Exhibit 10.3


CREXUS INVESTMENT CORP.


2009 EQUITY INCENTIVE PLAN


          Section
1. Purpose of the Plan


          The
purpose of the Plan is to aid the Company and its Affiliates in attracting,
rewarding, and retaining employees, non-employee directors or other service
providers and to motivate such employees, non-employee directors or other
Persons who perform services for the Company or an Affiliate to stimulate their
efforts toward the Company’s continued success, long-term growth and
profitability by providing incentives through the granting of Awards. The
Company expects that it will benefit from the added interest which such key
employees, non-employee directors or other service providers will have in the
welfare of the Company as a result of their proprietary interest in the
Company’s success. 


          Section
2. Definitions


          The
following capitalized terms used in the Plan have the respective meanings set
forth in this Section: 


	
 

	
 


	
 

	
          (a)
 Act: The Securities Exchange
 Act of 1934, as amended, or any successor thereto. 


	
 

	
 


	
 

	
          (b)
 Affiliate: Any entity directly
 or indirectly controlling, controlled by, or under common control with, the
 Company or any other entity designated by the Board in which the Company or
 stockholder of the Company has an interest. 


	
 

	
 


	
 

	
          (c)
 Award: An Option, Stock
 Appreciation Right, Restricted Shares, Dividend Equivalent Right, or Other
 Share-Based Award granted pursuant to the Plan. 


	
 

	
 


	
 

	
          (d)
 Beneficial Owner: A “beneficial
 owner,” as such term is defined in Rule 13d-3 and 13d-5 under the Act (or any
 successor rule thereto). 


	
 

	
 


	
 

	
          (e)
 Board: The Board of Directors
 of the Company. 


	
 

	
 


	
 

	
          (f)
 Change in Control: The
 occurrence of any of the following events: 








	
 

	
 

	
 


	
 

	
i.

	
any “person,”
 including a “group” (as such terms are used in Sections 13(d) and 14(d) of
 the Exchange Act), but excluding the Company, any entity controlling,
 controlled by or under common control with the Company, any trustee,
 fiduciary or other person or entity holding securities under any employee
 benefit plan or trust of the Company or any such entity, and, with respect to
 any particular Participant, the Participant and any “group” (as such term is
 used in Section 13(d)(3) of the Exchange Act) of which the Participant is a
 member), is or becomes the “beneficial owner” (as defined in Rule 13(d)(3)
 under the Exchange Act), directly or indirectly, of securities of the Company
 representing 50% or more 















	
 

	
 

	
 


	
 

	
 

	
of either
 (A) the combined voting power of the Company’s then outstanding securities or
 (B) the then outstanding Shares (in either such case other than as a result
 of an acquisition of securities directly from the Company);


	
 

	
 

	
 


	
 

	
ii.

	
any
 consolidation or merger of the Company where the shareholders of the Company,
 immediately prior to the consolidation or merger, would not, immediately
 after the consolidation or merger, beneficially own (as such term is defined
 in Rule 13d-3 under the Exchange Act), directly or indirectly, shares
 representing in the aggregate 50% or more of the combined voting power of the
 securities of the corporation issuing cash or securities in the consolidation
 or merger (or of its ultimate parent corporation, if any); 


	
 

	
 

	
 


	
 

	
iii.

	
there shall
 occur (A) any sale, lease, exchange or other transfer (in one transaction or
 a series of transactions contemplated or arranged by any party as a single
 plan) of all or substantially all of the assets of the Company, other than a
 sale or disposition by the Company of all or substantially all of the Company’s
 assets to an entity, at least 50% of the combined voting power of the voting
 securities of which are owned by “persons” (as defined above) in
 substantially the same proportion as their ownership of the Company
 immediately prior to such sale or (B) the approval by shareholders of the
 Company of any plan or proposal for the liquidation or dissolution of the
 Company; or 


	
 

	
 

	
 


	
 

	
iv.

	
the members
 of the Board at the beginning of any consecutive 24-calendar-month period
 (the “Incumbent Directors”) cease for any reason other than due to death to
 constitute at least a majority of the members of the Board; provided that any
 Director whose election, or nomination for election by the Company’s
 shareholders, was approved or ratified by a vote of at least a majority of the
 members of the Board then still in office who were members of the Board at
 the beginning of such 24-calendar-month period, shall be deemed to be an
 Incumbent Director. 


	
 

	
 

	
 


	
 

	
Notwithstanding
 the foregoing, for any Awards that constitute a nonqualified deferred
 compensation plan within the meaning of Section 409A(d) of the Code and
 provide for an accelerated payment in connection with a Change in Control,
 Change in Control shall have the same meaning as set forth in any
 regulations, revenue procedure, revenue rulings or other pronouncements
 issued by the Secretary of the United States Treasury pursuant to Section
 409A of the Code, applicable to such plans.





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          (g)
 Code: The Internal Revenue Code
 of 1986, as amended, or any successor thereto. 


	
 

	
 


	
 

	
          (h)
 Committee: The Compensation
 Committee of the Board or such other committee as may be appointed by the
 Board in accordance with Section 4 of the Plan. The Board may exercise any
 power or right of the Committee; provided, that, the Board may not grant any
 Award that is intended to be performance-based compensation under Section
 162(m) of the Code. 


	
 

	
 


	
 

	
          (i)
 Company: CreXus Investment
 Corp., a Maryland corporation. 


	
 

	
 


	
 

	
          (j)
 Dividend Equivalent Right: a
 right awarded under Section 8 of the Plan to receive (or have credited) the
 equivalent value of dividends paid on common stock of the Company. 


	
 

	
 


	
 

	
          (k)
 Effective Date: The date the
 initial public offering of shares of the Company’s common stock. 


	
 

	
 


	
 

	
          (l)
 Fair Market Value: On a given
 date, (i) if there should be a public market for the Shares on such date, the
 closing price of the Shares as reported on such date on the Composite Tape of
 the principal national securities exchange on which such Shares are listed or
 admitted to trading, or, if the Shares are not listed or admitted on any
 national securities exchange, the closing price on such date as quoted on the
 National Association of Securities Dealers Automated Quotation System (or
 such market in which such prices are regularly quoted) (the “NASDAQ”), or, if
 no sale of Shares shall have been reported on the Composite Tape of any
 national securities exchange or quoted on the NASDAQ on such date, then the
 immediately preceding date on which sales of the Shares have been so reported
 or quoted shall be used; provided that, in the event of an initial public
 offering of the Shares of the Company, the Fair Market Value on the date of
 such initial public offering shall be the price at which the initial public
 offering was made, and (ii) if there should not be a public market for the
 Shares on such date, the Fair Market Value shall be the value established by
 the Committee in its sole discretion, in accordance with any applicable
 requirements of Section 409(A) of the Code. 


	
 

	
 


	
 

	
          (m)
 Group: A “group” as such term is used in
 Sections 13(d) and 14(d) of the Act, acting in concert. 


	
 

	
 


	
 

	
          (n)
 ISO: An Option that is also an
 incentive stock option, as described in Section 422 of the Code, granted
 pursuant to Section 6(c) of the Plan. 


	
 

	
 


	
 

	
          (o)
 Management Agreement: The
 Management Agreement between the Company and the Manager, dated as of
 [_________], 2009, as the same may be amended from time to time. 


	
 

	
 


	
 

	
          (p)
 Manager: Fixed Income Discount
 Advisory Company, a Delaware corporation, or any successor or assign. 





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          (q)
 Option: An option to purchase
 Shares granted pursuant to Section 6 of the Plan. 


	
 

	
 


	
 

	
          (r)
 Option Price: The purchase
 price per Share under the terms of an Option, as determined pursuant to
 Section 6(a) of the Plan. 


	
 

	
 


	
 

	
          (s)
 Other Share-Based Awards:
 Awards granted pursuant to Section 9 of the Plan. 


	
 

	
 


	
 

	
          (t)
 Participant: Members of the
 Board, employees of, or any Person who performs services for, the Company,
 the Manager or an Affiliate of either the Company or the Manager (whether as
 a consultant, advisor or otherwise) who is selected by the Committee or
 designated by the Manager to participate in the Plan. 


	
 

	
 


	
 

	
          (u)
 Person: A “person,” as such
 term is used for purposes of Section 13(d) or 14(d) of the Act (or any
 successor section thereto). 


	
 

	
 


	
 

	
          (v)
 Plan: The 2009 Equity Incentive
 Plan. 


	
 

	
 


	
 

	
          (w)
 Restricted Shares: An Award of
 Shares to a Participant under Section 9 that may be subject to certain
 restrictions and a risk of forfeiture. 


	
 

	
 


	
 

	
          (x)
 RSU: A restricted share unit,
 granted pursuant to Section 9 of the Plan, which represents the right to
 receive a Share. 


	
 

	
 


	
 

	
          (y)
 Shares: Shares of common stock
 of the Company, subject to adjustment pursuant to Section 10 of the Plan. 


	
 

	
 


	
 

	
          (z)
 Stock Appreciation Right: A
 stock appreciation right granted in connection with or independent of the
 grant of an Option, pursuant to Section 7 of the Plan. 





          Section
3. Shares Subject to the Plan


          Subject
to this Section 3, and subject to adjustments as provided in Section 10, the
total number of Shares that may be issued with respect to Awards granted under
the Plan, in the aggregate, may not exceed 8% of the authorized number of
Shares of the Company on the Effective Date; provided, however, that no Award
may cause the total number of Shares subject to all outstanding Awards to
exceed an amount equal to (i) 8% of the number of Shares outstanding on a fully
diluted basis (assuming, if applicable, the exercise of all outstanding options
and the conversion of all warrants and convertible securities into Shares) at
the time of the Award less (ii) 1,000,000 Shares. The Shares that may be used
hereunder may consist, in whole or in part, of unissued Shares or previously
issued Shares that have been reacquired by the Company, as determined by the
Chief Financial Officer of the Company (or the Chief Financial Officer’s
designee) from time to time, unless otherwise determined by the Committee. The
issuance of Shares upon the exercise or payment of an Award shall reduce the
total number of Shares available under the Plan, as applicable. Shares which
are subject to Awards that terminate, lapse or are cancelled may again be used
to satisfy Awards under the Plan. If the Option Price of any Option granted
under the Plan is satisfied by delivering Shares to the 


4






Company in
accordance with the terms of Section 6(b) of the Plan (including a through a
net settlement), only the number of Shares issued net of the Shares delivered
shall be deemed delivered for purposes of determining the maximum number of
Shares available under the Plan. If, in accordance with the terms of the Plan,
a Participant pays the Option Price for an Option or satisfies any tax
withholding requirement with respect to any taxable event arising as a result
of this Plan by either tendering previously owned Shares or having the Company
withhold Shares, then such Shares shall not be deemed to have been delivered
for purposes of determining the maximum number of Shares available under the
Plan. Shares subject to Dividend Equivalent Rights, other than Dividend
Equivalent Rights based directly on the dividends payable with respect to
Shares subject to Options, shall be subject to the limitation of this Section
3. If any Dividend Equivalent Rights or Other Share-Based Awards under Section
9 are paid out in cash, then the underlying Shares may again be made the subject
of Awards under the Plan. For purposes of Section 422(b)(1) of the Code, the
maximum number of Shares which may be issued under the Plan pursuant to ISOs is
as set forth in the first sentence of this Section 3 above, without regard to
the adjustments above resulting from Awards that terminate, lapse or are
cancelled, from Shares used to satisfy the Option Price of any Option, from
Shares used to satisfy any tax withholding obligation or from Awards settled in
cash. In addition, in no event shall a Participant receive an Award or Awards
during any one (1) calendar year covering in the aggregate more than two
hundred thousand (200,000) Shares (whether such Award or Awards may be settled
in Shares, cash or any combination of Shares and cash). 


          Section
4. Administration 


          The
Plan shall be administered by the Committee, which may delegate its duties and
powers in whole or in part as it determines, including to a subcommittee
consisting of at least two individuals who are intended to qualify as
“non-employee directors” within the meaning of Rule 16b-3 under the Act (or any
successor rule thereto) and “outside directors” within the meaning of Section
162(m) of the Code. The Committee may grant Awards under this Plan only to
Participants; provided that Awards may also, in the discretion of the
Committee, be made under the Plan in assumption of, or in substitution for,
outstanding awards previously granted by the Company or its Affiliates or a
company that becomes an Affiliate. The number of Shares underlying such
substitute Awards shall be counted against the aggregate number of Shares
available for Awards under the Plan. The Committee is authorized to interpret
the Plan, to establish, amend and rescind any rules and regulations relating to
the Plan, and to make any other determinations that it deems necessary or
desirable for the administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan in the
manner and to the extent the Committee deems necessary or desirable. Any
decision of the Committee in the interpretation and administration of the Plan,
as described herein, shall lie within its sole and absolute discretion and
shall be final, conclusive and binding on all parties concerned (including, but
not limited to, Participants and their beneficiaries or successors). The
Committee shall have the full power and authority to establish the terms and
conditions of any Award consistent with the provisions of the Plan and to waive
any such terms and conditions at any time, in its sole discretion (including,
without limitation, accelerating or waiving any vesting conditions and/or
accelerating any payment). No member of the Committee shall be personally
liable for any action, determination or interpretations taken or made in good
faith with respect to this Plan or Awards made hereunder, and all members of
the Committee shall be fully 


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indemnified
and protected by the Company in respect of any such action, determination or
interpretation. 


          Section
5. Limitations


          No
Award may be granted under the Plan after the tenth anniversary of the earlier
of (i) the stockholders adopt the Plan or (ii) the date the Board adopts the
Plan, but Awards theretofore granted may extend beyond that date and will
continue to be governed by the terms of the Plan. 


          Section
6. Terms and Conditions of Options


          Options
granted under the Plan shall be, as determined by the Committee, non-qualified
stock options or ISOs for United States federal income tax purposes (or other
types of Options in jurisdictions outside the United States), as evidenced by
the related Award, and shall be subject to the foregoing, the following terms
and conditions, and to such other terms and conditions, not inconsistent
therewith, as the Committee shall determine: 


	
 

	
 


	
 

	
          (a)
 Option Price; Exercisability. Any Option granted under the Plan shall
 have an Option Price of not less than the Fair Market Value of one Share on
 the date the Option is granted, and shall be vested and exercisable in
 installments at such time and upon such terms and conditions, as may be
 determined by the Committee, but in no event shall an Option be exercisable
 more than ten years after the date it is granted. 


	
 

	
 


	
 

	
          (b)
 Exercise of Options. Except as otherwise provided in the Plan or in an
 Award, an Option may be exercised for all, or from time to time any part, of
 the Shares for which it is then exercisable. For purposes of this Section 6
 of the Plan, the exercise date of an Option shall be the later of the date a
 notice of exercise is received by the Company and, if applicable, the date
 payment is received by the Company pursuant to clauses (i) through (vi) in
 the following sentence. Except as otherwise provided in an Award, the
 purchase price for the Shares as to which an Option is exercised shall be
 paid in full at the time of exercise at the election of the Participant: (i)
 in cash or its equivalent (e.g., by check); (ii) to the extent permitted by
 the Committee, in Shares having a Fair Market Value equal to the aggregate
 Option Price for the Shares being purchased and satisfying such other
 requirements as may be imposed by the Committee; (iii) partly in cash and, to
 the extent permitted by the Committee, partly in such Shares; (iv) to the
 extent permitted by applicable law through the delivery of irrevocable
 instructions to a broker to sell Shares obtained upon the exercise of the
 Option and deliver promptly to the Company an amount out of the proceeds of
 such sale equal to the aggregate Option Price for the Shares being purchased,
 (v) to the extent permitted by the Committee, through net settlement in
 Shares (a “cashless exercise”) or (vi) by any other means which the Committee
 determines to be consistent with the Plan’s purpose and applicable law. The
 Committee may also authorize the Company to make or facilitate loans to
 Participants to enable them to exercise Options to the extent not prohibited
 by applicable law. The Committee may permit Participants to exercise Options
 in joint-tenancy with the Participant’s spouse. 





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          (c)
 ISOs. The Committee may grant Options under the Plan that are intended
 to be ISOs. No ISO shall have an Option Price of less than the Fair Market
 Value of one Share on the date granted or have a term in excess of ten years.
 Additionally, no ISO may be granted to any Participant who, at the time of
 such grant, owns more than ten percent of the total combined voting power of
 all classes of shares of the Company or of any Subsidiary, unless (i) the
 Option Price for such ISO is at least 110% of the Fair Market Value of one
 Share on the date the ISO is granted and (ii) the date on which such ISO
 terminates is a date not later than the day preceding the fifth anniversary
 of the date on which the ISO is granted. Any Participant who disposes of
 Shares acquired upon the exercise of an ISO either (A) within two years after
 the date of grant of such ISO or (B) within one year after the transfer of
 such Shares to the Participant, shall notify the Company of such disposition
 and of the amount realized upon such disposition. All options granted under
 the Plan are intended to be nonqualified stock options, unless the applicable
 Award agreement expressly states that the Option is intended to be an ISO. If
 an Option is intended to be an ISO, and if for any reason such Option (or
 portion thereof) shall not qualify as an ISO, then, to the extent of such
 non-qualification, such Option (or portion thereof) shall be regarded as a
 nonqualified stock option granted under the Plan; provided that such Option
 (or portion thereof) otherwise complies with the Plan’s requirements relating
 to nonqualified stock options. In no event shall any member of the Committee,
 the Company or any of its Affiliates (or their respective employees, officers
 or directors) have any liability to any Participant (or any other Person) due
 to the failure of an Option to qualify for any reason as an ISO. 


	
 

	
 


	
 

	
          (d) Attestation.
 Wherever in this Plan or any agreement evidencing an Award a Participant is
 permitted to pay the Option Price (or taxes relating to the exercise of an
 Option) by delivering Shares, the Participant may, subject to procedures
 satisfactory to the Committee (and to the extent permitted by applicable law),
 satisfy such delivery requirement by presenting proof of record ownership of
 such Shares, or, to the extent permitted by the Committee, beneficial
 ownership of such Shares, in which case the Company shall treat the Option as
 exercised without further payment and shall withhold such number of Shares
 from the Shares acquired by the exercise of the Option. 





          Section
7. Terms and Conditions of Stock Appreciation Rights


	
 

	
 


	
 

	
          (a)
 Grants. The Committee also may grant (i) a Stock Appreciation Right
 independent of an Option or (ii) a Stock Appreciation Right in connection
 with an Option, or a portion thereof. A Stock Appreciation Right granted
 pursuant to clause (ii) of the preceding sentence (A) may be granted at the
 time the related Option is granted or at any time prior to the exercise or
 cancellation of the related Option, (B) shall cover the same number of Shares
 covered by an Option (or such lesser number of Shares as the Committee may
 determine) and (C) shall be subject to the same terms and conditions as such
 Option except for such additional limitations as are contemplated by this
 Section 7 (or such additional limitations as may be included in a Stock
 Appreciation Right Award). 


	
 

	
 


	
 

	
          (b)
 Terms. The exercise price per Share of a Stock Appreciation Right
 shall be an amount determined by the Committee but in no event shall such
 amount be less than the greater of (i) the Fair Market Value of a Share on
 the date the Stock 





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Appreciation
 Right is granted or, in the case of a Stock Appreciation Right granted in
 conjunction with an Option, or a portion thereof, the Option Price of the
 related Option and (ii) the minimum amount permitted by applicable laws,
 rules, by-laws or policies of regulatory authorities or stock exchanges. Each
 Stock Appreciation Right granted independent of an Option shall entitle a
 Participant upon exercise to a payment from the Company of an amount equal to
 (i) the excess of (A) the Fair Market Value on the exercise date of one Share
 over (B) the exercise price per Share, times (ii) the number of Shares
 covered by the Stock Appreciation Right. Each Stock Appreciation Right
 granted in conjunction with an Option, or a portion thereof, shall entitle a
 Participant to surrender to the Company the unexercised Option, or any
 portion thereof, and to receive from the Company in exchange therefor an
 amount equal to (i) the excess of (A) the Fair Market Value on the exercise
 date of one Share over (B) the Option Price, times (ii) the number of Shares
 covered by the Option, or portion thereof, which is surrendered. The date a
 notice of exercise is received by the Company shall be the exercise date.
 Payment shall be made in Shares or in cash, or partly in Shares and partly in
 cash (any such Shares valued at such Fair Market Value), all as shall be
 determined by the Committee. Stock Appreciation Rights may be exercised from
 time to time upon actual receipt by the Company of written notice of exercise
 stating the number of Shares with respect to which the Stock Appreciation
 Right is being exercised. No fractional Shares will be issued in payment for
 Stock Appreciation Rights, but instead cash will be paid for a fraction or,
 if the Committee should so determine, the number of Shares will be rounded
 downward to the next whole Share. 


	
 

	
 


	
 

	
          (c)
 Limitations. The Committee may impose, in its discretion, such
 conditions upon the exercisability of Stock Appreciation Rights as it may
 deem fit; provided that no Stock Appreciation Right may remain exercisable
 more than 10 years after the date of grant. 





          Section
8. Terms and Conditions of Dividend Equivalent Rights


	
 

	
 


	
 

	
          (a)
 Grants. Subject to the other terms of the Plan, the Committee shall,
 in its discretion as reflected by the terms of the Award Agreements,
 authorize the granting of Dividend Equivalent Rights to Participants based on
 the regular cash dividends declared on Shares, to be credited as of the
 dividend payment dates, during the period between the date an Award is
 granted, and the date such Award is exercised, vests or expires, as
 determined by the Committee. Such Dividend Equivalent Rights shall be
 converted to cash or additional Shares by such formula and at such time and
 subject to such limitation as may be determined by the Committee. With respect
 to Dividend Equivalent Rights granted with respect to Options intended to be
 qualified performance-based compensation for purposes of Section 162(m) of
 the Code, such Dividend Equivalent Rights shall be payable regardless of
 whether such Option is exercised. If a Dividend Equivalent Right is granted
 in respect of another Award hereunder, then, unless otherwise stated in the
 Award Agreement, in no event shall the Dividend Equivalent Right be in effect
 for a period beyond the time during which the applicable portion of the
 underlying Award is in effect. 





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          (b)
 Certain Terms. The terms of a Dividend Equivalent Right shall be set
 by the Committee in its discretion. Payment of the amount determined in
 accordance with Section 8(a) shall be in cash, in Common Stock or a
 combination of the both, as determined by the Committee. 


	
 

	
 


	
 

	
          (c)
 Other Types of Dividend Equivalent Rights. The Committee may establish
 a program under which Dividend Equivalent Rights of a type whether or not described
 in the foregoing provisions of this Section 8 may be granted to Participants.
 For example, and without limitation, the Committee may grant a dividend
 equivalent right in respect of each Share subject to an Option, which right
 would consist of the right (subject to Section 8(b)) to receive a cash
 payment in an amount equal to the dividend distributions paid on a Share from
 time to time. 





          Section
9. Other Share-Based Awards 


	
 

	
 


	
 

	
          (a)
 Generally. The Committee, in its sole discretion, may grant Awards of
 Shares, Awards of Restricted Shares, Awards of RSUs and other Awards that are
 valued in whole or in part by reference to, or are otherwise based on the
 Fair Market Value, of Shares (“Other
 Share-Based Awards”). Such Other Share-Based Awards shall be in
 such form, and dependent on such conditions, as the Committee shall
 determine, including, without limitation, the right to receive one or more
 Shares (or the equivalent cash value of such Shares) upon the completion of a
 specified period of service, the occurrence of an event and/or the attainment
 of performance objectives. Other Share-Based Awards may be granted alone or
 in addition to any other Awards granted under the Plan. Subject to the
 provisions of the Plan, the Committee shall determine: (i) to whom and when
 Other Share-Based Awards will be made; (ii) the number of Shares to be
 awarded under (or otherwise related to) such Other Share-Based Awards; (iii)
 whether such Other Share-Based Awards shall be settled in cash, Shares or a combination
 of cash and Shares; and (iv) all other terms and conditions of such Other
 Share-Based Awards (including, without limitation, the vesting provisions
 thereof and provisions ensuring that all Shares so awarded and issued shall
 be fully paid and non-assessable). 


	
 

	
 


	
 

	
          (b)
 Performance-Based Awards. Notwithstanding anything to the contrary
 herein, certain Other Share-Based Awards granted under this Section 9 may be
 granted in a manner which is intended to be deductible by the Company under
 Section 162(m) of the Code (or any successor section thereto) (“Performance-Based Awards”). A
 Participant’s Performance-Based Award shall be determined based on the
 attainment of written performance goals approved by the Committee for a
 performance period established by the Committee (i) while the outcome for
 that performance period is substantially uncertain and (ii) no more than 90
 days after the commencement of the performance period to which the
 performance goal relates or, if less, the number of days which is equal to 25
 percent of the relevant performance period. The performance goals, which must
 be objective, shall be based upon one or more of the following criteria: (i)
 consolidated earnings before or after taxes (including earnings before
 interest, taxes, depreciation and amortization); (ii) net income; (iii)
 operating income; (iv) earnings per Share; (v) book value per Share; (vi)
 return on stockholders’ equity; (vii) expense management; (viii) return on
 investment; (ix) improvements in capital structure; (x) 





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profitability
 of an identifiable business unit or product; (xi) maintenance or improvement
 of profit margins; (xii) stock price; (xiii) dividend per Share; (xiv)
 revenues or sales; (xv) costs; (xvi) cash flow; and (xvii) return on assets.
 The foregoing criteria may relate to the Company, one or more of its
 Affiliates or one or more of its or their divisions or units, or any
 combination of the foregoing, and may be applied on an absolute basis and/or
 be relative to prior years for the Company, one or more peer group companies
 or indices, or any combination thereof, all as the Committee shall determine.
 In addition, to the degree consistent with Section 162(m) of the Code (or any
 successor section thereto), the performance goals may be calculated without
 regard to extraordinary items. The Committee shall determine whether, with
 respect to a performance period, the applicable performance goals have been
 met with respect to a given Participant and, if they have, shall so certify
 and ascertain the amount of the applicable Performance-Based Award. No
 Performance-Based Awards will be paid for such performance period until such
 certification is made by the Committee. The amount of the Performance-Based
 Award actually paid to a given Participant may be less than the amount
 determined by the applicable performance goal formula, at the discretion of
 the Committee. The amount of the Performance-Based Award determined by the
 Committee for a performance period shall be paid to the Participant at such time
 as determined by the Committee in its sole discretion after the end of such
 performance period; provided, however, that a Participant may, if and to the
 extent permitted by the Board and consistent with the provisions of Sections
 162(m) and 409A of the Code, elect to defer payment of a Performance-Based
 Award. 





          Section
10. Adjustments Upon Certain Events 


          Subject
to Section 18 below, the following provisions shall apply to all Awards granted
under the Plan: 


	
 

	
 


	
 

	
          (a)
 Generally. In the event of any change in the outstanding Shares after
 the Effective Date by reason of any Share dividend or split, reorganization,
 recapitalization, merger, consolidation, spin-off or combination transaction
 or exchange of Shares or other corporate exchange, or any distribution to
 stockholders of Shares other than regular cash dividends or any transaction
 similar to the foregoing, the Committee in its sole discretion and without
 liability to any person shall make such substitution or adjustment, if any,
 as it deems to be equitable, as to (i) the number or kind of Shares or other
 securities available for issuance, issued or reserved for issuance pursuant
 to the Plan and pursuant to outstanding Awards; (ii) the maximum amounts of
 Awards that may be granted during a calendar year to any Participant pursuant
 to Section 3; (iii) the Option Price or exercise price of any Stock
 Appreciation Right; and/or (iv) any other affected terms of any Award. 


	
 

	
 


	
 

	
          (b)
 Change in Control. In the event of a Change in Control after the
 Effective Date, the Committee may, in its sole discretion, provide for: (i)
 the accelerated vesting (including transferability) or exercisability of any
 outstanding Awards then held by Participants that are otherwise unexercisable
 or unvested, as the case may be, to the extent determined by the Committee
 and as of a date selected by the Committee; (ii) the earning of all or any
 outstanding performance shares or incentive awards; (iii) the termination of
 an Award upon the consummation of the Change in Control, and the 





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payment of a
 cash amount in exchange for the cancellation of an Award which, in the case
 of Options and Stock Appreciation Rights, may equal the excess, if any, of
 the Fair Market Value of the Shares in the Change in Control subject to such
 Options or Stock Appreciation Rights over the aggregate exercise price of
 such Options or Stock Appreciation Rights; and/or (iv) the issuance of
 substitute Awards that will substantially preserve the otherwise applicable
 terms of any affected Awards previously granted hereunder. 





          Section
11. No Right to Employment or Awards 


          The
granting of an Award under the Plan shall impose no obligation on the Company
or any Affiliate to continue the employment or service or consulting
relationship of a Participant and shall not lessen or affect the Company’s or
Affiliate’s right to terminate the employment or service or consulting
relationship of such Participant. No Participant or other person shall have any
claim to be granted any Award, and there is no obligation for uniformity of
treatment of Participants, or holders or beneficiaries of Awards. The terms and
conditions of Awards and the Committee’s determinations and interpretations
with respect thereto need not be the same with respect to each Participant
(whether or not such Participants are similarly situated). 


          Section
12. Successors and Assigns


          The
Plan shall be binding on all successors and assigns of the Company and a
Participant, including without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant’s creditors. 


          Section
13. Transferability of Awards 


          Unless
otherwise permitted by the Committee on such terms and conditions as it shall
determine, an Award shall not be transferable or assignable by the Participant
other than by will or by the laws of descent and distribution. An Award exercisable
after the death of a Participant may be exercised by the legatees, personal
representatives or distributees of the Participant. 


          Section
14. Amendments or Termination


          Subject
to Section 10 of the Plan, the Board may amend, alter or discontinue the Plan,
but no amendment, alteration or discontinuation shall be made which would: (a)
increase the maximum number of Shares available for Awards under the Plan
(including the limits applicable to the different types of Awards) or change the
class of eligible Participants under the Plan (other than amendments having
such purpose that are approved by a majority of the Stockholders of the Company
that are present and entitled to vote on such matter at a meeting duly convened
for such purposes (or such other standard of Stockholder vote as may be
required by applicable state or federal law)); (b) without the consent of a
Participant, diminish any of the rights of the Participant under any Award
theretofore granted to such Participant under the Plan; or (c) be prohibited by
applicable law or otherwise require stockholder approval (whether in order to
maintain the full tax deductibility of all Awards under Section 162(m) of the
Code or otherwise); provided, however, that the Committee may amend the Plan in
such manner as it deems necessary to permit Awards to meet the requirements of
the Code or other applicable laws. [In 


11






no event may
the Board amend the Plan or any Award to provide for the repricing of any
Option price or exercise price of any Stock Appreciation Rights without the
approval by the Stockholders of the Company. Notwithstanding any provision
herein to the contrary, the repricing of Options or Stock Appreciation Rights
is prohibited without prior approval of the Company’s stockholders. For this
purpose, a “repricing” means any of the following (or any other action that has
the same effect as any of the following): (A) changing the terms of an Option
or Stock Appreciation Right to lower its Option Price or grant price; (B) any other
action that is treated as a “repricing” under generally accepted accounting
principles; and (C) repurchasing for cash or canceling an Option or Stock
Appreciation Right at a time when its Option Price or grant price is greater
than the Fair Market Value of the underlying Shares in exchange for another
Award, unless the cancellation and exchange occurs in connection with a change
in capitalization or similar change under Section 10 above. Such cancellation
and exchange would be considered a “repricing” regardless of whether it is
treated as a “repricing” under generally accepted accounting principles and
regardless of whether it is voluntary on the part of the Participant.” 


          Without
limiting the generality of the foregoing, to the extent applicable,
notwithstanding anything herein to the contrary, this Plan and Awards issued
hereunder shall be interpreted in accordance with Section 409A of the Code and
Department of Treasury regulations and other interpretative guidance issued
thereunder, including without limitation any such regulations or other guidance
that may be issued after the Effective Date. Notwithstanding any provision of
the Plan to the contrary, in the event that the Committee reasonably determines
that any amounts payable hereunder may be taxable to a Participant under
Section 409A of the Code and related Department of Treasury guidance prior to
payment to such Participant of such amount, the Company may (a) adopt such
amendments to the Plan and Awards and appropriate policies and procedures,
including amendments and policies with retroactive effect, that the Committee
determines necessary or appropriate to preserve the intended tax treatment of
the benefits provided by the Plan and Awards hereunder and/or (b) take such
other actions as the Committee determines necessary or appropriate to comply
with the requirements of Section 409A of the Code, provided that under no
circumstances shall the Company or any affiliate be liable for or indemnify any
Participant for any additional taxes or other amounts that may be imposed upon
such Participant pursuant to or as a result of Section 409A of the Code. 


          Section
15. International Participants


          With
respect to Participants, if any, who reside or work outside the United States of
America, the Committee may, in its sole discretion, amend the terms of the Plan
or Awards with respect to such Participants in order to conform such terms with
the provisions of local law, and the Committee may, where appropriate,
establish one or more sub-plans to reflect such amended or varied provisions. 


          Section
16. Choice of Law


          The
Plan shall be governed by and construed in accordance with the laws of the
State of New York without regard to conflicts of laws. 



12






          Section
17. Effectiveness of the Plan



          The
Plan shall be effective as of the Effective Date. 


          Section
18. Section 409A


          Without
limiting the generality of the foregoing, to the extent applicable,
notwithstanding anything herein to the contrary, this Plan and Awards issued
hereunder shall be interpreted in accordance with Section 409A of the Code and
Department of Treasury regulations and other interpretative guidance issued
thereunder, including without limitation any such regulations or other guidance
that may be issued after the Effective Date. Notwithstanding any provision of
the Plan to the contrary, in the event that the Committee reasonably determines
that any amounts payable hereunder may be taxable to a Participant under
Section 409A of the Code and related Department of Treasury guidance prior to
payment to such Participant of such amount, the Company may (a) adopt such
amendments to the Plan and Awards and appropriate policies and procedures,
including amendments and policies with retroactive effect, that the Committee
determines necessary or appropriate to preserve the intended tax treatment of
the benefits provided by the Plan and Awards hereunder and/or (b) take such
other actions as the Committee determines necessary or appropriate to comply
with the requirements of Section 409A of the Code, provided that under no
circumstances shall the Company or any affiliate be liable for or indemnify any
Participant for any additional taxes or other amounts that may be imposed upon
such Participant pursuant to or as a result of Section 409A of the Code. 


          Section
19. Tax Withholding 


          The
Company shall have the power and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount sufficient to satisfy Federal,
state, and local taxes (including the Participant’s FICA obligation) required
by law to be withheld with respect to any taxable event arising as a result of
this Plan. In that regard, the Company may cause any such tax withholding
obligation to be satisfied by the Company withholding Shares having a Fair
Market Value on the date the tax is to be determined equal to the minimum
statutory total tax which could be imposed on the transaction. In the
alternative, the Company may permit Participants to elect to satisfy the tax
withholding obligation, in whole or in part, by either (i) having the Company
withhold Shares having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax which could be imposed on
the transaction or (ii) tendering previously acquired Shares having an
aggregate Fair Market Value equal to the minimum statutory total tax which
could be imposed on the transaction (provided that the Shares which are
tendered must have been held by the Participant for at least six (6) months
prior to their tender unless such Shares had been acquired by the Participant
on the open market). All such elections shall be irrevocable, made in writing,
signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate. 


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