Exhibit 10.1


 


ZALE CORPORATION


NON-EMPLOYEE DIRECTOR


EQUITY COMPENSATION PLAN

(As amended through November 2008)


 


1.                                   PREAMBLE


 


This Zale Corporation Non-Employee Director Equity
Compensation Plan, as it may be amended from time to time (the “Plan”), is intended
to promote the interests of Zale Corporation, a Delaware corporation (the “Company”),
and its stockholders by providing directors of the Company who are not
employees of the Company with appropriate incentives and rewards to serve on
the board of directors of the Company and to acquire a proprietary interest in
the long-term success of the Company.


 


2.                                   DEFINITIONS


 


As used in the Plan, the following definitions apply
to the terms indicated below:


 


(a)                              “Board of Directors” shall mean the Board of Directors of the Company.


 


(b)                             “Cause,” when used in connection with a Participant’s removal or
resignation as a member of the Board of Directors, shall mean (i) the
willful and continued failure by the Participant substantially to perform his
or her duties and obligations to the Company (other than any such failure
resulting from his or her incapacity due to physical or mental illness) or (ii) the
willful engaging by the Participant in misconduct which is materially injurious
to the Company.  For purposes of this Section 2(b),
no act, or failure to act, on a Participant’s part shall be considered “willful”
unless done, or omitted to be done, by the Participant in bad faith and without
reasonable belief that his or her action or omission was in the best interests
of the Company.  The Board of Directors
shall determine whether a Participant’s removal or resignation as a member of
the Board of Directors is for Cause.


 


(c)                              “Change in Control” shall mean the first to occur of the following:


 


(i)                                  any “person,” as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than the
Company or any trustee or other fiduciary holding securities under an employee
benefit plan of the Company), is or becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company’s then outstanding securities;


 


(ii)                               during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors, and any new
director (other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause (i), (iii) or
(iv) of this 


 













 


definition)
whose election by the Board of Directors or nomination for election by the
Company’s stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof;


 


(iii)                            the stockholders of the Company approve a merger or consolidation of
the Company with any other entity, other than (i) a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation or (ii) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no “person” (as hereinabove defined) acquires more than 50% of the
combined voting power of the Company’s then outstanding securities; or


 


(iv)                           the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of
all or substantially all of the Company’s assets.


 


(d)                             “Code” shall mean the Internal Revenue Code of 1986, as amended.


 


(e)                              “Company Stock” shall mean the common stock, par value $.01 per share,
of the Company.


 


(f)                                 A “Deferred Stock Unit” shall mean a unit
which is granted pursuant to the terms of Section 6 and as described in Section 8B.


 


(g)                              “Disability” shall mean any physical or mental condition that would
qualify a Participant for a disability benefit under the long-term disability
plan maintained by the Company and applicable to him or her.


 


(h)                              “Effective Date” shall mean November 11, 2005.


 


(i)                                  “Equity Award” shall mean a Deferred Stock
Unit, an Option, a share of Restricted Stock or a Restricted Stock Unit granted
pursuant to the terms of the Plan.


 


(j)                                 “Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended.


 


(k)                             The “Fair Market Value” of a share of Company Stock with respect to any
day shall be the closing price of Company Stock on the day of the award as
reported on the New York Stock Exchange or on such other securities exchange or
reporting system as may be designated by the Board of Directors.  In the event that the price of a share of
Company Stock shall not be so reported, the Fair Market Value of a share of
Company Stock shall be determined by the Board of Directors in its absolute
discretion.


 


 


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(l)                                  “Option” shall mean an option to purchase
shares of Company Stock granted pursuant to Section 6(a) and as
described in Section 7.


 


(m)                          “Participant” shall mean a member of the Board of Directors who is not
an employee of the Company or a Subsidiary.


 


(n)                              A share of “Restricted Stock” shall mean a share of Company Stock which
is granted pursuant to the terms of Section 6 and as described in Section 8.


 


(o)                             A “Restricted Stock Unit” shall mean a unit which is granted pursuant
to the terms of Section 6 and as described in Section 8A.


 


(p)                             “Rule 16b-3” shall mean the rule thus designated as
promulgated under the Exchange Act.


 


(q)                             “Subsidiary” shall mean any corporation or other entity in which, at
the time of reference, the Company owns, directly or indirectly, stock or
similar interests comprising more than 50 percent of the combined voting
power of all outstanding securities of such entity.


 


(r)                                “Vesting Date” shall mean the date established by the Board of
Directors on which Restricted Stock and Restricted Stock Units vest.


 


3.                                   STOCK SUBJECT TO THE PLAN


 


(a)                              Shares Available for EquityAwards


 


The total number of shares of Company Stock with
respect to which EquityAwards may be granted shall not exceed 250,000 shares,
with not more than 100,000 shares to be granted as Deferred Stock Units,
Restricted Stock or Restricted Stock Unit awards.  Such shares may be authorized but unissued
Company Stock or authorized and issued Company Stock held in the Company’s
treasury or acquired by the Company for the purposes of the Plan.  The Board of Directors may direct that any
stock certificate evidencing shares of Company Stock issued pursuant to the
Plan shall bear a legend setting forth such restrictions on transferability as
may apply to such shares pursuant to the Plan.


 


(b)                             Adjustment for Change in Capitalization


 


If there is any change in the outstanding shares of
Company Stock by reason of a stock dividend or distribution, stock split-up,
recapitalization, combination or exchange of shares, or by reason of any
merger, consolidation, spin-off or other corporate reorganization in which the
Company is the surviving corporation, the number of shares available for
issuance both in the aggregate and with respect to each outstanding
EquityAward, and the price per share under each outstanding Option, shall be
proportionately adjusted by the Board of Directors, whose determination shall
be final and binding.  After any
adjustment made pursuant to this Section 3(b), the number of shares
subject to each outstanding EquityAward shall be rounded to the nearest whole
number.


 


 


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(c)                              Re-use of Shares


 


Any shares subject to an EquityAward that remain
unissued upon the cancellation or termination of such EquityAward for any
reason whatsoever shall again become available for EquityAwards under the Plan.


 


(d)                             No Repricing


 


Absent stockholder approval, the Board of Directors
shall not have any authority, with or without the consent of the affected
holders of Options, to “reprice” an Option after the date of its initial grant
with a lower exercise price in substitution for the original exercise
price.  This paragraph may not be
amended, altered or repealed by the Board of Directors without approval of the
stockholders of the Company.


 


4.                                   ADMINISTRATION OF THE PLAN


 


The Plan shall be administered by the Board of Directors.  The Board of Directors shall have full
authority to administer the Plan, including authority to interpret and construe
any provision of the Plan and the terms of any EquityAwards issued under it and
to adopt such rules and regulations for administering the Plan as it may
deem necessary or appropriate.  Decisions
of the Board of Directors shall be final and binding on all parties.  Unless determined otherwise by the Board of
Directors, the authority of the Board of Directors to administer the Plan is
delegated to the Compensation Committee of the Board of Directors.


 


No member of the Board of Directors shall be liable
for any action, omission or determination relating to the Plan, and the Company
shall indemnify and hold harmless each member of the Board of Directors and
each other director or employee of the Company to whom any duty or power
relating to the administration or interpretation of the Plan has been delegated
against any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim with the approval of the Board of Directors)
arising out of any action, omission or determination relating to the Plan,
unless, in either case, such action, omission or determination was taken or
made by such member, director or employee in bad faith and without reasonable
belief that it was in the best interests of the Company.


 


5.                                   ELIGIBILITY


 


The persons who shall be eligible to receive
EquityAwards pursuant to the Plan shall be such members of the Board of
Directors who are not employees of the Company or a Subsidiary.


 


6.                                   EQUITYAWARDS UNDER THE PLAN


 


EquityAwards granted under
the Plan shall be subject to the terms and conditions set forth in the Plan,
and shall be evidenced by an EquityAward Agreement which shall not be
inconsistent with the provisions of the Plan.


 


(a)                              Annual Awards.  Following each
annual meeting of stockholders, Participants shall receive such combination of
Options, Restricted Stock and Restricted 


 


 


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Stock
Units as the Board of Directors shall from time-to-time determine (the “Annual
Award”).


 


(b)                             Other Awards.  Upon the initial
election to the Board of Directors of any person who is a Participant (other
than through an initial election by the Company’s stockholders at an annual
meeting of stockholders), such person shall be granted a pro rata portion of
the Annual Award based upon the number of full calendar months elapsed since
the most recent annual meeting of stockholders.


 


(c)                              Elective Awards.  At the election
of the Board of Directors or individual Participants, a Participant shall
receive a grant of Deferred Stock Units in lieu of a portion or all of the cash
retainer and meeting and other fees payable to the Participant for serving on
the Board of Directors, provided that such election is made in accordance with
the requirements of Section 409A of the Code.


 


 


7.                                   OPTIONS


 


(a)                              Exercise Price


 


The exercise price per share of an Option shall be the
Fair Market Value of a share of Company Stock on the date the Option is
granted.


 


(b)                             Term and Exercise of Options


 


(i)                                  Unless the Board, in its discretion,
determines otherwise, each Option shall become fully exercisable on the earlier
of the first anniversary of the date of grantor the next annual meeting of
stockholders of the Company following the date of grant.  The expiration date of each Option shall be
ten years after the date of grant; provided, however, that if the
expiration date would occur during a period in which the Participant is
prohibited from trading in the Company Stock pursuant to the provisions of the
Company’s insider trading policy, then the expiration date shall be extended
and such Option shall expire on the 30th day after the prohibition against trading
under the Company’s insider trading policy has ceased to be in effect.


 


(ii)                               An Option may be exercised for all or any portion of the shares as to
which it is exercisable; provided, that no partial exercise of an Option shall
be for an aggregate exercise price of less than $1,000.  The partial exercise of an Option shall not
cause the expiration, termination or cancellation of the remaining portion
thereof.


 


(iii)                            An Option shall be exercised by delivering notice to the Company’s
principal office, to the attention of its Secretary (or the Secretary’s
designee), no less than one business day in advance of the effective date of
the proposed exercise.  Such notice shall
specify the number of shares of Company Stock with respect to which the Option
is being exercised and the effective date of 


 


 


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the
proposed exercise and shall be signed by the Participant or other person then
having the right to exercise the Option. 
Such notice may be withdrawn at any time prior to the close of business
on the business day immediately preceding the effective date of the proposed
exercise.  Payment for shares of Company
Stock purchased upon the exercise of an Option shall be made on the effective
date of such exercise by one or a combination of the following means: (i) in
cash, by certified check, bank cashier’s check or wire transfer; (ii) subject
to the approval of the Board of Directors, in shares of Company Stock owned by
the Participant for at least six months prior to the date of exercise and
valued at their Fair Market Value on the effective date of such exercise; or (iii) subject
to the approval of the Board of Directors, by such other provision as the Board
of Directors may from time to time authorize. 
Any payment in shares of Company Stock shall be effected by the delivery
of such shares to the Secretary (or the Secretary’s designee) of the Company,
duly endorsed in blank or accompanied by stock powers duly executed in blank,
together with any other documents and evidences as the Secretary (or the Secretary’s
designee) of the Company shall require.


 


(iv)                           Certificates for shares of Company Stock purchased upon the exercise of
an Option shall be issued in the name of the Participant or other person
entitled to receive such shares, and delivered to the Participant or such other
person as soon as practicable following the effective date on which the Option
is exercised.


 


(c)                              Effect of Termination of Directorship


 


(i)                                  Unless the Board of Directors shall determine
otherwise, in the event of a Participant’s removal or resignation as a member
of the Board of Directors for any reason other than Cause, Disability or death:
(i) Options granted to such Participant, to the extent that they were
exercisable at the time of such removal or resignation, shall remain exercisable
until the date that is three months after such removal or resignation, on which
date they shall expire; and (ii) Options granted to such Participant, to
the extent that they were not exercisable at the time of such removal or
resignation, shall expire at the close of business on the date of such removal
or resignation.  The three-month period
described in this Section 7(c)(i) shall be extended to one year in
the event of the Participant’s death during such three-month period.  Notwithstanding the foregoing, no Option
shall be exercisable after the expiration of its term.


 


(ii)                               Unless the Board of Directors shall determine otherwise, in the event
of a Participant’s removal or resignation as a member of the Board of Directors
on account of the Disability or death of the Participant: (i) Options
granted to such Participant, to the extent that they were exercisable at the
time of such removal or resignation, shall remain exercisable until the first
anniversary of such removal or resignation, on which date they shall expire;
and (ii) Options granted to such Participant, to the extent that they were
not exercisable at the time of such removal or resignation, shall expire at the
close of business on the date of 


 


 


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such
removal or resignation.  Notwithstanding
the foregoing, no Option shall be exercisable after the expiration of its term.


 


(iii)                            In the event of a Participant’s removal or resignation as a member of
the Board of Directors for Cause, all outstanding Options granted to such
Participant shall expire at the commencement of business on the date of such
removal or resignation.


 


(d)                             Acceleration of Exercise Date Upon Change in Control


 


Upon the occurrence of a Change in Control, each
Option granted under the Plan and outstanding at such time shall become fully
and immediately exercisable and shall remain exercisable until its expiration,
termination or cancellation pursuant to the terms of the Plan.  In addition, in the event of a potential
Change in Control, the Board of Directors may in its discretion, cancel any
outstanding Options and pay to the holders thereof, in cash or stock, or any
combination thereof, the value of such Options based upon the price per share
of Company Stock to be received by shareholders of the Company in the
transaction giving rise to the Change in Control less the exercise price of
each Option.


 


8.                                   RESTRICTED STOCK


 


(a)                              Vesting Date


 


At the time of the grant of shares of Restricted
Stock, the Board of Directors shall establish a Vesting Date (or Vesting Dates)
with respect to such shares.  Provided
that all conditions to the vesting of shares of Restricted Stock imposed
pursuant to Section 8(b) are satisfied, upon the occurrence of the
Vesting Date with respect to shares of Restricted Stock, such shares shall vest
and the restrictions of Section 8(b) shall cease to apply to such
shares.  Unless the Board of Directors
determines otherwise, the Vesting Date of Restricted Stock shall  be the earlier of the first anniversary of date
of grant or the date of the next annual meeting of stockholders of the Company
following the date of grant.


 


(b)                             Conditions to Vesting


 


At the time of the grant of
shares of Restricted Stock, the Board of Directors may impose such restrictions
or conditions to the vesting of such shares as it, in its absolute discretion,
deems appropriate.  By way of example and
not by way of limitation, the Board of Directors may require, as a condition to
the vesting of any class or classes of shares of Restricted Stock, that the
Participant or the Company achieves such performance goals as the Board of
Directors may specify.


 


(c)                              Restrictions on Transfer Prior to Vesting


 


Prior to the vesting of a
share of Restricted Stock, no transfer of a Participant’s rights with respect
to such share, whether voluntary or involuntary, by operation of law or
otherwise, shall be permitted. 
Immediately upon any attempt to transfer such rights, such share, and
all of the rights related thereto, shall be forfeited by the Participant.


 


 


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(d)                             Dividends on Restricted Stock


 


The Board of Directors in
its discretion may require that any dividends paid on shares of Restricted
Stock shall be held in escrow until all restrictions on such shares have lapsed.


 


(e)                              Issuance of Certificates


 


Reasonably promptly after
the date of grant with respect to shares of Restricted Stock, the Company shall
cause to be issued a stock certificate, registered in the name of the
Participant to whom such shares were granted, evidencing such shares; provided,
that the Company shall not cause such a stock certificate to be issued unless
it has received a stock power duly endorsed in blank with respect to such
shares.  Each such stock certificate
shall bear the following legend:


 


The transferability of this certificate and the
shares of stock represented hereby are subject to the restrictions, terms and
conditions (including forfeiture provisions and restrictions against transfer)
contained in the Zale Corporation Non-Employee Director Equity Compensation
Plan, and such rules, regulations and interpretations as the Zale Corporation
Board of Directors may adopt.  Copies of
the Plan and, if any, rules, regulations and interpretations are on file in the
office of the Secretary of Zale Corporation, 901 West Walnut Hill Lane, Irving,
Texas 75038-1003.


 


Such legend shall not be
removed until such shares vest pursuant to the terms hereof.


 


Each certificate issued
pursuant to this Section 8(e), together with the stock powers relating to
the shares of Restricted Stock evidenced by such certificate, shall be held by
the Company unless the Board of Directors determines otherwise.


 


(f)                                 Voting Rights of Restricted Stock


 


During the restricted
period, Participants holding shares of Restricted Stock may exercise full
voting rights with respect to the shares.


 


(g)                              Consequences of Vesting


 


Upon the vesting of a share of Restricted Stock
pursuant to the terms of the Plan, the restrictions of Section 8(c) shall
cease to apply to such share.  Reasonably
promptly after a share of Restricted Stock vests, the Company shall cause to be
delivered to the Participant to whom such shares were granted, a certificate
evidencing such share, free of the legend set forth in Section 8(e).  Notwithstanding the foregoing, such share
still may be subject to restrictions on transfer as a result of applicable
securities laws.


 


(h)                              Effect of Termination of Directorship


 


(i)                                  Unless the Board of Directors provides
otherwise, during the 90 days following a Participant’s removal or
resignation as a member of the 


 


 


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Board
of Directors for any reason other than Cause, the Company shall have the right
to require the return of any shares to which restrictions on transferability
apply, in exchange for which the Company shall repay to the Participant (or the
Participant’s estate) any amount paid by the Participant for such shares.  In the event that the Company requires such a
return of shares, it also shall have the right to require the return of all
dividends paid on such shares, whether by termination of any escrow arrangement
under which such dividends are held or otherwise.


 


(ii)                               In the event of a Participant’s removal or resignation as a member of
the Board of Directors for Cause, all shares of Restricted Stock granted to
such Participant which have not vested as of the date of such removal or
resignation shall immediately be returned to the Company, together with any
dividends paid on such shares, in return for which the Company shall repay to
the Participant any amount paid for such shares.


 


(i)                                  Effect of Change in Control


 


Upon the occurrence of a Change in Control, all
outstanding shares of Restricted Stock which have not theretofore vested shall
immediately vest.


 


8A.                        RESTRICTED STOCK UNITS


 


(a)                              Vesting


 


At the time of the grant of Restricted Stock Units,
the Board of Directors shall establish a Vesting Date (or Vesting Dates) with
respect thereto.  Provided that all
conditions to the vesting of Restricted Stock Units imposed pursuant to Section (b) are
satisfied, upon the occurrence of the Vesting Date with respect to Restricted
Stock Units, such Restricted Stock Units shall vest and the restrictions of Section (b) shall
cease to apply thereto.  Unless the Board
of Directors determines otherwise, the Vesting Date of Restricted Stock Units
shall be the earlier of the first anniversary of the date of grant or the date
of the next annual meeting of stockholders of the Company following the date of
grant.


 


(b)                             Conditions to Vesting


 


At the time of the grant of
Restricted Stock Units, the Board of Directors may impose such restrictions or
conditions to the vesting of such Restricted Stock Units as it, in its absolute
discretion, deems appropriate.  By way of
example and not by way of limitation, the Board of Directors may require, as a
condition to the vesting of any Restricted Stock Units, that the Participant or
the Company achieves such performance goals as the Board of Directors may
specify.


 


(c)                              Restrictions on Transfer


 


Prior to payment of a
Restricted Stock Unit, no transfer of a Participant’s rights with respect
thereto, whether voluntary or involuntary, by operation of law or otherwise,
shall be 


 


 


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permitted.  Immediately upon any
attempt to transfer such rights, such Restricted Stock Unit, and all of the
rights related thereto, shall be forfeited by the Participant.


 


(d)                             No Dividends for Restricted Stock Units


 


No dividends shall be
payable with respect to Restricted Stock Units. 
Unless otherwise provided by the Board of Directors the Participant
shall be entitled to receive, currently or on a deferred basis, amounts
equivalent to cash, stock or other property dividends on Company Stock (“Dividend
Equivalents”) with respect to the number of shares of Company Stock covered by
the Restricted Stock Units.  The Board of
Directors may provide that the Dividend Equivalents shall be deemed to have
been reinvested in additional Restricted Stock Units or otherwise reinvested
and may provide that the Dividend Equivalents are subject to the same Vesting
Date and other conditions as the Restricted Stock Units.


 


(e)                              No Voting Rights for Restricted Stock Units


 


Holders of Restricted Stock
Units shall not have any voting rights with respect to Restricted Stock Units.


 


(f)                                 Payment of Restricted Stock Units


 


Upon the vesting of a Restricted Stock Unit pursuant
to the terms of the Plan, the Company promptly shall cause to be delivered to
the Participant a number of shares of Company Stock equal to the number of
Restricted Stock Units granted by the Board of Directors (and any additional
Restricted Stock Units or other amounts credited with respect to Dividend
Equivalents), unless the Board of Directors in its sole discretion determines
that payment shall be made instead by delivering an amount of cash equal to the
Fair Market Value thereof.  A Participant
or, at the time of the grant, the Board of Directors may elect to defer such
receipt of the delivery of shares of Company Stock that would otherwise be due
to the Participant by virtue of the vesting of a Restricted Stock Unit,
provided such deferral election is made in accordance with the requirements of Section 409A
of the Code.  Notwithstanding the
foregoing, such shares may be subject to restrictions on transfer as a result
of applicable securities laws.


 


(g)                              Effect of Termination of Directorship


 


In the event a Participant’s resignation or removal
for Cause as a member of the Board of Directors, all Restricted Stock Units
granted to such Participant which have not vested as of the date of such
resignation or removal (and any additional Restricted Stock Units or other
amounts credited with respect to Dividend Equivalents) shall immediately be
forfeited.


 


(h)                              Effect of Change in Control


 


Upon the occurrence of a Change in Control, all
outstanding Restricted Stock Units which have not theretofore vested shall
immediately vest.


 


8B.                        DEFERRED
STOCK UNITS


 


(a)                              Vesting


 


 


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Deferred Stock Units
shall be fully vested at all times.


 


(b)        Restrictions on Transfer


 


Prior to payment of a Deferred Stock Unit, no transfer
of a Participant’s rights with respect thereto, whether voluntary or
involuntary, by operation of law or otherwise, shall be permitted.  Immediately upon any attempt to transfer such
rights, such Deferred Stock Unit, and all of the rights related thereto, shall
be forfeited by the Participant.


 


(c)        No Dividends for Deferred Stock Units


 


No dividends shall be payable with respect to Deferred
Stock Units.  Unless otherwise provided
by the Board of Directors the Participant shall be entitled to receive,
currently or on a deferred basis, Dividend Equivalents with respect to the number
of shares of Company Stock covered by the Deferred Stock Units.  The Board of Directors may provide that the
Dividend Equivalents shall be deemed to have been reinvested in additional
Deferred Stock Units or otherwise reinvested.


 


(d)        No Voting Rights for Deferred Stock
Units


 


Holders
of Restricted Stock Units shall not have any voting rights with respect to
Deferred Stock Units.


 


(e)        Payment of Deferred Stock Units


 


On the payment
date elected by the Board of Directors or a Participant, the Company promptly
shall cause to be delivered to the Participant a number of shares of Company
Stock equal to the number of Deferred Stock Units granted to the Participant
(and any additional Deferred Stock Units or other amounts credited with respect
to Dividend Equivalents), unless the Board of Directors in its sole discretion
determines that payment shall be made instead by delivering an amount of cash
equal to the Fair Market Value thereof. 
Notwithstanding the foregoing, such shares may be subject to
restrictions on transfer as a result of applicable securities laws.


 


(f)         Effect of Change in Control


 


Upon the occurrence of a
Change in Control that is a Section 409A Change in Control as defined in
Appendix A, the Company shall promptly (but in all events within 2-1/2 months)
pay to the Participant all outstanding Deferred Stock Units (and any additional
Deferred Stock Units or other amounts credited with respect to Dividend
Equivalents) by delivering an amount of cash equal to the Fair Market Value
thereof.  Upon the occurrence of any
other Change in Control (i) as of the date of the Change of Control the
Company shall credit to an account for the Participant the Fair Market Value of
the Deferred Stock Units granted to the Participant (and any additional
Deferred Stock Units or other amounts credited with respect to Dividend
Equivalents) and (ii) the Company shall pay the value of the account
together with interest at the rate of 10% per annum to the Participant in
accordance with paragraph (e) of this Section.


 


 


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9.         REQUIRED HOLDINGS


 


Notwithstanding anything
in Sections 7, 8, 8A or 8B to the contrary, by accepting a grant hereunder,
each Participant agrees to hold and not dispose of any securities received
hereunder to the extent required by the Company’s director equity ownership
guidelines in place as of the date of the grant.


 


10.       RIGHTS AS A STOCKHOLDER


 


No person shall
have any rights as a stockholder with respect to any shares of Company Stock
covered by or relating to any Option, Restricted Stock Unit, or Deferred Stock
Unit until the date of issuance of a stock certificate with respect to such
shares of Company Stock.  Except as
otherwise expressly provided in Section 3(b), no adjustment to any Option,
Restricted Stock Unit, or Deferred Stock Unit shall be made for regular cash
dividends or other rights for which the record date occurs prior to the date
such stock certificate is issued.


 


11.       NO RIGHT TO EQUITYAWARD


 


Other than as
specifically provided in the Plan, no person shall have any claim or right to
receive an EquityAward hereunder.  The
Board of Director’s granting of an EquityAward to a Participant at any time
shall neither require the Board of Directors to grant any other EquityAward to
such Participant or other person at any time nor preclude the Board of
Directors from making subsequent grants to such Participant or any other
person.


 


12.       SECURITIES MATTERS


 


The Company shall
be under no obligation to effect the registration pursuant to the Securities
Act of 1933 of any interests in the Plan or any shares of Company Stock to be
issued hereunder or to effect similar compliance under any state laws.  Notwithstanding anything herein to the
contrary, the Company shall not be obligated to cause to be issued or delivered
any certificates evidencing shares of Company Stock pursuant to the Plan unless
and until the Company is advised by its counsel that the issuance and delivery
of such certificates is in compliance with all applicable laws, regulations of
governmental authority and the requirements of the New York Stock Exchange and
any other securities exchange on which shares of Company Stock are traded.  Certificates evidencing shares of Company
Stock issued pursuant to the terms hereof, may bear such legends, as the Board
of Directors, in its sole discretion, deems necessary or desirable to insure
compliance with applicable securities laws.


 


The transfer of
any shares of Company Stock hereunder shall be effective only at such time as
counsel to the Company shall have determined that the issuance and delivery of
such shares is in compliance with all applicable laws, regulations of
governmental authority and the requirements of the New York Stock Exchange and
any other securities exchange on which shares of Company Stock are traded.  The Board of Directors may, in its sole
discretion, defer the effectiveness of any transfer of shares of Company stock
hereunder in order to allow the issuance of such shares to be made pursuant to
registration or an exemption from registration or other methods for compliance
available under federal or state securities laws.  The Company shall inform the Participant in
writing of the Board of Director’s decision to defer the 


 


 


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effectiveness of a
transfer.  During the period of such a
deferral in connection with the exercise of an Option, the Participant may, by
written notice, withdraw such exercise and obtain the refund of any amount paid
with respect thereto.


 


13.       NOTIFICATION OF ELECTION UNDER SECTION 83(b) OF
THE CODE


 


If any Participant
shall, in connection with the acquisition of shares of Company Stock under the
Plan, make the election permitted under Section 83(b) of the Code
(i.e., an election to include in gross income in the year of transfer the
amounts specified in Section 83(b)), such Participant shall notify the
Company of such election within ten days of filing notice of the election with
the Internal Revenue Service, in addition to any filing and notification
required pursuant to regulations issued under the authority of Code Section 83(b).


 


14.       WITHHOLDING TAXES


 


Whenever cash is
to be paid pursuant to an EquityAward, the Company shall have the right to
deduct therefrom an amount sufficient to satisfy any federal, state and local
withholding tax requirements related thereto.


 


Whenever shares of
Company Stock are to be delivered either pursuant to an Equity Award, the
Company shall have the right to require the Participant to remit to the Company
in cash an amount sufficient to satisfy any federal, state and local
withholding tax requirements related thereto. 
With the approval of the Board of Directors, which it shall have sole
discretion to grant, a Participant may satisfy the foregoing requirement by
electing to have the Company withhold from delivery shares of Company Stock
having a value equal to the amount of tax required to be withheld.  Such shares shall be valued at their Fair
Market Value on the date as of which the amount of tax to be withheld is
determined (the “Tax Date”).  Fractional
share amounts shall be settled in cash. 
Such a withholding election may be made with respect to all or any
portion of the shares to be delivered pursuant to an  Award. 
To the extent required for such a withholding of stock to qualify for
the exemption available under Rule 16b-3, such an election by a grantee
whose transactions in Company Stock are subject to Section 16(b) of
the Exchange Act shall be: (i) subject to the approval of the Board of
Directors in its sole discretion; (ii) irrevocable; (iii) made no
sooner than six months after the grant of the award with respect to which the
election is made; and (iv) made at least six months prior to the Tax Date
unless such withholding election is in connection with exercise of an Option
and both the election and the exercise occur prior to the Tax Date in a “window
period” of ten business days beginning on the third day following release of
the Company’s quarterly or annual summary statement of sales and earnings.


 


15.       AMENDMENT OR TERMINATION OF THE PLAN


 


Except as provided
in Section 3(d), the Board of Directors may, at any time, suspend or
terminate the Plan or revise or amend it in any respect whatsoever; provided,
however, that stockholder approval shall be required if and to the extent
required by Rule 16b-3 or the New York Stock Exchange or any other
securities exchange on which shares of the Company Stock are traded.  Nothing herein shall restrict the Board of
Director’s ability to exercise its discretionary authority pursuant to Section 4,
which discretion may be exercised without 


 


 


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amendment to the
Plan.  No action hereunder may, without
the consent of a Participant, reduce the Participant’s rights under any
outstanding EquityAward.


 


16.       NO OBLIGATION TO EXERCISE


 


The grant to a
Participant of an Option shall impose no obligation upon such Participant to
exercise such Option.


 


17.       TRANSFERS UPON DEATH; NONASSIGNABILITY


 


Upon the death of
a Participant outstanding EquityAward granted to such Participant may be
exercised only by the executor or administrator of the Participant’s estate or
by a person who shall have acquired the right to such exercise by will or by
the laws of descent and distribution.  No
transfer of an EquityAward by will or the laws of descent and distribution
shall be effective to bind the Company unless the Company shall have been
furnished with (a) written notice thereof and with a copy of the will
and/or such evidence as the Board of Directors may deem necessary to establish
the validity of the transfer and (b) an agreement by the transferee to
comply with all the terms and conditions of the EquityAward that are or would
have been applicable to the Participant and to be bound by the acknowledgments
made by the Participant in connection with the grant of the EquityAward.


 


During a
Participant’s lifetime, the Board of Directors may permit the transfer,
assignment or other encumbrance of an outstanding EquityAward unless the award
is meant to qualify for the exemptions available under Rule 16b-3 and the
Board of Directors and the Participant intend that it shall continue to so
qualify.


 


18.       EXPENSES AND RECEIPTS


 


The expenses of
the Plan shall be paid by the Company. 
Any proceeds received by the Company in connection with the exercise of
any Option by a Participant will be used for general corporate purposes.


 


19.       FAILURE TO COMPLY


 


In addition to the
remedies of the Company elsewhere provided for herein, failure by a Participant
(or beneficiary) to comply with any of the terms and conditions of the Plan,
unless such failure is remedied by such Participant (or beneficiary) within ten
days after notice of such failure by the Board of Directors, shall be grounds
for the cancellation and forfeiture of such EquityAward, in whole or in part,
as the Board of Directors, in its sole discretion, may determine.


 


20.       EFFECTIVE DATE AND TERM OF PLAN


 


The Plan shall be
effective as of the Effective Date. 
Unless earlier terminated by the Board of Directors, the right to grant
Options under the Plan will terminate on the tenth anniversary of the Effective
Date.  Options outstanding at the
termination of the Plan will remain in effect according to their terms and the
provisions of the Plan.


 


 


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21.       APPLICABLE LAW


 


Except to the
extent preempted by any applicable federal law, the Plan will be construed and
administered in accordance with the laws of the State of Delaware, without
reference to the principles of conflicts of laws thereunder.


 


 


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APPENDIX A


 


“409A Change in Control”
means and shall be deemed to have occurred as of the date of the first to occur
of the following events:


 


(a)        Any Person or Group acquires stock of
the Company that, together with stock held by such Person or Group, constitutes
more than 50% of the total fair market value or total voting power of the stock
of the Company.  However, if any Person
or Group is considered to own more than 50% of the total fair market value or
total voting power of the stock of the Company, the acquisition of additional
stock by the same Person or Group is not considered to cause a 409A Change in
Control.  An increase in the percentage
of stock owned by any Person or Group as a result of a transaction in which the
Company acquires its stock in exchange for property will be treated as an
acquisition of stock for purposes of this subsection.  This subsection applies only when there is a
transfer of stock of the Company (or issuance of stock of the Company) and
stock in the Company remains outstanding after the transaction;


 


(b)        Any Person or Group acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such Person or Group) ownership of stock of the Company
possessing 30% or more of the total voting power of the stock of the
Company.  However, if any Person or Group
is considered to own 30% of the total voting power of the stock of the Company,
the acquisition of additional stock by the same Person or Group is not
considered to cause a 409A Change in Control;


 


(c)        A majority of members of the Company’s
Board is replaced during any 12-month period by Directors whose appointment or
election is not endorsed by a majority of the members of the Company’s Board
prior to the date of the appointment or election; or


 


(d)        Any
Person or Group acquires (or has acquired during the 12-month period ending on
the date of the most recent acquisition by such Person or Group) assets from
the Company that have a total gross fair market value equal to or more than 40%
of the total gross fair market value of all of the assets of the Company
immediately prior to such acquisition or acquisitions.  For this purpose, gross fair market value
means the value of the assets of the Company, or the value of the assets being
disposed of, determined without regard to any liabilities associated with such
assets.   However, no 409A Change in
Control shall be deemed to occur under this subsection (d) as a result of
a transfer to:


 


(i)         A
shareholder of the Company (immediately before the asset transfer) in exchange
for or with respect to its stock;


 


(ii)        An
entity, 50% or more of the total value or voting power of which is owned,
directly or indirectly, by the Company;


 


(iii)       A
Person or Group that owns, directly or indirectly, 50% or more of the total
value or voting power of all the outstanding stock of the Company; or


 


 


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(iv)       An
entity, at least 50% of the total value or voting power of which  is owned, directly or indirectly, by a person described in
clause (iii) above.


 


For these
purposes, the term:


 


(i)  “Person” shall mean an individual, Company,
association, joint stock company, business trust or other similar organization,
partnership, limited liability company, joint venture, trust, unincorporated
organization or government or agency, instrumentality or political subdivision
thereof.


 


(ii)  The term “Group” shall have the meaning set
forth in Rule13d-5 of the Securities Exchange Commission, modified to the
extent necessary to comply with Treasury Regulation Section 1.409A-3(g)(5)(v)(B),
or any successor thereto in effect at the time a determination of whether a
Change of Control has occurred is being made. 
Persons will not be considered to be acting as a group solely because
they purchase or own stock of the same corporation at the same time, or as a
result of the same public offering. 
Persons will be considered to be acting as a group if they are owners of
a corporation that enters into a merger consolidation, purchase or acquisition
of stock, or similar business transaction with the corporation.  If a person, including an entity, owns stock
in both corporations that enter into a merger consolidation, purchase or
acquisition of stock, or similar transaction, such shareholder is considered to
be acting as a group with other shareholders in a corporation prior to the
transaction giving rise to the change and not with respect to the ownership
interest in the other corporation.


 


 


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