Exhibit 10.1


 


GRIFFON
CORPORATION


2006 EQUITY INCENTIVE PLAN


AS AMENDED


 


1.                                       Purpose. The purpose of the Griffon Corporation 2006
Equity Incentive Plan (the “Plan”) is to attract and retain employees,
consultants and non-employee directors for Griffon Corporation and its
subsidiaries and to provide such persons with incentives and rewards for
superior performance.


 


2.                                       Definitions. As used in this Plan, the following terms
shall be defined as set forth below:


 


2.1.                              “Award” means
any Performance Shares, Performance Units, Options, Stock Appreciation Rights,
Restricted Shares or Deferred Shares granted under the Plan.


 


2.2.                              “Award Agreement”
means an agreement, certificate, resolution or other form of writing or other
evidence approved by the Committee that sets forth the terms and conditions of
an Award.  An Award Agreement may be in
an electronic medium, or may be limited to a notation on the Company’s books or
records, but shall be signed by a representative of the Company and the
Participant unless otherwise approved by the Committee.


 


2.3.                              “Base Price”
means the price used as the basis for determining the Spread upon the exercise
of Stock Appreciation Right.


 


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


 


2.5.                              “Cause” means, (a) if the applicable Participant
is party to an effective employment, consulting, severance or similar agreement
with the Company or any of its Subsidiaries, “Cause” shall have the same
meaning as such term is defined therein; (b) if the applicable Participant
is not a party to an effective employment, consulting, severance or similar
agreement or if no definition of “Cause” is set forth in the applicable
employment, consulting, severance or similar agreement, “Cause” shall have the
same meaning as such term is defined in the applicable Award Agreement; and (c) if
the applicable Participant is not a party to any effective employment,
consulting, severance or similar agreement or no definition of “Cause” is set
forth in the applicable employment, consulting, severance or similar agreement,
and no definition of “Cause” is set forth in the applicable Award Agreement,
the existence of “Cause” shall be determined in good faith by the Committee
from time to time as circumstances dictate; provided that the Committee shall
provide notice to the Participant of such determination and an opportunity for
the Participant to cure such event (if the Committee determines such event is
reasonably curable).


 


2.6.                              “Change in Control”
means, after the effective date of the Plan:


 


(i)            the acquisition, directly or indirectly, by a “person”
(within the meaning of Section 13(d)(3) of the Exchange Act) (a “Person”)
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of more than 20% of the combined voting power of the
voting securities of the Company entitled to vote generally in the election of
directors (the “Voting Securities”); provided, however, that the following
acquisitions shall not constitute a Change in Control:  (a) any acquisition by or from the
Company or any Subsidiary, or by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary, (b) any
acquisition by an individual who as of the effective date of the Plan is a
member of the Board, (c) any acquisition by any underwriter in any firm
commitment underwriting of securities to be issued by the Company, or (d) any
acquisition by any corporation (or other entity) if, immediately following such
acquisition, 65% or more of the then outstanding shares of common stock (or
other equity unit) of such corporation (or other entity) and the combined
voting power of the then outstanding voting securities of such corporation (or
other entity), are beneficially owned, directly or indirectly, by all or
substantially all of the individuals or entities who, immediately prior to such
acquisition, were the beneficial owners of the then outstanding Shares and the
Voting Securities in substantially the same proportions, respectively, as their
ownership immediately prior to the acquisition of the Stock and Voting
Securities; or


 


(ii)           the consummation of the sale or other disposition of all
or substantially all of the assets of the Company, other than to a wholly-owned
Subsidiary or to a holding company of which the Company is a direct or indirect
wholly owned subsidiary prior to such transaction; or


 


(iii)          the approval by stockholders of the Company (or, with
respect to Awards granted after December 31, 2008, the consummation) of a
reorganization, merger or consolidation of the Company, other than a
reorganization, merger or consolidation, which would result in the Voting
Securities outstanding immediately prior to the transaction continuing to
represent (whether by remaining outstanding or by being converted to voting
securities of the surviving entity) 65% or more of the Voting Securities or the
voting 


 


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power of the voting securities of such
surviving entity outstanding immediately after such transaction; or


 


(iv)          the approval by stockholders of the Company (or, with
respect to Awards granted after December 31, 2008, the consummation) of a
plan of complete liquidation or substantial dissolution of the Company; or


 


(v)           the following individuals cease for any reason to
constitute a majority of the Board: 
individuals who, as of the effective date of the Plan, constitute the
Board and any new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election contest,
including, but not limited to, a consent solicitation relating to the election
of directors of the Company) whose appointment or election by the Board or
nomination for election by the Company’s stockholders was approved and
recommended by a vote of at least two-thirds of the directors then still in
office who either were directors on the effective date of the Plan or whose
appointment, election or nomination for election was previously so approved or
recommended; or


 


(vi)          the sale, transfer, assignment, distribution or other
disposition by the Company and/or one of its Subsidiaries, in one transaction,
or in a series of related transactions within any period of 18 consecutive
calendar months (including, without limitation, by means of the sale, transfer,
assignment, distribution or other disposition of the capital stock of any
Subsidiary or Subsidiaries), of assets which account for an aggregate of 50% or
more of the consolidated revenues of the Company and its Subsidiaries, as
determined in accordance with U.S. generally accepted accounting principles,
for the fiscal year most recently ended prior to the date of such transaction
(or, in the case of a series of transactions as described above, the first such
transaction); provided, however, that no such transaction shall be taken into
account if substantially all the proceeds thereof (whether in cash or in kind)
are used after such transaction in the ongoing conduct by the Company and/or
its Subsidiaries of the business conducted by the Company and/or its
Subsidiaries prior to such transaction; or


 


(vii)         notwithstanding Sections 2.6(i) through 2.6(vi) above,
in the case of a distribution under the Plan of an amount which is subject to
section 409A of the Code, an event which constitutes a “change in control event”
as defined under Section 409A of the Code.


 


2.7.                              “Code” means the
Internal Revenue Code of 1986, as amended from time to time and the regulations
and other guidance issued thereunder.


 


2.8.                              “Committee”
means the Compensation Committee of the Board. 
The Committee shall have at least two members, each of whom shall be a “non-employee
director” as defined in Rule 16b-3 under the Exchange Act and an “outside
director” as defined in Section 162(m) of the Code and the
regulations thereunder, and, if applicable meet the independence requirements
of the applicable stock exchange, quotation system or other self-regulatory
organization on which the Shares are traded.


 


2.9.                              “Company” means
Griffon Corporation, a Delaware corporation, or any successor corporation.


 


2.10.                        “Consultant” means an individual (other than an Employee
or a Nonemployee Director) who renders services to the Company or a Subsidiary,
including an independent contractor or an advisor.


 


2.11.                        “Deferral Period”
means the period of time during which Deferred Shares are subject to deferral
limitations under Section 9.


 


2.12.                        “Deferred Shares”
means an Award pursuant to Section 9 of the right to receive Shares at the
end of a specified Deferral Period.


 


2.13.                        “Employee” means
any person, including an officer, employed by the Company or a Subsidiary.


 


2.14.                        “Exchange Act” means the Securities Exchange Act of 1934,
as amended from time to time, including rules thereunder and successor
provisions and rules thereto.


 


2.15.                        “Fair Market Value”
means, on any given date, unless otherwise determined by the Committee, the
closing sale prices reported as having occurred on the New York Stock Exchange
(or other principal exchange or market on which the Shares are traded or
listed) on such date, or, if no sale was made on such date on such principal
exchange or market, on the last preceding day on which the Shares were traded
or listed.


 


2.16.                        “Grant Date”
means the date specified by the Committee on which a grant of an Award shall
become effective, which shall not be earlier than the date on which the
Committee takes action with respect thereto.


 


2.17.                        “Incentive Stock Option”
means any Option which meets the requirements of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Committee.


 


2.18.                        “Nonemployee Director”
means a member of the Board who is not an Employee.


 


2.19.                        “Nonqualified Stock Option”
means an Option that is not intended to qualify as an Incentive Stock Option,
and designated as a Nonqualified Stock Option by the Committee.


 


2.20.                        “Option” means
any option to purchase Shares granted under Section 6.


 


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2.21.                        “Optionee” means
the person so designated in an agreement evidencing an outstanding Option.


 


2.22.                        “Option Price”
means the purchase price payable upon the exercise of an Option.


 


2.23.                        “Participant”
means an Employee, Nonemployee Director or Consultant who is selected by the
Committee to receive Awards, provided that only Employees may receive grants of
Incentive Stock Options.


 


2.24.                        “Performance Objectives”
means the performance objectives established in the sole discretion of the
Committee for Participants who are eligible to receive Awards under the
Plan.  Performance Objectives may be
described in terms of Company-wide objectives or objectives that are related to
the performance of the individual Participant or the Subsidiary, division,
department or function within the Company or Subsidiary in which the
Participant is employed.  Performance Objectives
may be measured on an absolute or relative basis.  Relative performance may be measured by a
group of peer companies or by a financial market index.  Any Performance Objectives applicable to a
Qualified Performance-Based Award shall be limited to: specified levels of or
increases in the Company’s, a division’s or a Subsidiary’s return on capital,
equity or assets; earnings measures/ratios (on a gross, net, pre-tax or
post-tax basis), including basic earnings per share, diluted earnings per
share, total earnings, operating earnings, earnings growth, earnings before
interest and taxes and earnings before interest, taxes, depreciation and
amortization; net economic profit (which is operating earnings minus a charge
to capital); net income; operating income; sales; sales growth; gross margin;
direct margin; Share price (including but not limited to growth measures and
total stockholder return); operating profit; per period or cumulative cash flow
(including but not limited to operating cash flow and free cash flow) or cash
flow return on investment (which equals net cash flow divided by total
capital); inventory turns; financial return ratios; market share; balance sheet
measurements such as receivable turnover; improvement in or attainment of
expense levels; improvement in or attainment of working capital levels; debt
reduction; strategic innovation; customer or employee satisfaction; individual
objectives; and any combination of the foregoing.  If the Committee determines that a change in
the business, operations, corporate structure or capital structure of the
Company, or the manner in which it conducts its business, or other events or
circumstances render the Performance Objectives unsuitable, the Committee may
modify such Performance Objectives or the related minimum acceptable level of
achievement, in whole or in part, as the Committee deems appropriate and
equitable.


 


2.25.                        “Performance Period”
means a period of time established under Section 5 within which the
Performance Objectives relating to Awards are to be achieved.


 


2.26.                        “Performance Share”
means a bookkeeping entry that records the equivalent of one Share awarded
pursuant to Section 5.


 


2.27.                        “Performance Unit”
means a bookkeeping entry that records a unit equivalent to $1.00 awarded
pursuant to Section 5.


 


2.28.                        “Qualified Performance-Based
Award” means an Award or portion of an Award that is intended to
satisfy the requirements for “qualified performance-based compensation” under
Code Section 162(m).  The Committee
shall designate any Qualified Performance-Based Award as such at the time of
grant.


 


2.29.                        “Restricted Shares”
mean Shares granted under Section 8 subject to a substantial risk of
forfeiture.


 


2.30.                        “Shares” means
shares of the Common Stock of the Company, $.25 par value, or any security into
which Shares may be converted by reason of any transaction or event of the type
referred to in Section 14.


 


2.31.                        “Spread” means,
in the case of a Stock Appreciation Right, the amount by which the Fair Market
Value on the date when any such right is exercised exceeds the Base Price specified
in such right.


 


2.32.                        “Stock Appreciation Right”
means a right granted under Section 7.


 


2.33.                        “Subsidiary”
means a corporation or other entity in which the Company owns or controls
directly or indirectly at least 50 percent of the total combined voting power
represented by all classes of stock issued by such corporation, or in the case
of a noncorporate entity, at least 50% of the profits or capital interest in
such entity, at the time of such grant.


 


3.                                       Shares Available Under the Plan.


 


3.1.                              Reserved Shares. Subject to adjustment as provided in Section 14,
the maximum number of Shares that may be (a) issued upon the exercise of
Options or Stock Appreciation Rights, (b) issued as Restricted Shares and
released from substantial risk of forfeiture, or (c) issued in payment of
Deferred Shares or Performance Shares, shall not in the aggregate exceed
7,750,000 Shares.  Such Shares may be
Shares of original issuance, Shares held in Treasury, or Shares that have been
reacquired by the Company.  In addition:


 


(i)            To the extent any Shares covered by an Award are not
issued to a Participant (or, if applicable, his heir, legatee or permitted
transferee) because the Award is forfeited or canceled, such Shares shall not
be deemed to have been issued for purposes of determining the maximum number of
Shares available for 


 


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issuance under the Plan.


 


(ii)           Shares issued under the Plan in settlement, assumption or
substitution of outstanding awards (or obligations to grant future awards)
under the plans or arrangements of another entity shall not reduce the maximum
number of Shares available for issuance under the Plan, to the extent that such
settlement, assumption or substitution is a result of the Company acquiring another
entity (or an interest in another entity).


 


3.2.                              Reduction Ratio. For purposes of Section 3.1, each
Share issued pursuant to an Award other than an Option shall reduce the number
of Shares available for issuance under the Plan by two Shares.  For example, if all Awards under the Plan are
in the form of Restricted Shares, 3,875,000 Shares are available for issuance,
subject to adjustment as provided in Section 14.


 


3.3.                              ISO Maximum. In no event shall the number of Shares
issued upon the exercise of Incentive Stock Options exceed 600,000 Shares,
subject to adjustment as provided in Section 14.


 


3.4.                              Maximum Annual Award.  No
Participant may receive Awards (including performance-based Awards)
representing more than 1,500,000 Shares underlying Option grants (or 750,000
Shares underlying any Award, except for Options) in any one fiscal year,
subject to adjustment as provided in Section 14.  The maximum Qualified Performance-Based Award
that may be granted to a Participant in any one Performance Period is 750,000
Shares (subject to adjustment as provided in Section 14).


 


4.                                       Plan Administration.


 


4.1.                              Committee Administration. This Plan shall be administered by the
Committee.  The interpretation and
construction by the Committee of any provision of this Plan or of any Award
Agreement and any determination by the Committee pursuant to any provision of
this Plan or any such agreement, notification or document, shall be final and
conclusive.  No member of the Committee
shall be liable to any person for any such action taken or determination, other
than one made in bad faith.


 


4.2.                              Committee Powers.  The Committee shall have full authority to interpret
the Plan; to establish and amend rules and regulations relating to the
Plan; to select the Participants and determine the type of Awards to be made to
Participants, the number of shares subject to Awards and the terms, conditions,
restrictions and limitations of Awards; and to make all other determinations as
are necessary or advisable for the administration of the Plan.


 


4.3.                              Committee Delegation. The Committee may delegate to one or more
officers of the Company the authority to grant Awards to Participants who are
not subject to the requirements of Section 16 of the Exchange Act or Section 162(m) of
the Code and the rules and regulations thereunder, provided that the
Committee shall have fixed the total number of Shares subject to such
grants.  Any such delegation shall be
subject to the limitations of Section 157(c) of the Delaware General
Corporation Law.  The Committee may
revoke any such allocation or delegation at any time for any reason with or
without prior notice.


 


5.                                       Performance Shares and
Performance Units. The
Committee may authorize grants of Performance Shares and Performance Units,
which shall vest and become payable to the Participant upon the achievement of
specified Performance Objectives during a specified Performance Period, upon
such terms and conditions as the Committee may determine in accordance with the
following provisions:


 


5.1.                              Terms and Conditions of
Performance Share/Performance Unit Awards. Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains. 
The Performance Period with respect to each Performance Share or
Performance Unit shall commence on the Grant Date and may be subject to earlier
termination in the event of a Change in Control or other similar transaction or
event.  Each grant shall specify the
Performance Objectives that are to be achieved by the Participant.  Each grant may specify in respect of the
specified Performance Objectives a minimum acceptable level of achievement
below which no payment will be made and may set forth a formula for determining
the amount of any payment to be made if performance is at or above such minimum
acceptable level but falls short of the maximum achievement of the specified
Performance Objectives.


 


5.2.                              Payment of Performance Shares and
Units. Each grant shall
specify the time and manner of payment of Performance Shares or Performance
Units that shall have been earned, and shall be paid by the Company in Shares.


 


5.3.                              Maximum Payment. Subject to Section 3.4 of the Plan,
any grant of Performance Shares may specify that the Shares payable with
respect thereto may not exceed a maximum specified by the Committee on the
Grant Date. Any grant of Performance Units may specify the number of Shares
issued, with respect thereto may not exceed maximums specified by the Committee
on the Grant Date.


 


5.4.                              Adjustment of Performance
Objectives. The Committee
may adjust Performance Objectives and the related minimum acceptable level of
achievement if, in the sole judgment of the Committee, events or transactions 


 


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have occurred after the
Grant Date that are unrelated to the performance of the Participant and result
in distortion of the Performance Objectives or the related minimum acceptable
level of achievement.


 


5.5.                              Qualified Performance-Based
Awards.  In the case of a Qualified Performance-Based
Award the following provisions shall apply in addition to, and where necessary,
in lieu of other provisions of the Plan, including the provisions of Sections
5.1 through 5.4:


 


(i)            Only Employees who are “Covered Employees” within the
meaning of Section 162(m) of the Code shall be eligible to receive
Qualified Performance-Based Awards.  The
Committee shall designate in its sole discretion which Covered Employees will
be Participants for a Performance Period within the earlier of the (a) first
90 days of a Performance Period and (b) the lapse of 25% of the
Performance Period.


 


(ii)           The Committee shall establish in writing within the
earlier of the (a) first 90 days of a Performance Period and (b) the
lapse of 25% of the Performance Period, and in any event, while the outcome is
substantially uncertain, (x) Performance Objectives for the Performance
Period, and (y) in respect of such Performance Objectives, a minimum
acceptable level of achievement below which no Award will be made, and an
objective formula or other method for determining the Award to be made if
performance is at or above such minimum acceptable level but falls short of the
maximum achievement of the specified Performance Objectives.


 


(iii)          Following the completion of a Performance Period, the
Committee shall review and certify in writing whether, and to what extent, the
Performance Objectives for the Performance Period have been achieved and, if
so, to also calculate and certify in writing the amount of the Qualified
Performance-Based Awards earned for the period based upon the Performance
Objectives and the related formulas or methods as determined pursuant to Section 5.5(ii).  The Committee shall then determine the actual
number of Shares issuable under each Participant’s Award for the Performance
Period, and, in doing so, may reduce or eliminate, unless otherwise and/or to
the extent provided in the Award Agreement, the amount of the Award.  In no event shall the Committee have the
authority to increase Award amounts to any Covered Employee.


 


(iv)          Subject to Section 20.2, Awards granted for a
Performance Period shall be made to Participants within a reasonable time after
completion of the certification described in Section 5.5(iii).


 


5.6.                              Other Awards. Any grant of an Award under Sections 6, 7,
8 or 9, and/or the vesting or exercise thereof, may be further conditioned upon
the attainment of Performance Objectives established by the Committee in
accordance with the applicable provisions of this Section 5 regarding
Performance Shares and Performance Units.


 


6.                                       Options. The Committee may from time to time
authorize grants of Options to Participants upon such terms and conditions as
the Committee may determine in accordance with the following provisions:


 


6.1.                              Number of Shares. Each grant shall specify the number of
Shares to which it pertains.


 


6.2.                              Option Price. Each grant shall specify an Option Price
per Share, which shall be equal to or greater than the Fair Market Value per
Share on the Grant Date; provided that in the case of any Incentive Stock
Option granted to a person who on any given date owns, either directly or
indirectly (taking into account the attribution rules contained in Section 424(d) of
the Code), stock possessing more than 10 percent of the total combined voting
power of all classes of stock of the Company or any Subsidiary, the Option
Price shall not be less than 110% of the Fair Market Value of a Share on the
date of grant.


 


6.3.                              Consideration. Each grant shall specify the form of
consideration to be paid in satisfaction of the Option Price and the manner of
payment of such consideration, which may include (i) cash in the form of
currency or check or other cash equivalent, in each such case as is acceptable
to the Company, (ii) subject to approval by the Committee, nonforfeitable,
unrestricted Shares owned by the Optionee, (iii) any other legal
consideration that the Committee may deem appropriate, including without
limitation any form of consideration authorized under Section 6.4, on such
basis as the Committee may determine in accordance with this Plan, or (iv) any
combination of the foregoing.


 


6.4.                              Payment of Option Price in
Restricted Shares. On or
after the Grant Date of any Option other than an Incentive Stock Option, the
Committee may determine that payment of the Option Price may also be made in
whole or in part in the form of Restricted Shares or other Shares that are
subject to risk of forfeiture or restrictions on transfer.  Unless otherwise determined by the Committee,
whenever any Option Price is paid in whole or in part by means of any of the
forms of consideration specified in this Section 6.4, the Shares received
by the Optionee upon the exercise of the Options shall be subject to the same
risks of forfeiture or restrictions on transfer as those that applied to the
consideration surrendered by the Optionee, provided that such risks of
forfeiture and restrictions on transfer shall apply only to the same number of
Shares received by the Optionee as applied to the forfeitable or restricted
Shares 


 


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surrendered by the Optionee.


 


6.5.                              Broker Assisted Exercise. To the extent such program is permitted by
the Company and permitted by applicable law, rule or regulations, the
Option Price may be satisfied from the proceeds of a sale through a bank or
broker on the date of exercise of some or all of the Shares to which the
exercise relates pursuant to a broker assisted exercise program provided by
such bank or broker.


 


6.6.                              Exercise Period. No Option granted may be exercised more
than ten years after the Grant Date; provided that in the case of any Incentive
Stock Option granted to a person who on any given date owns, either directly or
indirectly (taking into account the attribution rules contained in Section 424(d) of
the Code), stock possessing more than 10 percent of the total combined voting
power of all classes of stock of the Company or any Subsidiary, such Option
shall be exercised within five years after the Grant Date.


 


6.7.                              Disqualifying Dispositions of
ISOs.  Each
Participant awarded an Incentive Stock Option under the Plan shall notify the
Company in writing immediately after the date he or she makes a disqualifying
disposition (as defined in Section 421(b) of the Code) of any Shares
acquired pursuant to the exercise of such Incentive Stock Option.  The Company may, if determined by the
Committee and in accordance with procedures established by it, retain
possession of any Shares acquired pursuant to the exercise of an Incentive
Stock Option as agent for the applicable Participant until the end of the period
described in the preceding sentence, subject to complying with any instructions
from such Participant as to the sale of such Shares.


 


7.                                       Stock Appreciation Rights. The Committee may also authorize grants to
Participants of Stock Appreciation Rights. A Stock Appreciation Right is the
right of the Participant to receive from the Company an amount, which, shall be
determined by the Committee and shall be expressed as a percentage (not
exceeding 100 percent) of the Spread at the time of the exercise of such right.
Any grant of Stock Appreciation Rights shall be upon such terms and conditions
as the Committee may determine in accordance with the following provisions:


 


7.1.                              Payment in Shares. Any amount payable upon the exercise of a
Stock Appreciation Right shall be paid by the Company in Shares.  Any grant may specify that the Shares payable
upon the exercise of a Stock Appreciation Right shall not exceed a maximum
specified by the Committee on the Grant Date.


 


7.2.                              Exercise Period. Any grant may specify (a) a waiting
period or periods before Stock Appreciation Rights shall become exercisable and
(b) permissible dates or periods on or during which Stock Appreciation
Rights shall be exercisable; provided that no Stock Appreciation Right granted
may be exercised more than ten years after the Grant Date.  A grant may specify that a Stock Appreciation
Right may be exercised only in the event of a Change in Control or other
similar transaction or event.


 


7.3.                              Base Price.  Each grant shall specify in respect of each Stock Appreciation Right a
Base Price per Share, which shall be equal to or greater than the Fair Market
Value on the Grant Date.


 


7.4.                              Deemed Exercise.  The
Committee may provide that a Stock Appreciation Right shall be deemed to be
exercised at the close of business on the scheduled expiration date of such
Stock Appreciation Right if at such time the Stock Appreciation Right by its
terms remains exercisable and, if so exercised, would result in a payment of
Shares to the holder of such Stock Appreciation Right.


 


8.                                       Restricted Shares. The Committee may also authorize grants to
Participants of Restricted Shares upon such terms and conditions as the
Committee may determine in accordance with the following provisions:


 


8.1.                              Transfer of Shares. Each grant shall constitute an immediate
transfer of the ownership of Shares to the Participant in consideration of the
performance of services, subject to the substantial risk of forfeiture and
restrictions on transfer referred to in Section 10.  Each grant may be made without additional
consideration from the Participant or in consideration of a payment by the
Participant that is less than the Fair Market Value on the Grant Date.


 


8.2.                              Dividends. Any grant may require that any or all
dividends or other distributions paid on the Restricted Shares during the
period of such restrictions be reinvested in additional Shares or held in cash,
which additional Shares or cash, as the case may be, may be subject to the same
restrictions as the underlying Award or such other restrictions as the
Committee may determine.


 


9.                                       Deferred Shares. The Committee may authorize grants of
Deferred Shares to Participants upon such terms and conditions as the Committee
may determine in accordance with the following provisions:


 


9.1.                              Deferred Transfer of Shares. Each grant shall constitute the agreement
by the Company to issue or transfer Shares to the Participant in the future in
consideration of the performance of services, subject to the fulfillment during
the Deferral Period of such conditions as the Committee may specify.


 


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9.2.                              Consideration. Each grant may be made without additional
consideration from the Participant or in consideration of a payment by the
Participant that is less than the Fair Market Value on the Grant Date.


 


10.                                 Vesting.


 


10.1.                        In General.  Each
grant of Options and Stock Appreciation Rights shall specify the period of
continuous employment by the Company or any Subsidiary, or service to the
Company or any Subsidiary (and in the case of a Nonemployee Director, service
on the Board), of the Participant that is necessary before such Options or
Stock Appreciation Rights, or installments thereof, shall become
exercisable.  Each grant of Restricted
Shares shall specify the period during which such Restricted Shares shall be
subject to a “substantial risk of forfeiture” within the meaning of Code Section 83,
and each grant of Deferred Shares shall specify the Deferral Period to which
such Deferred Shares shall be subject. 
Each grant of such Award may provide for the earlier exercise of rights,
termination of a risk of forfeiture or termination of a Deferral Period in the
event of a Change in Control or similar transaction or event.


 


10.2.                        Restrictions on Transfer of
Restricted Shares.  Each grant of Restricted Shares shall provide
that, during the period for which a substantial risk of forfeiture is to
continue, the transferability of the Restricted Shares shall be prohibited or
restricted in the manner and to the extent prescribed by the Committee on the
Grant Date. Such restrictions may include, without limitation, rights of
repurchase or first refusal in the Company or provisions subjecting the
Restricted Shares to a continuing substantial risk of forfeiture in the hands
of any transferee.


 


11.                                 Dividends and Other Ownership
Rights.


 


11.1.                        Restricted Shares. Unless otherwise determined by the
Committee, an Award of Restricted Shares shall entitle the Participant to
dividend, voting and other ownership rights during the period for which a
substantial risk of forfeiture is to continue.


 


11.2.                        Deferred Shares. 
Unless otherwise determined by the Committee, during the Deferral
Period, the Participant shall not have any right to transfer any rights under
an Award of Deferred Shares, shall not have any rights of ownership in the
Deferred Shares and shall not have any right to vote such Shares.


 


12.                                 Transferability.


 


12.1.                        Transfer Restrictions. Except as provided in Section 12.2, no
Award granted shall be transferable by a Participant other than by will or the
laws of descent and distribution, and Options and Stock Appreciation Rights
shall be exercisable during a Participant’s lifetime only by the Participant
or, in the event of the Participant’s legal incapacity, by his or her guardian
or legal representative acting in a fiduciary capacity on behalf of the
Participant under state law. Any attempt to transfer an Award in violation of
this Plan shall render such Award null and void.


 


12.2.                        Limited Transfer Rights. The Committee may expressly provide in an
Award Agreement (or an amendment to an Award Agreement) that a Participant may
transfer such Award (other than an Incentive Stock Option), in whole or in
part, to a spouse or lineal descendant (a “Family Member”), a trust for the
exclusive benefit of Family Members, a partnership or other entity in which all
the beneficial owners are Family Members, or any other entity affiliated with
the Participant that may be approved by the Committee. Subsequent transfers of
Awards shall be prohibited except in accordance with this Section 12.2.
All terms and conditions of the Award, including without limitation provisions
relating to termination of the Participant’s employment or service with the
Company or a Subsidiary, shall continue to apply following a transfer made in
accordance with this Section 12.2. 
In order for a transfer to be effective, a Participant must agree in
writing prior to the transfer on a form provided by the Company to pay any and
all payroll and withholding taxes due upon exercise of the transferred Option.
In addition, prior to the exercise of a transferred Option by a transferee,
arrangements must be made by the Participant with the Company for the payment
of all payroll and withholding taxes.  Finally,
the Company shall be under no obligation to provide a transferee with any
notice regarding the transferred Awards held by the transferee upon forfeiture
or any other circumstance.


 


12.3.                        Restrictions on Transfer. Any Award granted may provide that all or
any part of the Shares that are (a) to be issued or transferred by the
Company upon the exercise of Options or Stock Appreciation Rights, upon
termination of the Deferral Period applicable to Deferred Shares or upon
payment under any grant of Performance Shares or Performance Units, or (b) no
longer subject to the substantial risk of forfeiture and restrictions on
transfer referred to in Section 10, shall be subject to further
restrictions upon transfer, including restrictions relating to any minimum
Share ownership requirements imposed by the Company with respect to a
Participant.


 


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13.                                 Award Agreement. Each grant under the Plan shall be evidenced
by an Award Agreement, which shall describe the subject Award, state that the
Award is subject to all of the terms and conditions of this Plan and contain
such other terms and provisions as the Committee may determine consistent with
this Plan.


 


14.                                 Adjustments. The Committee shall make or provide for appropriate adjustments in the
(a) number of Shares covered by outstanding Options, Stock Appreciation
Rights, Deferred Shares, Restricted Shares and Performance Shares granted
hereunder, (b) prices per Share applicable to such Options and Stock
Appreciation Rights, and (c) kind of Shares covered thereby (including
Shares of another issuer), as the Committee in its sole discretion may in good
faith determine to be equitably required in order to prevent dilution or
enlargement of the rights of Participants that otherwise would result from (x) any
stock dividend, stock split, combination or exchange of Shares,
recapitalization or other change in the capital structure of the Company, (y) any
merger, consolidation, spin-off, spin-out, split-off, split-up, reorganization,
partial or complete liquidation or other distribution of assets (other than a
normal cash dividend), issuance of rights or warrants to purchase securities,
or (z) any other corporate transaction or event having an effect similar
to any of the foregoing.  Moreover, in
the event of any such transaction or event, the Committee may provide in
substitution for any or all outstanding Awards such alternative consideration
as it may in good faith determine to be equitable under the circumstances and
may require in connection therewith the surrender of all Awards so
replaced.  The Committee may also make or
provide for such adjustments in each of the limitations specified in Section 3
as the Committee in its sole discretion may in good faith determine to be
appropriate in order to reflect any transaction or event described in this Section 14.  The Company
shall give each Participant notice of an adjustment hereunder and, upon notice,
such adjustment shall be conclusive and binding for all purposes.


 


15.                                 Fractional Shares. The Company shall not be required to issue
any fractional Shares pursuant to this Plan. The Committee may provide for the
elimination of fractions or for the settlement thereof in cash.


 


16.                                 Withholding Taxes. The Company shall be entitled to deduct from
any payment under the Plan, regardless of the form of such payment, the amount
of all applicable income and employment taxes required by law to be withheld
with respect to such payment or may require the Participant to pay to it such
tax prior to and as a condition of the making of such payment. In accordance
with any applicable administrative guidelines it establishes, the Committee may
allow a Participant to pay the amount of taxes required by law to be withheld
from an Award by withholding from any payment of Shares due as a result of such
Award, or by permitting the Participant to deliver to the Company Shares having
a Fair Market Value, as determined by the Committee, equal to the minimum
amount of such required withholding taxes.


 


17.                                 Certain Terminations of
Employment, Hardship and Approved Leaves of Absence. In the event of termination of employment by
reason of death, disability, normal retirement, early retirement with the
consent of the Committee, other termination of employment or a leave of absence
that is approved by the Committee, or in the event of hardship or other special
circumstances that are approved by the Committee, of a Participant who holds an
Option or Stock Appreciation Right that is not immediately and fully
exercisable, any Restricted Shares as to which the substantial risk of
forfeiture or the prohibition or restriction on transfer has not lapsed, any
Deferred Shares as to which the Deferral Period is not complete, any
Performance Shares or Performance Units that have not been fully earned, or any
Shares that are subject to any transfer restriction pursuant to Section 12.3,
the Committee may, in its sole discretion, take any action that it deems to be
equitable under the circumstances or in the best interests of the Company,
including without limitation waiving or modifying any limitation or requirement
with respect to any Award and providing for post-termination exercise periods
with respect to any Option or Stock Appreciation Right.


 


18.                                 Termination for Cause.   A Participant who is terminated for
Cause shall, unless otherwise determined by the Committee, immediately forfeit,
effective as of the date the Participant engages in such conduct, all
unexercised, unearned, and/or unpaid Awards, including, but not by way of
limitation, Awards earned but not yet paid or exercised, all unpaid dividends
and all interest, if any, accrued on the foregoing.


 


19.                                 Foreign Participants. In order to facilitate the making of any
grant or combination of grants under this Plan, the Committee may provide for
such special terms for Awards to Participants who are foreign nationals, or who
are employed by or perform services for the Company or any Subsidiary outside
of the United States of America, as the Committee may consider necessary or
appropriate to accommodate differences in local law, tax policy or custom. 


 


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Moreover, the Committee may
approve such supplements to, or amendments, restatements or alternative
versions of, this Plan as it may consider necessary or appropriate for such purposes
without thereby affecting the terms of this Plan as in effect for any other
purpose, provided that no such supplements, amendments, restatements or
alternative versions shall include any provisions that are inconsistent with
the terms of this Plan, as then in effect, unless this Plan could have been
amended to eliminate such inconsistency without further approval by the
stockholders of the Company.


 


20.                                 Amendments and Other Matters.


 


20.1.                        Plan Amendments. This Plan may be amended from time to time
by the Board, but no such amendment shall: (a) increase any of the
limitations specified in Section 3, other than to reflect an adjustment
made in accordance with Section 14, (b) change the class of persons
eligible to receive grants of Awards or the types of Awards available under the
Plan, or (c) increase the benefits to Participants under the Plan, in any
such case without the further approval of the stockholders of the Company. The
Board will also condition any amendment on the approval of the stockholders of
the Company if such approval is necessary with respect to the applicable
listing or other requirements of a national securities exchange or other
applicable laws, policies or regulations, and the Board may condition any
amendment on the approval of the stockholders of the Company if such approval
is deemed advisable to comply with such requirements.


 


20.2.                        Award Deferrals. An Award Agreement may provide that payment
of any Award, dividend, or any portion thereof, may be deferred by a
Participant until such time as the Committee may establish. All such deferrals
shall be accomplished by the delivery of a written, irrevocable election by the
Participant prior to the time established by the Committee for such purpose, on
a form provided by the Company.   Deferred
Awards may also be credited with interest, at such rates to be determined by
the Committee.


 


20.3.                        Conditional Awards. The Committee may condition the grant of
any Award or combination of Awards on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other compensation
otherwise payable by the Company or any Subsidiary to the Participant.


 


20.4.                        Repricing Prohibited. No Award may be repriced, replaced,
regranted through cancellation, or modified, directly or indirectly, without
the approval of the stockholders of the Company, provided that nothing herein
shall prevent the Committee from taking any action provided for in Section 14.


 


20.5.                        Amendments to Awards. Subject to the requirements of Section 20.4,
the Committee may at any time unilaterally amend any unexercised, unearned, or
unpaid Award, including, but not by way of limitation, Awards earned but not
yet paid, to the extent it deems appropriate (including for the purposes of
compliance with local laws and regulations or to avoid costly government
filings); provided, however, that except to the extent that the Committee
determines that an amendment is necessary to avoid a penalty tax under Section 409A
of the Code, any such amendment which, in the opinion of the Committee, is
adverse to the Participant shall require the Participant’s consent.


 


20.6.                        No Employment Right. This Plan shall not confer upon any
Participant any right with respect to continuance of employment or other
service with the Company or any Subsidiary and shall not interfere in any way
with any right that the Company or any Subsidiary would otherwise have to
terminate any Participant’s employment or other service at any time.


 


20.7.                        Compliance with Section 409A
of the Code.  Notwithstanding any other provision of the
Plan to the contrary, (a) to the extent that any payment of or in
connection with an Award constitutes a payment under a “non-qualified deferred
compensation plan,” as defined in Section 409A of the Code, such payment
shall be made in compliance with Section 409A of the Code and (b) any
adjustment of Shares or prices per Share or substitution of Awards pursuant to Section 14
and any modification of Awards pursuant to Section 17 shall not cause the
affected Award to violate the requirements of Section 409A of the Code.


 


21.                                 Change in Control. Except as otherwise provided at the time of
grant in an Award Agreement relating to a particular Award and subject to the
requirements of Section 14, if a Change in Control occurs, then:


 


21.1.                        The Participant’s Restricted Shares, Deferred
Shares, Performance Shares, Performance Units or other Share-based Awards that
were forfeitable shall, unless otherwise determined by the Committee prior to
the occurrence of the Change in Control, become nonforfeitable and, to the
extent applicable, shall be converted into Shares.


 


21.2.                        Any unexercised Option or Stock Appreciation
Right, whether or not exercisable on the date of such Change in Control, shall
thereupon be fully exercisable and may be exercised, in whole or in part.


 


21.3.        Notwithstanding Sections 21.1 and 21.2, in the event of a Change in Control, the Committee
may in its discretion cancel any outstanding Awards and (a) pay to the
holders thereof, in cash or stock, or any combination 


 


9

















 


thereof,
the value of such Awards based upon the price per share of Stock received or to
be received by other stockholders of the Company in the event or (b) arrange
for fully vested substitute awards to be granted to the holders thereof,
denominated in the equity of the acquirer or an affiliate thereof, provided
such substitute awards substantially preserve the value of the substituted
Awards.


 


21.4.                        If a Change in Control occurs during the term
of one or more Performance Periods for which the Committee has granted
performance-based Awards pursuant to the provisions of Section 5, the term
of each such Performance Period (hereinafter a “current Performance Period”)
shall immediately terminate upon the occurrence of such Change in Control. Upon
a Change in Control, for each current Performance Period and each completed
Performance Period for which the Committee has not on or before such date made
a determination as to whether and to what degree the Performance Objectives for
such period have been attained (hereinafter a “completed Performance Period”),
it shall be assumed that the Performance Objectives have been attained at a
level of one hundred percent (100%) or the equivalent thereof. A Participant in
one or more current Performance Periods shall be considered to have earned and,
therefore, be entitled to receive, a prorated portion of the Award previously
granted to him for each such current Performance Period.  Such prorated portion shall be determined by
multiplying the number of Performance Shares or Performance Units (or other
performance-based Awards), as the case may be, granted to the Participant by a
fraction, the numerator of which is the total number of days that have elapsed
since the beginning of the current Performance Period, and the denominator of
which is the total number of days in such current Performance Period.  A Participant in one or more completed
Performance Periods shall be considered to have earned and, therefore, be
entitled to receive all the Performance Shares or Performance Units (or other
performance-based Awards), as the case may be, previously granted to him during
each such completed Performance Period.


 


21.5.                        Unless otherwise provided by the Committee,
at any time, upon a Change in Control, any Awards deferred by a Participant
under Section 20.2, but for which he or she has not received payment as of
such date, shall be paid by the 90th day following the Change in Control.


 


22.                                 Effective Date. This Plan shall become effective upon its approval
by the stockholders of the Company.


 


23.                                 Termination. This Plan shall terminate on the tenth
anniversary of the date upon which it is approved by the stockholders of the
Company, and no Award shall be granted after that date.


 


24.                                 Arbitration of Disputes. Any and all disputes arising out of or
relating to the Plan or any Award Agreement (or breach thereof) shall be
resolved exclusively through binding arbitration in the State of New York in
accordance with the rules of the American Arbitration Association then in
effect.


 


25.                                 Regulatory Approvals and
Listings.
Notwithstanding anything contained in this Plan to the contrary, the Company
shall have no obligation to issue or deliver certificates of Shares evidencing
Awards or any other Award resulting in the payment of Shares prior to (i) the
obtaining of any approval from any governmental agency which the Company shall,
in its sole discretion, determine to be necessary or advisable, (ii) the
admission of such Shares to listing on the stock exchange or market on which
the Shares may be listed, and (iii) the completion of any registration or
other qualification of said Shares under any state or federal law or ruling of
any governmental body which the Company shall, in its sole discretion,
determine to be necessary or advisable. 
The Committee may, from time to time, impose additional restrictions
upon an Award, including but not limited to, restrictions regarding tax
withholdings and restrictions regarding the Participant’s ability to exercise
Awards under the Company’s broker-assisted stock option exercise program.


 


26.                                 No Right, Title, or Interest in
Company Assets. No
Participant shall have any rights as a stockholder of the Company as a result
of participation in the Plan until the date of issuance of a stock certificate
in his or her name, and, in the case of Restricted Shares, such rights are
granted to the Participant under the Plan. To the extent any person acquires a
right to receive payments from the Company under the Plan, such rights shall be
no greater than the rights of an unsecured creditor of the Company and the
Participant shall not have any rights in or against any specific assets of the
Company. All of the Awards granted under the Plan shall be unfunded.


 


27.                                 No Guarantee of Tax Consequences. Notwithstanding any other provision of the
Plan, no person connected with the Plan in any capacity, including, but not
limited to, the Company and its directors, officers, agents and employees,
makes any representation, commitment, or guarantee that any tax treatment,
including, but not limited to, 


 


10

















 


federal, state and local
income, estate and gift tax treatment, will be applicable with respect to the
tax treatment of any Award, any amounts deferred under the Plan, or paid to or
for the benefit of a Participant under the Plan, or that such tax treatment
will apply to or be available to a Participant on account of participation in
the Plan, or that any of the foregoing amounts will not be subject to the 20%
penalty tax and interest under Section 409A of the Code.


 


28.                                 Governing Law. The validity, construction and effect of
this Plan and any Award hereunder will be determined in accordance with the
laws of the State of Delaware.


 


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