaccount for items of gain, loss or expense determined to be extraordinary orunusual in nature or infrequent in occurrence or related to the disposal of asegment of a business or related to a change in accounting principles.

 

(x)            “Person” shall have the meaning setforth in Section 3(a)(9) of the Exchange Act, as modified and used inSections 13(d) and 14(d) thereof and the rules thereunder,except that such term shall not include (1) the Company or any Subsidiarycorporation, (2) a trustee or other fiduciary holding securities under anemployee benefit plan of the Company or any Subsidiary corporation, (3) anunderwriter temporarily holding securities pursuant to an offering of suchsecurities, or (4) a corporation owned, directly or indirectly, by thestockholders of the Company in substantially the same proportions as theirownership of stock of the Company.

 

(y)           “Plan” means this Pzena InvestmentManagement, Inc. Equity Incentive Plan, as amended from time to time.

 

(z)            “Plan Year” means a calendar year.

 

(aa)         “Restricted Stock” means an Award ofshares of Stock to a Grantee under Section 6(b)(ii) that may besubject to certain restrictions and to a risk of forfeiture.

 

(bb)         “Restricted Stock Unit” means a rightgranted to a Grantee under Section 6(b)(iii) of the Plan to receiveStock or cash at the end of a specified period, which right may be subject tothe attainment of Performance Goals in a period of continued employment orother terms and conditions as permitted under the Plan.

 

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(cc)         “Rule 16b-3” means Rule 16b-3,as from time to time in effect promulgated by the Securities and ExchangeCommission under Section 16 of the Exchange Act, including any successorto such Rule.

 

(dd)         “Stock” means shares of Class Acommon stock, par value $0.01 per share, of the Company.

 

(ee)         “Stock Appreciation Right” means anOther Stock-Based Award, payable in cash or stock, that entitles a Grantee uponexercise to the excess of the Fair Market Value of the Stock underlying theAward over the base price established in respect of such Stock.

 

(ff)           “Subsidiary” means any corporation inan unbroken chain of corporations beginning with the Company if, at the time ofgranting of an Award, each of the corporations (other than the last corporationin the unbroken chain) owns stock possessing 50% or more of the total combinedvoting power of all classes of stock in one of the other corporations in thechain.

 

(gg)         “Total Payments” shall have the meaningset forth in Section 7(d) hereof.

 

3.                                       ADMINISTRATION.

 

(a)           The Plan shall be administered by theCommittee or, at the discretion of the Board, the Board, provided that anyAward to the Chairman of the Board shall be subject to ratification by theBoard.  In the event the Board is theadministrator of the Plan, references herein to the Committee shall be deemedto include the Board.  The Board may fromtime to time appoint a member or members of the Committee in substitution foror in addition to the member or members then in office and may fill vacancieson the Committee however caused.  TheBoard or the Committee may delegate the ability to grant Awards to employeeswho are not subject to potential liability under Section 16(b) of the1934 Act with respect to transactions involving equity securities of theCompany at the time any such delegated authority is exercised.

 

(b)           The decision of the Committee as toall questions of interpretation and application of the Plan shall be final,binding and conclusive on all persons. The Committee shall have the authority in its discretion, subject to andnot inconsistent with the express provisions of the Plan, to administer thePlan and to exercise all the power and authority either specifically granted toit under the Plan or necessary or advisable in the administration of the Plan,including without limitation, the authority to grant Awards, to determine thepersons to whom and the time or times at which Awards shall be granted, todetermine the type and number of Awards to be granted, the number of shares ofStock to which an Award may relate and the terms, conditions, restrictions andPerformance Goals relating to any Award; to determine Performance Goals nolater than such time as is required to ensure that an underlying Award which isintended to comply with the requirements of Section 162(m) of theCode so complies; to determine whether, to what extent, and under whatcircumstances an Award may be settled, canceled, forfeited, accelerated,exchanged, or surrendered (provided that, unless approved by the Company’sstockholders, no Award shall be settled, canceled, forfeited, exchanged orsurrendered in exchange or otherwise in consideration for a new Award with avalue in excess of the value of such settled, canceled, forfeited, exchanged orsurrendered Award); to make adjustments in the terms and conditions (includingPerformance Goals) applicable to Awards; to construe and interpret the Plan andany

 

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Award; to prescribe, amendand rescind rules and regulations relating to the Plan; to determine theterms and provisions of the Award Terms (which need not be identical for eachGrantee); and to make all other determinations deemed necessary or advisablefor the administration of the Plan.  TheCommittee may correct any defect or supply any omission or reconcile anyinconsistency in the Plan or in any Award Terms granted hereunder in the mannerand to the extent it shall deem expedient to carry the Plan into effect andshall be the sole and final judge of such expediency.  No Committee member (or member of theManagement Committee) shall be liable for any action or determination made withrespect to the Plan or any Award.

 

4.                                       ELIGIBILITY.

 

(a)           Awards may be granted to officers,independent contractors, employees and nonemployee directors of the Company orof any of its Subsidiaries and Affiliates; provided, that ISOs shall be grantedonly to employees (including officers and directors who are also employees) ofthe Company, its parent or any of its Subsidiaries.

 

(b)           No ISO shall be granted to anyemployee of the Company, its parent or any of its Subsidiaries if such employeeowns, immediately prior to the grant of the ISO, stock representing more than10% of the voting power or more than 10% of the value of all classes of stockof the Company or a parent or a Subsidiary, unless the purchase price for thestock under such ISO shall be at least 110% of its Fair Market Value at thetime such ISO is granted and the ISO, by its terms, shall not be exercisablemore than five years from the date it is granted. In determining the stockownership under this paragraph, the provisions of Section 424(d) ofthe Code shall be controlling.

 

5.                                       STOCK SUBJECTTO THE PLAN.

 

(a)           The maximum number of shares of Stockreserved for the grant or settlement of Awards under the Plan (the “Share Limit”)shall be 7,059,658 shares of Stock, and shall be subject to adjustment asprovided herein.  The aggregate number ofshares of Stock made subject to Awards granted during any fiscal year to anysingle individual shall not exceed 0.2% of the Share Limit.  Determinations made in respect of thelimitation set forth in the preceding sentence shall be made in a mannerconsistent with Section 162(m) of the Code.  Such shares may, in whole or in part, beauthorized but unissued shares or shares that shall have been or may be reacquiredby the Company in the open market, in private transactions or otherwise.  If any shares subject to an Award areforfeited, canceled, exchanged or surrendered or if an Award otherwiseterminates or expires without a distribution of shares to the Grantee, theshares of stock with respect to such Award shall, to the extent of any suchforfeiture, cancellation, exchange, surrender, termination or expiration, againbe available for Awards under the Plan. Notwithstanding the foregoing, shares of Stock that are exchanged by aGrantee or withheld by the Company as full or partial payment in connectionwith any Award under the Plan, as well as any shares of Stock exchanged by aGrantee or withheld by the Company or any Subsidiary to satisfy the taxwithholding obligations related to any Award under the Plan, shall not beavailable for subsequent Awards under the Plan. Upon the exercise of any Award granted in tandem with any other Awards,such related Awards shall be canceled to the extent of the number of shares ofStock as to which the Award is exercised and, notwithstanding the foregoing,such number of shares shall no longer be available for Awards under the Plan.

 

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(b)           Except as provided in any Award Termsor as otherwise provided in the Plan, in the event that the Committee shalldetermine that any dividend or other distribution (whether in the form of cash,Stock, or other property), recapitalization, Stock split, reverse split,reorganization, merger, consolidation, spin-off, combination, repurchase, orshare exchange, or other similar corporate transaction or event, affects theStock such that an adjustment is appropriate in order to prevent dilution orenlargement of the rights of Grantees under the Plan, then the Committee shallmake such equitable changes or adjustments as it deems necessary or appropriateto any or all of (i) the number and kind of shares of Stock or otherproperty (including cash) that may thereafter be issued in connection withAwards or the total number of Awards issuable under the Plan, (ii) thenumber and kind of shares of Stock or other property issued or issuable inrespect of outstanding Awards, (iii) the exercise price, grant price orpurchase price relating to any Award, (iv) the Performance Goals and (v) theindividual limitations applicable to Awards; provided that, with respect toISOs, any adjustment shall be made in accordance with the provisions of Section 424(h) ofthe Code and any regulations or guidance promulgated thereunder, and providedfurther that no such adjustment shall cause any Award hereunder which is orbecomes subject to Section 409A of the Code to fail to comply with therequirements of such section.

 

6.                                       SPECIFIC TERMSOF AWARDS.

 

(a)                                  General.  The term of each Award shall be for suchperiod as may be determined by the Committee. Subject to the terms of the Planand any applicable Award Terms, payments to be made by the Company or aSubsidiary or Affiliate upon the grant, maturation, or exercise of an Award maybe made in such forms as the Committee shall determine at the date of grant orthereafter, including, without limitation, cash, Stock, or other property, andmay be made in a single payment or transfer, in installments, or, subject tothe requirements of Section 409A of the Code, on a deferred basis.

 

(b)                                 Awards.  The Committee is authorized to grant toGrantees the following Awards, as deemed by the Committee to be consistent withthe purposes of the Plan.  The Committeeshall determine the terms and conditions of such Awards.

 

(i)                                     Options.  The Committee is authorized to grant Optionsto Grantees on the following terms and conditions:

 

(A)                              The Award Terms evidencing the grant of an Option under thePlan shall designate the Option as an ISO or an NQSO.

 

(B)                             The exercise price per share of Stock purchasable under anOption shall be determined by the Committee, but in no event shall the exerciseprice of an Option per share of Stock be less than the Fair Market Value of ashare of Stock as of the date of grant of such Option.  The purchase price of Stock as to which anOption is exercised shall be paid in full at the time of exercise; payment maybe made in cash, which may be paid by check, or other instrument acceptable tothe Company, or, with the consent of the Committee, in shares of Stock, valuedat the Fair Market Value on the date of

 

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exercise (including shares of Stock that otherwisewould be distributed to the Grantee upon exercise of the Option), or if therewere no sales on such date, on the next preceding day on which there were salesor (if permitted by the Committee and subject to such terms and conditions asit may determine) by surrender of outstanding Awards under the Plan, or theCommittee may permit such payment of exercise price by any other method itdeems satisfactory in its discretion. In addition, subject to applicable lawand pursuant to procedures approved by the Committee, payment of the exerciseprice may be made through the sale of Stock acquired on exercise of the Option,valued at Fair Market Value on the date of exercise, sufficient to pay for suchStock (together with, if requested by the Company, the amount of federal, stateor local withholding taxes payable by Grantee by reason of such exercise). Anyamount necessary to satisfy applicable federal, state or local tax withholdingrequirements shall be paid promptly upon notification of the amount due.  The Committee may permit such amount of taxwithholding to be paid in shares of Stock previously owned by the employee, ora portion of the shares of Stock that otherwise would be distributed to suchemployee upon exercise of the Option, or a combination of cash and shares ofsuch Stock.

 

(C)                                Options shall be exercisable over the exercise period (whichshall not exceed ten years from the date of grant), at such times and upon suchconditions as the Committee may determine, as reflected in the Award Terms;provided that, the Committee shall have the authority to accelerate the exercisabilityof any outstanding Option at such time and under such circumstances as it, inits sole discretion, deems appropriate. An Option may be exercised to theextent of any or all full shares of Stock as to which the Option has becomeexercisable, by giving written notice of such exercise to the Committee or itsdesignated agent. No partial exercise may be made for less than one hundred(100) full shares of Stock.

 

(D)                               Upon the termination of a Grantee’s employment or servicewith the Company and its Subsidiaries or Affiliates, the Options granted tosuch Grantee, to the extent that they are exercisable at the time of suchtermination, shall remain exercisable for such period as may be provided in theapplicable Award Terms, but in no event following the expiration of their term.The treatment of any Option that is unexercisable as of the date of suchtermination shall be as set forth in the applicable Award Terms.

 

(E)                                 Options may be subject to such other conditions including,but not limited to, restrictions on transferability of, or provisions forrecovery of, the shares acquired upon exercise of such Options (or

 

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proceeds of sale thereof), as the Committee mayprescribe in its discretion or as may be required by applicable law.

 

(ii)                                  Restricted Stock.

 

(A)                              The Committee may grant Awards of Restricted Stock, alone orin tandem with other Awards under the Plan, subject to such restrictions, termsand conditions, as the Committee shall determine in its sole discretion and asshall be evidenced by the applicable Award Terms (provided that any such Awardis subject to the vesting requirements described herein).  The vesting of a Restricted Stock Awardgranted under the Plan may be conditioned upon the completion of a specifiedperiod of employment or service with the Company or any Subsidiary orAffiliate, upon the attainment of specified Performance Goals, and/or upon suchother criteria as the Committee may determine in its sole discretion.

 

(B)                                The Committee shall determine the price, which, to the extentrequired by law, shall not be less than par value of the Stock, to be paid bythe Grantee for each share of Restricted Stock or unrestricted stock or stockunits subject to the Award. Each Award Terms with respect to such stock awardshall set forth the amount (if any) to be paid by the Grantee with respect tosuch Award and when and under what circumstances such payment is required to bemade.

 

(C)                                Except as provided in the applicable Award Terms, no sharesof Stock underlying a Restricted Stock Award may be assigned, transferred, orotherwise encumbered or disposed of by the Grantee until such shares of Stockhave vested in accordance with the terms of such Award.

 

(D)                               If and to the extent that the applicable Award Terms may soprovide, a Grantee shall have the right to vote and receive dividends onRestricted Stock granted under the Plan. Unless otherwise provided in theapplicable Award Terms, any Stock received as a dividend on or in connectionwith a stock split of the shares of Stock underlying a Restricted Stock Awardshall be subject to the same restrictions as the shares of Stock underlyingsuch Restricted Stock Award.

 

(E)                                 Upon the termination of a Grantee’s employment or servicewith the Company and its Subsidiaries or Affiliates, the Restricted Stockgranted to such Grantee shall be subject to the terms and conditions specifiedin the applicable Award Terms.

 

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(iii)                               Restricted Stock Units.The Committee is authorized to grant Restricted Stock Units to Grantees,subject to the following terms and conditions:

 

(A)                              At the time of the grant of Restricted Stock Units, theCommittee may impose such restrictions or conditions to the vesting of suchAwards as it, in its discretion, deems appropriate, including, but not limitedto, the achievement of Performance Goals. The Committee shall have theauthority to accelerate the settlement of any outstanding award of RestrictedStock Units at such time and under such circumstances as it, in its solediscretion, deems appropriate, subject to the requirements of Section 409Aof the Code.

 

(B)                                Unless otherwise provided in Award Terms or except asotherwise provided in the Plan, upon the vesting of a Restricted Stock Unit thereshall be delivered to the Grantee, as soon as practicable following the date onwhich such Award (or any portion thereof) vests (but in any event within suchperiod as is required to avoid the imposition of a tax under Section 409Aof the Code), that number of shares of Stock equal to the number of RestrictedStock Units becoming so vested.

 

(C)                                Subject to the requirements of Section 409A of the Code,an Award of Restricted Stock Units may provide the Grantee with the right toreceive dividend equivalent payments with respect to Stock subject to the Award(both before and after the Stock subject to the Award is earned or vested),which payments may be either made currently or credited to an account for theParticipant, and may be settled in cash or Stock, as determined by theCommittee. Any such settlements and any such crediting of dividend equivalentsmay be subject to such conditions, restrictions and contingencies as theCommittee shall establish, including the reinvestment of such credited amountsin Stock equivalents.

 

(D)                               Upon the termination of a Grantee’s employment or servicewith the Company and its Subsidiaries or Affiliates, the Restricted Stock Unitsgranted to such Grantee shall be subject to the terms and conditions specifiedin the applicable Award Terms.

 

(iv)                              Other Stock-Based or Cash-Based Awards.

 

(A)                              The Committee is authorized to grant Awards to Grantees inthe form of Other Stock-Based Awards or Other Cash-Based Awards, as deemed bythe Committee to be consistent with the purposes of the Plan. The Committeeshall determine the terms and conditions of such Awards, consistent with theterms of the Plan, at the date of grant or thereafter, including thePerformance Goals and

 

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performance periods. Stock or other securities orproperty delivered pursuant to an Award in the nature of a purchase rightgranted under this Section 6(b)(iv) shall be purchased for suchconsideration, paid for at such times, by such methods, and in such forms,including, without limitation, Stock, other Awards, notes or other property, asthe Committee shall determine, subject to any required corporate action.

 

(B)           Themaximum value of the aggregate payment that any Grantee may receive withrespect to Other Cash-Based Awards pursuant to this Section 6(b)(iv) inrespect of any annual performance period is $15 million and for any otherperformance period in excess of one year, such amount multiplied by a fraction,the numerator of which is the number of months in the performance period andthe denominator of which is twelve. No payment shall be made to a CoveredEmployee prior to the certification by the Committee that the Performance Goalshave been attained. The Committee may establish such other rules applicableto the Other Stock- or Cash-Based Awards to the extent not inconsistent with Section 162(m) ofthe Code.

 

(C)           Paymentsearned in respect of any Cash-Based Award may be decreased or, with respect toany Grantee who is not a Covered Employee, increased in the sole discretion ofthe Committee based on such factors as it deems appropriate. Notwithstandingthe foregoing, any Awards may be adjusted in accordance with Section 5(b) hereof.

 

7.                                       CHANGE INCONTROL PROVISIONS.

 

(a)                                  Unless otherwise determined by the Committee or evidenced inan applicable Award Terms or employment or other agreement, in the event of aChange in Control, the Committee shall have the discretion, exercisable eitherin advance of such Change in Control or at the time thereof, to provide for oneor more of the following:

 

(i)            thecontinuation of outstanding Awards after the Change in Control without change;

 

(ii)           thecash-out of outstanding Options as of the time of the transaction as part ofthe transaction for an amount equal to the difference between the price thatwould have been paid for the shares of Stock subject to such outstandingOptions if such Options were exercised upon the closing of such transaction andthe exercise price of such outstanding Options; provided that if the exerciseprice of the Options exceeds the price that would have been paid for the sharesof Stock subject to the outstanding Options if such Options were exercised uponthe closing of the transaction,

 

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then such Options may be cancelledwithout making a payment to the Optionees;

 

(iii)          theexpiration of the exercise period for outstanding Options upon the closing ofthe transaction;

 

(iv)          thecancellation of outstanding Restricted Stock, Restricted Stock Units and/orOther Stock-Based Awards and payment to the Participants holding such Awardsequal to the value of the underlying shares of Stock as of the closing date ofthe transaction, in such form and at such time as the Committee shalldetermine;

 

(v)           arequirement that the buyer in the transaction assume outstanding Options and/orRestricted Stock and/or Restricted Stock Units;

 

(vi)          arequirement that the buyer in the transaction substitute outstanding Optionswith comparable options to purchase the equity interests of the buyer or itsparent and/or substitute outstanding Restricted Stock Units and/or OtherStock-Based Awards with comparable restricted stock or units of the buyer orits parent; and

 

(vii)         theacceleration of outstanding Options, Restricted Stock Units and OtherStock-Based Awards.

 

Notwithstandingany other provision of the Plan, in the event of a Change in Control in whichthe consideration paid to the holders of shares of Stock is solely cash, theCommittee may, in its discretion, provide that each Award shall, upon theoccurrence of a Change in Control, be canceled in exchange for a payment in anamount equal to (i) the excess of the consideration paid per share ofStock in the Change in Control over the exercise or purchase price (if any) pershare of Stock subject to the Award multiplied by (ii) the number ofShares granted under the Award.

 

(b)                                 A “Change in Control” shall be deemed to have occurred if theevent set forth in any one of the following paragraphs shall have occurred:

 

(i)            anyPerson is or becomes the Beneficial Owner, directly or indirectly, ofsecurities of the Company (not including in the securities beneficially ownedby such Person any securities acquired directly from the Company or itsAffiliates) representing 30% or more of the combined voting power of theCompany’s then outstanding securities, excluding any Person who becomes such aBeneficial Owner in connection with a transaction described in clause (I) ofparagraph (iii) below; or

 

(ii)           thefollowing individuals cease for any reason to constitute a majority of thenumber of directors then serving: individuals who, on the date hereof,constitute the Board and any new director (other than a director whose initialassumption of office is in connection with an actual or threatened electioncontest, including but not limited to a consent solicitation, relating to theelection of directors of the Company) whose appointment or

 

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election by the Board or nominationfor election by the Company’s stockholders was approved or recommended by avote of at least two-thirds (2/3) of the directors then still in office whoeither were directors on the date hereof or whose appointment, election ornomination for election was previously so approved or recommended; or

 

(iii)          thereis consummated a merger or consolidation of the Company or any direct orindirect subsidiary of the Company with any other corporation or other entity,other than (I) a merger or consolidation which results in (A) the votingsecurities of the Company outstanding immediately prior to such merger orconsolidation continuing to represent (either by remaining outstanding or bybeing converted into voting securities of the surviving entity or any parentthereof), in combination with the ownership of any trustee or other fiduciaryholding securities under an employee benefit plan of the Company or anysubsidiary of the Company, at least 60% of the combined voting power of thesecurities of the Company or such surviving entity or any parent thereofoutstanding immediately after such merger or consolidation and (B) theindividuals who comprise the Board immediately prior thereto constitutingimmediately thereafter at least a majority of the board of directors of theCompany, the entity surviving such merger or consolidation or, if the Companyor the entity surviving such merger is then a subsidiary, the ultimate parentthereof, or (II) a merger or consolidation effected to implement arecapitalization of the Company (or similar transaction) in which no Person isor becomes the Beneficial Owner, directly or indirectly, of securities of theCompany (not including in the securities Beneficially Owned by such Person anysecurities acquired directly from the Company or its Affiliates) representing30% or more of the combined voting power of the Company’s then outstandingsecurities; or

 

(iv)          thestockholders of the Company approve a plan of complete liquidation ordissolution of the Company or there is consummated an agreement for the sale ordisposition by the Company of all or substantially all of the Company’s assets(it being conclusively presumed that any sale or disposition is a sale ordisposition by the Company of all or substantially all of its assets if theconsummation of the sale or disposition is contingent upon approval by theCompany’s stockholders unless the Board expressly determines in writing thatsuch approval is required solely by reason of any relationship between theCompany and any other Person or an Affiliate of the Company and any otherPerson), other than a sale or disposition by the Company of all orsubstantially all of the Company’s assets to an entity (i) at least 60% ofthe combined voting power of the voting securities of which are owned by stockholdersof the Company in substantially the same proportions as their ownership of theCompany immediately prior to such sale or disposition and (ii) the majority ofwhose board of directors immediately following such sale or dispositionconsists of individuals who comprise the Board immediately prior thereto.

 

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(c)                                  Notwithstanding the foregoing, a “Change in Control” shallnot be deemed to have occurred by virtue of the consummation of any transactionor series of integrated transactions immediately following which the recordholders of the common stock of the Company immediately prior to suchtransaction or series of transactions continue to have substantially the sameproportionate ownership in an entity which owns all or substantially all of theassets of the Company immediately following such transaction or series oftransactions.

 

(d)                                 Unless otherwise provided by the Committee or set forth in aGrantee’s Award Terms, notwithstanding the provisions of this Plan, in theevent that any payment or benefit received or to be received by the Grantee inconnection with a Change in Control or the termination of the Grantee’semployment or service (whether pursuant to the terms of this Plan or any otherplan, arrangement or agreement with the Company, any Subsidiary, any Affiliate,any Person whose actions result in a Change in Control or any Person affiliatedwith the Company or such Person) (all such payments and benefits, “TotalPayments”) would be subject (in whole or part), to the excise tax imposed by Section 4999of the Code (the “Excise Tax”), then, after taking into account any reductionin the Total Payments provided by reason of Section 280G of the Code insuch other plan, arrangement or agreement, the payment or benefit to bereceived by the Grantee upon a Change in Control shall be reduced to the extentnecessary so that no portion of the Total Payments is subject to the Excise Taxbut only if the net amount of such Total Payments, as so reduced (and aftersubtracting the net amount of federal, state and local income taxes on suchreduced Total Payments) is greater than or equal to the net amount of suchTotal Payments without such reduction (but after subtracting the net amount offederal, state and local income taxes on such Total Payments and the amount ofExcise Tax to which the Executive would be subject in respect of such unreducedTotal Payments).

 

8.                                       GENERALPROVISIONS.

 

(a)                                  Nontransferability, Deferrals and Settlements.  Unless otherwisedetermined by the Committee or provided in an Award Terms, Awards shall not betransferable by a Grantee except by will or the laws of descent anddistribution and shall be exercisable during the lifetime of a Grantee only bysuch Grantee or his guardian or legal representative.  Notwithstanding the foregoing, any transferof Awards to independent third parties for cash consideration withoutstockholder approval is prohibited.  AnyAward shall be null and void and without effect upon any attempted assignmentor transfer, except as herein provided, including without limitation anypurported assignment, whether voluntary or by operation of law, pledge,hypothecation or other disposition, attachment, divorce, trustee process orsimilar process, whether legal or equitable, upon such Award.  The Committee may require or permit Granteesto elect to defer the issuance of shares of Stock (with settlement in cash orStock as may be determined by the Committee or elected by the Grantee inaccordance with procedures established by the Committee), or the settlement ofAwards in cash under such rules and procedures as established under thePlan to the extent that such deferral complies with Section 409A of theCode and any regulations or guidance promulgated thereunder.  It may also provide that deferred settlementsinclude the payment or crediting of interest, dividends or dividend equivalentson the deferral amounts.

 

(b)                                 No Right to Continued Employment, etc.  Nothing in the Planor in any Award granted or any Award Terms, promissory note or other agreemententered into pursuant hereto shall confer upon any Grantee the right tocontinue in the employ or service of the Company, any

 

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Subsidiary or any Affiliateor to be entitled to any remuneration or benefits not set forth in the Plan orsuch Award Terms, promissory note or other agreement or to interfere with orlimit in any way the right of the Company or any such Subsidiary or Affiliateto terminate such Grantee’s employment or service.

 

(c)           Clawback.  If a Grantee engages in misconduct (asdefined herein), the Grantee: (i) forfeits the right to receive any futureAwards or other equity-based incentive compensation under the Plan; and (ii) theCompany may demand repayment of any Awards or cash payments already received bya Grantee, including without limitation repayment due to making retroactiveadjustments to any Awards or cash payments already received by a Grantee underthe Plan where such Award or cash payment was predicated upon the achievementof certain financial results that were subsequently the subject of arestatement as a result of misconduct by the Grantee.  The Grantee shall be required to providerepayment within ten (10) days following such written demand.  For the purposes of the Plan, “misconduct”means (i) Grantee’s employment or service is terminated for Cause, or (ii) thebreach of a noncompete or confidentiality covenant set out in the employmentagreement between the Grantee and the Company or an Affiliate, or (iii) theCompany has been required to prepare an accounting restatement due to materialnoncompliance, as a result of fraud or misconduct, with any financial reportingrequirement under the securities laws, and the Committee has determined in itssole discretion that the Grantee: (A) had knowledge of the materialnoncompliance or the circumstances that gave rise to such noncompliance andfailed to take reasonable steps to bring it to the attention of appropriateindividuals within the Company; or (B) personally and knowingly engaged inpractices which materially contributed to the circumstances that enabled amaterial noncompliance to occur.

 

(d)           Taxes.  The Company or any Subsidiary or Affiliate isauthorized to withhold from any Award granted, any payment relating to an Awardunder the Plan, including from a distribution of Stock, or any other payment toa Grantee, amounts of withholding and other taxes due in connection with anytransaction involving an Award, and to take such other action as the Committeemay deem advisable to enable the Company and Grantees to satisfy obligationsfor the payment of withholding taxes and other tax obligations relating to anyAward. This authority shall include authority to withhold or receive Stock orother property with a Fair Market Value not in excess of the minimum amountrequired to be withheld and to make cash payments in respect thereof insatisfaction of a Grantee’s tax obligations.

 

(e)           Stockholder Approval; Amendmentand Termination.  The Plan shall takeeffect on the Effective Date but the Plan (and any grants of Awards made priorto the stockholder approval mentioned herein) shall be subject to the requisiteapproval of the stockholders of the Company, which approval must occur withintwelve (12) months of the date that the Plan is adopted by the Board. In theevent that the stockholders of the Company do not ratify the Plan at a meetingof the stockholders at which such issue is considered and voted upon, then uponsuch event the Plan and all rights hereunder shall immediately terminate and noGrantee (or any permitted transferee thereof) shall have any remaining rightsunder the Plan or any Award Terms entered into in connection herewith.  The Board may amend, alter or discontinue thePlan, but no amendment, alteration, or discontinuation shall be made that wouldimpair the rights of a Grantee under any Award theretofore granted without suchGrantee’s consent, or that without the approval of the stockholders (asdescribed below) would, except as provided in Section 5, increase thetotal number of shares of Stock reserved for the purpose of the Plan.  In addition,

 

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stockholder approval shallbe required with respect to any amendment that materially increases benefitsprovided under the Plan or materially alters the eligibility provisions of thePlan or with respect to which stockholder approval is required under the rules ofany stock exchange on which Stock is then listed.  Unless earlier terminated by the Boardpursuant to the provisions of the Plan, the Plan shall terminate on the tenthanniversary of its Effective Date.  NoAwards shall be granted under the Plan after such termination date.

 

(f)                                    No Rights to Awards; No Stockholder Rights.  No individual shallhave any claim to be granted any Award under the Plan, and there is noobligation for uniformity of treatment of Grantees.  No individual shall have any right to anAward or to payment or settlement under any Award unless and until theCommittee or its designee shall have determined that an Award or payment orsettlement is to be made.  Except asprovided specifically herein, a Grantee or a transferee of an Award shall haveno rights as a stockholder with respect to any shares covered by the Awarduntil the date of the issuance of such shares.

 

(g)                                 Unfunded Status of Awards.  The Plan is intended to constitute an “unfunded”plan for incentive and deferred compensation. With respect to any payments not yet made to a Grantee pursuant to anAward, nothing contained in the Plan or any Award shall give any such Granteeany rights that are greater than those of a general creditor of the Company.

 

(h)                                 No Fractional Shares.  No fractional shares of Stock shall be issuedor delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards, or otherproperty shall be issued or paid in lieu of such fractional shares or whethersuch fractional shares or any rights thereto shall be forfeited or otherwiseeliminated.

 

(i)                                     Regulations and Other Approvals.

 

(i)            Theobligation of the Company to sell or deliver Stock with respect to any Awardgranted under the Plan shall be subject to all applicable laws, rules andregulations, including all applicable federal and state securities laws, andthe obtaining of all such approvals by governmental agencies as may be deemednecessary or appropriate by the Committee.

 

(ii)           EachAward is subject to the requirement that, if at any time the Committeedetermines, in its absolute discretion, that the listing, registration orqualification of Stock issuable pursuant to the Plan is required by anysecurities exchange or under any state or federal law, or the consent orapproval of any governmental regulatory body is necessary or desirable as acondition of, or in connection with, the grant of an Award or the issuance ofStock, no such Award shall be granted or payment made or Stock issued, in wholeor in part, unless listing, registration, qualification, consent or approvalhas been effected or obtained free of any conditions not acceptable to theCommittee.

 

(iii)          Inthe event that the disposition of Stock acquired pursuant to the Plan is notcovered by a then current registration statement under the Securities Act of1933, as amended (the “Securities Act”), and is not otherwise

 

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exempt from such registration, suchStock shall be restricted against transfer to the extent required by theSecurities Act or regulations thereunder, and the Committee may require aGrantee receiving Stock pursuant to the Plan, as a condition precedent toreceipt of such Stock, to represent to the Company in writing that the Stockacquired by such Grantee is acquired for investment only and not with a view todistribution.

 

(j)            Section 409A.  This Plan is intended to comply and shall beadministered in a manner that is intended to comply with Section 409A ofthe Code and shall be construed and interpreted in accordance with suchintent.  To the extent that an Award,issuance and/or payment is subject to Section 409A of the Code, it shallbe awarded and/or issued or paid in a manner that will comply with Section 409Aof the Code, including proposed, temporary or final regulations or any otherguidance issued by the Secretary of the Treasury and the Internal RevenueService with respect thereto.  Anyprovision of this Plan that would cause an Award, issuance and/or payment tofail to satisfy Section 409A of the Code shall have no force and effectuntil amended to comply with Code Section 409A (which amendment may beretroactive to the extent permitted by applicable law).

 

(k)           Governing Law.  The Plan and all determinations made andactions taken pursuant hereto shall be governed by the laws of the State ofDelaware without giving effect to the conflict of laws principles thereof.

 

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