**EXHIBIT 10****CAPSTEAD MORTGAGE CORPORATION****AMENDED AND RESTATED****2004 FLEXIBLE LONG-TERM INCENTIVE PLAN****MAY 3, 2007**SECTION 1. PURPOSES     The purposes of the Amended and Restated 2004 Flexible Long-Term Incentive Plan (the “Plan”)dated as of May 3, 2007, are to promote the interests of the Company and its stockholders byenabling the Company to attract, motivate, reward and retain key officers, employees and directorsand to encourage the holding of proprietary interests in the Company by persons who occupy keypositions in the Company or its Affiliates by enabling the Company to offer such key officers,employees and directors performance-based stock incentives and other equity interests in theCompany and other incentive awards that recognize the creation of value for the stockholders of theCompany and promote the Company’s long-term growth and success. To achieve this purpose, eligiblepersons may receive stock options, Stock Appreciation Rights, Restricted Stock, Performance Awards,performance stock, Dividend Equivalent Rights and any other awards, or any combination thereof.SECTION 2. DEFINITIONS     As used in this Plan, the following terms shall have the meanings set forth below unless thecontext otherwise requires:     2.1 *“Affiliate”*shall mean (i) any “parent corporation” of the Company (as defined in Section424(e) of the Code), (ii) any “subsidiary corporation” of any such parent corporation (as definedin Section 424(f) of the Code) of the Company and (iii) any trades or businesses, whether or notincorporated, which are members of a controlled group or are under common control (as defined inSections 414(b) or (c) of the Code) with the Company, substituting (for the purpose of determiningwhether stock options or Stock Appreciation Rights that may be subject to Section 409A of the Codeare derived in respect of “stock of the service recipient” within the meaning of that term underregulatory guidance issued by the appropriate governmental authority under Section 409A of theCode) “50 percent” in place of “80 percent” in determining a controlled group under Section 414(b)of the Code and in determining trades or businesses that are under common control for purposes ofSection 414(c) of the Code.     2.2 *“Award”*shall mean a stock option, Stock Appreciation Right, Restricted Stock, PerformanceAward, performance stock, Dividend Equivalent Right or any other award under the Plan.     2.3 *“Board”*shall mean the Board of Directors of the Company, as the same may be constitutedfrom time to time.     2.4 *“Change in Control”*shall be deemed to have occurred upon any of the following eventsafter the Effective Date of this Plan:
 

 
     (i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act(other than the Company, any trustee or other fiduciary holding securities under anyemployee benefit plan of the Company, or any company owned, directly or indirectly, by thestockholders of the Company in substantially the same proportions as their ownership ofstock of the Company), is or becomes the “beneficial owner” (as defined in Rule 13d-3 underthe Exchange Act), directly or indirectly, of securities of the Company representingtwenty-five percent (25%) or more of the combined voting power of the Company’s thenoutstanding securities;     (ii) during any period of two consecutive years, individuals who at the beginning ofsuch period constitute the Board cease for any reason to constitute at least a majoritythereof, unless the election by the Board or the nomination for election by the Company’sstockholders was approved by a vote of at least two-thirds (2/3) of the directors then stillin office who either were directors at the beginning of the two-year period or whoseelection or nomination for election was previously so approved;     (iii) the stockholders of the Company approve a merger or consolidation of the Companywith any other corporation, other than a merger or consolidation that would result in thevoting securities of the Company outstanding immediately prior thereto continuing torepresent (either by remaining outstanding or by being converted into voting securities ofthe surviving entity) more than eighty percent (80%) of the combined voting power of thevoting securities of the Company or such surviving entity outstanding immediately after suchmerger or consolidation; provided, however, that a merger or consolidation effected toimplement a reorganization or recapitalization of the Company, or a similar transaction(collectively, a “Reorganization”), in which no “person” acquires more than twenty percent(20%) of the combined voting power of the Company’s then outstanding securities shall notconstitute a Change in Control of the Company; or     (iv) the stockholders of the Company approve a plan of complete liquidation of theCompany or an agreement for the sale or disposition by the Company of all or substantiallyall of the Company’s assets.     2.5 *“Code”*shall mean the Internal Revenue Code of 1986, as amended from time to time.     2.6 *“Committee”*shall mean the compensation committee of the Board, which shall consist solelyof not less than two (2) members of the Board who are appointed by, and serve at the pleasure of,the Board and who are (i) “non-employee directors” within the meaning of Rule 16b-3 of the GeneralRules and Regulations of the Exchange Act; (ii) “outside directors,” as required under Section162(m) of the Code and the Treasury Regulations promulgated thereunder; and (iii) “independentdirectors” as defined in Rule 303A.02 of the New York Stock Exchange Listed Company Manual. ThePlan shall be administered and interpreted by the Committee. The Board may amend the Plan tomodify the definition of Committee within the limits of Rule 16b-3 to assure that the Plan isadministered by “non-employee” directors.
 

 
     2.7 *“Common Stock”*shall mean the Common Stock, par value $.01 per share, of the Company.     2.8 *“Company”*shall mean Capstead Mortgage Corporation, a Maryland corporation.     2.9 *“Covered Employees”*shall mean the Chief Executive Officer of the Company and the fourhighest paid officers of the Company other than the Chief Executive Officer as described in Section162(m)(3) of the Code.     2.10 *“Disability”*shall mean permanent and total inability to engage in any substantialgainful activity by reason of any medically determinable physical or mental impairment which haslasted or can be expected to last for a continuous period of not less than twelve (12) months, asdetermined in the sole and absolute discretion of the Committee.     2.11 *“Dividend Equivalent Right”*shall mean the right of the holder thereof to receive creditsbased on the cash or stock dividends or other distributions that would have been paid on the Sharesspecified in the Award if the Shares were held by the holder to whom the Award is made, or suchother amounts as may be determined by the Committee.     2.12 *“Effective Date”*shall mean the effective date of the Plan, which shall be April 22,2004, the date the Plan was initially approved by stockholders.     2.13 *“Exchange Act”*shall mean the Securities Exchange Act of 1934, as amended from time totime.     2.14 *“Fair Market Value”*shall mean with respect to the Shares, as of any date, (i) the lastreported sales price regular way on the New York Stock Exchange or, if not reported for the NewYork Stock Exchange, on the Composite Tape, or, in case no such sale takes place on such day, theaverage of the reported closing bid and asked quotations on the New York Stock Exchange; (ii) ifthe Shares are not listed on the New York Stock Exchange or no such quotations are available, theclosing price of the Shares as reported by the National Market System, or similar organization, or,if no such quotations are available, the average of the high bid and low asked quotations in theover-the-counter market as reported by the National Quotation Bureau Incorporated, or similarorganization; or (iii) in the event that there shall be no public market for the Shares, the fairmarket value of the Shares as determined (which determination shall be conclusive) in good faith bythe Committee, based upon the value of the Company as a going concern, as if such Shares werepublicly owned stock, but without any discount with respect to minority ownership.     2.15 *“Incentive Stock Option”*shall mean any stock option awarded under this Plan intended tobe and designated as an “Incentive Stock Option” under Section 422 of the Code or any successorprovision.     2.16 *“Modified Total Return”*shall mean the change in modified common book value per sharefrom the beginning of the year, together with common dividends per share, divided by the beginningmodified common book value per share, expressed as a percentage, as may be further defined by theCommittee.
 

 
     2.17 *“Non-Tandem Stock Appreciation Right”*shall mean any Stock Appreciation Right grantedalone and not in connection with an Award which is a stock option.     2.18 *“Non-Qualified Stock Option”*shall mean any stock option awarded under this Plan that isnot an Incentive Stock Option.     2.19 *“Optionee”*shall mean any person who has been granted a stock option under this Plan andwho has executed a written stock option agreement with the Company reflecting the terms of suchgrant.     2.20 *“Performance Award”*shall mean any Award, issued pursuant to Section 9 hereunder, ofShares, units or rights based upon, payable in, or otherwise related to, Shares (includingRestricted Stock), or cash of an equivalent value, as the Committee may determine, at the end of aspecified performance period established by the Committee.     2.21 *“Plan”*shall mean this Amended and Restated 2004 Flexible Long-Term Incentive Plan of theCompany.     2.22 *“Reload Option”*shall mean a stock option as defined in subsection 6.6(b) herein.     2.23 *“Restricted Stock”*shall mean any Award of Shares under this Plan that are subject torestrictions or risk of forfeiture.     2.24 *“Retirement”*shall mean, with respect to an employee of the Company, termination ofemployment, other than discharge for cause, after age 65 or on or before age 65, with the consentof the Committee. With respect to a director of the Company, “Retirement” shall mean the earlierof (a) the removal of such director from the Board for other than cause, and (b) the expiration ofsuch director’s term on the Board.     2.25 *“Shares”*shall mean shares of the Company’s Common Stock and any shares of capital stockor other securities of the Company hereafter issued or issuable upon, in respect of or insubstitution or exchange for such Shares.     2.26 *“Stock Appreciation Right”*shall mean the right of the holder thereof to receive anamount in cash or Shares equal to the excess of the Fair Market Value of a Share on the date ofexercise over the Fair Market Value of a Share on the date of the grant.     2.27 *“Tandem Stock Appreciation Right”*shall mean a Stock Appreciation Right granted inconnection with an Award that is a stock option.SECTION3. ADMINISTRATION OF THE PLAN     3.1 *Committee.*The Plan shall be administered by the Committee.     3.2 *Awards*. Subject to the provisions of the Plan and directions from the Board, theCommittee is authorized to:     (a) determine the persons to whom Awards are to be granted;
 

 
     (b) determine the types and combinations of Awards to be granted, the number of Sharesto be covered by the Award, the pricing of the Award, the time or times when the Award shallbe granted and may be exercised, the terms, performance criteria or other conditions,vesting periods or any restrictions for an Award, any restrictions on Shares acquiredpursuant to the exercise of an Award and any other terms and conditions of an Award;     (c) conclusively interpret the Plan provisions;     (d) prescribe, amend and rescind rules and regulations relating to the Plan or makeindividual decisions as questions arise, or both;     (e) rely upon employees of the Company for such clerical and record-keeping duties asmay be necessary in connection with the administration of the Plan; and     (f) make all other determinations and take all other actions necessary or advisable forthe administration of the Plan.     3.3 *Procedures.*A majority of the Committee members shall constitute a quorum. Alldeterminations of the Committee shall be made by a majority of its members. All questions ofinterpretation and application of the Plan or pertaining to any question of fact or Award grantedhereunder shall be decided by the Committee, whose decision shall be final, conclusive and bindingupon the Company and each other affected party.SECTION 4. SHARES SUBJECT TO PLAN     4.1 *Limitations.*The maximum number of Shares that may be issued with respect to Awards underthe Plan commencing on May 3, 2007, the date the stockholders approved the amendments to the Planset forth herein, shall not exceed 2,080,207 Shares (unless such maximum shall be increased ordecreased by reasons of changes in capitalization of the Company as hereinafter provided), whichamount was determined as follows:     Initial Shares approved April 22, 2004  1,000,000 Shares granted pursuant to Plan  (819,793)Additional shares approved  1,900,000      Total shares available under Plan  2,080,207           Notwithstanding the above, however, in the event that at any time after the Effective Date theoutstanding shares of Common Stock are changed into or exchanged for a different number or kind ofshares or other securities of the Company by reason of a merger, consolidation, recapitalization,reclassification, stock split, stock dividend, combination of shares or the like, the aggregatenumber and class of securities available under the Plan shall be ratably adjusted by the Committeeas described in Section 14. The Committee’s determinations shall be final and binding upon theCompany and all other interested persons. The Shares issued pursuant to the Plan may be authorizedbut unissued Shares, or may be issued Shares that have been reacquired by the Company.
 

 
     4.2 *Changes.*To the extent that any Award under the Plan, or any stock option or performanceaward granted under any prior incentive plan of the Company, shall be forfeited, shall expire orshall be canceled, in whole or in part, then the number of Shares covered by the Award soforfeited, expired or canceled may again be awarded pursuant to the provisions of this Plan. Inthe event that (i) Shares are delivered to the Company in full or partial payment of the exerciseprice for the exercise of a stock option granted under the Plan of the Company, or (ii) the numberof Shares issued under any Award is reduced for any reason, the Shares available for future Awardsunder the Plan shall be reduced only by the net number of Shares issued. Awards that may besatisfied either by the issuance of Shares or by cash or other consideration shall be countedagainst the maximum number of Shares that may be issued under the Plan, even though the Award isultimately satisfied by the payment of consideration other than Shares, as, for example, a stockoption granted in tandem with a Stock Appreciation Right that is settled by a cash payment of thestock appreciation. However, Awards will not reduce the number of Shares that may be issuedpursuant to the Plan if the settlement of the Award will not require the issuance of Shares, as,for example, a Stock Appreciation Right that can be satisfied only by the payment of cash.SECTION 5. ELIGIBILITY     Except with respect to Awards that are to be qualified under Section 422, Section 423 or otherrelevant Section of the Code (“Qualified Awards”), eligibility for participation under the Planshall be open to all officers, employees and directors of the Company and its Affiliates. Withrespect to Qualified Awards, eligibility for participation in the Plan shall be confined toemployees of the Company and its subsidiaries, as such term is defined under Section 424 of theCode.SECTION 6. STOCK OPTIONS     6.1 *Grants.*The Committee may grant stock options alone or in addition to other Awardsgranted under this Plan to any eligible officer, employee or director. Each person so selectedshall be offered an option to purchase the number of Shares determined by the Committee. TheCommittee shall specify whether such option is an Incentive Stock Option or Non-Qualified StockOption and any other terms or conditions relating to such Award. To the extent that any stockoption does not qualify as an Incentive Stock Option (whether because of its provisions or the timeor manner of its exercise or otherwise), such stock option, or the portion thereof, which does notqualify, shall constitute a separate Non-Qualified Stock Option. Options shall be in such form asthe Committee may from time to time approve, shall be subject to the following terms and conditionsand may contain such additional terms and conditions, not inconsistent with the Plan as theCommittee may deem desirable. At any time and from time to time, the Optionee and the Company mayagree to modify an option agreement in order that an Incentive Stock Option may be converted to aNon-Qualified Stock Option.     The Committee may require than an Optionee meet certain conditions before the option or aportion thereof may vest or be exercised, as, for example, that the Optionee remain in the employof the Company or one of its Affiliates for a stated period or periods of time before the option,or stated portions thereof, may vest or be exercised; provided, however, that nothing in the Planor in any option agreement shall confer upon any Optionee any right to remain in the
 

 
employ of the Company or one of its Affiliates, and nothing herein shall be construed in anymanner to interfere in any way with the right of the Company or its Affiliates to terminate suchOptionee’s employment at any time.     6.2 *Option Price.*The option exercise price of the Shares covered by each stock option shallbe determined by the Committee; provided, however, that the option exercise price of an IncentiveStock Option shall not be less than one hundred percent (100%) of the Fair Market Value of Shareson the date of the grant of such Incentive Stock Option; provided, further, that effective as ofJanuary 1, 2005, the option exercise price of any stock option shall not be less than one hundredpercent (100%) of the Fair Market Value of Shares on the effective date of the grant.     6.3 *Incentive Stock Options Limitations.*     (a) In no event shall any person be granted Incentive Stock Options so that the Sharescovered by any Incentive Stock Options that may be exercised for the first time by suchperson in any calendar year have an aggregate Fair Market Value in excess of $100,000. Forthis purpose, the Fair Market Value of the Shares shall be determined as of the dates onwhich the Incentive Stock Options are granted. It is intended that the limitation onIncentive Stock Options provided in this paragraph be the maximum limitation on options thatmay be considered Incentive Stock Options under the Code.     (b) Notwithstanding anything herein to the contrary, in no event shall any employeeowning more than ten percent (10%) of the total combined voting power of the Company or anyAffiliate corporation be granted an Incentive Stock Option hereunder unless: the optionexercise price shall be at least one hundred ten percent (110%) of the Fair Market Value ofthe Shares at the time that the option is granted and the term of the option shall notexceed five (5) years.     6.4 *Option Term.*The term of a stock option shall be for such period of months or years fromthe date of its grant as may be determined by the Committee; provided, however, that no stockoption shall be exercisable later than ten (10) years from the date of its grant. Each optionshall be subject to earlier termination as hereinafter provided (unless the Committee has providedotherwise):     (a) If the Optionee ceases to be an officer, employee or director of the Company or anyAffiliate by reason of the Optionee’s discharge for cause, all rights of the Optionee toexercise an option shall terminate, lapse and be forfeited immediately at the time of theOptionee’s discharge for cause.     (b) If the Optionee ceases to be an officer, employee or director of the Company or anyAffiliate by reason of death, the personal representatives, heirs, legatees or distributeesof the Optionee, as appropriate, shall have the right up to the earlier of (i) six (6)months from the Optionee’s death or (ii) the remaining term of the option to exercise anysuch option.     (c) If the Optionee ceases to be an officer, employee or director of the Company or anyAffiliate by reason of the Optionee’s resignation, Retirement, Disability or for any
 

 
reason other than the Optionee’s death or discharge for cause, all rights of theOptionee to exercise an option shall terminate, lapse, and be forfeited upon the earlier of(i) six (6) months after the date of the Optionee’s termination of employment by reason ofsuch Optionee’s resignation, Retirement, Disability or such other reason or (ii) theremaining term of the option, except that in case the Optionee shall die within six (6)months after the date of termination of employment by reason of such Optionee’s resignation,Retirement, Disability or such other reason, the personal representatives, heirs, legateesor distributees of the Optionee, as appropriate, shall have the right up to an additionalthree (3) months from the date of the Optionee’s death to exercise any such option.     (d) Despite the provisions of paragraphs (b), and (c) of this subsection, no IncentiveStock Option shall be exercisable after the expiration of the earlier of: (i) the ten (10)year period beginning on the date of its grant, (ii) the three (3) month period beginning onthe date of the Optionee’s termination of employment for any reason other than death orDisability, or (iii) the one (1) year period beginning on the date of the Optionee’stermination of employment by reason of death or Disability.     6.5 *Vesting of Stock Options.*     (a) Each stock option granted hereunder may only be exercised to the extent that theOptionee is vested in such option. Each stock option shall vest separately in accordancewith the option vesting schedule, if any, determined by the Committee in its solediscretion, which will be incorporated in the stock option agreement entered into betweenthe Company and each Optionee. The option vesting schedule will be accelerated in the eventthe provisions of paragraphs (b), (c), (d) or (e) of this subsection apply; or if, in thesole discretion of the Committee, the Committee determines that acceleration of the optionvesting schedule would be desirable for the Company.     (b) If an Optionee ceases to be an officer, employee or director of the Company or anyAffiliate by reason of death, the personal representatives, heirs, legatees or distributeesof the Optionee, as appropriate, shall become fully vested in each stock option granted tothe Optionee, effective on the date of the Optionee’s death and shall have the immediateright to exercise any such option to the extent not previously exercised.     (c) In the event of the dissolution or liquidation of the Company, each stock optiongranted under the Plan shall terminate as of a date to be fixed by the Board; provided,however, that not less than thirty (30) days’ written notice of the date so fixed shall begiven to each Optionee and each such Optionee shall be fully vested in and shall have theright during such period to exercise the option, even though such option would not otherwisebe exercisable under the option vesting schedule. At the end of such period, anyunexercised option shall terminate and be of no further effect.     (d) In the event of a Reorganization:     (1) If there is no plan or agreement respecting the Reorganization, or if suchplan or agreement does not specifically provide for the change, conversion
 

 
or exchange of the Shares under outstanding and unexercised stock options forother securities then the provisions of the above paragraph (c) of this subsectionshall apply as if the Company had dissolved or been liquidated on the effective dateof the Reorganization; or     (2) If there is a plan or agreement respecting the Reorganization, and if suchplan or agreement specifically provides for the change, conversion or exchange ofthe Shares under outstanding and unexercised stock options for securities of anothercorporation, then the Board shall adjust the Shares under such outstanding andunexercised stock options (and shall adjust the Shares remaining under the Planwhich are then available to be awarded under the Plan, if such plan or agreementmakes no specific provision therefore) in a manner not inconsistent with theprovisions of such plan or agreement for the adjustment, change, conversion orexchange of such Shares and such options.     (e) In the event of a Change in Control of the Company, all stock options and anyassociated rights shall become fully vested and immediately exercisable and the vesting ofall performance-based stock options shall be determined as if the performance period orcycle applicable to such stock options had ended immediately upon such Change in Control.     6.6 *Exercise of Stock Options.*     (a) Stock options may be exercised as to Shares only in amounts and at intervals oftime specified in the written option agreement between the Company and the Optionee. Eachexercise of a stock option, or any part thereof, shall be evidenced by a notice in writingto the Company. The purchase price of the Shares as to which an option shall be exercisedshall be paid in full at the time of exercise, and may be paid to the Company either:     (1) in cash (including check, bank draft or money order);     (2) by the delivery of Shares having a Fair Market Value equal to the aggregateoption price; provided, however, that such Shares shall have been owned on a fullyvested basis by the Optionee for more than six months prior to exercise;     (3) by a combination of cash and Shares as described above;     (4) by arrangement with a broker acceptable to the Committee in which paymentof the exercise price is made pursuant to an irrevocable direction from the Optioneeto the broker to deliver to the Company proceeds from the sale of the option Sharesin an amount equal to the exercise price of the Shares; or     (5) at the Committee’s discretion, by authorizing the Company to retain thenumber of shares from the exercise of the Options, the Fair Market Value of which(as of the date of delivery of such notice) is equal to the portion of the
 

 
exercise price and/or withholding with respect to which the Optionee intends tomake payment.     (b) If an Optionee delivers Shares (including Shares of Restricted Stock) already ownedby the Optionee in full or partial payment of the exercise price for any stock optiongranted under the Plan or any prior incentive plan of the Company, or if the Optionee elects(with Committee consent) to have the Company retain that number of Shares out of the Sharesbeing acquired through the exercise of the option having a Fair Market Value equal to theexercise price of the stock option being exercised, the Committee may authorize theautomatic grant of a new option (a “Reload Option”) for that number of Shares as shall equalthe number of already owned Shares surrendered (including Shares of Restricted Stock) ornewly acquired Shares being retained in payment of the option exercise price of theunderlying stock option being exercised. The grant of a Reload Option will become effectiveupon the exercise of the underlying stock option. The option exercise price of the ReloadOption shall be the Fair Market Value of a Share on the effective date of the grant of theReload Option. Each Reload Option shall be exercisable no earlier than six (6) months fromthe date of its grant and no later than the time when the underlying stock option beingexercised could be last exercised. The Committee may also specify additional terms,conditions and restrictions for the Reload Option and the Shares to be acquired upon theexercise thereof.     (c) The amount, as determined by the Committee, of any federal, state or local taxrequired to be withheld by the Company due to the exercise of a stock option shall besatisfied either (a) by payment by the Optionee to the Company of the amount of suchwithholding obligation in cash (the “Cash Method”), (b) through either the retention by theCompany of a number of Shares out of the Shares being acquired through the exercise of theoption or the delivery of already owned Shares having a Fair Market Value equal to theamount of the withholding obligation (the “Share Retention Method”), or (c) by a combinationof the Cash Method and the Share Retention Method. If the Share Retention Method is used infull or partial satisfaction for any tax liability resulting from the exercise of a stockoption, the Committee may authorize the grant of a Reload Option for that number of Sharesas shall equal the number of Shares used to satisfy the tax liabilities of the stock optionbeing exercised on the price and terms set forth in subsection (b) above. The cash paymentor the amount equal to the Fair Market Value of the Shares so withheld, as the case may be,shall be remitted by the Company to the appropriate taxing authorities. The Committee shalldetermine whether and to what extent, as well as the manner in which an Optionee may satisfya withholding obligation by either the Cash Method or the Share Retention Method.     (d) An Optionee shall not have any of the rights of a stockholder of the Company withrespect to the Shares covered by a stock option except to the extent that one or morecertificates of such Shares shall have been delivered to the Optionee, or the Optionee hasbeen determined to be a stockholder of record by the Company’s Transfer Agent, upon dueexercise of the option.     6.7 *Date of a Stock Option Grant.*The granting of a stock option shall take place only whenthe Committee approves the granting of such option. Neither any action taken by the
 

 
Board nor anything contained in the Plan or in any resolution adopted or to be adopted by theBoard or the stockholders of the Company shall constitute the granting of a stock option under thePlan.     6.8 *No Option Repricing Without Stockholder Approval.*With stockholder approval only, theCommittee, in its absolute discretion, may grant to holders of outstanding Non-Qualified StockOptions, in exchange for the surrender and cancellation of such Non-Qualified Stock Options, newNon-Qualified Stock Options having exercise prices lower (or higher with any required consent) thanthe exercise price provided in the Non-Qualified Stock Options so surrendered and canceled andcontaining such other terms and conditions as the Committee may deemed appropriate.SECTION 7. STOCK APPRECIATION RIGHTS     7.1 *Grants.*The Committee may grant to any eligible officer, employee or director eitherNon-Tandem Stock Appreciation Rights or Tandem Stock Appreciation Rights. Stock AppreciationRights shall be subject to such terms and conditions as the Committee shall impose. The grant ofthe Stock Appreciation Right may provide that the holder may be paid for the value of the StockAppreciation Right either in cash or in Shares, or a combination thereof, at the discretion of theCommittee. In the event of the exercise of a Stock Appreciation Right payable in Shares, theholder of the Stock Appreciation Right shall receive that number of whole Shares of stock of theCompany having an aggregate Fair Market Value on the date of exercise equal to the value obtainedby multiplying (i) either (a) in the case of a Tandem Stock Appreciation Right, the differencebetween the Fair Market Value of a Share on the date of exercise over the per share exercise priceof the related option, or (b) in the case of a Non-Tandem Stock Appreciation Right, the differencebetween the Fair Market Value of a Share on the date of exercise over the Fair Market Value on thedate of the grant by (ii) the number of Shares as to which the Stock Appreciation Right isexercised. However, notwithstanding the foregoing, the Committee, in its sole discretion, mayplace a ceiling on the amount payable upon exercise of a Stock Appreciation Right, but any suchlimitation shall be specified at the time that the Stock Appreciation Right is granted. Withrespect to all grants of Stock Appreciation Rights after December 31, 2004, the grant price shallnot be less than the Fair Market Value of a Share on the effective date of the grant.     7.2 *Exercise and Transfer.*A Tandem Stock Appreciation Right may only be granted at the timeof the grant of the related stock option. A Tandem Stock Appreciation Right granted in connectionwith an Incentive Stock Option (i) generally may be exercised at, and only at, the times and to theextent the related stock option is exercisable, (ii) expires upon the termination of the relatedstock option, (iii) may not exceed 100% of the difference between the exercise price of the relatedstock option and the market price of the Shares subject to the related stock option at the time theTandem Stock Appreciation Right is exercised and (iv) may be exercised at, and only at, such timesas the market price of the Shares subject to the related stock option exceeds the exercise price ofthe related stock option. The Tandem Stock Appreciation Right may be transferred at, and only at,the times and to the extent the related stock option is transferable. If a Tandem StockAppreciation Right is granted, there shall be surrendered and canceled from the option at the timeof exercise of the Tandem Stock Appreciation Right, in lieu of exercise under
 

 
the option, that number of Shares as shall equal the number of Shares as to which the TandemStock Appreciation Right shall have been exercised.     7.3 *Certain Limitations on Non-Tandem Stock Appreciation Rights.*A Non-Tandem StockAppreciation Right will be exercisable as provided by the Committee and will have such other termsand conditions as the Committee may determine. A Non-Tandem Stock Appreciation Right is subject toacceleration of vesting or immediate termination in certain circumstances in the same manner asstock options pursuant to subsections 6.4 and 6.5 of this Plan.SECTION 8. RESTRICTED STOCK     8.1 *Grants.*The Committee may grant Awards of Restricted Stock for no cash consideration, forsuch minimum consideration as may be required by applicable law, or for such other consideration asmay be specified by the grant. The terms and conditions of the Restricted Stock shall be specifiedby the grant agreement. The Committee, in its sole discretion, shall determine what rights, ifany, the person to whom an Award of Restricted Stock is made shall have in the Restricted Stockduring the restriction period and the restrictions applicable to the particular Award, including,without limitation, whether the holder of the Restricted Stock shall have the right to vote theShares and receive dividends and other distributions applicable to the Shares, the vesting schedule(which may be based on service, performance or other factors) and rights to acceleration of vesting(including, without limitation, whether non-vested Shares are forfeited or vested upon terminationof employment). The Committee shall also determine when the restrictions shall lapse or expire andthe conditions, if any, under which the Restricted Stock will be forfeited; provided, however, thatnotwithstanding the foregoing, upon a Change in Control, all restrictions applicable to RestrictedStock shall lapse and expire and Shares of Restricted Stock with vesting provisions shall becomefully vested (except for Restricted Stock that is part of a Performance Award, which shall vest asdetermined pursuant to Section 9.2(h) of the Plan). Each Award of Restricted Stock may havedifferent restrictions and conditions. The Committee, in its discretion, may prospectively changethe restriction period and the restrictions applicable to any particular Award of Restricted Stock.Unless otherwise set forth in the Plan, Restricted Stock may not be disposed of by the recipientuntil the restrictions specified in the Award expire.     8.2 *Awards and Certificates.*Any Restricted Stock issued hereunder may be evidenced in suchmanner as the Committee, in its sole discretion, shall deem appropriate including, withoutlimitation, book-entry registration or issuance of a stock certificate or certificates. In theevent any stock certificate is issued in respect of Shares of Restricted Stock awarded hereunder,such certificate shall bear an appropriate legend with respect to the restrictions applicable tosuch Award. The Company may retain, at its option, the physical custody of any stock certificaterepresenting any awards of Restricted Stock during the restriction period or require that theRestricted Stock be placed in escrow or trust, along with a stock power endorsed in blank, untilall restrictions are removed or expire.
 

 
SECTION 9. PERFORMANCE AWARDS     9.1 *Grants.*A Performance Award may consist of either or both, as the Committee maydetermine, of (i) “Performance Shares” or the right to receive Shares, Restricted Stock or cash ofan equivalent value, or any combination thereof as the Committee may determine, or (ii)“Performance Units,” or the right to receive a fixed dollar amount payable in cash, Common Stock,Restricted Stock or any combination thereof, as the Committee may determine. The value of anycash-denominated Performance Award issued to any one Covered Employee in any one year shall notexceed $2,500,000. No Covered Employee may be granted stock-denominated Performance Awards in anyone year with respect to more than 250,000 Shares.     9.2 *Performance Goals*. The grant and/or settlement of a Performance Award shall be contingentupon terms set forth in this Section 9.2.     (a) *Status of Performance Awards under**Section 162(m)**of the Code*. It is the intent ofthe Company that Performance Awards granted to persons who are designated by the Committeeas likely to be Covered Employees within the meaning of Section 162(m) of the Code andregulations thereunder (including Treasury Regulations sec. 1.162-27 and successorregulations thereto) shall, if so designated by the Committee, constitute “performance-basedcompensation” within the meaning of Section 162(m) of the Code and regulations thereunder.Accordingly, the terms of this Section 9.2 shall be interpreted in a manner consistent withSection 162(m) of the Code and regulations thereunder. The foregoing notwithstanding,because the Committee cannot determine with certainty whether a given participant will be aCovered Employee with respect to a fiscal year that has not yet been completed, the termCovered Employee as used herein shall mean only a person designated by the Committee, at thetime of grant of a Performance Award, who is likely to be a Covered Employee with respect tothat fiscal year. If any provision of the Plan as in effect on the date of adoption or anyagreements relating to Performance Awards that are designated as intended to comply withSection 162(m) of the Code does not comply or is inconsistent with the requirements ofSection 162(m) of the Code or regulations thereunder, such provision shall be construed ordeemed amended to the extent necessary to conform to such requirements.     (b) *General*. The performance goals for Performance Awards shall consist of one or morebusiness criteria and a targeted level or levels of performance with respect to each of suchcriteria, as specified by the Committee. In the case of any Award granted to a CoveredEmployee which is intended to meet the definition of performance-based pursuant to Section162(m) of the Code, the performance goals shall be designed to be objective and shallotherwise meet the requirements of Section 162(m) of the Code and regulations thereunder(including Treasury Regulations sec. 1.162-27 and successor regulations thereto), includingthe requirement that the level or levels of performance targeted by the Committee are suchthat the achievement of performance goals is “substantially uncertain” at the time of grant.The Committee may determine that such Performance Awards shall be granted and/or settledupon achievement of any one performance goal or that two or more of the performance goalsmust be achieved as a condition to the grant and/or settlement of such Performance Awards.Performance goals
 

 
may differ among Performance Awards granted to any one participant or for PerformanceAwards granted to different participants.     (c) *Business Criteria*. One or more of the following business criteria for the Company,an a consolidated basis, and/or for specified subsidiaries, divisions or business orgeographical units of the Company (except with respect to the total stockholder return andearnings per share criteria), shall be used by the Committee in establishing performancegoals for Performance Awards granted to a participant: (A) earnings per share; (B) increasein revenues; (C) increase in cash flow; (D) increase in cash flow return; (E) return on netassets; (F) Modified Total Return (G) return on assets; (H) return on investment; (I) returnon capital; (J) return on equity; (K) economic value added; (L) gross margin; (M) netincome; (N) pretax earnings; (O) pretax earnings before interest, depreciation andamortization; (P) pretax operating earnings after interest expense and before incentives,service fees, and extraordinary or special items; (Q) operating income; (R) totalstockholder return; (S) debt reduction; and (T) any of the above goals determined on theabsolute or relative basis or as compared to the performance of a published or special indexdeemed applicable by the Committee including, but not limited to a market index or a groupof comparable companies.     (d) *Performance Period; Timing for Establishing Performance Goals*. Achievement ofperformance goals in respect of Performance Awards shall be measured over a performanceperiod of not less than one year and not more than three years, as specified by theCommittee. Performance goals in the case of any Award granted to a participant shall beestablished not later than 90 days after the beginning of any performance period applicableto such Performance Awards, or at such other date as may be required or permitted for“performance-based compensation” under Section 162(m) of the Code.     (e) *Settlement of Performance Awards; Other Terms*. After the end of each performanceperiod, the Committee shall determine the amount, if any, of Performance Awards payable toeach participant based upon achievement of business criteria over a performance period.Except as may otherwise be required under Section 409A of the Code, payment described in theimmediately preceding sentence shall be made by the later of (i) the date that is 21/2 monthsafter the end of the Participant’s first taxable year in which the Performance Award isearned under the Plan and (ii) the date that is 21/2 months after the end of the Company’sfirst taxable year in which the Performance Award is earned under the Plan, and such paymentshall not be subject to any election by the Participant to defer the payment to a laterperiod. The Committee may not exercise discretion to increase any such amount payable inrespect of a Performance Award designed to comply with Section 162(m) of the Code. TheCommittee shall specify the circumstances in which such Performance Awards shall be paid orforfeited in the event of termination of employment by the participant prior to the end of aperformance period or settlement of Performance Awards.     (f) *Written Determinations*. All determinations by the Committee as to theestablishment of performance goals, the amount of any Performance Award, and the achievementof performance goals relating to Performance Awards shall be made in
 

 
writing in the case of any Award granted to a participant. The Committee may notdelegate any responsibility relating to such Performance Awards.     (g) *Amendment*. The Committee may amend or modify the terms of any Performance Award;provided, however, that with respect to any Award which is intended to qualify for theperformance-based exception to the limitation on deductibility set forth in section 162(m)of the Code, no amendment to the Award shall be made (a) more than 90 days after thecommencement of the performance period to which the performance goals relate; (b) after thelapse of 25% of the performance period to which the performance goals relate; or (c) whenthe outcome of the performance goals is not substantially uncertain.     (h) *Change in Control*. In the event of a Change in Control, each share of PerformanceStock and each Performance Unit previously granted which is not then immediately vested infull shall be immediately vested in full, all performance goals shall be deemed to have beenmet to the fullest extent under the terms of such grant and the performance periods shallimmediately end, unless prior to such Change in Control, the Committee shall determine thatsuch vesting shall not occur upon a Change in Control with respect to one or moreoutstanding Performance Awards.SECTION 10. DIVIDEND EQUIVALENT RIGHTS     The Committee may grant a Dividend Equivalent Right, either as a component of another Award oras a separate Award, and, in general, each such holder of a Dividend Equivalent Right that isoutstanding on a dividend record date for the Company’s Common Stock shall be credited with anamount equal to the cash or stock dividends or other distributions that would have been receivedhad the Shares covered by the Award been issued and outstanding on the dividend record date, orsuch other amounts as the Committee may provide. The terms and conditions of the DividendEquivalent Right shall be specified by the grant. Dividend equivalents credited to the holder of aDividend Equivalent Right may be paid currently or may be deemed to be reinvested in additionalShares (which may thereafter accrue additional Dividend Equivalent Rights). Any such reinvestmentshall be at the Fair Market Value at the time thereof. Dividend Equivalent Rights may be settledin cash or Shares, or a combination thereof, in a single Payment or in installments. A DividendEquivalent Right granted as a component of another Award may also contain terms and conditionsdifferent from such other Award. Any Dividend Equivalent Rights shall comply with the requirementsof Section 409A of the Code.SECTION 11. OTHER AWARDS     The Committee may grant to any eligible officer, employee or director other forms of Awardsbased upon, payable in or otherwise related to, in whole or in part, Shares if the Committee, inits sole discretion determines that such other form of Award is consistent with the purposes andrestrictions of the Plan. The terms and conditions of such other form of Award shall be specifiedby the grant, including, but not limited to, the price, if any, and the vesting schedule, if any.To the extent that any such Award includes a vesting schedule, except as may otherwise be requiredunder Section 409A of the Code, payment of such Award shall be made by the later of (i) the datethat is 21/2 months after the end of the Participant’s first taxable year in
 

 
which the Award is earned under the Plan and (ii) the date that is 21/2 months after the end ofthe Company’s first taxable year in which the Award is earned under the Plan, and such paymentshall not be subject to any election by the Participant to defer the payment to a later period.Such Awards may be granted for no cash consideration, for such minimum consideration as may berequired by applicable law or for such other consideration as may be specified by the grant. Anysuch Award shall comply with the requirements of Section 409A of the Code.     SECTION 12. NON-TRANSFERABILITY OF AWARDS.     A stock option shall not be transferable otherwise than by will or the laws of descent anddistribution, and a stock option may be exercised, during the lifetime of the Optionee, only by theOptionee; provided, however, that with the approval of the Committee, the agreement relating to anyAward (including, without limitation, a stock option) may provide that such Award may betransferred to one or more members of the immediate family of the grantee of the Award or to atrust for the benefit of such person or as directed under a qualified domestic relations order.Any attempted assignment, transfer, pledge, hypothecation or other disposition of a stock option orother Award contrary to the provisions hereof, or the levy of any execution, attachment or similarprocess upon a stock option or other Award shall be null and void and without effect.SECTION 13. COMPLIANCE WITH SECURITIES AND OTHER LAWS     In no event shall the Company be required to sell or issue Shares under any Award if the saleor issuance thereof would constitute a violation of applicable federal or state securities laws orregulations or a violation of any other law or regulation of any governmental or regulatory agencyor authority or any national securities exchange. As a condition to any sale or issuance ofShares, the Company may place legends on Shares, issue stop transfer orders and require suchagreements or undertakings as the Company may deem necessary or advisable to assure compliance withany such laws or regulations, including, if the Company or its counsel deems it appropriate,representations from the person to whom an Award is granted that he or she is acquiring the Sharessolely for investment and not with a view to distribution and that no distribution of the Shareswill be made unless registered pursuant to applicable federal and state securities laws, or in theopinion of counsel of the Company, such registration is unnecessary.SECTION 14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR REORGANIZATION     The value of an Award in Shares shall be adjusted from time to time as follows:     (a) In the event that at any time after the issuance of an Award, the outstandingShares are changed into or exchanged for a different number or kind of shares or othersecurities of the Company by reason of a merger, consolidation, recapitalization,reclassification, stock split, stock dividend, extraordinary dividend, combination of sharesor the like, the aggregate number and class of securities available under the Plan andissued pursuant to any outstanding Awards shall be equitably adjusted by the Committee.Upon the occurrence of any of the events described in the immediately preceding sentence,and subject to any required action of the Board and the stockholders, in order to
 

 
ensure that after such event the Shares subject to the Plan and each Participant’sproportionate interest shall be maintained substantially as before the occurrence of suchevent, the Committee shall adjust (i) the number and type of Shares of common stock of theCompany or any Affiliate with respect to which Awards may be granted under the Plan, (ii)the maximum number of Shares that may be covered by Awards granted under the Plan during anyperiod, (iii) the maximum number of Shares that may be covered by Awards to any singleindividual during any calendar year, (iv) the number of Shares subject to outstandingAwards, and (v) the grant or exercise price with respect to an Award. Such adjustment in anoutstanding Option shall be made (i) without change in the total price applicable to theOption or any unexercised portion of the Option (except for any change in the aggregateprice resulting from rounding-off of Share quantities or prices) and (ii) with any necessarycorresponding adjustment in exercise price per Share; provided, however, the Committee shallnot take any action otherwise authorized under this Section 14(a) to the extent that (i)such action would cause (A) the application of Section 162(m) or 409A of the Code to theAward or (B) create adverse tax consequences under Section 162(m) or 409A of the Code shouldeither or both of those Code sections apply to the Award or (ii) materially reduce thebenefit to the Participant without the consent of the Participant. The Committee’sdeterminations shall be final, binding and conclusive with respect to the Company and allother interested persons.     (b) Subject to any required action by stockholders, if the Company shall be thesurviving corporation in any Reorganization, merger or consolidation, each outstanding Awardshall pertain to and apply to the securities to which a holder of the number of Sharessubject to the Award would have been entitled, and if a plan or agreement reflecting anysuch event is in effect that specifically provides for the change, conversion or exchange ofShares, then any adjustment to Shares relating to an Award hereunder shall not beinconsistent with the terms of any such plan or agreement.     (c) In the event of a change in the Shares of the Company as presently constituted,which is limited to a change of par value into the same number of Shares with a differentpar value or without par value, the Shares resulting from any such change shall be deemed tobe the Shares within the meaning of the Plan.     To the extent that the foregoing adjustments relate to stock or securities of theCompany, such adjustments shall be made by the Board, whose determination shall be final,binding and conclusive.     Except as hereinbefore expressly provided in the Plan, any person to whom an Award isgranted shall have no rights by reason of any subdivision or consolidation of stock of anyclass or the payment of any stock dividend or any other increase or decrease in the numberof shares of stock of any class or by reason of any dissolution, liquidation,reorganization, merger or consolidation or spinoff of assets or stock of anothercorporation, and any issue by the Company of shares of stock of any class, or securitiesconvertible into shares of stock of any class, shall not affect, and no adjustment by reasonthereof shall be made with respect to, the number or exercise price of Shares subject to anAward.
 

 
     The grant of an Award pursuant to the Plan shall not affect in any way the right orpower of the Company to make adjustments, reclassifications, Reorganizations or changes ofits capital or business structure or to merge or to consolidate or to dissolve, liquidate orsell or transfer all or any part of its business or assets.SECTION 15. AMENDMENT OR TERMINATION OF THE PLAN     15.1 *Amendment of the Plan.*Notwithstanding anything contained in the Plan to the contrary,all provisions of the Plan may at any time or from time to time be modified or amended by theBoard; provided, however, that no Award at any time outstanding under the Plan may be modified,impaired or canceled adversely to the holder of the Award without the consent of such holder; andprovided, further, that the Plan may not be amended without approval by the holders of a majorityof the Shares of the Company cast at a meeting of the stockholders (a) to increase the maximumnumber of Shares subject to the Plan, (b) to materially modify the requirements as to eligibilityfor participation in the Plan, (c) to otherwise materially increase the benefits accruing topersons to whom Awards may be made under the Plan, as amended, or (d) if such approval is otherwisenecessary, to comply with Rule 16b-3 promulgated under the Exchange Act, as amended, or to complywith any other applicable laws, regulations or listing requirements, or to qualify, for anexemption or characterization that is deemed desirable by the Board. Notwithstanding theforegoing, the Board may amend any Award without the consent of the holder if the Board deems itnecessary to avoid adverse tax consequences to the holder under Section 409A of the Code.     15.2 *Termination of the Plan.*Subject to the requirements of Section 409A of the Code, theBoard may suspend or terminate the Plan at any time, and such suspension or termination may beretroactive or prospective. However, no Award may be granted on or after April 22, 2014, the tenthanniversary of the Effective Date of the Plan. Termination of the Plan shall not impair or affectany Award previously granted hereunder and the rights of the holder of the Award shall remain ineffect until the Award has been exercised in its entirety or has expired or otherwise has beenterminated by the terms of such Award.SECTION 16. AMENDMENTS AND ADJUSTMENTS TO AWARDS     Subject to Section 6.8, the Committee may amend, modify or terminate any outstanding Awardwith the participant’s consent at any time prior to payment or exercise in any manner notinconsistent with the terms of the Plan, including, without limitation, (i) to change the date ordates as of which (A) an option becomes exercisable or (B) a performance-based Award is deemedearned or (ii) to cancel an Award and grant a new Award in substitution therefore under suchdifferent terms and conditions as it determines in its sole and complete discretion to beappropriate. The Committee is also authorized to make adjustments in the terms and conditions of,and the criteria included in, Awards in recognition of unusual or nonrecurring events (including,without limitation, the events described in Section 14 hereof) affecting the Company, or thefinancial statements of the Company or any Affiliate, or of changes in applicable laws, regulationsor accounting principles, whenever the Committee determines that such adjustments are appropriatein order to prevent reduction or enlargement of the benefits or potential benefits intended to bemade available under the Plan. Any provision of the Plan or any agreement
 

 
regarding an Award to the contrary notwithstanding, the Committee may cause any Award grantedto be canceled in consideration of a cash payment or alternative Award made to the holder of suchcanceled Award equal in value to the Fair Market Value of such canceled Award. The determinationsof value under this Section 16 shall be made by the Committee in its sole discretion. Anyamendment or adjustment to an Award shall comply with Section 409A of the Code.SECTION 17. GENERAL PROVISIONS     17.1 *No Limit on Other Compensation Arrangements.*Nothing contained in the Plan shall preventthe Company from adopting or continuing in effect other compensation arrangements, and sucharrangements may be either generally applicable or applicable only in specific cases.     17.2 *No Right to Employment.*The grant of an Award shall not be construed as giving therecipient thereof the right to be retained in the employ of the Company. Further, the Company mayat any time dismiss a participant in the Plan from employment, free from any liability or any claimunder the Plan, unless otherwise expressly provided in the Plan or in any Award agreement. Noofficer, employee, director, participant or other person shall have any claim to be granted anyAward, and there is no obligation for uniformity or treatment of officers, employees, directors,participants or holders or beneficiaries of Awards.     17.3 *GOVERNING LAW.*THE VALIDITY, CONSTRUCTION AND EFFECT OF THE PLAN AND ANY RULES ANDREGULATIONS RELATING TO THE PLAN SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OFMARYLAND.     17.4 *Severability.*If any provision of the Plan or any Award is or becomes or is deemed to beinvalid, illegal or unenforceable in any jurisdiction or as to any person or Award, or woulddisqualify the Plan or any Award under any law deemed applicable by the Committee, such provisionshall be construed or deemed amended to conform to applicable laws, or if it cannot be construed ordeemed amended without, in the sole determination of the Committee, materially altering the intentof the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Awardand the remainder of the Plan and any such Award shall remain in full force and effect.     17.5 *No Fractional Shares.*No fractional Shares shall be issued or delivered pursuant to thePlan or any Award, and the Committee shall determine whether cash, other securities or otherproperty shall be paid or transferred in lieu of any fractional Shares or whether such fractionalShares or any rights thereto shall be canceled, terminated or otherwise eliminated.     17.6 *Headings.*Headings are given to the subsections of the Plan solely as a convenience tofacilitate reference. Such headings shall not be deemed in any way material or relevant to theconstruction or interpretation of the Plan or any provision thereof.     17.7 *Withholding.*The Company or any Affiliate is authorized to withhold at the minimumstatutory rate from any Award, from any payment due or transfer made under any Award or under thePlan or from any compensation or other amount owing to a Participant the
 

 
amount (in any medium) of any applicable taxes payable in respect of an Award, its exercise,the lapse of restrictions thereon, or any payment or transfer under an Award or under the Plan andto take such other action as may be necessary in the opinion of the Company to satisfy allobligations for the payment of such taxes.     17.8 *Code Section 409A*. Notwithstanding any other provision of the Plan to the contrary, anyAward granted after December 31, 2004 is intended to avoid application of Section 409A of the Codeto the Award.     17.9 *No Guarantee of Tax Consequences*. None of the Board, the Company nor the Committee makesany commitment or guarantee that any federal, state or local tax treatment will (or will not) applyor be available to any person participating or eligible to participate hereunder.     17.10 *Specified Employee under 409A.*Subject to any other restrictions or limitationscontained herein, in the event that a Specified Employee (as defined under Section 409A) becomesentitled to a payment under the Plan on account of a “Separation from Service” (as defined underSection 409A), such payment shall not occur until the date that is six months plus one day from thedate of such Separation from Service.