Document:

exv10w1

 

Exhibit 10.1

AMENDED AND RESTATED RR 2001 INCENTIVE COMPENSATION PLAN

 

 

AMENDED AND RESTATED RR 2001 INCENTIVE COMPENSATION PLAN

	 	 	 	 	 	 	 
	1.
	 	Purpose	 	 	1	 
	2.
	 	Definitions	 	 	1	 
	3.
	 	Administration	 	 	5	 
	 
	 	(a)                        Authority of the Committee	 	 	5	 
	 
	 	(b)                        Manner of Exercise of Committee Authority	 	 	5	 
	 
	 	(c)                        Limitation of Liability	 	 	6	 
	4.
	 	Stock Subject to Plan	 	 	6	 
	 
	 	(a)                        Limitation on Overall Number of Shares Subject to Awards	 	 	6	 
	 
	 	(b)                        Application of Limitations	 	 	6	 
	5.
	 	Eligibility; Per-Person Award Limitations	 	 	6	 
	6.
	 	Specific Terms of Awards	 	 	7	 
	 
	 	(a)                        General	 	 	7	 
	 
	 	(b)                        Options	 	 	7	 
	 
	 	(c)                        Stock Appreciation Rights	 	 	8	 
	 
	 	(d)                        Restricted Stock	 	 	9	 
	 
	 	(e)                        Deferred Stock	 	 	10	 
	 
	 	(f)                        Bonus Stock and Awards in Lieu of Obligations	 	 	11	 
	 
	 	(g)                        Dividend Equivalents	 	 	11	 
	 
	 	(h)                        Other Stock-Based Awards	 	 	11	 
	7.
	 	Certain Provisions Applicable to Awards	 	 	12	 
	 
	 	(a)                        Stand-Alone, Additional, Tandem, and Substitute Awards	 	 	12	 
	 
	 	(b)                        Term of Awards	 	 	12	 
	 
	 	(c)                        Form and Timing of Payment Under Awards; Deferrals	 	 	12	 
	 
	 	(d)                        Exemptions from Section 16(b) Liability	 	 	13	 
	8.
	 	Performance and Annual Incentive Awards	 	 	13	 
	 
	 	(a)                        Performance Conditions	 	 	13	 
	 
	 	(b)                        Performance Awards Granted to Designated Covered Employees	 	 	13	 
	 
	 	(c)                        Annual Incentive Awards Granted to Designated Covered Employees	 	 	15	 
	 
	 	(d)                        Written Determinations	 	 	16	 
	 
	 	(e)                        Status of Section 8(b) and Section 8(c) Awards Under Code Section 162(m)	 	 	16	 
	9.
	 	Change in Control	 	 	17	 
	 
	 	(a)                         Effect
of “Change in Control.”	 	 	17	 
	 
	 	(b)                        Definition of “Change in Control	 	 	17	 
	 
	 	(c)
Definition of “Change in Control Price.”	 	 	18	 
	10.
	 	General Provisions	 	 	18	 
	 
	 	(a)                        Compliance With Legal and Other Requirements	 	 	18	 
	 
	 	(b)                        Limits on Transferability; Beneficiaries	 	 	19	 
	 
	 	(c)                        Adjustments	 	 	19	 
	 
	 	(d)                        Taxes	 	 	20	 
	 
	 	(e)                        Changes to the Plan and Awards	 	 	20	 
	 
	 	(f)                        Limitation on Rights Conferred Under Plan	 	 	21	 
	 
	 	(g)                        Unfunded Status of Awards; Creation of Trusts	 	 	21	 

 

 

	 	 	 	 	 	 	 
	 
	 	(h)                        Nonexclusivity of the Plan	 	 	21	 
	 
	 	(i)                        Payments in the Event of Forfeitures; Fractional Shares	 	 	21	 
	 
	 	(j)                        Governing Law	 	 	21	 
	 
	 	(k)                        Plan Effective Date and Stockholder Approval; Termination of Plan	 	 	21	 

 

 

AMENDED AND RESTATED RR 2001 INCENTIVE COMPENSATION PLAN

     1. Purpose. The purpose of this AMENDED AND RESTATED RR 2001 INCENTIVE
COMPENSATION PLAN (formerly known as the Rent Rite, Inc. 2001 Incentive
Compensation Plan) (the “Plan”) is to assist RENT RITE, INC., a Tennessee
corporation (the “Company”) and its subsidiaries in attracting, motivating,
retaining and rewarding high-quality executives and other employees, officers,
directors and independent contractors by enabling such persons to acquire or
increase a proprietary interest in the Company in order to strengthen the
mutuality of interests between such persons and the Company’s stockholders, and
providing such persons with annual and long term performance incentives to
expend their maximum efforts in the creation of shareholder value. In the
event that the Company is or becomes a Publicly Held Corporation (as
hereinafter defined), the Plan is intended to qualify certain compensation
awarded under the Plan for tax deductibility under Section 162(m) of the Code
(as hereafter defined) to the extent deemed appropriate by the Committee (or
any successor committee) of the Board of Directors of the Company.

     2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.

          (a) “Accredited Investor” has the meaning set forth in Rule 501(a)
promulgated under the Securities Act of 1933, as amended.

          (b) “Annual Incentive Award” means a conditional right granted to a
Participant under Section 8(c) hereof to receive a cash payment, Stock or other
Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.

          (c) “Award” means any Option, SAR (including Limited SAR), Restricted
Stock, Deferred Stock, Stock granted as a bonus or in lieu of another award,
Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest, granted to a
Participant under the Plan.

          (d) “Beneficiary” means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under
the Plan upon such Participant’s death or to which Awards or other rights are
Transferred if and to the extent permitted under Section 10(b) hereof. If,
upon a Participant’s death, there is no designated Beneficiary or surviving
designated Beneficiary, then the term Beneficiary means the person, persons,
trust or trusts entitled by will or the laws of descent and distribution to
receive such benefits.

          (e) “Beneficial Owner”, “Beneficially Owning” and “Beneficial Ownership”
shall have the meanings ascribed to such terms in Rule 13d-3 under the Exchange
Act and any successor to such Rule.

          (f) “Board” means the Company’s Board of Directors.

 

 

          (g) “Cause” shall, with respect to any Participant, have the equivalent
meaning (or the same meaning as “cause” or “for cause”) set forth in any
employment agreement between the Participant and the Company or Parent
Corporation or Subsidiary or, in the absence of any such agreement, such term
shall mean (i) the failure by the Participant to perform his or her duties as
assigned by the Company (or Parent Corporation or Subsidiary) in a reasonable
manner, (ii) any violation or breach by the Participant of his or her
employment agreement with the Company (or Parent Corporation or Subsidiary), if
any, (iii) any violation or breach by the Participant of his or her
non-competition and/or non-disclosure agreement with the Company (or Parent
Corporation or Subsidiary), if any, (iv) any act by the Participant of
dishonesty or bad faith with respect to the Company (or Parent Corporation or
Subsidiary), (v) chronic addiction to alcohol, drugs or other similar
substances affecting the Participant’s work performance, or (vi) the commission
by the Participant of any act, misdemeanor, or crime reflecting unfavorably
upon the Participant or the Company. The good faith determination by the
Committee of whether the Participant’s employment was terminated by the Company
for “Cause” shall be final and binding for all purposes hereunder.

          (h) “Change in Control” means a Change in Control as defined with related
terms in Section 9 of the Plan.

          (i) “Change in Control Price” means the amount calculated in accordance
with Section 9(c) of the Plan.

          (j) “Code” means the Internal Revenue Code of 1986, as amended from time
to time, including regulations thereunder and successor provisions and
regulations thereto.

          (k) “Committee” means a committee designated by the Board to administer
the Plan; provided, however, that the Committee shall consist of at least two
directors, and, in the event the Company is or becomes a Publicly Held
Corporation (as hereinafter defined), each member of which shall be (i) a
“non-employee director” within the meaning of Rule 16b-3 under the Exchange
Act, unless administration of the Plan by “non-employee directors” is not then
required in order for exemptions under Rule 16b-3 to apply to transactions
under the Plan, and (ii) an “outside director” within the meaning of Section
162(m) of the Code, unless administration of the Plan by “outside directors” is
not then required in order to qualify for tax deductibility under Section
162(m) of the Code.

          (l) “Corporate Transaction” means a Corporate Transaction as defined in
Section 9(b)(i) of the Plan.

          (m) “Covered Employee” means an Eligible Person who is a Covered Employee
as specified in Section 8(e) of the Plan.

          (n) “Deferred Stock” means a right, granted to a Participant under Section
6(e) hereof, to receive Stock, cash or a combination thereof at the end of a
specified deferral period.

          (o) “Director” means a member of the Board.

2

 

          (p) “Disability” means a permanent and total disability (within the
meaning of Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.

          (q) “Dividend Equivalent” means a right, granted to a Participant under
Section 6(g) hereof, to receive cash, Stock, other Awards or other property
equal in value to dividends paid with respect to a specified number of shares
of Stock, or other periodic payments.

          (r) “Effective Date” means the effective date of the Plan, which shall be
June 28, 2001.

          (s) “Eligible Person” means each Executive Officer of the Company (as
defined under the Exchange Act) and other officers, Directors and employees of
the Company or of any Subsidiary, and independent contractors with the Company
or any Subsidiary. The foregoing notwithstanding, only employees of the
Company or any Subsidiary shall be Eligible Persons for purposes of receiving
any Incentive Stock Options. An employee on leave of absence may be considered
as still in the employ of the Company or a Subsidiary for purposes of
eligibility for participation in the Plan.

          (t) “Exchange Act” means the Securities Exchange Act of 1934, as amended
from time to time, including rules thereunder and successor provisions and
rules thereto.

          (u) “Executive Officer” means an executive officer of the Company as
defined under the Exchange Act.

          (v) “Fair Market Value” means the fair market value of Stock, Awards or
other property as determined by the Committee or the Board, or under procedures
established by the Committee or the Board. Unless otherwise determined by the
Committee or the Board, the Fair Market Value of Stock as of any given date
after which the Company is a Publicly Held Corporation shall be the closing
sale price per share reported on a consolidated basis for stock listed on the
principal stock exchange or market on which Stock is traded on the date as of
which such value is being determined or, if there is no sale on that date, then
on the last previous day on which a sale was reported.

          (w) “Good Reason” shall, with respect to any Participant, have the
equivalent meaning (or the same meaning as “good reason” or “for good reason”)
set forth in any employment agreement between the Participant and the Company
or Parent Corporation or Subsidiary or, in the absence of any such agreement,
such term shall mean (i) the assignment to the Participant of any duties
inconsistent in any respect with the Participant’s position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as assigned by the Company (or Parent Corporation or
Subsidiary), or any other action by the Company (or Parent Corporation or
Subsidiary) which results in a diminution in such position, authority, duties
or responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
(or Parent Corporation or Subsidiary) promptly after receipt of notice thereof
given by the Participant; (ii) any failure by the Company (or Parent
Corporation or Subsidiary) to comply with its obligations to the Participant as
agreed upon, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company (or Parent
Corporation or

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Subsidiary) promptly after receipt of notice thereof given by the
Participant; (iii) the Company’s (or Parent Corporation’s or Subsidiary’s)
requiring the Participant to be based at any office or location outside of
fifty miles from the location of employment as of the date of Award, except for
travel reasonably required in the performance of the Participant’s
responsibilities; (iv) any purported termination by the Company (or Parent
Corporation or Subsidiary) of the Participant’s employment otherwise than for
Cause as defined in Section 2(f), or by reason of the Participant’s Disability
as defined in Section 2(o), prior to the Expiration Date. For purposes of this
Section 2(v), any good faith determination of “Good Reason” made by the Company
shall be conclusive.

          (x) “Incentive Stock Option” or “ISO” means any Option intended to be
designated as an incentive stock option within the meaning of Section 422 of
the Code or any successor provision thereto.

          (y) “Incumbent Board” means the Incumbent Board as defined in Section
9(b)(ii) of the Plan.

          (z) “Limited SAR” means a right granted to a Participant under Section
6(c) hereof.

          (aa) “Option” means a right granted to a Participant under Section 6(b)
hereof, to purchase Stock or other Awards at a specified price during specified
time periods.

          (bb) “Other Stock-Based Awards” means Awards granted to a Participant
under Section 6(h) hereof.

          (cc) “Parent Corporation” means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company, if each of the
corporations in the chain (other than the Company) owns stock possessing 50% or
more of the combined voting power of all classes of stock in one of the other
corporations in the chain.

          (dd) “Participant” means a person who has been granted an Award under the
Plan which remains outstanding, including a person who is no longer an Eligible
Person, and, to the extent applicable, the person to whom such Award is
Transferred pursuant to and only as permitted under Section 10(b).

          (ee) “Performance Award” means a right, granted to an Eligible Person
under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee or the Board.

          (ff) “Person” shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and
shall include a “group” as defined in Section 13(d) thereof.

          (gg) “Publicly Held Corporation” shall mean a publicly held corporation as
that term is used under Section 162(m)(2) of the Code.

          (hh) “Restricted Stock” means Stock granted to a Participant under Section
6(d) hereof, that is subject to certain restrictions and to a risk of
forfeiture.

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          (ii) “Rule 16b-3” and “Rule 16a-1(c)(3)” means Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.

          (jj) “Stock” means the Company’s Common Stock, and such other securities
as may be substituted (or resubstituted) for Stock pursuant to Section 10(c)
hereof.

          (kk) “Stock Appreciation Rights” or “SAR” means a right granted to a
Participant under Section 6(c) hereof.

          (ll) “Subsidiary” means any corporation or other entity in which the
Company has a direct or indirect ownership interest of 50% or more of the total
combined voting power of the then outstanding securities or interests of such
corporation or other entity entitled to vote generally in the election of
directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.

          (mm)“Transfer” has the meaning set forth in Section 10(b).

     3. Administration.

          (a) Authority of the Committee. The Plan shall be administered by the
Committee; provided, however, that except as otherwise expressly provided in
this Plan or, during the period that the Company is a Publicly Held
Corporation, in order to comply with Code Section 162(m) or Rule 16b-3 under
the Exchange Act, the Board may exercise any power or authority granted to the
Committee under this Plan. The Committee or the Board shall have full and
final authority, in each case subject to and consistent with the provisions of
the Plan, to select Eligible Persons to become Participants, grant Awards,
determine the type, number and other terms and conditions of, and all other
matters relating to, Awards, prescribe Award agreements (which need not be
identical for each Participant) and rules and regulations for the
administration of the Plan, construe and interpret the Plan and Award
agreements and correct defects, supply omissions or reconcile inconsistencies
therein, and to make all other decisions and determinations as the Committee or
the Board may deem necessary or advisable for the administration of the Plan.
Except as otherwise provided in Section 3(b) hereof, the Committee may delegate
its authority as described in this Section 3(a) to the Chief Executive Officer
(the “CEO”) with respect to the granting of Awards hereunder to any Eligible
Employee other than to the Company’s President, Chief Executive Officer, Chief
Financial Officer, and Chief Operating Officer. In exercising any discretion
granted to the Committee, the CEO or the Board under the Plan or pursuant to
any Award, the Committee, the CEO or the Board shall not be required to follow
past practices, act in a manner consistent with past practices, or treat any
Eligible Person in a manner consistent with the treatment of other Eligible
Persons.

          (b) Manner of Exercise of Committee Authority. In the event that the
Company is or becomes a Publicly Held Corporation, the Committee, and not the
CEO or the Board, shall exercise sole and exclusive discretion on any matter
relating to an Eligible Person and/or Participant then subject to Section 16 of
the Exchange Act with respect to the Company to the extent necessary in order that transactions by such Eligible Person and/or
Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee, the CEO or

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the Board shall be final, conclusive and
binding on all persons, including the Company, its subsidiaries, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons claiming
rights from or through a Participant, and stockholders. The express grant of
any specific power to the Committee, the CEO or the Board, and the taking of
any action by the Committee, the CEO or the Board, shall not be construed as
limiting any power or authority of the Committee, the CEO or the Board. In
addition to the ability to delegate powers to the CEO, the Committee or the
Board may delegate to other officers or managers of the Company or any
subsidiary, or committees thereof, the authority, subject to such terms as the
Committee or the Board shall determine, (i) to perform administrative
functions, (ii) with respect to Participants not subject to Section 16 of the
Exchange Act, to perform such other functions as the Committee or the Board may
determine, and (iii) with respect to Participants subject to Section 16, to
perform such other functions of the Committee or the Board as the Committee or
the Board may determine to the extent performance of such functions will not
result in the loss of an exemption under Rule 16b-3 otherwise available for
transactions by such persons, in each case to the extent permitted under
applicable law and subject to the requirements set forth in Section 8(d). The
Committee or the Board may appoint agents to assist it in administering the
Plan.

          (c) Limitation of Liability. The Committee and the Board, and each member
thereof, shall be entitled to, in good faith, rely or act upon any report or
other information furnished to him or her by any executive officer, other
officer or employee of the Company or a Subsidiary, the Company’s independent
auditors, consultants or any other agents assisting in the administration of
the Plan. Members of the Committee and the Board, and any officer or employee
of the Company or a subsidiary acting at the direction or on behalf of the
Committee or the Board, shall not be personally liable for any action or
determination taken or made in good faith with respect to the Plan, and shall,
to the extent permitted by law, be fully indemnified and protected by the
Company with respect to any such action or determination.

     4. Stock Subject to Plan.

          (a) Limitation on Overall Number of Shares Subject to Awards. Subject to
adjustment as provided in Section 10(c) hereof, the total number of shares of
Stock reserved and available for delivery in connection with Awards under the
Plan shall be 668,916. Any shares of Stock delivered under the Plan may
consist, in whole or in part, of authorized and unissued shares or treasury
shares. Subject to adjustment as provided in Section 10(c) hereof, in no event
shall the aggregate number of shares of Stock which may be issued pursuant to
ISOs exceed 668,916 shares. As of the date this Amended and Restated RR 2001
Incentive Compensation Plan becomes effective, no additional Awards shall be
granted by the Committee or the Board pursuant to the Plan.

          (b) Application of Limitations. The limitation contained in Section 4(a)
shall apply not only to Awards that are settleable by the delivery of shares of
Stock but also to Awards relating to shares of Stock but settleable only in
cash (such as cash-only SARs). The Committee or the Board may adopt reasonable
counting procedures to ensure appropriate counting, avoid double counting (as,
for example, in
the case of tandem or substitute awards) and make adjustments if the
number of shares of Stock actually delivered differs from the number of shares
previously counted in connection with an Award.

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     5. Eligibility; Per-Person Award Limitations. Awards may be granted under
the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than 100,000 shares of Stock, subject to adjustment as
provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f),
6(g), 6(h), 8(b) and 8(c). In addition, the maximum amount that may be earned
as an Annual Incentive Award or other cash Award in any fiscal year by any one
Participant shall be $1,000,000, and the maximum amount that may be earned as a
Performance Award or other cash Award in respect of a performance period by any
one Participant shall be $2,000,000.

     6. Specific Terms of Awards.

          (a) General. Awards may be granted on the terms and conditions set forth
in this Section 6. In addition, the Committee or the Board may impose on any
Award or the exercise thereof, at the date of grant or thereafter (subject to
Section 10(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee or the Board shall determine,
including terms requiring forfeiture of Awards in the event of termination of
employment by the Participant and terms permitting a Participant to make
elections relating to his or her Award. The Committee or the Board shall
retain full power and discretion to accelerate, waive or modify, at any time,
any term or condition of an Award that is not mandatory under the Plan. Except
in cases in which the Committee or the Board is authorized to require other
forms of consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of applicable law, no
consideration other than services may be required for the grant (but not the
exercise) of any Award.

          (b) Options. The Committee and the Board each is authorized to grant
Options to Participants on the following terms and conditions:

          (i) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee or
the Board, provided that such exercise price shall not, in the case
of Incentive Stock Options, be less than 100% of the Fair Market
Value of the Stock on the date of grant of the Option and shall
not, in any event, be less than the par value of a share of Stock
on the date of grant of such Option. If an employee owns or is
deemed to own (by reason of the attribution rules applicable under
Section 424(d) of the Code) more than 10% of the combined voting
power of all classes of stock of the Company or any Parent
Corporation or Subsidiary and an Incentive Stock Option is granted
to such employee, the option price of such Incentive Stock Option
(to the extent required by the Code at the time of grant) shall be
no less than 110% of the Fair Market Value of the Stock on the date
such Incentive Stock Option is granted.

          (ii) Time and Method of Exercise. The Committee or the Board
shall determine the time or times at which or the circumstances
under which an Option
may be exercised in whole or in part (including based on
achievement of performance goals and/or future service
requirements), the time or times at which Options shall cease to be
or become exercisable following termination of employment or upon
other conditions, the methods by which such exercise price

7

 

may be
paid or deemed to be paid (including in the discretion of the
Committee or the Board payment by successive exercises by a
Participant), the form of such payment, including, without
limitation, cash, Stock, other Awards or awards granted under other
plans of the Company or any subsidiary, and the methods by or forms
in which Stock will be delivered or deemed to be delivered to
Participants.

          (iii) ISOs. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Section 422 of the
Code. Anything in the Plan to the contrary notwithstanding, no
term of the Plan relating to ISOs (including any SAR in tandem
therewith) shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be exercised, so as
to disqualify either the Plan or any ISO under Section 422 of the
Code, unless the Participant has first requested the change that
will result in such disqualification. Thus, if and to the extent
required to comply with Section 422 of the Code, Options granted as
Incentive Stock Options shall be subject to the following special
terms and conditions:

               (A) the Option shall not be exercisable more than ten years
after the date such Incentive Stock Option is granted; provided,
however, that if a Participant owns or is deemed to own (by reason
of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the
Company or any Parent Corporation and the Incentive Stock Option is
granted to such Participant, the term of the Incentive Stock Option
shall be (to the extent required by the Code at the time of the
grant) for no more than five years from the date of grant; and

               (B) The aggregate Fair Market Value (determined as of the date
the Incentive Stock Option is granted) of the shares of stock with
respect to which Incentive Stock Options granted under the Plan and
all other option plans of the Company or its Parent Corporation
during any calendar year exercisable for the first time by the
Participant during any calendar year shall not (to the extent
required by the Code at the time of the grant) exceed $100,000.

          (iv) Repurchase Rights. The Committee and the Board shall have
the discretion to grant Options which are exercisable for unvested
shares of Common Stock. Should the Optionee cease to be employed
with or perform services to the Company (or a Parent Corporation or
Subsidiary) while holding such unvested shares, the Company shall
have the right to repurchase, at the exercise price paid per share,
any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be
established by the Committee or the Board and set forth in the
document evidencing such repurchase right.

          (c) Stock Appreciation Rights. The Committee and the Board each is
authorized to grant SAR’s to Participants on the following terms and
conditions:

8

 

          (i) Right to Payment. A SAR shall confer on the Participant
to whom it is granted a right to receive, upon exercise thereof,
the excess of (A) the Fair Market Value of one share of stock on
the date of exercise (or, in the case of a “Limited SAR” that may
be exercised only in the event of a Change in Control, the Fair
Market Value determined by reference to the Change in Control
Price, as defined under Section 9(c) hereof), over (B) the grant
price of the SAR as determined by the Committee or the Board. The
grant price of an SAR shall not be less than the Fair Market Value
of a share of Stock on the date of grant except as provided under
Section 7(a) hereof.

          (ii) Other Terms. The Committee or the Board shall determine
at the date of grant or thereafter, the time or times at which and
the circumstances under which a SAR may be exercised in whole or in
part (including based on achievement of performance goals and/or
future service requirements), the time or times at which SARs shall
cease to be or become exercisable following termination of
employment or upon other conditions, the method of exercise, method
of settlement, form of consideration payable in settlement, method
by or forms in which Stock will be delivered or deemed to be
delivered to Participants, whether or not a SAR shall be in tandem
or in combination with any other Award, and any other terms and
conditions of any SAR. Limited SARs that may only be exercised in
connection with a Change in Control or other event as specified by
the Committee or the Board, may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee or the Board
may determine. SARs and Limited SARs may be either freestanding or
in tandem with other Awards.

          (d) Restricted Stock. The Committee and the Board each is authorized to
grant Restricted Stock to Participants on the following terms and conditions:

          (i) Grant and Restrictions. Restricted Stock shall be subject
to such restrictions on transferability, risk of forfeiture and
other restrictions, if any, as the Committee or the Board may
impose, which restrictions may lapse separately or in combination
at such times, under such circumstances (including based on
achievement of performance goals and/or future service
requirements), in such installments or otherwise, as the Committee
or the Board may determine at the date of grant or thereafter.
Except to the extent restricted under the terms of the Plan and any
Award agreement relating to the Restricted Stock, a Participant
granted Restricted Stock shall have all of the rights of a
stockholder, including the right to vote the Restricted Stock and
the right to receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the
Committee or the Board). During the restricted period
applicable to the Restricted Stock, subject to Section 10(b) below,
the Restricted Stock may not be Transferred by the Participant.

          (ii) Forfeiture. Except as otherwise determined by the
Committee or the Board at the time of the Award, upon termination
of a Participant’s employment during the applicable restriction
period, the Participant’s Restricted Stock that is at that time
subject to restrictions shall be forfeited and reacquired by

9

 

the
Company; provided that the Committee or the Board may provide, by
rule or regulation or in any Award agreement, or may determine in
any individual case, that restrictions or forfeiture conditions
relating to Restricted Stock shall be waived in whole or in part in
the event of terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in part
the forfeiture of Restricted Stock.

          (iii) Certificates for Stock. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee or the
Board shall determine. If certificates representing Restricted
Stock are registered in the name of the Participant, the Committee
or the Board may require that such certificates bear an appropriate
legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock, that the Company retain
physical possession of the certificates, and that the Participant
deliver a stock power to the Company, endorsed in blank, relating
to the Restricted Stock.

          (iv) Dividends and Splits. As a condition to the grant of an
Award of Restricted Stock, the Committee or the Board may require
that any cash dividends paid on a share of Restricted Stock be
automatically reinvested in additional shares of Restricted Stock
or applied to the purchase of additional Awards under the Plan.
Unless otherwise determined by the Committee or the Board, Stock
distributed in connection with a Stock split or Stock dividend, and
other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Stock or other property
has been distributed.

          (e) Deferred Stock. The Committee and the Board each is authorized to
grant Deferred Stock to Participants, which are rights to receive Stock, cash,
or a combination thereof at the end of a specified deferral period, subject to
the following terms and conditions:

          (i) Award and Restrictions. Satisfaction of an Award of
Deferred Stock shall occur upon expiration of the deferral period
specified for such Deferred Stock by the Committee or the Board
(or, if permitted by the Committee or the Board, as elected by the
Participant). In addition, Deferred Stock shall be subject to such
restrictions (which may include a risk of forfeiture) as the
Committee or the Board may impose, if any, which restrictions may
lapse at the expiration of the deferral period or at earlier
specified times (including based on achievement of performance
goals and/or future service requirements), separately
or in combination, in installments or otherwise, as the
Committee or the Board may determine. Deferred Stock may be
satisfied by delivery of Stock, cash equal to the Fair Market Value
of the specified number of shares of Stock covered by the Deferred
Stock, or a combination thereof, as determined by the Committee or
the Board at the date of grant or thereafter. Prior to
satisfaction of an Award of Deferred Stock, an Award of Deferred
Stock carries no voting or dividend or other rights associated with
share ownership.

10

 

          (ii) Forfeiture. Except as otherwise determined by the
Committee or the Board, upon termination of a Participant’s
employment during the applicable deferral period thereof to which
forfeiture conditions apply (as provided in the Award agreement
evidencing the Deferred Stock), the Participant’s Deferred Stock
that is at that time subject to deferral (other than a deferral at
the election of the Participant) shall be forfeited; provided that
the Committee or the Board may provide, by rule or regulation or in
any Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred Stock
shall be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee or the Board may
in other cases waive in whole or in part the forfeiture of Deferred
Stock.

          (iii) Dividend Equivalents. Unless otherwise determined by
the Committee or the Board at date of grant, any Dividend
Equivalents that are granted with respect to any Award of Deferred
Stock shall be either (A) paid with respect to such Deferred Stock
at the dividend payment date in cash or in shares of unrestricted
Stock having a Fair Market Value equal to the amount of such
dividends, or (B) deferred with respect to such Deferred Stock and
the amount or value thereof automatically deemed reinvested in
additional Deferred Stock, other Awards or other investment
vehicles, as the Committee or the Board shall determine or permit
the Participant to elect.

          (f) Bonus Stock and Awards in Lieu of Obligations. The Committee and the
Board each is authorized to grant Stock as a bonus, or to grant Stock or other
Awards in lieu of Company obligations to pay cash or deliver other property
under the Plan or under other plans or compensatory arrangements, provided
that, in the case of Participants subject to Section 16 of the Exchange Act,
the amount of such grants remains within the discretion of the Committee to the
extent necessary to ensure that acquisitions of Stock or other Awards are
exempt from liability under Section 16(b) of the Exchange Act. Stock or Awards
granted hereunder shall be subject to such other terms as shall be determined
by the Committee or the Board.

          (g) Dividend Equivalents. The Committee and the Board each is authorized
to grant Dividend Equivalents to a Participant entitling the Participant to
receive cash, Stock, other Awards, or other property equal in value to
dividends paid with respect to a specified number of shares of Stock, or other
periodic payments. Dividend Equivalents may be awarded on a free-standing
basis or in connection with another Award. The Committee or the Board may
provide that Dividend Equivalents shall be paid or distributed when accrued or
shall be deemed to have been reinvested in additional Stock,
Awards, or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee or the Board may
specify.

          (h) Other Stock-Based Awards. The Committee and the Board each is
authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase
rights for Stock, Awards with value and payment contingent upon performance of
the Company or any

11

 

other factors designated by the Committee or the Board, and
Awards valued by reference to the book value of Stock or the value of
securities of or the performance of specified subsidiaries or business units.
The Committee or the Board shall determine the terms and conditions of such
Awards. Stock delivered pursuant to an Award in the nature of a purchase right
granted under this Section 6(h) shall be purchased for such consideration
(including without limitation loans from the Company or a Parent Corporation or
a Subsidiary), paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Stock, other Awards or other property, as
the Committee or the Board shall determine. The Committee and the Board shall
have the discretion to grant such other Awards which are exercisable for
unvested shares of Common Stock. Should the Optionee cease to be employed with
or perform services to the Company (or a Parent Corporation or Subsidiary)
while holding such unvested shares, the Company shall have the right to
repurchase, at the exercise price paid per share, any or all of those unvested
shares. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Committee or the
Board and set forth in the document evidencing such repurchase right. Cash
awards, as an element of or supplement to any other Award under the Plan, may
also be granted pursuant to this Section 6(h).

     7. Certain Provisions Applicable to Awards.

          (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee or the Board, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any subsidiary, or any business entity to be acquired by the Company
or a subsidiary, or any other right of a Participant to receive payment from
the Company or any subsidiary. Such additional, tandem, and substitute or
exchange Awards may be granted at any time. If an Award is granted in
substitution or exchange for another Award or award, the Committee or the Board
shall require the surrender of such other Award or award in consideration for
the grant of the new Award. In addition, Awards may be granted in lieu of cash
compensation, including in lieu of cash amounts payable under other plans of
the Company or any subsidiary, in which the value of Stock subject to the Award
is equivalent in value to the cash compensation (for example, Deferred Stock or
Restricted Stock), or in which the exercise price, grant price or purchase
price of the Award in the nature of a right that may be exercised is equal to
the Fair Market Value of the underlying Stock minus the value of the cash
compensation
surrendered (for example, Options granted with an exercise price
“discounted” by the amount of the cash compensation surrendered).

          (b) Term of Awards. The term of each Award shall be for such period as
may be determined by the Committee or the Board; provided that in no event
shall the term of any Option or SAR exceed a period of ten years (or such
shorter term as may be required in respect of an ISO under Section 422 of the
Code).

          (c) Form and Timing of Payment Under Awards; Deferrals. Subject to the
terms of the Plan and any applicable Award agreement, payments to be made by
the Company or a subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee or the Board
shall determine, including, without limitation, cash, other Awards or other
property, and may be made in a single payment or transfer, in

12

 

installments, or
on a deferred basis. The settlement of any Award may be accelerated, and cash
paid in lieu of Stock in connection with such settlement, in the discretion of
the Committee or the Board or upon occurrence of one or more specified events
(in addition to a Change in Control). Installment or deferred payments may be
required by the Committee or the Board (subject to Section 10(e) of the Plan)
or permitted at the election of the Participant on terms and conditions
established by the Committee or the Board. Payments may include, without
limitation, provisions for the payment or crediting of a reasonable interest
rate on installment or deferred payments or the grant or crediting of Dividend
Equivalents or other amounts in respect of installment or deferred payments
denominated in Stock.

          (d) Exemptions from Section 16(b) Liability. If and to the extent that
the Company is or becomes a Publicly Held Corporation, it is the intent of the
Company that this Plan comply in all respects with applicable provisions of
Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure that neither
the grant of any Awards to nor other transaction by a Participant who is
subject to Section 16 of the Exchange Act is subject to liability under Section
16(b) thereof (except for transactions acknowledged in writing to be non-exempt
by such Participant). Accordingly, if any provision of this Plan or any Award
agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the
applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such
Participant shall avoid liability under Section 16(b). In addition, the
purchase price of any Award conferring a right to purchase Stock shall be not
less than any specified percentage of the Fair Market Value of Stock at the
date of grant of the Award then required in order to comply with Rule 16b-3.

     8. Performance and Annual Incentive Awards.

          (a) Performance Conditions. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Committee or
the Board. The Committee or the Board may use such business criteria and other
measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce the amounts
payable under any Award subject to performance conditions, except as limited
under Sections 8(b) and 8(c) hereof in the case of a Performance Award or
Annual Incentive Award intended to qualify under Code Section 162(m). At such
times as the Company is a Publicly Held Corporation, if and to the extent
required under Code Section 162(m), any power or authority relating to a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m), shall be exercised by the Committee and not the Board.

          (b) Performance Awards Granted to Designated Covered Employees. If and to
the extent that the Committee determines that a Performance Award to be granted
to an Eligible Person who is designated by the Committee as likely to be a
Covered Employee should qualify as “performance-based compensation” for
purposes of Code Section 162(m), the grant, exercise and/or settlement of such
Performance Award shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 8(b).

13

 

          (i) Performance Goals Generally. The performance goals for
such Performance Awards shall consist of one or more business
criteria and a targeted level or levels of performance with respect
to each of such criteria, as specified by the Committee consistent
with this Section 8(b). Performance goals shall be objective and
shall otherwise meet the requirements of Code Section 162(m) and
regulations thereunder including the requirement that the level or
levels of performance targeted by the Committee result in the
achievement of performance goals being “substantially uncertain.”
The Committee may determine that such Performance Awards shall be
granted, exercised and/or settled upon achievement of any one
performance goal or that two or more of the performance goals must
be achieved as a condition to grant, exercise and/or settlement of
such Performance Awards. Performance goals may differ for
Performance Awards granted to any one Participant or to different
Participants.

          (ii) Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or specified
subsidiaries or business units of the Company (except with respect
to the total stockholder return and earnings per share criteria),
shall be used exclusively by the Committee in establishing
performance goals for such Performance Awards: (1) total
stockholder return; (2) such total stockholder return as compared
to total return (on a comparable basis) of a publicly available
index such as, but not limited to, the Standard & Poor’s 500 Stock
Index or the S&P Specialty Retailer Index; (3) net income; (4)
pretax earnings; (5) earnings before interest expense, taxes,
depreciation and amortization; (6) pretax operating earnings after
interest expense and before bonuses, service fees, and
extraordinary or special items; (7) operating margin; (8) earnings
per share; (9) return on equity; (10) return on capital; (11)
return on investment; (12) operating earnings; (13) working capital
or inventory; and (14) ratio of debt to stockholders’ equity. One
or more of the foregoing business criteria shall also be
exclusively used in establishing performance goals for Annual
Incentive Awards granted to a Covered Employee under Section 8(c)
hereof that are intended to qualify as “performanced-based
compensation under Code Section 162(m).

          (iii) Performance Period; Timing For Establishing Performance
Goals. Achievement of performance goals in respect of such
Performance Awards shall be measured over a performance period of
up to ten years, as specified by the Committee. Performance goals
shall be established not later than 90 days after the beginning of
any performance period applicable to such Performance Awards, or at
such other date as may be required or permitted for
“performance-based compensation” under Code Section 162(m).

          (iv) Performance Award Pool. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with
Performance Awards. The amount of such Performance Award pool
shall be based upon the achievement of a performance goal or goals
based on one or more of the business criteria set forth in Section
8(b)(ii) hereof during the given performance period, as specified by the

14

 

Committee in accordance with Section 8(b)(iii) hereof. The
Committee may specify the amount of the Performance Award pool as a
percentage of any of such business criteria, a percentage thereof
in excess of a threshold amount, or as another amount which need
not bear a strictly mathematical relationship to such business
criteria.

          (v) Settlement of Performance Awards; Other Terms. Settlement
of such Performance Awards shall be in cash, Stock, other Awards or
other property, in the discretion of the Committee. The Committee
may, in its discretion, reduce the amount of a settlement otherwise
to be made in connection with such Performance Awards. The
Committee shall specify the circumstances in which such Performance
Awards shall be paid or forfeited in the event of termination of
employment by the Participant prior to the end of a performance
period or settlement of Performance Awards.

          (c) Annual Incentive Awards Granted to Designated Covered Employees. The
Committee may, within its discretion, grant one or more Annual Incentive Awards
to any Eligible Person, subject to the terms and conditions set forth in this
Section 8(c).

          (i) Annual Incentive Award Pool. The Committee may establish
an Annual Incentive Award pool, which shall be an unfunded pool,
for purposes of measuring Company performance in connection with
Annual Incentive Awards. In the case of Annual Incentive Awards
intended to qualify as “performance-based compensation” for
purposes of Code Section 162(m), the amount of such Annual
Incentive Award pool shall be based upon the achievement of a
performance goal or goals based on one or more of the business
criteria set forth in Section 8(b)(ii) hereof during the given
performance period, as specified by the Committee in accordance
with Section 8(b)(iii) hereof. The Committee may specify the
amount of the Annual Incentive Award pool as a percentage of any
such business criteria, a percentage thereof in excess of a
threshold amount, or as another amount which need not bear a
strictly mathematical relationship to such business criteria.

          (ii) Potential Annual Incentive Awards. Not later than the
end of the 90th day of each fiscal year, or at such other date as
may be required or permitted in the case of Awards intended to be
“performance-based compensation” under Code Section 162(m), the
Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially
payable thereunder, for that fiscal year, either out of an Annual
Incentive Award pool established by such date under Section 8(c)(i)
hereof or as individual Annual Incentive Awards. In the case of
individual Annual Incentive Awards intended to qualify under Code
Section 162(m), the amount potentially payable shall be based upon
the achievement of a performance goal or goals based on one or more
of the business criteria set forth in Section 8(b)(ii) hereof in
the given performance year, as specified by the Committee; in other
cases, such amount shall be based on such criteria as shall be
established by the Committee. In all cases, the maximum

15

 

Annual
Incentive Award of any Participant shall be subject to the
limitation set forth in Section 5 hereof.

          (iii) Payout of Annual Incentive Awards. After the end of
each fiscal year, the Committee shall determine the amount, if any,
of (A) the Annual Incentive Award pool, and the maximum amount of
potential Annual Incentive Award payable to each Participant in the
Annual Incentive Award pool, or (B) the amount of potential Annual
Incentive Award otherwise payable to each Participant. The
Committee may, in its discretion, determine that the amount payable
to any Participant as an Annual Incentive Award shall be reduced
from the amount of his or her potential Annual Incentive Award,
including a determination to make no Award whatsoever. The
Committee shall specify the circumstances in which an Annual
Incentive Award shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a
fiscal year or settlement of such Annual Incentive Award.

          (d) Written Determinations. All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award pool or
potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards under Section 8(b), and the
amount of any Annual Incentive Award pool or potential individual Annual
Incentive Awards and the amount of final Annual Incentive Awards under Section
8(c), shall be made in writing in the case of any Award intended to qualify
under Code Section 162(m). The Committee may not delegate any responsibility
relating to such Performance Awards or Annual Incentive Awards if and to the
extent required to comply with Code Section 162(m).

          (e) Status of Section 8(b) and Section 8(c) Awards Under Code Section
162(m). It is the intent of the Company that Performance Awards and Annual
Incentive Awards under Section 8(b) and 8(c) hereof granted to persons who are
designated by the Committee as
likely to be Covered Employees within the meaning of Code Section 162(m)
and regulations thereunder shall, if so designated by the Committee, constitute
“qualified performance-based compensation” within the meaning of Code Section
162(m) and regulations thereunder. Accordingly, the terms of Sections 8(b),
(c), (d) and (e), including the definitions of Covered Employee and other terms
used therein, shall be interpreted in a manner consistent with Code Section
162(m) and regulations thereunder. The foregoing notwithstanding, because the
Committee cannot determine with certainty whether a given Participant will be a
Covered Employee with respect to a fiscal year that has not yet been completed,
the term Covered Employee as used herein shall mean only a person designated by
the Committee, at the time of grant of Performance Awards or an Annual
Incentive Award, as likely to be a Covered Employee with respect to that fiscal
year. If any provision of the Plan or any agreement relating to such
Performance Awards or Annual Incentive Awards does not comply or is
inconsistent with the requirements of Code Section 162(m) or regulations
thereunder, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.

16

 

     9. Change in Control.

          (a) Effect of “Change in Control.” If and to the extent provided in the
Award, in the event of a “Change in Control,” as defined in Section 9(b):

          (i) The Committee may, within its discretion, accelerate the
vesting and exercisability of any Award carrying a right to
exercise that was not previously vested and exercisable as of the
time of the Change in Control, subject to applicable restrictions
set forth in Section 10(a) hereof;

          (ii) The Committee may, within its discretion, accelerate the
exercisability of any limited SARs (and other SARs if so provided
by their terms) and provide for the settlement of such SARs for
amounts, in cash, determined by reference to the Change in Control
Price;

          (iii) The Committee may, within its discretion, lapse the
restrictions, deferral of settlement, and forfeiture conditions
applicable to any other Award granted under the Plan and such
Awards may be deemed fully vested as of the time of the Change in
Control, except to the extent of any waiver by the Participant and
subject to applicable restrictions set forth in Section 10(a)
hereof; and

          (iv) With respect to any such outstanding Award subject to
achievement of performance goals and conditions under the Plan, the
Committee may, within its discretion, deem such performance goals
and other conditions as having been met as of the date of the
Change in Control.

          (b) Definition of “Change in Control. A “Change in Control” shall be
deemed to have occurred upon:

               (i) Approval by the shareholders of the Company of a reorganization,
merger, consolidation or other form of corporate transaction or series of
transactions, in each case, with respect to which persons who were the
shareholders of the Company immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately thereafter, own more
than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company’s then
outstanding voting securities, or a liquidation or dissolution of the Company
or the sale of all or substantially all of the assets of the Company (unless
such reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale (any such event being referred to as a
“Corporate Transaction”) is subsequently abandoned);

               (ii) Individuals who, as of the date on which the Award is granted,
constitute the Board (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board, provided that any person becoming
a director subsequent to the date on which the Award was granted whose
election, or nomination for election by the Company’s shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of

17

 

the Directors of the Company)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board; or

          (iii) the acquisition (other than from the Company) by any person, entity
or “group”, within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act, of more than 50% of either the then outstanding shares
of the Company’s Common Stock or the combined voting power of the Company’s
then outstanding voting securities entitled to vote generally in the election
of directors (hereinafter referred to as the ownership of a “Controlling
Interest”) excluding, for this purpose, any acquisitions by (1) the Company or
its Subsidiaries, (2) any person, entity or “group” that as of the date on
which the Award is granted owns beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act) of a Controlling
Interest or (3) any employee benefit plan of the Company or its Subsidiaries.

          (c) Definition of “Change in Control Price.” The “Change in Control
Price” means an amount in cash equal to the higher of (i) the amount of cash
and fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any Corporate Transaction triggering the
Change in Control under Section 9(b)(i) hereof or any liquidation of shares
following a sale of substantially all of the assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding and the 60-day period following the Change in Control.

          (d) In the event the Company is acquired directly or indirectly by another
corporation, after the date of such acquisition, all references to the
“Company” shall refer to the ultimate parent of the corporation that acquired
Rent Rite, Inc.

     10. General Provisions.

          (a) Compliance With Legal and Other Requirements. The Company may, to the
extent deemed necessary or advisable by the Committee or the Board, postpone
the issuance or delivery of Stock or payment of other benefits under any Award
until completion of such registration or qualification of such Stock or other
required action under any federal or state law, rule or regulation, listing or
other required action with respect to any stock exchange or automated quotation
system upon which the Stock or other Company securities are listed or quoted,
or compliance with any other obligation of the Company, as the Committee or the
Board, may consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Stock or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other obligations. The
foregoing notwithstanding, in connection with a Change in Control, the Company
shall take or cause to be taken no action, and shall undertake or permit to
arise no legal or contractual obligation, that results or would result in any
postponement of the issuance or delivery of Stock or payment of benefits under
any Award or the imposition of any other conditions on such issuance, delivery
or payment, to the extent that such postponement or other condition would
represent a greater burden on a Participant than existed on the 90th day
preceding the Change in Control.

18

 

          (b) Limits on Transferability; Beneficiaries. No Award or other right or
interest of a Participant under the Plan, including any Award or right which
constitutes a derivative security as generally defined in Rule 16a-1(c) under
the Exchange Act, shall be pledged, hypothecated or otherwise encumbered or
subject to any lien, obligation or liability of such Participant to any party
(other than the Company or a Subsidiary), assigned, transferred or otherwise
disposed of (other than by exercise, expiration, forfeiture, cancellation or
the like) (a “Transfer”) by such Participant except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder or as otherwise provided in
Section 10(b). The Committee may prescribe other restrictions on Transfer.
Any attempted Transfer of an Award or any other benefit under this Plan in
violation of this Section 10(b) shall be null and void. Notwithstanding the
foregoing, as of the date this Amended and Restated RR 2001 Incentive
Compensation Plan becomes effective, upon at least ten (10) business days prior
written notice to the Company (which notice shall include the identity and
address of the proposed transferee and such evidence reasonably requested by
the Company (which, unless waived in the Company’s sole discretion, shall
include the written legal opinion addressed to the Company from legal counsel
acceptable to the Company) that the proposed transferee is an Accredited
Investor and that the proposed Transfer does not involve a transaction
requiring registration or qualification under the Securities Act of 1933, as
amended, or the securities or “blue-sky” laws of any relevant jurisdiction),
each Participant that was a Participant at the time this Amended and Restated
RR 2001 Incentive Compensation Plan became effective, shall have the right to
Transfer all or part of such Participant’s Award(s) two (2) times to a Person
that the Company reasonably believes to be an Accredited Investor; provided,
however, that the transferring Participant shall be responsible for all fees
and expenses associated with any
such Transfer, all of which shall be paid prior to such Transfer. Any
Transfer not made in compliance with the preceding sentence shall be null and
void. To further clarify, a Participant that becomes a Participant after the
effective date of this Amended and Restated RR 2001 Incentive Compensation Plan
shall not have any right to Transfer all or any portion of such Participant’s
Award(s).

          (c) Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Stock such that a
substitution or adjustment is determined by the Committee or the Board to be
appropriate, then the Committee or the Board shall, in such manner as it may
deem equitable, substitute or adjust any or all of (i) the number and kind of
shares of Stock which may be delivered in connection with Awards granted
thereafter, (ii) the number and kind of shares of Stock by which annual
per-person Award limitations are measured under Section 5 hereof, (iii) the
number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award. In addition, the Committee (and
the Board if and only to the extent such authority is not required to be
exercised by the Committee to comply with Code Section 162(m)) is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual
Incentive Awards and any Annual Incentive Award pool or performance goals
relating thereto) in recognition of unusual or nonrecurring events (including,

19

 

without limitation, events described in the preceding sentence, as well as
acquisitions and dispositions of businesses and assets) affecting the Company,
any Subsidiary or any business unit, or the financial statements of the Company
or any Subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or in
view of the Committee’s assessment of the business strategy of the Company, any
Subsidiary or business unit thereof, performance of comparable organizations,
economic and business conditions, personal performance of a Participant, and
any other circumstances deemed relevant; provided that no such adjustment shall
be authorized or made if and to the extent that such authority or the making of
such adjustment would cause Options, SARs, Performance Awards granted under
Section 8(b) hereof or Annual Incentive Awards granted under Section 8(c)
hereof to Participants designated by the Committee as Covered Employees and
intended to qualify as “performance-based compensation” under Code Section
162(m) and the regulations thereunder to otherwise fail to qualify as
“performance-based compensation” under Code Section 162(m) and regulations
thereunder.

          (d) Taxes. The Company and any Subsidiary is authorized to withhold from
any Award granted, any payment relating to an Award under the Plan, including
from a distribution of Stock, or any payroll or other payment to a Participant,
amounts of withholding and other taxes due or potentially payable in connection
with any transaction involving an Award, and to take such other action as the
Committee or the Board may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments
in respect thereof in satisfaction of a Participant’s tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.

          (e) Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue or terminate the Plan, or the Committee’s authority to grant Awards
under the Plan, without the consent of stockholders or Participants, except
that any amendment or alteration to the Plan shall be subject to the approval
of the Company’s stockholders not later than the annual meeting next following
such Board action if such stockholder approval is required by any federal or
state law or regulation (including, without limitation, Rule 16b-3 or Code
Section 162(m)) or the rules of any stock exchange or automated quotation
system on which the Stock may then be listed or quoted, and the Board may
otherwise, in its discretion, determine to submit other such changes to the
Plan to stockholders for approval; provided that, without the consent of an
affected Participant, no such Board action may materially and adversely affect
the rights of such Participant under any previously granted and outstanding
Award. The Committee or the Board may waive any conditions or rights under, or
amend, alter, suspend, discontinue or terminate any Award theretofore granted
and any Award agreement relating thereto, except as otherwise provided in the
Plan; provided that, without the consent of an affected Participant, no such
Committee or the Board action may materially and adversely affect the rights of
such Participant under such Award. Notwithstanding anything in the Plan to the
contrary, if any right under this Plan would cause a transaction to be
ineligible for pooling of interest accounting that would, but for the right
hereunder, be eligible for such accounting treatment, the Committee or the
Board may modify or adjust the right so that pooling of interest accounting
shall be available, including the substitution of Stock having a Fair Market
Value equal to the cash otherwise payable

20

 

hereunder for the right which caused
the transaction to be ineligible for pooling of interest accounting.

          (f) Limitation on Rights Conferred Under Plan. Neither the Plan nor any
action taken hereunder shall be construed as (i) giving any Eligible Person or
Participant the right to continue as an Eligible Person or Participant or in
the employ of the Company or a Subsidiary; (ii) interfering in any way with the
right of the Company or a Subsidiary to terminate any Eligible Person’s or
Participant’s employment at any time, (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the Plan or to be treated
uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or Transferred shares of Stock in accordance
with the terms of an Award.

          (g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended
to constitute an “unfunded” plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or obligation to deliver
Stock pursuant to an Award, nothing contained in the Plan or any Award shall
give any such Participant any rights that are greater than those of a general
creditor of the Company; provided that the Committee may authorize the creation
of trusts and deposit therein cash, Stock, other Awards or other property, or
make other arrangements to meet the Company’s obligations under the Plan. Such
trusts or other arrangements shall be consistent with the “unfunded” status of
the Plan unless the Committee otherwise determines with the consent of each
affected Participant. The trustee of
such trusts may be authorized to dispose of trust assets and reinvest the
proceeds in alternative investments, subject to such terms and conditions as
the Committee or the Board may specify and in accordance with applicable law.

          (h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Company for approval shall
be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable including incentive arrangements and awards which do not qualify
under Code Section 162(m).

          (i) Payments in the Event of Forfeitures; Fractional Shares. Unless
otherwise determined by the Committee or the Board, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.

          (j) Governing Law. The validity, construction and effect of the Plan, any
rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the laws of the State of Texas without giving
effect to principles of conflicts of laws, and applicable federal law.

          (k) Plan Effective Date and Stockholder Approval; Termination of Plan.

21

 

          (i) The Plan shall become effective on the Effective Date,
subject to subsequent approval within 12 months of its adoption by
the Board by stockholders of the Company eligible to vote in the
election of directors, by a vote sufficient to meet the
requirements of Code Sections 162(m) (if applicable) and 422, Rule
16b-3 under the Exchange Act (if applicable), applicable NASDAQ
requirements, and other laws, regulations, and obligations of the
Company applicable to the Plan. Awards may be granted subject to
stockholder approval, but may not be exercised or otherwise settled
in the event stockholder approval is not obtained. The Plan shall
terminate at such time as no shares of Common Stock remain
available for issuance under the Plan and the Company has no
further rights or obligations with respect to outstanding Awards
under the Plan.

          (ii) The Plan was amended and restated effective May 7, 2004.
The Amended and Restated RR 2001 Incentive Compensation Plan was
approved by the Board on April 27, 2004.

22<PAGE>
                                                                     Exhibit 4.1

   NUMBER                                                             SHARES
PF

COMMON STOCK                                                        COMMON STOCK
                           PHASE FORWARD INCORPORATED
              INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

                                             SEE REVERSE FOR CERTAIN DEFINITIONS
                                                            CUSIP    71721R 40 6

THIS CERTIFIES THAT

                                    SPECIMEN

is the Owner of

  FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF

                           PHASE FORWARD INCORPORATED

transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
     Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized Officers.

Dated:

                           Phase Forward Incorporated
                                   CORPORATE
                                      SEAL
                                      1997
                                    DELAWARE

TREASURER                                                              PRESIDENT

<PAGE>
  The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;

  TEN COM - as tenants in common     UNIF GIFT MIN ACT-_________Custodian_______
  TEN ENT - as tenants by the                           (Cust)           (Minor)
            entireties                       under Uniform Gifts to Minors
  JT TEN  - as joint tenants with
            right of survivorship            Act________________________________
            and not as tenants in                           (State)
            common

    Additional abbreviations may also be used though not in the above list.

For Value Received, ___________________ hereby sells, assigns and transfers unto

PLEASE PRINT OR TYPEWRITE IDENTIFYING NUMBER
AND NAME OF ASSIGNEE AS IT SHOULD APPEAR ON
CERTIFICATE AND SHOW ADDRESS
____________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

_________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint

_______________________________________________________________________ Attorney
to transfer the said shares on the books of the within-named Corporation, with
full power of substitution in the premises.

Dated: __________________________________________

                    X___________________________________________________________

                    X___________________________________________________________

                    NOTICE: The signature to this assignment must correspond
                    with the name as written upon the face of the certificate,
                    in every particular, without alteration or enlargement or
                    any change whatever. Signatures of registered owners on
                    this certificate or on powers of attorney, and signatures
                    of attorneys on this certificate or on powers of
                    substitution, must be guaranteed.

Signature Guaranteed:_________________________________
                     SIGNATURE MUST BE GUARANTEED BY A
                     COMMERCIAL BANK OR FIRM WHICH IS
                     A MEMBER OF A REGISTERED NATIONAL
                     STOCK EXCHANGE.

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