exv4w6



 







EXHIBIT 4.6



     



 



     2007 OMNIBUS STOCK AND
    INCENTIVE PLAN




    For




    CAPITAL SENIOR LIVING
    CORPORATION



 



    

 








 







    2007
    Omnibus Stock And Incentive Plan

    For

    Capital Senior Living Corporation



 



    1. Purpose.  The purpose of this
    Plan is to advance the interests of Capital Senior Living
    Corporation and increase shareholder value by providing
    additional incentives to attract, retain and motivate those
    qualified and competent Employees, Outside Directors, and
    Consultants upon whose efforts and judgment its success is
    largely dependent.



 



    2. Definitions.  As used herein,
    the following terms shall have the meaning indicated:



 



    (a) “Affiliate” means any entity, other
    than the Parent or a Subsidiary, that is designated by the Board
    as a participating employer under the Plan, provided that the
    Parent directly or indirectly owns at least 20% of the combined
    voting power of all classes of stock of such entity or at least
    20% of the ownership interests in such entity.



 



    (b) “Agreed Price” shall relate to the
    grant of a SAR or Limited SAR under an Award, and shall mean the
    value assigned to the Available Shares in the Award which will
    form the basis for calculating the Spread on the date of
    exercise of the SAR or Limited SAR, which assigned value may be
    any value determined by the Committee, including the Fair Market
    Value of the Shares on the Date of Grant.



 



    (c) “Award” shall mean either an Option,
    an SAR, a Restricted Share Award, or a Performance Award, except
    that where it shall be appropriate to identify the specific type
    of Award, reference shall be made to the specific type of Award.



 



    (d) “Available Shares” shall mean, at each
    time of reference, the total number of Shares described in
    Section 3 with respect to which the Committee may
    grant an Award, all of which Available Shares shall be held in
    the Parent’s treasury or shall be made available from
    authorized and unissued Shares.



 



    (e) “Board” shall mean the Board of
    Directors of the Parent.



 



    (f) “Cause” shall mean (i) a final,
    nonappealable conviction of a Holder for commission of a felony
    involving moral turpitude, (ii) Holder’s willful gross
    misconduct that causes material economic harm to the Company or
    that brings substantial discredit to the Company’s
    reputation, or (iii) Holder’s material failure or
    refusal to perform his duties if Holder has failed to cure such
    failure or refusal to perform within thirty (30) days after
    the Company notifies Holder in writing of such failure or
    refusal to perform.



 



    (g) “Change in Control” shall mean the
    first to occur of (i) a merger, consolidation, statutory
    share exchange or sale, lease, exchange or other transfer (in
    one transaction or a series of related transactions) of all or
    substantially all of the assets of the Company that requires the
    consent or vote of the holders of the Parent’s Common
    Stock, other than a consolidation, merger or share exchange of
    the Parent in which the holders of the Parent’s Common
    Stock immediately prior to such transaction have the same
    proportionate ownership of common stock of the surviving
    corporation immediately after such transaction; (ii) the
    shareholders of the Parent approve any plan or proposal for the
    liquidation or dissolution of the Company; (iii) the
    cessation of control (by virtue of their not constituting a
    majority of Directors) of the Board of Directors of the Parent
    by the individuals (the “Continuing Directors”) who
    (x) on the Effective Date were Directors, or
    (y) become Directors after the date of this Agreement and
    whose election or nomination for election by the Parent’s
    shareholders was approved by a vote of at least two-thirds of
    the Directors then in office who were Directors at the Effective
    Date or whose election or nomination for election was previously
    so approved; (iv) the acquisition of beneficial ownership
    (within the meaning of
    Rule 13d-3
    under the Exchange Act) of an aggregate of 20% or more of the
    voting power of the Parent’s outstanding voting securities
    by any person or group (as such term is used in
    Rule 13d-5
    under the Exchange Act) who beneficially owned less than 15% of
    the voting power of the Parent’s outstanding voting
    securities on the Effective Date, or the acquisition of
    beneficial ownership of an additional 5% of the voting power of
    the Parent’s outstanding voting securities by any person or
    group who beneficially owned at least 15% of the voting power of
    the Parent’s outstanding voting securities on the Effective
    Date; provided, however, that notwithstanding the foregoing, an
    acquisition shall not be described hereunder if the acquiror is
    (x) a trustee or other fiduciary holding securities under
    an employee benefit plan of the Company




    










 






    and acting in such capacity, (y) a wholly-owned subsidiary
    of the Parent or a corporation owned, directly or indirectly, by
    the shareholders of the Parent in the same proportions as their
    ownership of voting securities of the Parent, or (z) any
    other person whose acquisition of shares of voting securities is
    approved in advance by a majority of the Continuing Directors;
    or (v) in a Title 11 bankruptcy proceeding, the
    appointment of a trustee or the conversion of a case involving
    the Company to a case under Chapter 7.



 



    (h) “Change in Control Price” shall mean
    the highest price per share paid in any transaction reported on
    the NYSE or such other exchange or market as is the principal
    trading market for the Common Stock, or paid or offered in any
    bona fide transaction related to a Change in Control at any time
    during the 60 day period immediately preceding such
    occurrence, in each case as determined by the Committee except
    that, in the case of Stock Appreciation Rights relating to
    Incentive Stock Options, such price shall be based only on
    transactions reported for the date on which the Holder exercises
    such Stock Appreciation Rights or, where applicable, the date on
    which a cash out occurs.



 



    (i) “Code” shall mean the Internal Revenue
    Code of 1986, as now or hereafter amended.



 



    (j) “Committee” shall mean the
    Compensation Committee of the Board, exclusive of any member of
    the Compensation Committee who is not a Non-Employee Director.



 



    (k) “Common Stock” shall mean the common
    stock, par value $.01 per share, of the Parent.



 



    (l) “Company” shall mean the Parent, its
    Subsidiaries and Affiliates, except when it shall be appropriate
    to refer only to Capital Senior Living Corporation, then it
    shall be referred to as “Parent”.



 



    (m) “Consultant” shall mean any person or
    entity (including a Director) who or which is engaged by the
    Company to render consulting services and is compensated for
    such consulting services; provided, further, without limiting
    the generality of the forgoing, it shall not mean a Director who
    is paid only a Director’s fee by the Company.



 



    (n) “Covered Person(s)” shall mean, for
    each Plan Year, the Chief Executive Officer and the four
    (4) highest paid Employees as of the last day of such Plan
    Year.



 



    (o) “Date of Grant” shall mean the date on
    which the Committee has taken all of the actions required to
    make the Award, in all material respects, final and binding on
    the Company; provided, further, it is followed, as soon as
    reasonably possible, by written notice to the Eligible Person
    who has been granted the Award.



 



    (p) “Director” shall mean a member of the
    Board.



 



    (q) “Disability” shall mean a
    Holder’s present incapacity resulting from an injury or
    illness (either mental or physical) which, in the reasonable
    opinion of the Committee based on such medical evidence as it
    deems necessary, will result in death or can be expected to
    continue for a period of at least twelve (12) months and
    will prevent the Holder from performing the normal services
    required of the Holder by the Company, provided, however, that
    such disability did not result, in whole or in part:
    (i) from chronic alcoholism; (ii) from addiction to
    narcotics; (ii) from a felonious undertaking; or
    (iv) from an intentional self-inflicted wound.



 



    (r) “Effective Date” shall mean May 8,
2007.



 



    (s) “Eligible Person” shall mean an
    Employee, a Consultant, or an Outside Director, who the
    Committee determines to have the capacity to substantially
    contribute to the success of the Company.



 



    (t) “Employee” shall mean a person
    employed by the Company.



 



    (u) “Fair Market Value” shall mean, as of
    a particular date, the closing sale price of Shares, which shall
    be (i) if the Shares are listed or admitted for trading on
    any United States national securities exchange, the last
    reported sale price of the Shares on such exchange as reported
    in any newspaper of general circulation or (ii) if the
    Shares are quoted on NASDAQ, or any similar system of automated
    dissemination of quotations of securities prices in common use,
    the mean between the closing high bid and low asked quotations
    for such day on such system. If neither clause (i) nor
    clause (ii) is applicable, the fair market value shall be
    determined by any fair and reasonable means prescribed by the
    Committee.




    










 





 



    (v) “Holder” shall mean, at each time of
    reference, each person (including, but not limited to an
    Optionee) with respect to whom an Award is in effect, except
    that where it should be appropriate to distinguish between a
    Holder with respect to an Option and a Holder with respect to a
    different type of Award, reference shall be made to Optionee;
    and provided further that to the extent provided under, and
    subject to the conditions of, the Award, it shall refer to the
    person who succeeds to the rights of the Holder upon the death
    of the Holder.



 



    (w) “Immediate Family” means any child,
    stepchild, grandchild, parent stepparent, grandparent, spouse,
    sibling,
    mother-in-law,
    father-in-law,
    son-in-law,
    daughter-in-law,
    brother-in-law,
    or
    sister-in-law,
    and shall include adoptive relationships.



 



    (x) “Incentive Stock Option” shall mean an
    Option that is an incentive stock option as defined in
    Section 422 of the Code.



 



    (y) “Limited SAR” shall mean a limited
    stock appreciation right as defined in Section 18
    hereof.



 



    (z) “Non-Employee Director” means a member
    of the Board who is a Non-Employee Director within the meaning
    of
    Rule 16b-3(b)(3)
    promulgated under the 1934 Act and an outside director
    within the meaning of Treasury Regulation Sec.
    162-27(e)(3)
    promulgated under the Code.



 



    (aa) “Non-qualified Stock Option” shall
    mean an Option that is not an Incentive Stock Option.



 



    (bb) “Option” (when capitalized) shall
    mean any Incentive Stock Option and Non-qualified Stock Option
    granted under this Plan, except that, where it shall be
    appropriate to identify a specific type of Option, reference
    shall be made to the specific type of Option; provided, further,
    without limitation, that a single Option may include both
    Incentive Stock Option and Non-qualified Stock Option provisions.



 



    (cc) “Optionee” shall mean a person to
    whom an Option is granted (often referred to as a Holder).



 



    (dd) “Option Price” shall mean the price
    per Share which is required to be paid by the Optionee in order
    to exercise his right to acquire the Share under the terms of
    the Option.



 



    (ee) “Option Proceeds” shall mean the cash
    proceeds received by the Company from the exercise of Options
    reduced by any such amounts previously used to purchase
    Reacquired Shares.



 



    (ff) “Outside Director” means a member of
    the Board who is not an officer or Employee.



 



    (gg) “Parent” shall mean Capital Senior
    Living Corporation, a Delaware corporation.



 



    (hh) “Performance Award” shall mean the
    award which is granted to a Covered Person, and is contingent
    upon the attainment of the Performance Measures specified in
    such Award during the Performance Period, all as described more
    fully in Section 13.



 



    (ii) “Performance Measures” shall mean one
    or more (or a combination) of the following: (i) earnings
    per share, (ii) return on average common equity,
    (iii) pre-tax income, (iv) earnings before deductions
    for interest, taxes, depreciation and amortization of non-cash
    items, (v) pre-tax operating income, (vi) net
    operating income, (vii) net revenue, (viii) net
    income, (ix) cash earnings per share, (x) book value
    per share, (xi) net asset values, (xii) overall or
    specific cost reductions, (xiii) resident satisfaction
    and/or
    retention, (xiv) completion of sale/leasebacks,
    (xv) site acquisitions, and (xvi) facility
    acquisitions; and such other criteria which the Committee
    reasonably determines is comparable to such listed criteria;
    provided, further, without limitation, that a Performance Award
    can provide that satisfaction of the selected criteria will be
    based on the Company’s performance relative to one or more
    peer companies; and provided, finally, without limitation, that
    a Performance Measure may not consist of merely remaining in the
    employ of the Company for a specified period of time.



 



    (jj) “Performance Period” shall mean the
    period during which attainment of the Performance Measures set
    forth in the Performance Award must occur.



 



    (kk) “Plan” shall mean this 2007 Omnibus
    Stock and Incentive Plan For Capital Senior Living Corporation.



 



    (ll) “Plan Year” shall mean the
    Parent’s fiscal year.




    










 





 



    (mm) “Potential Change In Control” shall
    mean the first to occur of (i) approval by shareholders of
    an agreement by the Parent, the consummation of which would
    result in a Change in Control; or (ii) the filing of a
    Schedule 13G or 13D under the Exchange Act and, within
    15 days after such filing, the adoption by the Committee of
    a resolution stating that, in the judgment of the Committee, a
    Potential Change in Control has occurred for purposes of this
    Plan.



 



    (nn) “Reacquired Shares” shall mean
    Shares, if any, reacquired by the Company on the open market
    with the Option Proceeds, provided that the aggregate of such
    Reacquired Shares may not exceed fifty percent (50%) of the
    aggregate Shares (excluding Reacquired Shares) authorized in
    Section 3.



 



    (oo) “Restriction(s)” shall mean the
    restrictions applicable to Available Shares subject to an Award
    which prohibit the “transfer” of such Available
    Shares, and which constitute “a substantial risk of
    forfeiture” of such Available Shares, as those terms are
    defined under Section 83(a)(1) of the Code.



 



    (pp) “Restricted Period” shall mean the
    period during which Restricted Shares shall be subject to
    Restrictions.



 



    (qq) “Restricted Shares” shall mean the
    Available Shares granted to an Eligible Person which are subject
    to Restrictions.



 



    (rr) “Restricted Share Award” shall mean
    the award of Restricted Shares.



 



    (ss) “Restricted Share Distributions”
    shall mean any amounts, whether Shares, cash or other
    property (other than regular cash dividends) paid or distributed
    by the Parent with respect to Restricted Shares during a
    Restricted Period.



 



    (tt) “SAR” shall mean a stock appreciation
    right as defined in Section 18 hereof.



 



    (uu) “Section 162(m) Maximum” shall
    mean 250,000 Shares.



 



    (vv) “Separation” shall mean the date on
    which a Holder ceases to have an employment relationship with
    the Company for any reason, including death or Disability; and
    provided, further, without limitation, such employment
    relationship will cease, (a) in the case of an Outside
    Director, upon his or her ceasing to be a Director, and
    (b) in the case of a Consultant, upon the termination of
    such Consultant’s contract with the Company, or in the
    absence of a contract, upon the later of (i) delivery by
    the Company to such Consultant of a formal written notice of
    cessation of his or her services for the Company, and
    (ii) the date of such cessation stated in such notice;
    provided, however, that a Separation will not be considered to
    have occurred while an Employee is on sick leave, military
    leave, or any other leave of absence approved by the Company, if
    the period of such leave does not exceed 180 days, or, if
    longer, so long as the Employee’s right to reemployment
    with the Company is guaranteed either by statute or by contract.



 



    (ww) “Share(s)” shall mean a share or
    shares of Common Stock.



 



    (xx) “Special Expired Option Shares” shall
    mean any Shares (i) which are subject to an Option, as
    defined in and issued under the 1997 Omnibus Stock and Incentive
    Plan For Capital Senior Living Corporation, which remains
    outstanding in whole or in part on the Effective Date, and
    (ii) which remain subject to such Option on the date such
    Option terminates, expires, is cancelled, or is settled in cash.



 



    (yy) “Spread” shall mean the difference
    between the Option Price, or the Agreed Price, as the case may
    be, of the Share(s) and the Fair Market Value of such Share(s),
    on the date of reference.



 



    (zz) “Subsidiary” shall mean a
    “subsidiary corporation” with respect to the Parent as
    defined in Section 424(f) of the Code.



 



    (aaa) “Vest”, “Vested” and
    similar terms shall mean the number of Award Shares which have
    become nonforfeitable, including the number of Restricted Shares
    on which the Restrictions have lapsed; provided, further, and
    without limitation, that the lapse of Restrictions imposed under
    a Performance Award, based on the attainment of the Performance
    Measures set forth in such Performance Award, is also a Vesting
    event.



 



    (bbb) “1933 Act” shall mean the
    Securities Act of 1933, as amended.




    










 





 



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



 



    3. Award of Available Shares.  As
    of the Effective Date, Two Million Six Hundred Thousand
    (2,600,000) Shares shall automatically, and without further
    action, become Available Shares. To the extent any Award shall
    terminate, expire or be canceled, or the Award shall be paid in
    cash, the Available Shares subject to such Award (or with
    respect to which the Award is measured), shall remain Available
    Shares. Such number shall be increased automatically by the
    number of Reacquired Shares and Special Expired Option Shares;
    provided, however, that Incentive Stock Options may not be
    issued after Two Million Six Hundred Thousand (2,600,000) Shares
    have been issued under the Plan. No Covered Person shall be
    eligible to receive Awards pursuant to this Plan in any Plan
    Year which relate to Shares which exceed the Section 162(m)
    Maximum.



 



    4. Conditions for Grant of Awards.



 



    (a) Without limiting the generality of the
    provisions hereof which deal specifically with each form of
    Award, Awards shall only be granted to such one or more Eligible
    Persons as shall be selected by the Committee.



 



    (b) In granting Awards, the Committee shall take
    into consideration the contribution the Eligible Person has made
    or may be reasonably expected to make to the success of the
    Company and such other factors as the Committee shall determine.
    The Committee shall also have the authority to consult with and
    receive recommendations from officers and other personnel of the
    Company with regard to these matters. The Committee may from
    time to time in granting Awards under the Plan prescribe such
    other terms and conditions concerning such Awards as it deems
    appropriate, including, without limitation, relating an Award to
    achievement of specific goals established by the Committee or to
    the continued employment of the Eligible Person for a specified
    period of time, provided that such terms and conditions are not
    inconsistent with the provisions of this Plan.



 



    (c) Incentive Stock Options may be granted only to
    Employees, and all other Awards may be granted to either
    Employees, Consultants or Outside Directors.



 



    (d) The Plan shall not confer upon any Holder any
    right with respect to continuation of employment by, or
    consulting relationship with, the Company, nor shall it
    interfere in any way with his right or the Company’s right
    to terminate his employment, consulting relationship or
    Directorship at any time, nor shall the reference to
    “Company” confer an employment relationship on a
    Consultant.



 



    (e) The Awards granted to Eligible Persons shall be
    in addition to regular salaries, pension, life insurance or
    other benefits related to their service to the Company. Neither
    the Plan nor any Award granted under the Plan shall confer upon
    any person any right to continuance of employment by the
    Company; and provided, further, that nothing herein shall be
    deemed to limit the ability of the Company to enter into any
    other compensation arrangements with any Eligible Person.



 



    (f) The Committee shall determine in each case
    whether periods of military or government service shall
    constitute a continuation of employment for the purposes of this
    Plan or any Award.



 



    (g) Notwithstanding any provision hereof to the
    contrary, each Award which in whole or in part involves the
    issuance of Available Shares may provide for the issuance of
    such Available Shares for consideration consisting of such
    consideration as the Committee may determine, including (without
    limitation) as compensation for past services rendered.



 



    5. Grant of Options.



 



    (a) The Committee may grant to Optionees from time
    to time Options alone, in addition to, or in tandem with , other
    Awards granted under the Plan
    and/or cash
    Awards made outside of the Plan, to purchase some or all of the
    Available Shares. An Option granted hereunder shall be either an
    Incentive Stock Option or a Non-qualified Stock Option, shall be
    evidenced by a written agreement that shall contain such
    provisions as shall be selected by the Committee, which may
    incorporate the terms of this Plan by reference, and which
    clearly shall state whether it is (in whole or in part) an
    Incentive Stock Option or a Non-qualified Stock Option.



 



    (b) The aggregate Fair Market Value (determined as
    of the Date of Grant) of the Available Shares with respect to
    which any Incentive Stock Option is exercisable for the first
    time by an Optionee during any calendar year under the Plan and
    all such plans of the Company (as defined in Section 425 of
    the Code) shall not exceed $100,000.




    









 





 



    (c) A Non-qualified Stock Option shall not be
    transferable by the Holder without the prior written consent of
    the Committee other than (i) transfers by the Holder to a
    member of his or her Immediate Family or a trust for the benefit
    of the optionee or a member of his or her Immediate Family, or
    (ii) transfers by will or by the laws of descent and
    distribution. An Incentive Stock Option shall not be
    transferable by the Holder otherwise than by will or by the laws
    of descent and distribution. All Options shall be exercisable,
    during the Holder’s lifetime, only by the Holder.



 



    (d) In the case of a Non-qualified Stock Option or a
    Holder who elects to make a disqualifying disposition (as
    defined in Section 422(a)(1) of the Code) of Shares
    acquired pursuant to the exercise of an Incentive Stock Option,
    the Committee in its discretion may award at the time of grant
    or thereafter the right to receive upon exercise of such Option
    a cash bonus calculated to pay part or all of the federal and
    state, if any, income tax incurred by the Holder upon such
    exercise.



 



    (e) The Committee may at any time offer to buy out
    for a payment in cash either (i) Restricted Stock, or
    (ii) an Option previously granted, provided that an offer
    to buy out an Option will not be made unless the Fair Market
    Value, on the date of such offer, of the Shares subject to such
    Option exceed the Option Price of such Option.



 



    (f) If the Option agreement so provides at Date of
    Grant or (except in the case of an Incentive Stock Option) is
    amended after Date of Grant and prior to exercise to so provide
    (with the Holder’s consent), the Committee may require that
    all or part of the Shares to be issued with respect to the
    Spread take the form of Restricted Stock, which shall be valued
    on the date of exercise on the basis of the Fair Market Value of
    such Restricted Stock determined without regard to the
    transferability and forfeiture Restrictions involved.



 



    (g) Without limitation, the Committee may condition
    the exercise of any Option upon the attainment of specified
    performance goals or other factors as the Committee may
    determine, in its sole discretion. Unless specifically provided
    in the Option agreement, any such conditional Option shall vest
    twelve (12) months prior to its expiration if the
    conditions to exercise have not theretofore been satisfied.



 



    6. Option Price.



 



    (a) The Option Price shall be any price determined
    by the Committee; provided, however, that the Option Price may
    not be less than the par value of the Common Stock, and in the
    case of an Incentive Stock Option, shall not be less than one
    hundred percent (100%) of the Fair Market Value per Share on the
    Date of Grant.



 



    (b) Unless further limited by the Committee in any
    Option, the Option Price shall be paid solely in cash, by
    certified or cashier’s check, by wire transfer, by money
    order, with Common Stock (but with Common Stock only if
    expressly permitted by the terms of the Option), or by a
    combination of the above; provided, however, that the Committee
    may accept a personal check in full or partial payment. If the
    Option Price is permitted to be, and is, paid in whole or in
    part with Common Stock, the value of the Common Stock
    surrendered shall its Fair Market Value on the date surrendered.



 



    7. Exercise of Options.  An Option
    shall be deemed exercised when (i) the Committee has
    received written notice of such exercise in accordance with the
    terms of the Option, and (ii) full payment of the aggregate
    Option Price of the Available Shares as to which the Option is
    exercised has been made. Separate stock certificates shall be
    issued by the Parent for any Available Shares acquired as a
    result of exercising an Incentive Stock Option and a
    Non-qualified Stock Option.



 



    8. Exercisability of Options.



 



    (a) Each Option shall become exercisable in whole or
    in part and cumulatively, and shall expire, according to the
    terms of the Option to the extent not inconsistent with the
    express provisions of this Plan; and provided further, without
    limitation, that in the case of the grant of an Option to an
    officer (as that term is used in
    Rule 16a-1
    promulgated under the 1934 Act) or any similar rule which
    may subsequently be in effect, the Committee may provide that no
    Available Shares acquired on the exercise of such Option shall
    be transferable during such 6 month period following the
    Date of Grant.



 



    (b) The Committee, in its sole discretion, may
    accelerate the date on which all or any portion of an otherwise
    unexercisable Option may be exercised or a Restriction will
    lapse.




    










 





 



    9. Termination of Option Period.



 



    (a) As provided in Section 5, and without
    limitation, each Option shall be evidenced by an agreement that
    may contain any provisions selected by the Committee; provided,
    however, that in each case, unless the terms of the Option
    expressly provide for a different date of termination, the
    unexercised portion of an Option shall automatically and without
    notice terminate and become null and void on the earlier of
    (i) the date that Optionee ceases to be an Employee, if
    such cessation is for Cause, (ii) the 90th day
    following Optionee’s Separation for any reason other than
    death, Disability or for Cause; (iii) the first anniversary
    of a Separation by reason of death or Disability; or
    (iv) the tenth (10th) anniversary of the Date of Grant.



 



    (b) Notwithstanding any provision of the Plan to the
    contrary, in the event of the proposed dissolution or
    liquidation of the Parent, or in the event of a proposed sale of
    all or substantially all of the assets of the Company, or the
    proposed merger of the Parent with or into another corporation,
    unless otherwise expressly provided (by express reference to
    this Section 9(b)) in the terms of an Option, the
    Committee may, following delivery of a written notice
    (“Cancellation Notice”) to any Holder of an
    Option, cancel the unexercised Vested portion (including the
    portion which becomes Vested by reason of acceleration), if any,
    of such Option, effective on the date specified in the
    Cancellation Notice (“Cancellation Date”).
    Notwithstanding the forgoing, the Cancellation Date may not be
    earlier than the last to occur of (i) the 30th day
    following delivery of the Cancellation Notice, and (ii) the
    60th day prior to the transaction which has caused the
    delivery of the Cancellation Notice. Without limitation, in the
    event the transaction giving rise to the Cancellation Notice
    does not occur, if so provided in the Cancellation Notice, each
    Holder who shall have elected to make his or her exercise
    conditional on the occurrence of the transaction shall be
    refunded any amounts paid to exercise such Holder’s Option,
    such Option will be reissued, and the purported exercise of such
    Option shall be null and void ab intitio.



 



    10. Incentive Stock Options for 10%
    Shareholder.  Notwithstanding any other
    provisions of the Plan to the contrary, an Incentive Stock
    Option shall not be granted to any person owning directly (or
    indirectly through attribution under Section 425(d) of the
    Code) at the Date of Grant, stock possessing more than 10% of
    the total combined voting power of all classes of stock of the
    Company (as defined in Section 425 of the Code) at the Date
    of Grant, unless the Option Price of such Incentive Stock Option
    is at least 110% of the Fair Market Value on the Date of Grant
    of the Available Shares subject to such Incentive Stock Option,
    and the period during which the Incentive Stock Option may be
    exercised does not exceed five (5) years from the Date of
    Grant.



 



    11. Non-qualified Stock
    Options.  Non-qualified Stock Options may be
    granted hereunder and shall contain such terms and provisions as
    shall be determined by the Committee, except that each such
    Non-qualified Stock Option (i) must be clearly designated
    as a Non- qualified Stock Option; (ii) may be granted for
    Available Shares which become exercisable in excess of the
    limits contained in Subsection 5(b); and
    (iii) shall not be subject to Section 10
    hereof. If both Incentive Stock Options and Non-qualified
    Stock Options are granted to an Optionee, the right to exercise,
    to the full extent thereof, Options of either type shall not be
    contingent in whole or in part upon the exercise of, or failure
    to exercise, Options of the other type.



 



    12. Restricted Share Awards.



 



    (a) Each Restricted Share Award shall be evidenced
    by an agreement that may contain any provisions selected by the
    Committee, including, without limitation, a provision allowing
    the Holder, prior to the date on which the Restrictions lapse
    with respect to the Restricted Shares of reference, or within a
    period of 10 days after such lapse where such lapse is
    accelerated, to elect to receive cash in an amount equal to the
    Fair Market Value of some or all of the Restricted Shares on the
    date the Restrictions with respect to such Restricted Shares
    lapse, in lieu of retaining the corresponding formerly
    Restricted Shares; and provided, further, that in the event such
    a provision is included in the Restricted Share Award of an
    officer (as defined in Section 18(k)), the election
    to receive cash in lieu of Restricted Shares shall be subject to
    the same limitations on exercise as are set forth in
    Section 18(k). As a condition to the grant of a
    Restricted Share Award, if required by applicable law, the
    Committee shall require the Eligible Person receiving the
    Restricted Share Award to pay to the Company an amount equal to
    the par value of the Restricted Shares granted under such
    Restricted Share Award, and such Restricted Share Award shall
    automatically terminate if such payment is not received within
    30 days following the Date of Grant. Except as otherwise
    provided in the express terms and conditions of each Restricted
    Share Award, the Eligible Person receiving the Restricted Share
    Award shall have all of the rights of a shareholder with respect
    to such Restricted Shares including, but not limited




    










 






    to, voting rights and the right to receive any dividends paid,
    subject only to the retention provisions applicable to the
    Restricted Share Distributions.



 



    (b) The Restrictions on Restricted Shares shall
    lapse in whole, or in installments, over whatever Restricted
    Period shall be selected by the Committee; provided, however,
    that a complete lapse of Restrictions always shall occur on or
    before the 9th anniversary of the Date of Grant.



 



    (c) The Committee may accelerate the date on which
    Restrictions lapse with respect to any Restricted Shares.



 



    (d) During the Restricted Period, the certificates
    representing the Restricted Shares, and any Restricted Share
    Distributions, shall be registered in the Holder’s name and
    bear a restrictive legend disclosing the Restrictions, the
    existence of the Plan, and the existence of the applicable
    agreement granting such Restricted Share Award. Such
    certificates shall be deposited by the Holder with the Company,
    together with stock powers or other instruments of assignment,
    each endorsed in blank, which will permit the transfer to the
    Company of all or any portion of the Restricted Shares, and any
    assets constituting Restricted Share Distributions, which shall
    be forfeited in accordance with the applicable agreement
    granting such Restricted Share Award. Restricted Shares shall
    constitute issued and outstanding Common Stock for all corporate
    purposes and the Holder shall have all rights, powers and
    privileges of a Holder of unrestricted Shares except that the
    Holder will not be entitled to delivery of the stock
    certificates until all Restrictions shall have terminated, and
    the Company will retain custody of all related Restricted Share
    Distributions (which will be subject to the same Restrictions,
    terms, and conditions as the related Restricted Shares) until
    the conclusion of the Restricted Period with respect to the
    related Restricted Shares; and provided, further, that any
    Restricted Share Distributions shall not bear interest or be
    segregated into a separate account but shall remain a general
    asset of the Company, subject to the claims of the
    Company’s creditors, until the conclusion of the applicable
    Restricted Period; and provided, finally, that any material
    breach of any terms of the Restricted Share Award, as reasonably
    determined by the Committee, will cause a forfeiture of both
    Restricted Shares and Restricted Share Distributions.



 



    13. Performance Awards.



 



    (a) Performance Awards during a Plan Year may be
    granted to one or more Covered Persons, and shall in all events
    be specifically designated as Performance Awards. Nothing herein
    shall be construed as limiting the Committee’s authority to
    grant other types of Awards to Eligible Persons, including
    Covered Persons, conditioned on the satisfaction of such
    criteria, including those comprising one or more of the
    Performance Measures, as the Committee, in its sole discretion,
    may select.



 



    (b) Without limitation, the Committee’s grant
    of Performance Awards may, in its sole discretion, be made in
    Shares (including, without limitation, Restricted Shares whose
    Restrictions will lapse on the basis of the satisfaction of the
    selected Performance Measure(s)), or in cash, or in a
    combination of Shares and cash, but the cash portion of such
    Performance Award granted to a Covered Person may not exceed
    $2,000,000 in a Plan Year.



 



    (c) The Committee shall select the Performance
    Measures which will be required to be satisfied during the
    Performance Period in order to earn amounts specified in the
    Performance Award. Such Performance Measures, and the duration
    of any Performance Period, may differ with respect to each
    Covered Person, or with respect to separate Performance Awards
    issued to the same Covered Person. The selected Performance
    Measures, the Performance Period(s), and any other conditions to
    the Company’s obligation to pay a Performance Award shall
    be set forth in each Performance Award on or before the first to
    occur of (i) the 90th day of the selected Performance
    Period, (ii) the first date on which more than 25% of the
    Performance Period has elapsed, and (iii) the first date,
    if any, on which satisfaction of the Performance Measure(s) is
    no longer substantially uncertain.



 



    (d) Unless otherwise expressly provided in the
    Performance Award, the Covered Person must remain employed by
    the Company until the end of the Performance Period in order to
    be entitled to any payment under such Performance Award;
    provided, however, that the Committee expressly may provide in
    the Performance Award that such Holder may become entitled to a
    specified portion of the amount earned under such Performance
    Award based on one or more specified period(s) of time between
    the Date of Grant of such Performance Award and such Covered
    Person’s Separation, prior to the end of the Performance
    Period.




    










 





 



    (e) Performance Awards may be payable in a single
    payment or in installments, but may not be paid in whole or in
    part prior to the date on which the Performance Measures are
    attained; except that, if expressly provided under the
    Performance Award, such payment may be accelerated upon the
    death or Disability of the Covered Person, or as a result of a
    Change in Control, it being understood that if such acceleration
    events occur prior to the attainment of the Performance
    Measures, the Performance Award will not be exempt from
    Section 162(m) of the Code.



 



    14. Acceleration on Change in
    Control.  In the event of either a Change in
    Control, or a Potential Change in Control followed, within
    360 days, by a Change in Control, unless otherwise
    expressly provided by the Committee prior to such event,
    (i) all Awards, other than Performance Awards, shall become
    fully exercisable, nonforfeitable, or the Restricted Period
    shall terminate, as the case may be (hereafter, in this
    Section 14, such Award shall be
    “accelerated”), and (ii) the Committee shall have
    the right to cash out some or all outstanding Non-qualified
    Stock Options, Stock Appreciation Rights, and Restricted Stock,
    on the basis of the Change in Control Price, effective as of the
    date of the Change in Control, or on such other date as the
    Committee may determine prior to the Change in Control.



 



    15. Adjustment of Available Shares.



 



    (a) If at any time while the Plan is in effect or
    Awards with respect to Available Shares are outstanding, there
    shall be any increase or decrease in the number of issued and
    outstanding Shares through the declaration of a stock dividend
    or through any recapitalization resulting in a stock
    split-up,
    combination or exchange of Shares, then and in such event:



 



    (i) appropriate adjustment shall be made in the
    maximum number of Available Shares which may be granted under
    Section 3, and in the Available Shares which are
    then subject to each Award, so that the same proportion of the
    Parent’s issued and outstanding Common Stock shall continue
    to be subject to grant under Section 3, and to such
    Award, and



 



    (ii) in addition, and without limitation, in the
    case of each Award (including, without limitation, Options)
    which requires the payment of consideration by the Holder in
    order to acquire Shares, an appropriate adjustment shall be made
    in the consideration (including, without limitation the Option
    Price) required to be paid to acquire the each Share, so that
    (i) the aggregate consideration to acquire all of the
    Shares subject to the Award remains the same and, (ii) so
    far as possible (and without disqualifying an Incentive Stock
    Option) as reasonably determined by the Committee in its sole
    discretion, the relative cost of acquiring each Share subject to
    such Award remains the same.



 



    (b) The Committee will change the terms of Options
    outstanding under this Plan, with respect to the Option Price or
    the number of Available Shares subject to the Options, or both,
    when, in the Committee’s judgment, such adjustments become
    appropriate by reason of a corporate transaction (as defined in
    Treasury Regulation
    § 1.425-1(a)(1)(ii));
    provided, however, that if by reason of such corporate
    transaction an Incentive Stock Option is assumed or a new option
    is substituted therefore, the Committee may only change the
    terms of such Incentive Stock Option such that (i) the
    excess of the aggregate Fair Market Value of the Shares subject
    to option immediately after the substitution or assumption, over
    the aggregate option price of such Shares, is not more than the
    excess of the aggregate Fair Market Value of all Available
    Shares subject to the Option immediately before such
    substitution or assumption over the aggregate Option Price of
    such Available Shares, and (ii) the new option, or the
    assumption of the old Incentive Stock Option does not give the
    Optionee additional benefits which he did not have under the old
    Incentive Stock Option.



 



    (c) Except as otherwise expressly provided herein,
    the issuance by the Parent of shares of its capital stock of any
    class, or securities convertible into shares of capital stock of
    any class, either in connection with direct sale or upon the
    exercise of rights or warrants to subscribe therefor, or upon
    conversion of shares or obligations of the Parent convertible
    into such shares or other securities, shall not affect, and no
    adjustment by reason thereof shall be made with respect to
    Available Shares subject to Awards granted under the Plan.



 



    (d) Without limiting the generality of the
    foregoing, the existence of outstanding Awards with respect to
    Available Shares granted under the Plan shall not affect in any
    manner the right or power of the Parent to make, authorize or
    consummate (1) any or all adjustments, recapitalizations,
    reorganizations or other changes in the Parent’s capital
    structure or its business; (2) any merger or consolidation
    of the Parent; (3) any issue by the Parent of




    










 






    debt securities, or preferred or preference stock which would
    rank above the Available Shares subject to outstanding Awards;
    (4) the dissolution or liquidation of the Parent;
    (5) any sale, transfer or assignment of all or any part of
    the assets or business of the Company; or (6) any other
    corporate act or proceeding, whether of a similar character or
    otherwise.



 



    16. Transferability of
    Awards.  Each Award shall provide that such
    Award shall not be transferable by the Holder otherwise than by
    will or the laws of descent and distribution, or, if so provided
    in the Award, (a) that such Award is transferable, in whole
    or in part, without payment of consideration, to members of the
    Holder’s Immediate Family, to trusts for such Immediate
    Family members, or to partnerships whose only partners are such
    Immediate Family members, or (b) except as prohibited by
    Rule 16b-3,
    to a person or other entity for which the Holder is entitled to
    a deduction for a “charitable contribution” under
    Section 170(a)(i) of the Code (provided, in each such case
    that no further transfer by any such permitted transferee(s)
    shall be permitted); provided, further, that in each case the
    exercise of the Award will remain the power and responsibility
    of the Holder and that so long as the Holder lives, only such
    Holder (even if pursuant to the legal direction of the person to
    whom a charitable contribution has been made) or his guardian or
    legal representative shall have the rights set forth in such
    Award.



 



    17. Issuance of Shares.  No Holder
    or other person shall be, or have any of the rights or
    privileges of, the owner of Shares subject to an Award unless
    and until certificates representing such Common Stock shall have
    been issued and delivered to such Holder or other person. As a
    condition of any issuance of Common Stock, the Committee may
    obtain such agreements or undertakings, if any, as the Committee
    may deem necessary or advisable to assure compliance with any
    such law or regulation including, but not limited to, the
    following:



 



    (i) a representation, warranty or agreement by the
    Holder to the Parent, at the time any Shares are transferred,
    that he is acquiring the Shares to be issued to him for
    investment and not with a view to, or for sale in connection
    with, the distribution of any such Shares; and



 



    (ii) a representation, warranty or agreement to be
    bound by any legends that are, in the opinion of the Committee,
    necessary or appropriate to comply with the provisions of any
    securities law deemed by the Committee to be applicable to the
    issuance of the Shares and are endorsed upon the Share
    certificates.



 



    Share certificates issued to the Holder receiving such Shares
    who are parties to any shareholders agreement or any similar
    agreement shall bear the legends contained in such agreements.
    Notwithstanding any provision hereof to the contrary, no Shares
    shall be required to be issued with respect to an Award unless
    counsel for the Parent shall be reasonably satisfied that such
    issuance will be in compliance with applicable Federal or state
    securities laws.



 



    18. Stock Appreciation Rights and Limited Stock
    Appreciation Rights.



 



    (a) The Committee shall have authority to grant a
    SAR, or to grant a Limited SAR with respect to all or some of
    the Available Shares covered by any Option (“Related
    Option”), or with respect to, or as some or all of, a
    Performance Award (“Related Performance
    Award”). A SAR or Limited SAR granted with respect to
    an Incentive Stock Option must be granted on the Date of Grant
    of such related Option. A SAR or Limited SAR granted with
    respect to a Related Non-qualified Stock Option or a Performance
    Award, may be granted on or after the Date of Grant of such
    Related Option or Related Performance Award.



 



    (b) For the purposes of this Section 18,
    the following definitions shall apply:



 



    (i) The term “Offer” shall mean any
    tender offer or exchange offer for thirty percent (30%) or more
    of the outstanding Common Stock of the Parent, other than one
    made by the Parent; provided that the corporation, person
    or other entity making the Offer acquires Common Stock pursuant
    to such Offer.



 



    (ii) The term “Offer Price Per Share”
    shall mean the highest price per Share paid in any Offer
    which is in effect at any time during the period beginning on
    the sixtieth (60th) day prior to the date on which a Limited SAR
    is exercised and ending on the date on which the Limited SAR is
    exercised. Any securities or properties which are a part or all
    of the consideration paid or to be paid for Common Stock in the
    Offer shall be valued in determining the Offer Price Per Share
    at the higher of (1) the valuation placed on such
    securities or properties by the person making such Offer, or
    (2) the valuation placed on such securities or properties
    by the Committee.




    










 





 



    (iii) The term “Limited SAR” shall
    mean a right granted under this Plan with respect to a Related
    Option or Related Performance Award, that shall entitle the
    Holder to an amount in cash equal to the Offer Spread in the
    event an Offer is made.



 



    (iv) The term “Offer Spread” shall
    mean, with respect to each Limited SAR, an amount equal to the
    product of (1) the excess of (A) the Offer Price Per
    Share immediately preceding the date of exercise over
    (B) (x) if the Limited SAR is granted in tandem with
    an Option, then the Option Price per Share of the Related
    Option, or (y) if the Limited SAR is issued with respect to
    a Performance Award, the Agreed Price under the Related
    Performance Award, multiplied by (2) the number of
    Available Shares with respect to which such Limited SAR is being
    exercised; provided, however that with respect to any Limited
    SAR granted in tandem with an Incentive Stock Option, in no
    event shall the Offer Spread exceed the amount permitted to be
    treated as the Offer Spread under applicable Treasury
    Regulations or other legal authority without disqualifying the
    Option as an Incentive Stock Option.



 



    (v) The term “SAR” shall mean a
    right granted under this Plan, including, without limitation, a
    right granted in tandem with an Award, that shall entitle the
    Holder thereof to an amount in cash equal to the Spread.



 



    (vi) The term “SAR Spread” shall
    mean with respect to each SAR an amount equal to the product of
    (1) the excess of (A) the Fair Market Value per Share
    on the date of exercise over (B) (x) if the SAR is
    granted in tandem with an Option, then the Option Price per
    Share of the Related Option, (y) if the SAR is granted in
    tandem with a Performance Award, the Agreed Price under the
    Related Performance Award, or (z) if the SAR is granted by
    itself with respect to a designated number of Available Shares,
    then whichever of the Fair Market Value of the Available Shares
    on the Date of Grant, or the Agreed Price, shall be designated
    in the SAR agreement, in each case multiplied by (2) the
    number of Available Shares with respect to which such SAR is
    being exercised; provided, however, that with respect to any SAR
    granted in tandem with an Incentive Stock Option, in no event
    shall the SAR Spread exceed the amount permitted to be treated
    as the SAR Spread under applicable Treasury Regulations or other
    legal authority without disqualifying the Option as an Incentive
    Stock Option.



 



    (c) To exercise the SAR or Limited SAR, the Holder
    shall:



 



    (i) Give written notice thereof to the Company,
    specifying the SAR or Limited SAR being exercised and the number
    or Available Shares with respect to which such SAR or Limited
    SAR is being exercised, and



 



    (ii) If requested by the Company, deliver within a
    reasonable time the agreement evidencing the SAR or Limited SAR
    being exercised, and the Related Option agreement, or Related
    Performance Award agreement, to the Secretary of the Company who
    shall endorse or cause to be endorsed thereon a notation of such
    exercise and return all agreements to the Holder.



 



    (d) As soon as practicable after the exercise of a
    SAR or Limited SAR, the Company shall pay to the Holder
    (i) cash, (ii) at the request of the Holder and the
    approval of the Committee, or in accordance with the terms of
    the Award, Shares, or (iii) a combination of cash and
    Shares, having a Fair Market Value equal to either the SAR
    Spread, or to the Offer Spread, as the case may be; provided,
    however, that the Company may, in its sole discretion, withhold
    from such payment any amount necessary to satisfy the
    Company’s obligation for federal and state withholding
    taxes with respect to such exercise.



 



    (e) A SAR or Limited SAR may be exercised only if
    and to the extent that it is permitted under the terms of the
    Award which, in the case of a Related Option, shall be only when
    such Related Option is eligible to be exercised; provided,
    however, a Limited SAR may be exercised only during the period
    beginning on the first day following the date of expiration of
    the Offer and ending on the thirtieth (30th) day following such
    date.



 



    (f) Upon the exercise or termination of a Related
    Option, or the payment or termination of a Related Performance
    Award, the SAR or Limited SAR with respect to such Related
    Option or Related Performance Award likewise shall terminate.



 



    (g) A SAR or Limited SAR shall be transferable only
    to the extent, if any, that the Related Award is transferable,
    and under the same conditions.




    










 





 



    (h) A SAR or Limited SAR granted with respect to an
    Incentive Stock Option may be exercised only when the Fair
    Market Value of the Available Shares exceeds the Option Price.



 



    (i) Each SAR or Limited SAR shall be on such terms
    and conditions not inconsistent with this Plan as the Committee
    may determine and shall be evidenced by a written agreement.



 



    (j) The Holder shall have no rights as a stockholder
    with respect to the related Available Shares as a result of the
    grant of a SAR or Limited SAR.



 



    (k) With respect to a Holder who, on the date of a
    proposed exercise of a SAR or Limited SAR, is an officer (as
    that term is used in
    Rule 16a-1
    promulgated under the 1934 Act or any similar rule which
    may subsequently be in effect), and who would receive cash in
    whole or in part upon the proposed exercise of his SAR, or
    Limited SAR such proposed exercise may only occur as permitted
    by
    Rule 16b-3,
    including without limitation paragraph (e)(3)(iii) (or any
    similar rule which may subsequently be in effect promulgated
    pursuant to Section 16(b) of the 1934 Act) which, at
    the date of adopting this Plan, among other things, permits
    exercise during a period beginning on the third (3rd) business
    day following the Parent’s public release of quarterly or
    annual summary statements of sales and earnings and ending on
    the twelfth (12th) business day following such public release.



 



    19. Administration of the Plan.



 



    (a) The Plan shall be administered by the Committee
    and, except for the powers reserved to the Board in
    Section 22 hereof, the Committee shall have all of
    the administrative powers under Plan.



 



    (b) The Committee, from time to time, may adopt
    rules and regulations for carrying out the purposes of the Plan
    and, without limitation, may delegate all of what, in its sole
    discretion, it determines to be ministerial duties to an officer
    of the Parent. The determinations under, and the interpretations
    of, any provision of the Plan or an Award by the Committee
    shall, in all cases, be in its sole discretion, and shall be
    final and conclusive.



 



    (c) Any and all determinations and interpretations
    of the Committee shall be made either (i) by a majority
    vote of the members of the Committee at a meeting duly called,
    with at least 3 days prior notice and a general explanation
    of the subject matter given to each member, or (ii) without
    a meeting, by the written approval of all members of the
    Committee.



 



    (d) No member of the Committee shall be liable for
    any action taken or omitted to be taken by him or by any other
    member of the Committee with respect to the Plan, and to the
    extent of liabilities not otherwise insured under a policy
    purchased by the Company, the Company does hereby indemnify and
    agree to defend and save harmless any member of the Committee
    with respect to any liabilities asserted or incurred in
    connection with the exercise and performance of their powers and
    duties hereunder, unless such liabilities are judicially
    determined to have arisen out of such member’s gross
    negligence, fraud or bad faith. Such indemnification shall
    include attorney’s fees and all other costs and expenses
    reasonably incurred in defense of any action arising from such
    act of commission or omission. Nothing herein shall be deemed to
    limit the Company’s ability to insure itself with respect
    to its obligations hereunder.



 



    (e) In particular, and without limitation, the
    Committee shall have the authority, consistent with the terms of
    the Plan:



 



    (i) to select the officers, key Employees, Outside
    Directors, and Consultants to whom Awards may from time to time
    be granted hereunder;



 



    (ii) to determine whether and to what extent Awards
    are to be granted hereunder to one or more Eligible Persons;



 



    (iii) to determine the number of Shares to be
    covered by each such Award granted hereunder;



 



    (iv) to determine the terms and conditions, not
    inconsistent with the terms of the Plan, of any Award granted
    hereunder (including, but not limited to, the Agreed Price and
    any Restriction or limitation, or any Vesting acceleration or
    waiver of forfeiture Restrictions, based in each case on such
    factors as the Committee shall determine, in its sole
    discretion); and to amend or waive any such terms and conditions
    to the extent permitted by the Plan; provided, however, and
    notwithstanding any provision hereof to the contrary, the




    










 






    Committee (i) will not (w) amend an Option to reduce
    its Option Price, or (except for Vesting acceleration)
    materially improve its terms and conditions in favor of the
    Holder; nor (x) amend a SAR or a Limited SAR in a manner
    which causes or increases its SAR Spread or Offer Spread,
    respectively, or (except for Vesting acceleration) materially
    improves its terms and conditions in favor of the Holder; and
    (ii) will not grant an Award whose exercise is conditioned
    directly or indirectly on the surrender, or failure to exercise,
    either (y) an Option whose Option Price is greater than the
    Fair Market Value of a Share on the date of grant of such Award,
    or (z) a SAR which does not have a SAR Spread, or a Limited
    SAR which does not have an Offer Spread, on the date of grant of
    such Award.



 



    (v) to determine whether and under what
    circumstances an Option may be settled in cash, or Restricted
    Shares, instead of Shares;



 



    (vi) to determine whether, to what extent, and under
    what circumstances Awards under the Plan are to be made, and
    operate, on a tandem basis
    vis-a-vis
    other Awards under the Plan
    and/or cash
    awards made outside of the Plan;



 



    (vii) to determine whether and to what extent, and
    under what circumstances Shares and other amounts payable with
    respect to an Award shall be deferred either automatically or at
    the election of the Holder (including providing for and
    determining the amount (if any) of any deemed earnings on any
    deferred amount during any deferral period); provided, further,
    that any such determinations or elections must comply with all
    applicable laws, including, without limitation,
    Section 409A of the Code; and



 



    (viii) to determine whether and to what extent a
    Holder will be allowed to pay the Option Price of an Option, or
    to satisfy tax withholding requirements, in Shares.



 



    (f) The Committee shall have the authority to adopt,
    alter, and repeal such rules, guidelines, and practices
    governing the Plan as it shall, from time to time, deem
    advisable; to interpret the terms and provisions of the Plan and
    any Award issued under the Plan (and any agreements relating
    thereto); and to otherwise supervise the administration of the
    Plan; provided, however, that to the extent that this Plan
    otherwise requires the approval of the Board or the shareholders
    of the Parent, all decisions of the Committee shall be subject
    to such Board or shareholder approval. Subject to the foregoing,
    and without limitation, all decisions made by the Committee
    pursuant to the provisions of the Plan shall be made in the
    Committee’s sole discretion and shall be final and binding
    on all persons, including the Company and Holders.



 



    20. Tax Withholding.  On or
    immediately prior to the date on which a payment is made to a
    Holder hereunder or, if earlier, the date on which an amount is
    required to be included in the income of the Holder as a result
    of an Award, the Holder shall be required to pay to the Company,
    in cash, or in Shares (but in Shares only if expressly provided
    in the Award, or otherwise authorized by the Committee), the
    amount which the Company reasonably determines to be necessary
    in order for the Company to comply with applicable federal or
    state tax withholding requirements, and the collection of
    employment taxes, if applicable.



 



    21. Interpretation.



 



    (a) If any provision of the Plan is held invalid for
    any reason, such holding shall not affect the remaining
    provisions hereof, but instead the Plan shall be construed and
    enforced as if such provision had never been included in the
    Plan.



 



    (b) This Plan
    shall be governed by the laws of the State of Texas.



 



    (c) Headings contained in this Agreement are for
    convenience only and shall in no manner be construed as part of
    this Plan.



 



    (d) Any reference to the masculine, feminine, or
    neuter gender shall be a reference to such other gender as is
    appropriate.



 



    (e) The Plan is intended to constitute an
    “unfunded” plan for incentive and deferred
    compensation. With respect to any payments not yet made to a
    Holder, nothing contained herein shall give any such Holder any
    rights 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 Common Stock




    










 






    or payments in lieu of or with respect to Awards hereunder;
    provided, however, that, unless the Committee otherwise
    determines with the consent of the affected Holder, the
    existence of such trusts or other arrangements is consistent
    with the “unfunded” status of the Plan.



 



    (f) Nothing contained in this Plan shall prevent the
    Board from adopting other or additional compensation
    arrangements, subject to shareholder approval if such approval
    is required; and such arrangements may be either generally
    applicable or applicable only in specific cases.



 



    22. Amendment and Discontinuation of the
    Plan.  The Board, or the Committee (subject to
    the prior written authorization of the Board), may from time to
    time amend the Plan or any Award; provided, however, that
    (except to the extent provided in Section 9(b) and 15
    hereof) no such amendment may, without approval by the
    shareholders of the Parent, (a) increase the number of
    Available Shares or change the class of Eligible Persons,
    (b) permit the granting of Awards which expire beyond the
    maximum
    10-year
    period described in Subsection 9(a)(iv),
    (c) extend the termination date of the Plan as set forth in
    Section 24, (d) increase the
    Section 162(m) Maximum; or (e) make any change for
    which applicable law or regulatory authority (including the
    regulatory authority of the NYSE or any other market or exchange
    on which the Common Stock is traded) would require shareholder
    approval or for which shareholder approval would be required to
    secure all deductibility of compensation received under the Plan
    under Section 162(m) of the Code; and provided, further,
    that no amendment or suspension of the Plan or any Award issued
    hereunder shall, except as specifically permitted in this Plan
    or under the terms of such Award, substantially impair any Award
    previously granted to any Holder without the consent of such
    Holder.



 



    23. Section 83(b)
    Election.  If as a result of receiving an
    Award, a Holder receives Restricted Shares subject to a
    “substantial risk of forfeiture”, then such Holder may
    elect under Section 83(b) of the Code to include in his
    gross income, for his taxable year in which the Restricted
    Shares are transferred to him, the excess of the Fair Market
    Value (determined without regard to any Restriction other than
    one which by its terms will never lapse), of such Restricted
    Shares at the Date of Grant, over the amount paid for the
    Restricted Shares. If the Holder makes the Section 83(b)
    election described above, the Holder shall (i) make such
    election in a manner that is satisfactory to the Committee,
    (ii) provide the Committee with a copy of such election,
    (iii) agree to promptly notify the Company if any Internal
    Revenue Service or state tax agent, on audit or otherwise,
    questions the validity or correctness of such election or of the
    amount of income reportable on account of such election, and
    (iv) agree to such federal and state income withholding as
    the Committee may reasonably require in its sole and absolute
    discretion.



 



    24. Effective Date and Termination
    Date.  The Plan shall be effective as of its
    Effective Date, and shall terminate on the tenth anniversary of
    such Effective Date.



 



    CAPITAL SENIOR LIVING CORPORATION