Exhibit 10.1


 


OUTSIDE DIRECTORS’ 2005
STOCK INCENTIVE PLAN


 


1.                                      PREAMBLE


 


This Zale Corporation Outside Directors’ 2005 Stock
Incentive Plan, as it may be amended from time to time (the “Plan”), is
intended to promote the interests of Zale Corporation, a Delaware corporation
(the “Company”), and its stockholders by providing directors of the Company who
are not employees of the Company with appropriate incentives and rewards to
serve on the board of directors of the Company and to acquire a proprietary
interest in the long-term success of the Company.


 


2.                                      DEFINITIONS


 


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


 


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


 


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


 


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


 


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


 


(ii)                                  during any period of
two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (i), (iii) or (iv) of this
definition) whose election by the Board of Directors or nomination for election
by the Company’s stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(j)                                     “Incentive Award” shall mean
an Option or a share of Restricted Stock granted pursuant to the terms of the
Plan.


 


(k)                                  “Issue Date” shall mean the date
established by the Board of Directors on which certificates representing shares
of Restricted Stock shall be issued by the Company pursuant to the terms of Section 8(e).


 


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


 


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


 


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


 


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


 


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


 


(q)                                 “Vesting Date” shall
mean the date established by the Board of Directors on which a share of
Restricted Stock may vest.


 


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3.                                      STOCK
SUBJECT TO THE PLAN


 


(a)                                  Shares Available for
Option or Restricted Stock Awards


 


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


 


(b)                                 Adjustment for Change
in Capitalization


 


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


 


(c)                                  Re-use
of Shares


 


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


 


(d)                                 No
Repricing


 


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


 


4.                                      ADMINISTRATION
OF THE PLAN


 


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


 


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


 


5.                                      ELIGIBILITY


 


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


 


6.                                      INCENTIVE
AWARDS UNDER THE PLAN


 


Incentive Awards granted under the Plan shall
be subject to the terms and conditions set forth in the Plan, and shall be
evidenced by an Incentive Award Agreement which shall not be inconsistent with
the provisions of the Plan.  The Board of
Directors shall be entitled to increase or decrease the number of Incentive
Awards Participants receive.


 


(a)                                  Annual Awards.  Annually, Participants shall receive the
following Incentive Awards:


 


(i)                                     3,800
Options; and


 


(ii)                                  1,500
shares of Restricted Stock.


 


(b)                                 Other Awards


 


Upon the initial election to the Board of
Directors of any person who is a Participant (other than through an initial
election by the Company’s stockholders at an annual meeting of stockholders),
such person shall be granted:


 


(i)                                     Options to
purchase such number of shares of Company Stock as shall be determined by
multiplying (1) 300 by (2) the number of full calendar months
remaining before the next annual meeting of stockholders of the Company at
which directors will be elected (if no date has been set for the next annual
meeting of stockholders such date shall be presumed to be November 1); and


 


(ii)                                  Restricted Stock in
such number of shares as shall be determined by multiplying (1) 100 by (2) the
number of full calendar months remaining before the next annual meeting of
stockholders of the Company at which directors will be elected (if no date has
been set for the next annual meeting of stockholders such date shall be
presumed to be November 1).


 


The Board of Directors shall be entitled to
increase or decrease these pro rata amounts in order to reflect any adjustment
on the annual awards.


 


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7.                                      OPTIONS


 


(a)                                  Exercise Price


 


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


 


(b)                                 Term and Exercise of
Options


 


(i)                                     Unless the Board,
in its discretion, determines otherwise, each Option shall become cumulatively
exercisable as to 25% of the shares covered thereby on each of the first,
second, third and fourth anniversaries of the date of grant.  The expiration date of each Option shall be
ten years after the date of grant; provided, however, that if the expiration
date would occur during a period in which the Participant is prohibited from
trading in the Company Stock pursuant to the provisions of the Company’s
insider trading policy, then the expiration date shall be extended and such
Option shall expire on the 30th day after the prohibition against trading under
the Company’s insider trading policy has ceased to be in effect.


 


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


 


(iii)                               An Option shall be
exercised by delivering notice to the Company’s principal office, to the attention
of its Secretary (or the Secretary’s designee), no less than one business day
in advance of the effective date of the proposed exercise.  Such notice shall specify the number of
shares of Company Stock with respect to which the Option is being exercised and
the effective date of the proposed exercise and shall be signed by the
Participant or other person then having the right to exercise the Option.  Such notice may be withdrawn at any time
prior to the close of business on the business day immediately preceding the
effective date of the proposed exercise. 
Payment for shares of Company Stock purchased upon the exercise of an
Option shall be made on the effective date of such exercise by one or a
combination of the following means: (i) in cash, by certified check, bank
cashier’s check or wire transfer; (ii) subject to the approval of the
Board of Directors, in shares of Company Stock owned by the Participant for at
least six months prior to the date of exercise and valued at their Fair Market
Value on the effective date of such exercise; or (iii) subject to the
approval of the Board of Directors, by such other provision as the Board of
Directors may from time to time authorize. 
Any payment in shares of Company Stock shall be effected by the delivery
of such shares to the Secretary (or the Secretary’s designee) of the Company,
duly endorsed in blank or accompanied by stock powers duly executed in blank,
together with any other documents and evidences as the Secretary (or the
Secretary’s designee) of the Company shall require.


 


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


 


(c)                                  Effect of Termination
of Directorship


 


(i)                                     Unless the Board
of Directors shall determine otherwise, in the event of a Participant’s removal
or resignation as a member of the Board of Directors for any reason other


 


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


 


(ii)                                  Unless the Board of
Directors shall determine otherwise, in the event of a Participant’s removal or
resignation as a member of the Board of Directors on account of the Disability
or death of the Participant: (i) Options granted to such Participant, to
the extent that they were exercisable at the time of such removal or
resignation, shall remain exercisable until the first anniversary of such
removal or resignation, on which date they shall expire; and (ii) Options
granted to such Participant, to the extent that they were not exercisable at
the time of such removal or resignation, shall expire at the close of business
on the date of such removal or resignation. 
Notwithstanding the foregoing, no Option shall be exercisable after the
expiration of its term.


 


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


 


(d)                                 Acceleration of
Exercise Date Upon Change in Control


 


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


 


8.                                      RESTRICTED
STOCK


 


(a)                                  Issue Date and
Vesting Date


 


At the time of the grant of shares of
Restricted Stock, the Board of Directors shall establish an Issue Date or Issue
Dates and a Vesting Date or Vesting Dates with respect to such shares.  Provided that all conditions to the vesting
of a share of Restricted Stock imposed pursuant to Section 8(b) are
satisfied, upon the occurrence of the Vesting Date with respect to a share of
Restricted Stock, such share shall vest and the restrictions of Section 8(b) shall
cease to apply to such share.  Unless the
Board of Directors determines otherwise, shares of Restricted Stock issued
under the Plan shall vest on the first anniversary of the Issue Date.


 


(b)                                 Conditions to Vesting


 


At the time of the grant of shares of
Restricted Stock, the Board of Directors may impose such restrictions or
conditions to the vesting of such shares as it, in its absolute discretion,
deems appropriate.  By way of example and
not by way of limitation, the Board of Directors may


 


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require, as a condition to the vesting of any class or classes of
shares of Restricted Stock, that the Participant or the Company achieves such
performance goals as the Board of Directors may specify.


 


(c)                                  Restrictions on
Transfer Prior to Vesting


 


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


 


(d)                                 Dividends on
Restricted Stock


 


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


 


(e)                                  Issuance of
Certificates


 


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


 


The transferability of this certificate and
the shares of stock represented hereby are subject to the restrictions, terms
and conditions (including forfeiture provisions and restrictions against
transfer) contained in the Zale Corporation Outside Directors’ 2005 Stock
Incentive Plan, and such rules, regulations and interpretations as the Zale
Corporation Board of Directors may adopt. 
Copies of the Plan and, if any, rules, regulations and interpretations
are on file in the office of the Secretary of Zale Corporation, 901 West Walnut
Hill Lane, Irving, Texas 75038-1003.


 


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


 


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


 


(f)                                    Voting
Rights of Restricted Stock


 


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


 


(g)                                 Consequences
of Vesting


 


Upon the vesting of a share of Restricted
Stock pursuant to the terms of the Plan, the restrictions of Section 8(c) shall
cease to apply to such share.  Reasonably
promptly after a share of Restricted Stock vests, the Company shall cause to be
delivered to the Participant to whom such shares were granted, a certificate
evidencing such share, free of the legend set forth in


 


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Section 8(e). 
Notwithstanding the foregoing, such share still may be subject to
restrictions on transfer as a result of applicable securities laws.


 


(h)                                 Effect
of Termination of Directorship


 


(i)                                     Unless
the Board of Directors provides otherwise, during the 90 days following a
Participant’s removal or resignation as a member of the Board of Directors for
any reason other than Cause, the Company shall have the right to require the
return of any shares to which restrictions on transferability apply, in
exchange for which the Company shall repay to the Participant (or the Participant’s
estate) any amount paid by the Participant for such shares.  In the event that the Company requires such a
return of shares, it also shall have the right to require the return of all
dividends paid on such shares, whether by termination of any escrow arrangement
under which such dividends are held or otherwise.


 


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


 


(i)                                     Effect
of Change in Control


 


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


 


9.                                      RIGHTS
AS A STOCKHOLDER


 


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


 


10.                               NO
RIGHT TO INCENTIVE AWARD


 


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


 


11.                               SECURITIES
MATTERS


 


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


 


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hereof, may bear such legends, as the Board of Directors,
in its sole discretion, deems necessary or desirable to insure compliance with
applicable securities laws.


 


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


 


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


 


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


 


13.                               WITHHOLDING
TAXES


 


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


 


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


 


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14.                               AMENDMENT
OR TERMINATION OF THE PLAN


 


Except as provided in Section 3(d), the
Board of Directors may, at any time, suspend or terminate the Plan or revise or
amend it in any respect whatsoever; provided, however, that stockholder
approval shall be required if and to the extent required by Rule 16b-3 or
the New York Stock Exchange or any other securities exchange on which shares of
the Company Stock are traded.  Nothing
herein shall restrict the Board of Director’s ability to exercise its
discretionary authority pursuant to Section 4, which discretion may be
exercised without amendment to the Plan. 
No action hereunder may, without the consent of a Participant, reduce
the Participant’s rights under any outstanding Incentive Award.


 


15.                               NO
OBLIGATION TO EXERCISE


 


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


 


16.                               TRANSFERS
UPON DEATH; NONASSIGNABILITY


 


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


 


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


 


17.                               EXPENSES
AND RECEIPTS


 


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


 


18.                               FAILURE
TO COMPLY


 


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


 


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19.                               EFFECTIVE
DATE AND TERM OF PLAN


 


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


 


20.                               APPLICABLE
LAW


 


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


 


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