Common Stock (including by attestation of Common Stock owned) or by a combination of cash andCommon Stock. The aggregate fair market value (determined at the time the option is granted) of shares of Common Stock as to which incentive stock options are exercisable for the first time bya Participant during any calendar year (under this Plan and any other plan of Ferro) may notexceed $100,000 (or such other limit as may be fixed by the Code from time to time).     (b) Stock Appreciation Rights. The Committee may grant Awards in the form of StockAppreciation Rights. Stock Appreciation Rights will entitle a Participant to receive a payment,in cash or Common Stock, equal to the appreciation in market value of a stated number of sharesof Common Stock from the price stated in the Award Agreement to the fair market value on the dateof exercise or surrender, on such terms, conditions and restrictions as the Committee deemsappropriate. Once a stock appreciation right has been granted, the initial share value may not beadjusted or amended, whether directly or indirectly, by amendment, cancellation, replacementgrants or any other means, so as to increase the value of such Stock Appreciation Right. StockAppreciation Rights may be granted either separately or in conjunction with other Awards grantedunder this Plan. Any Stock Appreciation Right related to a Stock Option, however, will beexercisable only to the extent the related Stock Option is exercisable. Similarly, upon exerciseof a Stock Appreciation Right as to some or all of the shares of Common Stock covered by arelated Stock Option, the related Stock Option will be canceled automatically to the extent ofthe Stock Appreciation Right exercised, and such shares of Common Stock shall not be eligible forsubsequent grant. Any Stock Appreciation Right related to a nonstatutory stock option may begranted at the same time such stock option is granted or at any subsequent time before exerciseor expiration of such stock option. Any Stock Appreciation Right related to an incentive stockoption must be granted at the same time such incentive stock option is granted.     (c) Restricted Shares. The Committee may grant Awards in the form of Restricted Shares. SuchAwards may be in such numbers of shares of Common Stock and at such times as the Committeedetermines. Such Awards will have such periods of vesting and forfeiture restrictions as theCommittee may determine at the time of grant, except that no restriction period applicable toRestricted Shares may be less than 12 months.     (d) Performance Shares. The Committee may grant Awards in the form of Performance Shares.Performance Shares will be (i) represented by forfeitable shares of Common Stock issued at thetime of grant of a Performance Share Award or (ii) phantom Performance Shares. Such PerformanceShares will be earned upon satisfaction of Performance Targets relating to Performance Periodsestablished by the Committee at the time of a grant. At the end of the applicable PerformancePeriod, based upon the level of achievement of the Performance Targets, Performance Shares willbe converted into Common Stock, cash, or a combination of Common Stock and cash, or forfeited. IfPerformance Shares initially were represented by forfeitable Common Stock, such Common Stock willbecome nonforfeitable or be repurchased by Ferro at the end of the applicable Performance Period.During the period any Performance Shares are subject to forfeiture restrictions, the Committeemay, in its discretion, grant to the Participant to whom phantom Performance Shares have beenawarded the right to receive dividend equivalents with respect to such Performance Shares.     The Committee may establish Performance Targets in terms of any or all of the following:sales; sales growth; gross margins; operating income; net earnings; earnings growth; cash flows;market share; total shareholder returns; returns on equity, net assets, assets employed, orcapital employed; accomplishment of acquisitions, divestitures, or joint ventures (or the successof an acquisition or joint venture, measured in terms of any of the preceding), or the attainmentof levels of performance of Ferro under one or more of the measures described above relative tothe performance of other businesses, or various combinations of the foregoing, or changes in anyof the foregoing. Performance Targets applicable to Performance Shares may vary from Award toAward and from Participant to Participant.     When determining whether Performance Targets have been attained, the Committee will have thediscretion to make adjustments to take into account extraordinary or nonrecurring items orevents, or unusual nonrecurring gains or losses identified in Ferro’s financial statements,provided such adjustments are made in a manner consistent with Section 162(m) of the Code (to theextent applicable). Awards of Performance Shares made to Participants subject to Section 162(m)of the Code are intended to qualify under Section 162(m) and the Committee will interpret theterms of such Awards in a manner consistent with that intent to the extent appropriate. (Theforegoing provisions of this Section 4(d) will also apply to Awards of Restricted Shares madeunder Section 4(c) to the extent such Awards of Restricted Shares are subject to the financialperformance of Ferro.)
 

 
     (e) Common Stock Awards. The Committee may grant Awards in the form of Common Stock or on abasis valued in whole or in part by reference to, or otherwise based upon, Common Stock. CommonStock Awards will be subject to conditions established by the Committee and set forth in theapplicable Award Agreement.     5. Award Agreements. All Awards to executive personnel under this Plan will be evidenced by awritten agreement (an “Award Agreement”) between Ferro and the Participant containing such termsnot inconsistent with this Plan as the Committee may determine, including such restrictions,conditions, and requirements as to transferability, continued employment, individual performance orfinancial performance of Ferro or a subsidiary or affiliate as the Committee deems appropriate.Each such Award Agreement will, however, provide that the Award will be forfeitable if, in theopinion of the Committee, the Participant, without the written consent of Ferro:     (a) Directly or indirectly, engages in, or assists or has a material ownership interest in,or acts as agent, advisor or consultant of, for, or to any person, firm, partnership, corporationor other entity that is engaged in the manufacture or sale of any products manufactured or soldby Ferro, or any subsidiary or affiliate, or any products that are logical extensions, on amanufacturing or technological basis, of such products;     (b) Discloses to any person any proprietary or confidential business information concerningFerro, its subsidiaries, or affiliates or any of the officers, Directors, employees, agents, orrepresentatives of Ferro, its subsidiaries or affiliates, which the Participant obtained or whichcame to his or her attention during the course of his or her employment with Ferro;     (c) Takes any action likely to disparage or have an adverse effect on Ferro, itssubsidiaries, or affiliates or any of the officers, Directors, employees, agents, orrepresentatives of Ferro, its subsidiaries, or affiliates;     (d) Induces or attempts to induce any employee of Ferro or any of its subsidiaries oraffiliates to leave the employ of Ferro or such subsidiary or affiliate or otherwise interfereswith the relationship between Ferro or any of its subsidiaries or affiliates and any of theirrespective employees, or hires or assists in the hiring of any person who was an employee ofFerro or any of its subsidiaries or affiliates, or solicits, diverts or otherwise attempts totake away any customers, suppliers, or co-venturers of Ferro, any subsidiary or any affiliate,either on the Participant’s own behalf or on behalf of any other person or entity; or     (e) Otherwise performs any act or engages in any activity which in the opinion of theCommittee is inimical to the best interests of Ferro.     6. Stock Options for Directors. Each year under this Plan, Ferro may grant Directors who arenot employees of Ferro or any of its subsidiaries and affiliates options to purchase such number ofshares of Common Stock as is recommended by the Committee and approved by the Board. Such DirectorStock Options will be granted on such date as the Committee or the Board determines. If anindividual is elected or appointed Director at least six months before the expected annual grantdate, then his or her first Director Stock Option will granted as of the date he or she is electedor appointed. No Director Stock Option will be granted to a Director if his or her normalretirement under a plan or policy of Ferro will occur within six months after the date a DirectorStock Option otherwise would have been granted. The option exercise price of Director Stock Optionswill be the per share fair market value of the Common Stock on the date of the grant, as determinedby the Committee. The terms and conditions of each Director Stock Option will be contained in awritten option agreement, signed on behalf of Ferro by the Chief Executive Officer, setting forththe number of shares of Common Stock subject to the option, the option price to be paid uponexercise, the manner in which the option may be exercised and the option price may be paid, theterm of the option and such other provisions not inconsistent with this Plan as the Committee mayspecify.     7. Shares Subject to this Plan. The shares of Common Stock to be issued under this Plan may beeither authorized but unissued shares or previously issued shares reacquired by Ferro and held astreasury shares, as the Committee may from time to time determine. Subject to adjustment asprovided in Section 8 below, the number of shares of Common Stock reserved for Awards under thisPlan will equal 3,250,000 shares of Common Stock.     Any shares of Common Stock issued by Ferro through the assumption or substitution ofoutstanding grants previously made by an acquired corporation or entity shall not reduce the numberof shares available for Awards under this Plan. If any shares of Common Stock subject to any Awardgranted under this Plan are forfeited or if such Award otherwise terminates without the issuance ofsuch shares or payment of other consideration in lieu of such shares, the shares subject to such
 

 
Award, to the extent of any such forfeiture or nonissuance, shall again be available for grantunder this Plan as if such shares had not been subject to an Award. As regards Performance ShareAwards, each Performance Share will be considered as a share of Common Stock counted against themaximum number of shares of Common Stock reserved for Awards under this Plan, whether representedby forfeitable Common Stock or by phantom Performance Shares, and no shares of Common Stock shallagain be available for grant under this Plan as a result of any repurchase by Ferro of forfeitableCommon Stock or any cash payment in settlement of Performance Shares.     Subject to adjustment as provided in Section 8 below:     (a) A cumulative maximum of 200,000 shares of Common Stock will be available for issuancewith respect to incentive stock options granted under this Plan;     (b) A cumulative maximum of 500,000 shares of Common Stock will be available for issuancewith respect to Restricted Shares, Performance Shares, and Common Stock Awards granted under thisPlan;     (c) A maximum of 300,000 shares of Common Stock will be the subject of Stock Options(including related Stock Appreciation Rights) granted under this Plan to any single Participantduring any 12-month period;     (d) The maximum payout to any single Participant under a Performance Share Award grantedduring any 12-month period under this Plan will be 100,000 shares of Common Stock; and     (e)Awards, other than the grant of Stock Options or Performance Shares, made under this Planto any single Participant during any 12-month period may not exceed a maximum of 100,000 sharesof Common Stock.     8. Adjustments Upon Changes in Capitalization. If the outstanding shares of Common Stock arechanged by reason of any reorganization, recapitalization, stock split, stock dividend, combinationor exchange of shares, merger, consolidation or any change in the corporate structure or CommonStock of Ferro, then the maximum aggregate number and class of shares of Common Stock as to whichAwards may be granted under this Plan, the maximums described in Section 7 above, the shares ofCommon Stock issuable pursuant to then outstanding Awards, and the option price of outstandingstock options and any related Stock Appreciation Rights shall be appropriately adjusted by theCommittee. If Ferro makes an extraordinary distribution in respect of Common Stock or effects a prorata repurchase of Common Stock, the Committee will consider the economic impact of theextraordinary distribution or pro rata repurchase on Participants and make such adjustments as itdeems equitable under the circumstances. For purposes of this Section 8,     (a) The term “extraordinary distribution” means a dividend or other distribution of (i)cash, where the aggregate amount of such cash dividend or distribution together with the amountof all cash dividends and distributions made during the preceding twelve months, when combinedwith the aggregate amount of all pro rata repurchases (for this purpose, including only thatportion of the aggregate purchase price of such pro rata repurchases that is in excess of thefair market value of the Common Stock repurchased during such 12-month period), exceeds tenpercent of the aggregate fair market value of all shares of Common Stock outstanding on therecord date for determining the shareholders entitled to receive such extraordinary distribution,or (ii) any shares of capital stock of Ferro (other than shares of Common Stock), othersecurities of Ferro, evidences of indebtedness of Ferro or any other person, or any otherproperty (including shares of any subsidiary of Ferro), or any combination thereof; and     (b) The term “pro rata repurchase” means a purchase of shares of Common Stock by Ferro orany of its subsidiaries or affiliates, pursuant to any tender offer or exchange offer subject tosection 13(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or anysuccessor provision of law, or pursuant to any other offer available to substantially all holdersof Common Stock other than a purchase of shares of Ferro made in an open market transaction.     The determinations of the Committee under this Section 8 shall be final and binding upon allParticipants, in the absence of revision by the Board.     9. Assignment and Transfer. No Award of a Stock Option or a related Stock Appreciation Rightshall be transferable by a Participant or Director except by will or the laws of descent anddistribution, and Stock Options and Stock Appreciation Rights may be exercised during aParticipant’s or Director’s lifetime only by the Participant or Director or the Participant’s or
 

 
Director’s guardian or legal representative. Notwithstanding the foregoing, the Committee may, inits discretion, authorize the transfer of all or a portion of a Stock Option and related StockAppreciation Right (other than an incentive stock option) to:     (a) A Participant’s or Director’s spouse, children, grandchildren, parents, siblings andother family members approved by the Committee (collectively, “Family Members”);     (b) Trust(s) for the exclusive benefit of such Participant, Director, or Family Members; or     (c) Partnerships or limited liability companies in which such Participant, Director, orFamily Members are at all times the only partners or members.Any transfer to or for the benefit of Family Members permitted under this Plan may be made subjectto such conditions or limitations as the Committee may establish to ensure compliance under theFederal securities laws, or for other purposes. Subject to the terms of the Award, atransferee-Family Member may exercise a Stock Option and/or related Stock Appreciation Right duringor after the Participant’s or Director’s lifetime.     The rights and interests of a Participant or Director with respect to any Award made underthis Plan other than Stock Options and related Stock Appreciation Rights may not be assigned,encumbered or transferred except, in the event of the death of a Participant or Director, by willor the laws of descent and distribution; PROVIDED, HOWEVER, that the Board is specificallyauthorized to permit assignment, encumbrance, and transfer of any such other Award if and to theextent it, in its sole discretion, determines that such assignment, encumbrance or transfer wouldnot produce adverse consequences under tax or securities laws.     10. Change of Control. Except as the Board may expressly provide otherwise, in the event of aChange of Control:     (a) All Stock Options (including Director Stock Options) and Stock Appreciation Rights thenoutstanding shall become fully exercisable as of the date of the Change of Control;     (b) All restrictions and conditions with respect to all Awards of Restricted Shares thenoutstanding shall be deemed fully released or satisfied as of the date of the Change of Control,except as set forth in paragraph (d) below;     (c) All previously established Performance Targets necessary to achieve 100% of aParticipant’s specified award level for Performance Shares shall be deemed to have been met as ofthe date of the Change of Control; and     (d) If the Change of Control occurs during a restriction period applicable to an Award ofRestricted Shares or during a Performance Period applicable to a Performance Share Award, thenParticipants will be entitled to receive a prorata proportion of the Award that would have beendistributed to them at the end of the applicable restriction period or Performance Period, basedupon the portion of the applicable restriction period or Performance Period during which theParticipant’s employment continued.In lieu of distributing shares of Common Stock in settlement of an Award of Restricted Shares orPerformance Shares in connection with a Change of Control, Ferro may make payment to Participantsin cash based on the fair market value of the Common Stock that would have been issued under theapplicable Award, which fair market value for this purpose shall be the higher of (i) the closingprice on the New York Stock Exchange for the Common Stock on the date of such Change of Control or(ii) the highest price per share of Common Stock actually paid in connection with such Change ofControl.     For purposes of this Section 10, the term “Change of Control” means a change of control ofFerro of a nature that would be required to be reported (assuming such event has not beenpreviously reported) in response to Item 6 (e) of Schedule 14A of Regulation 14A (or any successorprovision) promulgated under the Exchange Act; provided that, without limitation, a Change ofControl shall be deemed to have occurred at such time as (i) any “person” (within the meaning ofsection 14(d) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, ofsecurities of Ferro representing 50% or more of the combined voting power of Ferro’s thenoutstanding securities, (ii) during any period of two consecutive years, individuals who at thebeginning of such period constituted the Board cease for any reason to constitute at least amajority of the Board unless the election, or the nomination for election, by Ferro’s shareholdersof each new Director was approved by a vote of at least two-thirds of the Directors then still inoffice who were Directors at the beginning of the period (iii) a merger or consolidation of Ferrooccurs, other than a merger or consolidation that would result in Ferro’s shareholders holding
 

 
securities that represent immediately after the merger or consolidation more than fifty percent(50%) of the voting securities of either Ferro or the other entity that survives such merger orconsolidation (or the parent of such entity) or (iv) Ferro sells or otherwise disposes of all orsubstantially all of Ferro’s assets to an entity that is not controlled by Ferro or itsshareholders; provided, however, that no Change of Control shall be deemed to occur solely as aresult of the acquisition of any securities of Ferro by a trust exempt from tax under Section501(a) of the Code that is formed for the purpose of providing retirement or other benefits toemployees of Ferro, any subsidiary or any affiliate.     11. Employee Rights Under this Plan. No employee or other person shall have any claim or rightto be granted any Award under this Plan. Neither this Plan nor any action taken under this Planshall be construed as giving any employee any right to be retained in the employ of Ferro or anysubsidiary or affiliate.     12. Settlement by Subsidiaries and Affiliates. Settlement of Awards held by employees ofsubsidiaries or affiliates shall be made by and at the expense of such subsidiary or affiliate.Ferro either will sell or contribute, in its sole discretion, to the subsidiary or affiliate, thenumber of shares needed to settle any Award that is granted under this Plan. In addition, withrespect to Participants who are foreign nationals or employed outside the United States, or both,the Committee may cause Ferro or a subsidiary or affiliate to adopt such rules and regulations,policies, sub-plans or the like as may, in the judgment of the Committee, be necessary or advisablein order to effectuate the purposes of this Plan.     13. Amendment or Termination. Ferro, by action of its Board, reserves the right to amend,modify or terminate this Plan at any time and, by action of the Committee with the consent of theParticipant or Director, to amend, modify or terminate any outstanding Award Agreement, except tothe extent, if any, that further shareholder approval is required pursuant to any applicable law,regulation or rule, including any rule relating to the listing on a national securities exchange ofFerro Common Stock, and except with respect to any adjustment or amendment affecting the value of aStock Option or Stock Appreciation Right not permitted under paragraph 4(a) or 4(b) above.     14. Effective Date and Term of Plan. This Plan is adopted by the Board as of January 1, 2003,subject to approval by Ferro shareholders at the 2003 annual meeting of shareholders. No Awardsshall be made under this Plan after December 31, 2012, provided that any Awards outstanding on suchdate shall not be affected and shall continue in accordance with their terms.     15. Status of Grants Under Prior Plans. Following approval of this Plan by the shareholders ofFerro, no further grants of stock options or stock appreciation rights shall be made under Ferro’sEmployee Stock Option Plan and no further grants of performance shares shall be made under Ferro’s1997 Performance Share Plan, provided that any outstanding stock options, stock appreciationrights, and performance shares under such prior plans shall not be affected by shareholder approvalof this Plan and shall continue in accordance with their terms.