2004 INCENTIVE PLAN



 





EXHIBIT 10.1




BARNES & NOBLE, INC.

2004 INCENTIVE PLAN




     BARNES & NOBLE, INC., a corporation existing under the laws of the State
of Delaware (the “Company”), hereby establishes and adopts the following 2004
Incentive Plan (the “Plan”). Certain capitalized terms used in the Plan are
defined in Article 2.



RECITALS




     WHEREAS, the Company desires to encourage high levels of performance by
those individuals who are key to the success of the Company, to attract new
individuals who are highly motivated and who are expected to contribute to the
success of the Company and to encourage such individuals to remain as
directors, employees, consultants and/or advisors of the Company and its
Affiliates by increasing their proprietary interest in the Company’s growth and
success; and



     WHEREAS, to attain these ends, the Company has formulated the Plan
embodied herein to authorize the granting of Awards to Participants whose
judgment, initiative and efforts are or have been or are expected to be
responsible for the success of the Company.



     NOW, THEREFORE, the Company hereby constitutes, establishes and adopts the
following Plan and agrees to the following provisions:



ARTICLE 1




PURPOSE OF THE PLAN




     1.1. Purpose. The purpose of the Plan is to assist the Company and its
Affiliates in attracting and retaining selected individuals to serve as
directors, employees, consultants and/or advisors of the Company who are
expected to contribute to the Company’s success and to achieve long-term
objectives which will inure to the benefit of all stockholders of the Company
through the additional incentives inherent in the Awards hereunder.



ARTICLE 2




DEFINITIONS




     2.1.
“Affiliate” shall mean (i) any person or entity that directly, or
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Company (including any Subsidiary) or (ii) any entity
in which the Company has a significant equity interest, as determined by the
Committee.



     2.2.
“Award” shall mean any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Award, Dividend Equivalent, Other Stock Unit Award or
any other right, interest or option relating to Shares or other property
(including cash) granted pursuant to the provisions of the Plan.



 









 





     2.3. “Award Agreement” shall mean any written agreement, contract or other
instrument or document evidencing any Award granted by the Committee hereunder.



     2.4. “Board” shall mean the board of directors of the Company.



     2.5. “Code” shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.



     2.6. “Committee” shall mean the Compensation Committee of the Board (or
such other committee designated by the Compensation Committee of the Board),
consisting of no fewer than two Directors, each of whom is (i) a “Non-Employee
Director” within the meaning of Rule 16b-3 (or any successor rule) of the
Exchange Act, (ii) an “outside director” within the meaning of Section
162(m)(4)(C)(i) of the Code, and (iii) an “independent director” for purpose of
the rules and regulations of the New York Stock Exchange.



     2.7. “Company” has the meaning set forth in introductory paragraph of the
Plan.



     2.8. “Covered Employee” shall mean a “covered employee” within the meaning
of Section 162(m)(3) of the Code, or any successor provision thereto.



     2.9. “Director” shall mean a non-employee member of the Board or a
non-employee member of the board of directors of a Subsidiary.



     2.10. “Dividend Equivalents” shall have the meaning set forth in Section
12.5.



     2.11. “Employee” shall mean any employee of the Company or any Affiliate.
Solely for purposes of the Plan, an Employee shall also mean any consultant or
advisor who provides services to the Company or any Affiliate, so long as such
person (i) renders bona fide services that are not in connection with the offer
and sale of the Company’s securities in a capital-raising transaction and (ii)
does not directly or indirectly promote or maintain a market for the Company’s
securities.



     2.12. “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.



     2.13. “Fair Market Value” shall mean, with respect to any property other
than Shares, the market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee. The
Fair Market Value of Shares as of any date shall be the per Share closing price
of the Shares as reported on the New York Stock Exchange on that date (or if
there was no reported closing price on such date, on the last preceding date on
which the closing price was reported) or, if the Company is not then listed on
the New York Stock Exchange, the Fair Market Value of Shares shall be
determined by the Committee in its sole discretion using appropriate criteria.



     2.14. “Freestanding Stock Appreciation Right” shall have the meaning set
forth in Section 6.1.



     2.15. “Limitations” shall have the meaning set forth in Section 10.5.



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     2.16. “Option” shall mean any right granted to a Participant under the
Plan allowing such Participant to purchase Shares at such price or prices and
during such period or periods as the Committee shall determine.



     2.17. “Option Proceeds” shall mean the cash actually received by the
Company for the option price in connection with the exercise of Options or
options granted under the Prior Plans that are exercised after the effective
date of the Plan, plus the maximum tax benefit that could be realized by the
Company as a result of the exercise of such Options or options granted under
the Prior Plans, which tax benefit shall be determined by multiplying (a) the
amount that is deductible for Federal income tax purposes as a result of any
such option exercise (currently, equal to the amount upon which the
Participant’s withholding tax obligation is calculated), times (b) the sum of
the maximum federal corporate income tax rate for the year of exercise plus an
assumed 6% state income tax rate. With respect to Options or options granted
under the Prior Plans, to the extent that a Participant pays the option price
and/or withholding taxes with Shares, Option Proceeds shall not be calculated
with respect to the amounts so paid in Shares.



     2.18. “Other Stock Unit Award” shall have the meaning set forth in Section
8.1.



     2.19. “Participant” shall mean an Employee or Director who is selected by
the Committee to receive an Award under the Plan.



     2.20. “Payee” shall have the meaning set forth in Section 13.1.



     2.21. “Performance Award” shall mean any Award of Performance Shares or
Performance Units granted pursuant to Article 9.



     2.22. “Performance Period” shall mean that period established by the
Committee at the time any Performance Award is granted or at any time
thereafter during which any performance goals specified by the Committee with
respect to such Award are to be measured.



     2.23. “Performance Share” shall mean any grant pursuant to Article 9 of a
unit valued by reference to a designated number of Shares, which value may be
paid to the Participant by delivery of such property as the Committee shall
determine, including cash, Shares, other property, or any combination thereof,
upon achievement of such performance goals during the Performance Period as the
Committee shall establish at the time of such grant or thereafter.



     2.24. “Performance Unit” shall mean any grant pursuant to Article 9 of a
unit valued by reference to a designated amount of property (including cash)
other than Shares, which value may be paid to the Participant by delivery of
such property as the Committee shall determine, including cash, Shares, other
property, or any combination thereof, upon achievement of such performance
goals during the Performance Period as the Committee shall establish at the
time of such grant or thereafter.



     2.25. “Permitted Assignee” shall have the meaning set forth in Section
12.3.



     2.26. “Prior Plans” shall mean, collectively, the Company’s 1991 Incentive
Plan, as amended, and the Company’s 1996 Incentive Plan, as amended.



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     2.27. “Restricted Stock” shall mean any Share issued with the restriction
that the holder may not sell, transfer, pledge or assign such Share and with
such other restrictions as the Committee, in its sole discretion, may impose
(including any restriction on the right to vote such Share and the right to
receive any dividends), which restrictions may lapse separately or in
combination at such time or times, in installments or otherwise, as the
Committee may deem appropriate.



     2.28. “Restricted Period” shall have the meaning set forth in Section 7.1.



     2.29. “Restricted Stock Award” shall have the meaning set forth in Section
7.1.



     2.30. “Shares” shall mean the shares of common stock of the Company, par
value $0.001 per share.



     2.31. “Stock Appreciation Right” shall mean the right granted to a
Participant pursuant to Article 6.



     2.32. “Subsidiary” shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the granting of the Award, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.



     2.33. “Substitute Awards” shall mean Awards granted or Shares issued by
the Company in assumption of, or in substitution or exchange for, awards
previously granted, or the right or obligation to make future awards, by a
company acquired by the Company or any Subsidiary or with which the Company or
any Subsidiary combines.



     2.34. “Tandem Stock Appreciation Right” shall have the meaning set forth
in Section 6.1.



ARTICLE 3




SHARES SUBJECT TO THE PLAN




     3.1. Number of Shares. (a) Subject to adjustment as provided in Section
12.2, a total of 7,300,000 Shares shall be authorized for grant under the Plan,
plus any Shares remaining available for grant under the Prior Plans on the
effective date of the Plan. Any Shares that are subject to Awards of Options
or Stock Appreciation Rights shall be counted against this limit as one (1)
Share for every one (1) Share issued. Any Shares that are subject to Awards
other than Options or Stock Appreciation Rights shall be counted against this
limit as two (2) Shares for every one (1) Share granted.



          (b) If any Shares subject to an Award or to an award under the Prior Plans
are forfeited, expire or otherwise terminate without issuance of such Shares,
or any Award or award under the Prior Plans is settled for cash or otherwise
does not result in the issuance of all or a portion of the Shares subject to
such Award, the Shares shall, to the extent of such forfeiture,



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expiration, termination, cash settlement or non-issuance, again be available
for Awards under the Plan, subject to Section 3.1(g) below.



          (c) In the event that (i) any Option or other Award granted hereunder is
exercised through the tendering of Shares (either actually or by attestation)
or by the withholding of Shares by the Company, or (ii) withholding tax
liabilities arising from such Option or other Award are satisfied by the
tendering of Shares (either actually or by attestation) or by the withholding
of Shares by the Company, then only the number of Shares issued net of the
Shares tendered or withheld shall be counted for purposes of determining the
maximum number of Shares available for issuance under the Plan. In the event
that (i) any option or award granted under the Prior Plans is exercised through
the tendering of Shares (either actually or by attestation) or by the
withholding of Shares by the Company, or (ii) withholding tax liabilities
arising from such options or awards are satisfied by the tendering of Shares
(either actually or by attestation) or by the withholding of Shares by the
Company, then the Shares so tendered or withheld shall again be available for
Awards under the Plan.



          (d) Shares reacquired by the Company on the open market using Option
Proceeds shall be available for Awards under the Plan. The increase in Shares
available pursuant to the repurchase of Shares with Option Proceeds shall not
be greater than the amount of such proceeds divided by the Fair Market Value of
a Share on the date of exercise of the Option giving rise to such Option
Proceeds.



          (e) Substitute Awards shall not reduce the Shares authorized for issuance
under the Plan or authorized for grant to a Participant in any calendar year.
Additionally, in the event that a company acquired by the Company or any
Subsidiary or with which the Company or any Subsidiary combines has shares
available under a pre-existing plan approved by shareholders and not adopted in
contemplation of such acquisition or combination, the shares available for
grant pursuant to the terms of such pre-existing plan (as adjusted, to the
extent appropriate, using the exchange ratio or other adjustment or valuation
ratio or formula used in such acquisition or combination to determine the
consideration payable to the holders of common stock of the entities party to
such acquisition or combination) may be used for Awards under the Plan and
shall not reduce the Shares authorized for issuance under the Plan; provided
that Awards using such available shares shall not be made after the date awards
or grants could have been made under the terms of the pre-existing plan, absent
the acquisition or combination, and shall only be made to individuals who were
not Employees or Directors or any Affiliate prior to such acquisition or
combination.



          (f) Grants of Awards as a material inducement to a person becoming an
employee of the Company or any Subsidiary, including new employees in
connection with a merger or acquisition, or a former employee being rehired as
an employee following a bona fide period of interruption of employment, shall
not reduce the Shares authorized for issuance under the Plan if the Committee
determines to not grant such Awards under the Plan.



          (g) Any Shares that again become available for grant pursuant to this
Article 3 shall be added back as one (1) Share if such Shares were subject to
Options or Stock Appreciation Rights granted under the Plan or options or stock
appreciation rights granted under



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the Prior Plans, and as two (2) Shares if such Shares were subject to Awards
other than Options or Stock Appreciation Rights granted under the Plan.



     3.2. Character of Shares. Any Shares issued hereunder may consist, in
whole or in part, of authorized and unissued shares, treasury shares or shares
purchased in the open market or otherwise.



ARTICLE 4




ELIGIBILITY AND ADMINISTRATION




     4.1. Eligibility. Any Employee or Director shall be eligible to be
selected as a Participant.



     4.2. Administration. (a) The Plan shall be administered by the Committee.
The Directors may remove from, add members to, or fill vacancies on, the
Committee.



          (b) The Committee shall have full power and authority, subject to the
provisions of the Plan and subject to such orders or resolutions not
inconsistent with the provisions of the Plan as may from time to time be
adopted by the Board, to: (i) select the Employees and Directors to whom Awards
may from time to time be granted hereunder; (ii) determine the type or types of
Awards, not inconsistent with the provisions of the Plan, to be granted to each
Participant hereunder; (iii) determine the number of Shares to be covered by
each Award granted hereunder; (iv) determine the terms and conditions, not
inconsistent with the provisions of the Plan, of any Award granted hereunder;
(v) determine whether, to what extent and under what circumstances Awards may
be settled in cash, Shares or other property, subject to Section 8.1; (vi)
determine whether, to what extent, and under what circumstances cash, Shares,
other property and other amounts payable with respect to an Award made under
the Plan shall be deferred either automatically or at the election of the
Participant; (vii) determine whether, to what extent and under what
circumstances any Award shall be canceled or suspended; (viii) interpret and
administer the Plan and any instrument or agreement entered into under or in
connection with the Plan, including any Award Agreement; (ix) correct any
defect, supply any omission or reconcile any inconsistency in the Plan or any
Award in the manner and to the extent that the Committee shall deem desirable
to carry it into effect; (x) establish such rules and regulations and appoint
such agents as it shall deem appropriate for the proper administration of the
Plan; (xi) determine whether any Award will have Dividend Equivalents; and
(xii) make any other determination and take any other action that the Committee
deems necessary or desirable for administration of the Plan.



          (c) Decisions of the Committee shall be final, conclusive and binding on
all persons or entities, including the Company, any Participant, any
stockholder and any Employee or any Affiliate. A majority of the members of
the Committee may determine its actions and fix the time and place of its
meetings. Notwithstanding the foregoing or anything else to the contrary in
the Plan, any action or determination by the Committee specifically affecting
or relating to an Award to a Director shall require the prior approval of the
Board.



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          (d) The Committee may delegate to a committee of one or more directors of
the Company or, to the extent permitted by law, to one or more officers or a
committee of officers the right to grant Awards to Employees who are not
Directors or officers of the Company and to cancel or suspend Awards to
Employees who are not Directors or officers of the Company.



ARTICLE 5




OPTIONS




     5.1. Grant of Options. Options may be granted hereunder to Participants
either alone or in addition to other Awards granted under the Plan. Any Option
shall be subject to the terms and conditions of this Article 5 and to such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall deem desirable.



     5.2. Award Agreements. All Options granted pursuant to this Article 5
  shall be evidenced by a written Award Agreement in such form and
containing such terms and conditions as the Committee shall determine which are
not inconsistent with the provisions of the Plan. Granting of an Option
pursuant to the Plan shall impose no obligation on the recipient to exercise
such Option. Any individual who is granted an Option pursuant to this Article
5 may hold more than one Option granted pursuant to the Plan at the same time.



     5.3. Option Price. Other than in connection with Substitute Awards, the
option price per each Share purchasable under any Option granted pursuant to
this Article 5 shall not be less than 100% of the Fair Market Value of such
Share on the date of grant of such Option. Other than pursuant to Section
12.2, the Committee shall not be permitted to (a) lower the option price per
Share of an Option after it is granted, (b) cancel an Option when the option
price per Share exceeds the Fair Market Value of the underlying Shares in
exchange for another Award (other than in connection with Substitute Awards),
and (c) take any other action with respect to an Option that may be treated as
a repricing under the rules and regulations of the New York Stock Exchange.



     5.4. Option Period. The term of each Option shall be fixed by the
Committee in its sole discretion; provided that no Option shall be exercisable
after the expiration of ten years from the date the Option is granted, except
in the event of death or disability.



     5.5. Exercise of Options. Vested Options granted under the Plan shall be
exercised by the Participant or by a Permitted Assignee thereof (or by the
Participant’s executors, administrators, guardian or legal representative, as
may be provided in an Award Agreement) as to all or part of the Shares covered
thereby, by the giving of written notice of exercise to the Company or its
designated agent, specifying the number of Shares to be purchased, accompanied
by payment of the full purchase price for the Shares being purchased. Unless
otherwise provided in an Award Agreement, full payment of such purchase price
shall be made at the time of exercise and shall be made (a) in cash or by
certified check or bank check or wire transfer of immediately available funds,
(b) by tendering previously acquired Shares (either actually or by attestation,
valued at their then Fair Market Value) that have been owned for a period of at
least six months (or such other period to avoid accounting charges against the
Company’s earnings),



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(c) with the consent of the Committee, by delivery of other consideration
(including, where permitted by law and the Committee, other Awards) having a
Fair Market Value on the exercise date equal to the total purchase price, (d)
with the consent of the Committee, by withholding Shares otherwise issuable in
connection with the exercise of the Option, (e) through any other method
specified in an Award Agreement, or (f) any combination of any of the
foregoing. In connection with a tender of previously acquired Shares pursuant
to clause (b) above, the Committee, in its sole discretion, may permit the
Participant to constructively exchange Shares already owned by the Participant
in lieu of actually tendering such Shares to the Company, provided that
adequate documentation concerning the ownership of the Shares to be
constructively tendered is furnished in form satisfactory to the Committee.
The notice of exercise, accompanied by such payment, shall be delivered to the
Company at its principal business office or such other office as the Committee
may from time to time direct, and shall be in such form, containing such
further provisions consistent with the provisions of the Plan, as the Committee
may from time to time prescribe. In no event may any Option granted hereunder
be exercised for a fraction of a Share. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date of
such issuance.



     5.6. Form of Settlement. In its sole discretion, the Committee may
provide, at the time of grant, that the Shares to be issued upon an Option’s
exercise shall be in the form of Restricted Stock or other similar securities,
or may reserve the right so to provide after the time of grant.



     5.7. Incentive Stock Options. With respect to the Options that may be
granted by the Committee under the Plan, the Committee may grant Options
intended to qualify as “incentive stock options” as defined in Section 422 of
the Code, to any employee of the Company or any Affiliate, subject to the
requirements of Section 422 of the Code. Notwithstanding anything in Section
3.1 to the contrary and solely for the purposes of determining whether Shares
are available for the grant of “incentive stock options” under the Plan, the
maximum aggregate number of Shares with respect to which “incentive stock
options” may be granted under the Plan shall be 7,300,000 Shares.



ARTICLE 6




STOCK APPRECIATION RIGHTS




     6.1. Grant and Exercise. The Committee may provide Stock Appreciation
Rights (a) in conjunction with all or part of any Option granted under the Plan
or at any subsequent time during the term of such Option (“Tandem Stock
Appreciation Right”), (b) in conjunction with all or part of any Award (other
than an Option) granted under the Plan or at any subsequent time during the
term of such Award, or (c) without regard to any Option or other Award (a
“Freestanding Stock Appreciation Right”), in each case upon such terms and
conditions as the Committee may establish in its sole discretion.



     6.2. Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the
following:



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          (a) Upon the exercise of a Stock Appreciation Right, the holder shall have
the right to receive the excess of (i) the Fair Market Value of one Share on
the date of exercise or such other amount as the Committee shall so determine
at any time during a specified period before the date of exercise over (ii) the
grant price of the right on the date of grant, or in the case of a Tandem Stock
Appreciation Right granted on the date of grant of the related Option, as
specified by the Committee in its sole discretion, which, except in the case of
Substitute Awards or in connection with an adjustment provided in Section 12.2,
shall not be less than the Fair Market Value of one Share on such date of grant
of the right or the related Option, as the case may be.



          (b) Upon the exercise of a Stock Appreciation Right, the Committee shall
determine in its sole discretion whether payment shall be made in cash, in
whole Shares or other property, or any combination thereof.



          (c) Any Tandem Stock Appreciation Right may be granted at the same time as
the related Option is granted or at any time thereafter before exercise or
expiration of such Option.



          (d) Any Tandem Stock Appreciation Right related to an Option may be
exercised only when the related Option would be exercisable and the Fair Market
Value of the Shares subject to the related Option exceeds the option price at
which Shares can be acquired pursuant to the Option. In addition, (i) if a
Tandem Stock Appreciation Right exists with respect to less than the full
number of Shares covered by a related Option, then an exercise or termination
of such Option shall not reduce the number of Shares to which the Tandem Stock
Appreciation Right applies until the number of Shares then exercisable under
such Option equals the number of Shares to which the Tandem Stock Appreciation
Right applies, and (ii) no Tandem Stock Appreciation Right granted under the
Plan to a person then subject to Section 16 of the Exchange Act shall be
exercised during the first six months of its term for cash.



          (e) Any Option related to a Tandem Stock Appreciation Right shall no
longer be exercisable to the extent the Tandem Stock Appreciation Right has
been exercised.



          (f) The provisions of Stock Appreciation Rights need not be the same with
respect to each recipient.



          (g) The Committee may impose such other conditions or restrictions on the
terms of exercise and the exercise price of any Stock Appreciation Right, as it
shall deem appropriate, including providing that the exercise price of a Tandem
Stock Appreciation Right may be less than the Fair Market Value on the date of
grant if the Tandem Stock Appreciation Right is added to an Option following
the date of the grant of the Option. In connection with the foregoing, the
Committee shall consider the applicability and effect of Section 162(m) of the
Code. Notwithstanding the foregoing provisions of this Section 6.2(g), but
subject to Section 12.2, a Freestanding Stock Appreciation Right shall not have
(i) an exercise price less than Fair Market Value on the date of grant, or (ii)
a term of greater than ten years. In addition to the foregoing, but subject to
Section 12.2, the base amount of any Stock Appreciation Right shall not be
reduced after the date of grant.



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          (h) The Committee may impose such terms and conditions on Stock
Appreciation Rights granted in conjunction with any Award (other than an
Option) as the Committee shall determine in its sole discretion.



ARTICLE 7




RESTRICTED STOCK AWARDS




     7.1. Grants. Awards of Restricted Stock may be issued hereunder to
Participants either alone or in addition to other Awards granted under the Plan
(a “Restricted Stock Award”). A Restricted Stock Award shall be subject to
restrictions imposed by the Committee covering a period of time specified by
the Committee (the “Restriction Period”). The provisions of Restricted Stock
Awards need not be the same with respect to each recipient. The Committee has
absolute discretion to determine whether any consideration (other than
services) is to be received by the Company or any Affiliate as a condition
precedent to the issuance of Restricted Stock.



     7.2. Award Agreements. The terms of any Restricted Stock Award granted
under the Plan shall be set forth in a written Award Agreement which shall
contain provisions determined by the Committee and not inconsistent with the
Plan.



     7.3. Rights of Holders of Restricted Stock. Beginning on the date of
grant of the Restricted Stock Award and subject to execution of the Award
Agreement, the Participant shall become a shareholder of the Company with
respect to all Shares subject to the Award Agreement and shall have all of the
rights of a shareholder, including the right to vote such Shares and the right
to receive distributions made with respect to such Shares; provided, however,
that any Shares or any other property (other than cash) distributed as a
dividend or otherwise with respect to any Restricted Shares as to which the
restrictions have not yet lapsed shall be subject to the same restrictions as
such Restricted Shares.



     7.4. Minimum Vesting Period. Except for certain limited situations
(including the death, disability or retirement of the Participant or a Change
of Control referred to in Article 11), Restricted Stock Awards subject solely
to continued employment restrictions shall have a Restriction Period of not
less than three years from date of grant (but permitting pro-rata vesting over
such time); provided, that the provisions of this Section 7.4 shall not be
applicable to any Substituted Awards or grants of Restricted Stock in payment
of Performance Awards pursuant to Article 9. Subject to the foregoing
three-year minimum vesting requirement, the Committee may, in its sole
discretion and subject to the limitations imposed under Section 162(m) of the
Code and the Treasury Regulations thereunder in the case of a Restricted Stock
Award intended to comply with the performance-based exception under Code
Section 162(m), waive the forfeiture period and any other conditions set forth
in any Award Agreement subject to such terms and conditions as the Committee
shall deem appropriate.



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ARTICLE 8




OTHER STOCK UNIT AWARDS




     8.1. Stock and Administration. Other Awards of Shares and other Awards
that are valued in whole or in part by reference to, or are otherwise based on,
Shares or other property (“Other Stock Unit Awards”) may be granted hereunder
to Participants, either alone or in addition to other Awards granted under the
Plan, and such Other Stock Unit Awards shall also be available as a form of
payment in the settlement of other Awards granted under the Plan. Other Stock
Unit Awards shall be paid only in Shares. Subject to the provisions of the
Plan, the Committee shall have sole and complete authority to determine the
Employees and Directors to whom and the time or times at which such Other Stock
Unit Awards shall be made, the number of Shares to be granted pursuant to such
Awards, and all other conditions of the Awards. The provisions of Other Stock
Unit Awards need not be the same with respect to each recipient. Except for
certain limited situations (including the death, disability or retirement of
the Participant or a Change of Control referred to in Article 11), Other Stock
Unit Awards subject solely to continued employment restrictions shall be
subject to restrictions imposed by the Committee for a period of not less than
three years from date of grant (but permitting pro-rata vesting over such
time); provided, that such restrictions shall not be applicable to any
Substituted Awards, grants of Other Stock Unit Awards in payment of Performance
Awards pursuant to Article 9, or grants of Other Stock Unit Awards on a
deferred basis.



     8.2. Terms and Conditions. Shares (including securities convertible into
Shares) subject to Awards granted under this Article 8 may be issued for no
consideration or for such minimum consideration as may be required by
applicable law. Shares (including securities convertible into Shares)
purchased pursuant to a purchase right awarded under this Article 8 shall be
purchased for such consideration as the Committee shall determine in its sole
discretion.



ARTICLE 9




PERFORMANCE AWARDS




     9.1. Terms of Performance Awards. Performance Awards may be issued
hereunder to Participants, for no consideration or for such minimum
consideration as may be required by applicable law, either alone or in addition
to other Awards granted under the Plan. The performance criteria to be
achieved during any Performance Period and the length of the Performance Period
shall be determined by the Committee upon the grant of each Performance Award;
provided, however, that a Performance Period shall not be shorter than 12
months nor longer than five years. Except as provided in Article 11 or as may
be provided in an Award Agreement, Performance Awards will be distributed only
after the end of the relevant Performance Period. Performance Awards may be
paid in cash, Shares, other property, or any combination thereof, in the sole
discretion of the Committee at the time of payment. The performance goals to
be achieved for each Performance Period shall be conclusively determined by the
Committee and may be based upon the criteria set forth in Section 10.2. The
amount of the Award to be distributed shall be conclusively determined by the
Committee. Performance Awards may be paid in a lump sum or in installments
following the close of the Performance Period or, in accordance with procedures
established by the Committee, on a deferred basis.



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ARTICLE 10




CODE SECTION 162(m) PROVISIONS




     10.1. Covered Employees. Notwithstanding any other provision of the Plan,
if the Committee determines at the time Restricted Stock, a Performance Award
or an Other Stock Unit Award is granted to a Participant who is, or is likely
to be, as of the end of the tax year in which the Company would claim a tax
deduction in connection with such Award, a Covered Employee, then the Committee
may provide that this Article 10 is applicable to such Award.



     10.2. Performance Criteria. If Restricted Stock, a Performance Award or
an Other Stock Unit Award is subject to this Article 10, then the lapsing of
restrictions thereon and the distribution of cash, Shares or other property
pursuant thereto, as applicable, shall be subject to the achievement of one or
more objective performance goals established by the Committee, which shall be
based on the attainment of specified levels of one or any combination of the
following: net sales; pretax income before allocation of corporate overhead and
bonus; earnings per share; net income; division, group or corporate financial
goals; return on stockholders’ equity; return on assets; attainment of
strategic and operational initiatives; appreciation in and/or maintenance of
the price of the Shares or any other publicly-traded securities of the Company;
market share; gross profits; earnings before taxes; earnings before interest
and taxes; earnings before interest, taxes, depreciation and amortization;
economic value-added models; comparisons with various stock market indices;
reductions in costs, and/or return on invested capital of the Company or any
Affiliate, division or business unit of the Company for or within which the
Participant is primarily employed. Such performance goals also may be based
solely by reference to the Company’s performance or the performance of an
Affiliate, division or business unit of the Company, or based upon the relative
performance of other companies or upon comparisons of any of the indicators of
performance relative to other companies. The Committee may also exclude the
impact of an event or occurrence which the Committee determines should
appropriately be excluded, including (a) restructurings, discontinued
operations, extraordinary items, and other unusual or non-recurring charges,
(b) an event either not directly related to the operations of the Company or
not within the reasonable control of the Company’s management, or (c) a change
in accounting standards required by generally accepted accounting principles.
Such performance goals shall be set by the Committee within the time period
prescribed by, and shall otherwise comply with the requirements of, Section
162(m) of the Code, or any successor provision thereto, and the regulations
thereunder.



     10.3. Adjustments. Notwithstanding any provision of the Plan (other than
Article 11), with respect to any Restricted Stock, Performance Award or Other
Stock Unit Award that is subject to this Article 10, the Committee may adjust
downwards, but not upwards, the amount payable pursuant to such Award, and the
Committee may not waive the achievement of the applicable performance goals,
except in the case of the death or disability of the Participant.



     10.4. Restrictions. The Committee shall have the power to impose such
other restrictions on Awards subject to this Article 10 as it may deem
necessary or appropriate to ensure that such Awards satisfy all requirements
for “performance-based compensation” within the meaning of Section 162(m)(4)(C)
of the Code, or any successor provision thereto.



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     10.5. Limitations on Grants to Individual Participant. Subject to
adjustment as provided in Section 12.2, no Participant may be
granted (i) Options or Stock Appreciation Rights during any 36-month period
with respect to more than 2,000,000 Shares or (ii) Restricted Stock,
Performance Awards and/or Other Stock Unit Awards that are denominated in
Shares in any 36-month period with respect to more than 1,000,000 Shares (the
“Limitations”). In addition to the foregoing, the maximum dollar value payable
to any Participant in any 12-month period with respect to Performance Awards
and/or Other Stock Unit Awards that are valued with reference to property other
than Shares is $5,000,000. If an Award is cancelled, the cancelled Award shall
continue to be counted toward the applicable Limitations.



     10.6. Other Company Compensation Plans. Shares available for Awards under
the Plan may be used by the Company as a form of payment of performance based
compensation under other Company compensation plans, whether or not existing on
the date hereof. Notwithstanding anything in this Article 10 to the contrary,
to the extent any Shares are used as such by the Company, such Shares will
reduce the then number of Shares available under Article 3 of the Plan for
future Awards, but will not be subject to the Share or dollar limitations set
forth in Section 10.5 above.



ARTICLE 11




CHANGE OF CONTROL PROVISIONS




     11.1. Impact of Change of Control. The terms of any Award may provide in
the Award Agreement evidencing the Award that, upon a “Change of Control” of
the Company (as that term may be defined therein), (a) Options and Stock
Appreciation Rights outstanding as of the date of the Change of Control
immediately vest and become fully exercisable, (b) restrictions and deferral
limitations on Restricted Stock lapse and the Restricted Stock become free of
all restrictions and limitations and become fully vested, (c) all Performance
Awards shall be considered to be earned and payable (either in full or pro-rata
based on the portion of Performance Period completed as of the date of the
Change in Control), and any deferral or other restriction shall lapse and such
Performance Awards shall be immediately settled or distributed, (d) the
restrictions and deferral limitations and other conditions applicable to any
Other Stock Unit Awards or any other Awards shall lapse, and such Other Stock
Unit Awards or such other Awards shall become free of all restrictions,
limitations or conditions and become fully vested and transferable to the full
extent of the original grant, and (e) such other additional benefits as the
Committee deems appropriate shall apply, subject in each case to any terms and
conditions contained in the Award Agreement evidencing such Award. For
purposes of the Plan, a “Change of Control” shall mean an event described in an
Award Agreement evidencing the Award or such other event as determined in the
sole discretion of the Board. Notwithstanding any other provision of the Plan,
the Committee, in its discretion, may determine that, upon the occurrence of a
Change of Control of the Company, each Option and Stock Appreciation Right
outstanding shall terminate within a specified number of days after notice to
the Participant, and such Participant shall receive, with respect to each Share
subject to such Option or Stock Appreciation Right, an amount equal to the
excess of the Fair Market Value of such Share immediately prior to the
occurrence of such Change of Control over the exercise price per share of such
Option and/or Stock Appreciation Right; such amount to be payable in cash, in
one or more kinds of



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stock or property (including the stock or property, if any, payable in the
transaction) or in a combination thereof, as the Committee, in its discretion,
shall determine.



     11.2. Assumption Upon Change of Control. Notwithstanding the foregoing,
the terms of any Award Agreement may also provide that, if in the event of a
Change of Control the successor company assumes or substitutes for an Option,
Stock Appreciation Right, Share of Restricted Stock or Other Stock Unit Award,
then each outstanding Option, Stock Appreciation Right, Share of Restricted
Stock or Other Stock Unit Award shall not be accelerated as described in
Sections 11.1(a), (b) and (d). For the purposes of this Section 11.2, an
Option, Stock Appreciation Right, Share of Restricted Stock or Other Stock Unit
Award shall be considered assumed or substituted for if following the Change of
Control the award confers the right to purchase or receive, for each Share
subject to the Option, Stock Appreciation Right, Restricted Stock Award or
Other Stock Unit Award immediately prior to the Change of Control, the
consideration (whether stock, cash or other securities or property) received in
the transaction constituting a Change of Control by holders of Shares for each
Share held on the effective date of such transaction (and if holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares); provided, however, that if
such consideration received in the transaction constituting a Change of Control
is not solely common stock of the successor company, the Committee may, with
the consent of the successor company, provide that the consideration to be
received upon the exercise or vesting of an Option, Stock Appreciation Right,
Restricted Stock Award or Other Stock Unit Award, for each Share subject
thereto, will be solely common stock of the successor company substantially
equal in fair market value to the per share consideration received by holders
of Shares in the transaction constituting a Change of Control. The
determination of such substantial equality of value of consideration shall be
made by the Committee in its sole discretion and its determination shall be
conclusive and binding. Notwithstanding the foregoing, on such terms and
conditions as may be set forth in an Award Agreement, in the event of a
termination of a Participant’s employment in such successor company within a
specified time period following such Change in Control, each Award held by such
Participant at the time of the Change in Control shall be accelerated as
described in Sections 11.1(a), (b) and (d) above.



ARTICLE 12




GENERALLY APPLICABLE PROVISIONS




     12.1. Amendment and Modification of the Plan. The Board may, from time to
time, alter, amend, suspend or terminate the Plan as it shall deem advisable,
subject to any requirement for stockholder approval imposed by applicable law,
including the rules and regulations of the New York Stock Exchange or any rule
or regulation of any stock exchange or quotation system on which Shares are
listed or quoted; provided that the Board may not amend the Plan in any manner
that would result in noncompliance with Rule 16b-3 of the Exchange Act; and
further provided that the Board may not, without the approval of the Company’s
stockholders, amend the Plan to (a) increase the number of Shares that may be
the subject of Awards under the Plan (except for adjustments pursuant to
Section 12.2), (b) expand the types of awards available under the Plan, (c)
materially expand the class of persons eligible to participate in the Plan, (d)
amend any provision of Section 5.3, (e) increase the maximum permissible term
of any Option specified by Section 5.4, or (f) amend any provision of Section
10.5. In addition, no amendments to, or



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termination of, the Plan shall in any way impair the rights of a
Participant under any Award previously granted without such Participant’s
consent.



     12.2. Adjustments. In the event of any merger, reorganization,
consolidation, recapitalization, dividend or distribution (whether in cash,
shares or other property), stock split, reverse stock split, spin-off or
similar transaction or other change in corporate structure affecting the Shares
or the value thereof, such adjustments and other substitutions shall be made to
the Plan and to Awards as the Committee, in its sole discretion, deems
equitable or appropriate, including such adjustments in the aggregate number,
class and kind of securities that may be delivered under the Plan and, in the
aggregate or to any one Participant, in the number, class, kind and option or
exercise price of securities subject to outstanding Awards granted under the
Plan (including, if the Committee deems appropriate, the substitution of
similar options to purchase the shares of, or other awards denominated in the
shares of, another company) as the Committee may determine to be appropriate in
its sole discretion; provided, however, that the number of Shares subject to
any Award shall always be a whole number.



     12.3. Transferability of Awards. Except as provided below, and except as
otherwise authorized by the Committee in an Award Agreement, no Award and no
Shares subject to Awards described in Article 8 that have not been issued or as
to which any applicable restriction, performance or deferral period has not
lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered,
other than by will or the laws of descent and distribution, and such Award may
be exercised during the life of the Participant only by the Participant or the
Participant’s guardian or legal representative. Notwithstanding the foregoing,
a Participant may assign or transfer an Award with the consent of the Committee
(each transferee thereof, a “Permitted Assignee”); provided that such
Permitted Assignee shall be bound by and subject to all of the terms and
conditions of the Plan and the Award Agreement relating to the transferred
Award and shall execute an agreement satisfactory to the Company evidencing
such obligations; and provided further that such Participant shall remain bound
by the terms and conditions of the Plan. The Company shall cooperate with any
Permitted Assignee and the Company’s transfer agent in effectuating any
transfer permitted under this Section 12.3.



     12.4. Termination of Employment. The Committee shall determine and set
forth in each Award Agreement whether any Awards granted in such Award
Agreement will continue to be exercisable, and the terms of such exercise, on
and after the date that a Participant ceases to be employed by or to provide
services to the Company or any Affiliate (including as a Director), whether by
reason of death, disability, voluntary or involuntary termination of employment
or services, or otherwise. The date of termination of a Participant’s
employment or services will be determined by the Committee, which determination
will be final.



     12.5. Deferral; Dividend Equivalents. The Committee shall be authorized
to establish procedures pursuant to which the payment of any Award may be
deferred. Subject to the provisions of the Plan and any Award Agreement, the
recipient of an Award (including any deferred Award) may, if so determined by
the Committee, be entitled to receive, currently or on a deferred basis, cash,
stock or other property dividends, or cash payments in amounts equivalent to
cash, stock or other property dividends on Shares (“Dividend Equivalents”) with
respect to the number of Shares covered by the Award, as determined by the
Committee, in its sole discretion,



15









 





and the Committee may provide that such amounts (if any) shall be deemed
to have been reinvested in additional Shares or otherwise reinvested.



ARTICLE 13




MISCELLANEOUS




     13.1. Tax Withholding. The Company shall have the right to make all
payments or distributions pursuant to the Plan to a Participant (or a Permitted
Assignee thereof) (any such person, a “Payee”) net of any applicable Federal,
State and local taxes required to be paid or withheld as a result of (a) the
grant of any Award, (b) the exercise of an Option or Stock Appreciation Rights,
(c) the delivery of Shares or cash, (d) the lapse of any restrictions in
connection with any Award or (e) any other event occurring pursuant to the
Plan. The Company or any Affiliate shall have the right to withhold from wages
or other amounts otherwise payable to such Payee such withholding taxes as may
be required by law, or to otherwise require the Payee to pay such withholding
taxes. If the Payee shall fail to make such tax payments as are required, the
Company or its Affiliates shall, to the extent permitted by law, have the right
to deduct any such taxes from any payment of any kind otherwise due to such
Payee or to take such other action as may be necessary to satisfy such
withholding obligations. The Committee shall be authorized to establish
procedures for election by Participants to satisfy such obligation for the
payment of such taxes by tendering previously acquired Shares (either actually
or by attestation, valued at their then Fair Market Value) that have been owned
for a period of at least six months (or such other period to avoid accounting
charges against the Company’s earnings), or by directing the Company to retain
Shares (up to the employee’s minimum required tax withholding rate) otherwise
deliverable in connection with the Award.



     13.2. Right of Discharge Reserved; Claims to Awards. Nothing in the Plan
nor the grant of an Award hereunder shall confer upon any Employee or Director
the right to continue in the employment or service of the Company or any
Affiliate or affect any right that the Company or any Affiliate may have to
terminate the employment or service of (or to demote or to exclude from future
Awards under the Plan) any such Employee or Director at any time for any
reason. Except as specifically provided by the Committee, the Company shall
not be liable for the loss of existing or potential profit from an Award
granted in the event of termination of an employment or other relationship. No
Employee or Participant shall have any claim to be granted any Award under the
Plan, and there is no obligation for uniformity of treatment of Employees or
Participants under the Plan.



     13.3. Prospective Recipient. The prospective recipient of any Award under
the Plan shall not, with respect to such Award, be deemed to have become a
Participant, or to have any rights with respect to such Award, until and unless
such recipient shall have executed an agreement or other instrument evidencing
the Award and delivered a copy thereof to the Company, and otherwise complied
with the then applicable terms and conditions.



     13.4. Cancellation of Award. Notwithstanding anything to the contrary
contained herein, all outstanding Awards granted to any Participant shall be
canceled if the Participant, without the consent of the Company, while employed
by the Company or any Affiliate or after termination of such employment or
service, establishes a relationship with a competitor of the



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Company or any Affiliate or engages in activity that is in conflict with
or adverse to the interest of the Company or any Affiliate, as determined by
the Committee in its sole discretion.



     13.5. Stop Transfer Orders. All certificates for Shares delivered under
the Plan pursuant to any Award shall be subject to such stop-transfer orders
and other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Shares are then listed, and any applicable
federal or state securities law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to
such restrictions.



     13.6. Nature of Payments. All Awards made pursuant to the Plan are in
consideration of services performed or to be performed for the Company or any
Affiliate, division or business unit of the Company. Any income or gain
realized pursuant to Awards under the Plan and any Stock Appreciation Rights
constitute a special incentive payment to the Participant and shall not be
taken into account, to the extent permissible under applicable law, as
compensation for purposes of any of the employee benefit plans of the Company
or any Affiliate except as may be determined by the Committee or by the Board
or board of directors of the applicable Affiliate.



     13.7. Other Plans. Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.



     13.8. Severability. If any provision of the Plan shall be held unlawful
or otherwise invalid or unenforceable in whole or in part by a court of
competent jurisdiction, such provision shall (a) be deemed limited to the
extent that such court of competent jurisdiction deems it lawful, valid and/or
enforceable and as so limited shall remain in full force and effect, and (b)
not affect any other provision of the Plan or part thereof, each of which shall
remain in full force and effect. If the making of any payment or the provision
of any other benefit required under the Plan shall be held unlawful or
otherwise invalid or unenforceable by a court of competent jurisdiction, such
unlawfulness, invalidity or unenforceability shall not prevent any other
payment or benefit from being made or provided under the Plan, and if the
making of any payment in full or the provision of any other benefit required
under the Plan in full would be unlawful or otherwise invalid or unenforceable,
then such unlawfulness, invalidity or unenforceability shall not prevent such
payment or benefit from being made or provided in part, to the extent that it
would not be unlawful, invalid or unenforceable, and the maximum payment or
benefit that would not be unlawful, invalid or unenforceable shall be made or
provided under the Plan.



     13.9.
Construction. All references in the Plan to
“Section,” “Sections,”
or “Article” are intended to refer to the Section, Sections or Article, as the
case may be, of the Plan. As used in the Plan, the words “include” and
“including,” and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words “without
limitation.”



     13.10. Unfunded Status of the Plan. The Plan is intended to constitute an
“unfunded” plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights



17









 





that are greater than those of a general creditor of the Company. In its
sole discretion, the Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver the
Shares or payments in lieu of or with respect to Awards hereunder; provided,
however, that the existence of such trusts or other arrangements is consistent
with the unfunded status of the Plan.



     13.11. Governing Law. The Plan and all determinations made and actions
taken thereunder, to the extent not otherwise governed by the Code or the laws
of the United States, shall be governed by the laws of the State of Delaware
and construed accordingly.



     13.12. Effective Date of Plan; Termination of Plan. The Plan shall be
effective on the date of the approval of the Plan by the holders of a majority
of the shares entitled to vote at a duly constituted meeting of the
stockholders of the Company. The Plan shall be null and void and of no effect
if the foregoing condition is not fulfilled and in such event each Award shall,
notwithstanding any of the preceding provisions of the Plan, be null and void
and of no effect. Awards may be granted under the Plan at any time and from
time to time on or prior to the tenth anniversary of the effective date of the
Plan, on which date the Plan will expire except as to Awards then outstanding
under the Plan. Such outstanding Awards shall remain in effect until they have
been exercised or terminated, or have expired.



     13.13. Foreign Employees. Awards may be granted to Participants who are
foreign nationals or employed outside the United States, or both, on such terms
and conditions different from those applicable to Awards to Employees employed
in the United States as may, in the judgment of the Committee, be necessary or
desirable in order to recognize differences in local law or tax policy. The
Committee also may impose conditions on the exercise or vesting of Awards in
order to minimize the Company’s obligation with respect to tax equalization for
Employees on assignments outside their home country.



     13.14. Captions. The captions in the Plan are for convenience of
reference only, and are not intended to narrow, limit or affect the substance
or interpretation of the provisions contained herein.




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