Document:

exv10w2

 

EXHIBIT 10.2

ASSISTED LIVING CONCEPTS, INC.

TANDEM STOCK OPTION/STOCK APPRECIATION RIGHTS AWARD AGREEMENT

	 	 	 	 	 	 	 
	Employee:
	 	 	 	 	 	 
	Number of Stock Options/SARs:
	 	 	 	 	 	 
	Grant Date:

	 	March 30, 2007
	 	 
	Exercise Price:

	 	$ 11.80	 	 	 	 

     This Tandem Stock Option/Stock Appreciation Rights Award Agreement (the “Award Agreement”) is
entered into as of March 30, 2007, between Assisted Living Concepts, Inc. (“ALC”) and Employee. In
consideration of the mutual promises and covenants made in this Award Agreement and the mutual
benefits to be derived from this Award Agreement, ALC and the Employee agree as follows:

     THIS AWARD IS SUBJECT TO ALL TERMS AND CONDITIONS OF THE PLAN AND THIS AWARD AGREEMENT,
INCLUDING, WITHOUT LIMITATION, THE DISPUTE RESOLUTION PROVISIONS SET FORTH IN SECTION 17 OF THIS
AWARD AGREEMENT. BY SIGNING YOUR NAME BELOW, YOU WILL HAVE CONFIRMED YOUR ACCEPTANCE OF THE TERMS
AND CONDITIONS OF THIS AWARD AGREEMENT.

1. Definitions. Capitalized terms used in this Award Agreement that are not defined in
this Award Agreement have the meanings as used or defined in the Assisted Living Concepts, Inc.
2006 Omnibus Incentive Compensation Plan (the “Plan”) and is intended to be performance
compensation under Section 162(m) of the Internal Revenue Code. As used in this Award Agreement,
the following terms have the meanings set forth below:

     “Board” means the Board of Directors of ALC.

     “Business Day” means a day that is not a Saturday, a Sunday or a day on which banking
institutions are legally permitted to be closed in the City of New York.

     “Committee” means the Compensation/ Nominating/Governance Committee of the Board, or such
other committee of the Board as may be designated by the Board from time to time to administer the
Plan.

     “Common Stock” means Class A common stock of ALC, par value $0.01 per share.

     “Determination Date” means the date during the first quarter of 2008, as determined by the
Committee, on which the Committee determines whether Performance Goals with respect to the
Performance Period have been achieved.

     “Fair Market Value” means the closing market price per Share as reported on the New York Stock
Exchange (or other relevant exchange) on the applicable date or, in the event there shall be no
public market for the Shares on the applicable date, the fair market value of the Shares as
determined in good faith by the Committee.

     “Performance Period” means the period from January 1, 2007 through December 31, 2007.

     “Share” means a share of Common Stock.

2. Grant of Award. This Award Agreement sets forth the terms and conditions of an award
(the “Award”) under the Plan to the Employee as of the Grant Date of:

     a. Stock Options. The right and option (the “Stock Options”) to purchase up to Shares
at the Exercise Price per Share, the Fair Market Value on the date hereof. Each Stock Option is a
Nonqualified Stock Option. Unless earlier terminated pursuant to the terms of this Award
Agreement, the Stock Options shall expire on the fifth anniversary of the Grant Date.

     b. Stock Appreciation Rights. Each Stock Option includes a stock appreciation right
(“SAR”) at the price per Share equal to the Exercise Price. The SAR constitutes an unfunded and
unsecured promise of ALC to deliver (or cause to be delivered) to Employee a whole number of
Shares, cash or a combination of Shares and Cash at the time such SAR vests and is exercised, as
provided herein, equal in value to the excess, if any, of the Fair Market Value per Share over the
Exercise Price per Share of the SAR. Fractional shares will not be delivered and the number of
Shares to be delivered upon any exercise by you of SARs subject to this Award shall be rounded down
to the nearest whole Share. The Committee has sole discretion to deliver such value in Shares,
cash, or a combination of Shares and cash. Until such delivery, Employee has only the rights of a
general unsecured creditor and no rights as a stockholder of ALC. Unless earlier terminated
pursuant to the terms of this Award Agreement, the SARs shall expire on the fifth anniversary of
the Grant Date.

 

 

     c. Tandem Stock Option/Stock Appreciation Rights. An SAR with respect to a Share
shall vest, become exercisable, and terminate at the same times and under the same terms as the
Stock Option such Share is subject to. The exercise of a Stock Option with respect to any Share
shall cause the related SAR to automatically terminate and the exercise of an SAR with respect to
any Share shall cause the related Stock Option to automatically terminate. Only one Stock Option
or one SAR, and not both, may be exercised with respect to any Share that is subject to a Stock
Option under this Award Agreement. The tandem Stock Option and SAR rights with respect to a Share
are referred to in this Award Agreement as the “Stock Option/SAR.”

     d. Award Subject to Performance-Based Vesting. Except as otherwise provided in any
individual employment agreement between you and ALC or any of its Affiliates (an “Employment
Agreement”), the vesting of your rights with respect to Stock Options/SARs is contingent on the
attainment of performance goals set forth on Exhibit A to this Award Agreement (the “Performance
Goals”). Accordingly, unless otherwise provided in your Employment Agreement, your rights with
respect to Stock Options/SARs subject to this Award Agreement will not become vested on the
Determination Date unless the Committee determines that the Performance Goals with respect to the
Performance Period have been attained. Furthermore, pursuant to Section 14 and except as otherwise
provided in your Employment Agreement, in order for your rights with respect to any Stock Option or
SAR to become vested on the Determination Date, you must be employed by ALC or an Affiliate on the
Determination Date. If, on the Determination Date, the Committee determines in its sole discretion
that your rights with respect to any Stock Options/SARs under this Award Agreement remain unvested,
your rights with respect to such Stock Options/SARs shall immediately terminate, and you will be
entitled to no further payments or benefits with respect thereto.

     e. Number of Vested Stock Options/SARs Dependent Upon Level of Performance. If the
Committee determines that the threshold level Performance Goal specified in Exhibit A has been
attained for the Performance Period, the Committee will then determine the whole number of Stock
Options/SARs that vest on the Determination Date, up to the maximum number listed on the first page
of this Award Agreement, using the formula set forth in Exhibit A.

     f. Exercisability Subject to Time Vesting. Unless earlier terminated, any Stock
Options/SARs that the Committee determines to be vested as of the Determination Date shall become
exercisable as follows: one-third of the Shares covered thereby (rounded up to the next whole
Share) on March 30, 2008, an additional one-third of such Shares (rounded up to the next whole
Share) on March 30, 2009, and the remainder of such Shares on March 30, 2010, subject in each case
to the prior termination of the Stock Option/SAR.

     g. Exercisability Upon Death, Disability or Change of Control. Notwithstanding the
foregoing, the Stock Options/SARs, to the extent outstanding, shall become immediately vested and
fully exercisable upon (a) a Change of Control or (b) a Termination of Employment due to death or
Disability. For purposes of this Award Agreement, Disability means (1) “Disability” as defined in
your Employment Agreement, or (2) if there is no such employment or similar agreement or it does
not define “Disability,” permanent and total disability as determined under ALC’s long-term
disability plan applicable to Employee. For purposes of this Award Agreement, Termination of
Employment means the termination of Employee’s employment with, or performance of services for, ALC
and any of its Subsidiaries or Affiliates. A participant employed by, or performing services for,
a Subsidiary or an Affiliate shall also be deemed to incur a Termination of Employment if the
Subsidiary or Affiliate ceases to be such a Subsidiary or an Affiliate, as the case may be, and the
participant does not immediately thereafter become an employee of, or service-provider for, ALC or
another Subsidiary or Affiliate. Temporary absences from employment because of illness, vacation
or leave of absence and transfers among ALC and its Subsidiaries and Affiliates shall not be
considered Terminations of Employment.

     (h) Suspension or Termination of Stock Options/SARs. If at any time (including after
a notice of exercise has been delivered) the Committee, including any administrator authorized
pursuant to Section 3(e) of the Plan (any such person, an “Authorized Officer”), reasonably
believes that Employee has committed an act of misconduct as described in this Section, the
Committee or Authorized Officer may suspend the Employee’s right to exercise any Stock Option/SAR
pending a determination of whether an act of misconduct has been committed. If the Committee or an
Authorized Officer determines Employee has committed an act of embezzlement, fraud, dishonesty,
nonpayment of any obligation owed to ALC, breach of fiduciary duty or deliberate disregard of ALC
rules resulting in loss, damage or injury to ALC, or if Employee makes an unauthorized disclosure
of any ALC trade secret or confidential information, engages in any conduct constituting unfair
competition, or induces a customer to breach a contract with ALC, neither Employee nor his or her
estate shall be entitled to exercise any Stock Option/SAR whatsoever. In addition, if Employee is
designated an “executive officer” by the Board and if the Committee determines that Employee
engaged in an act of embezzlement, fraud or breach of fiduciary duty during Employee’s employment
that contributed to an obligation to restate ALC’s financial statements (“Contributing
Misconduct”), Employee shall be required to repay ALC, in cash and upon demand, the Option Proceeds
(as defined below) resulting from the sale or other disposition (including to ALC) of Shares issued
or issuable upon exercise of a Stock Option or SAR if the sale or disposition was effected during
the twelve-month period following the first public issuance or filing with the Securities and
Exchange Commission of the financial statements required to be restated. The term “Option
Proceeds” means,

 

 

with respect to any sale or other disposition (including to ALC) of Shares issued or issuable upon
exercise of a Stock Option or SAR, an amount determined appropriate by the Committee to reflect the
effect of the restatement on ALC’s stock price, up to the amount equal to the number of Shares sold
or disposed of multiplied by the difference between the market value per Share at the time of such
sale or disposition and the exercise price. The return of Option Proceeds is in addition to and
separate from any other relief available to ALC due to the executive officer’s Contributing
Misconduct. Any determination by the Committee with respect to the foregoing shall be final,
conclusive and binding on all interested parties.

3. The Plan. This Award is made pursuant to the Plan, all the terms of which are hereby
incorporated in this Award Agreement. In the event of any conflict between the terms of the Plan
and the terms of this Award Agreement, the terms of this Award Agreement shall govern;
provided, however, that, notwithstanding the foregoing, it is understood that the
provisions of Section 6(i)(vi)(D) of the Plan, including but not limited to the concept of
“negative discretion” shall not be applicable to the Stock Options/SARs. In the event of any
conflict between the terms of this Award Agreement and the terms of any Employment Agreement, the
terms of your Employment Agreement will govern.

4. Exercise of the Stock Options.

     a. Stock Options as to which the Employee is vested, which have become exercisable, and which
have not terminated may be exercised by delivery to the Secretary of ALC of a written or electronic
notice, complying with the applicable procedures established by the Committee or ALC, stating the
number of whole Shares to be purchased pursuant to this Award Agreement and the date on which the
Employee wants to exercise the Stock Option and accompanied by payment of the full purchase price
of the Shares to be purchased.

     b. The full purchase price of the Stock Option (the Exercise Price multiplied by the number of
Stock Options exercised) shall be paid in cash, by wire transfer, or by certified check or bank
draft payable to the order of ALC, by exchange of Shares of unrestricted Common Stock of ALC
already owned by the Employee (that have been purchased on the open market by the Employee and held
for at least six months prior to exercise) and having an aggregate Fair Market Value equal to the
full purchase price, or by any other procedure approved by the Committee, or by a combination of
the foregoing.

     c. Employees who are not Executive Officers (as such term is defined the by Securities and
Exchange Commission) may also give notice and make payment through a brokerage firm pursuant to an
arrangement approved by ALC in advance.

5. Exercise of Stock Appreciation Rights. SARs as to which the Employee is vested, which
have become exercisable, and which have not terminated may be exercised by delivery to the
Secretary of ALC of a written or electronic notice, complying with the applicable procedures
established by the Committee or ALC, stating the whole number of SARs that are thereby exercised.
Upon exercise, ALC shall deliver to Employee or Employee’s legal representative, at the absolute
discretion of the Committee, either (i) the number of Shares (rounded down to the nearest whole
Share) (the “Number of Equivalent Shares”) equal to (x) (A) the excess, if any, of the Fair Market
Value per Share on the exercise date over the Exercise Price per Share of the SAR, multiplied by
(B) the number of SARs being exercised pursuant to such notice, divided by (y) the Fair Market
Value per Share on the exercise date, (ii) cash equal to the Fair Market Value per Share on the
exercise date multiplied by the Number of Equivalent Shares, or (iii) any combination of cash and
Shares with an aggregate value equal to the Fair Market Value per Share on the exercise date
multiplied by the Number of Equivalent Shares.

6. Expiration of Stock Options/SARs. Unless the Committee determines otherwise and except
as otherwise provided in Section 7 or in your Employment Agreement unexercised Options/SARs expire
(i) automatically on the date of your Termination of Employment for Cause (as defined in your
Employment Agreement or, if your Employment Agreement does not contain a definition of Cause) or
(ii) 90 days after the effective date of your Termination of Employment for any reason other than
Cause; provided that any portion of the Stock Options/SARs that is not vested as of such
effective date ceases vesting and terminates immediately; and provided further that all
Options/SARs will automatically expire on the fifth anniversary of this Award Agreement.

7. Termination of Employment.

     a. If the Employee incurs a Termination of Employment due to Disability, the Stock
Options/SARs, to the extent outstanding at the time of such Termination of Employment, shall become
immediately vested and fully exercisable and may be exercised by the Employee at any time prior to
the first to occur of (i) one year after such Termination of Employment or (ii) the expiration date
of the Stock Options/SARs, and shall thereafter expire.

     b. If the Employee incurs a Termination of Employment due to death, the Stock Options/SARs, to
the extent outstanding at the time of such Termination of Employment, shall become immediately
vested and fully exercisable and may

 

 

be exercised by the Employee’s estate or by a person who acquired the right to exercise such
Stock Options/SARs by bequest or inheritance or otherwise by reason of the death of the Employee at
any time prior to the first to occur of (i) one year after such Termination of Employment or (ii)
the expiration date of the Stock Options/SARs, and shall thereafter expire.

          c. If the Employee incurs a Termination of Employment due to retirement at or after age 65,
the portion of the Stock Options/SARs, if any, which is exercisable at the time of such Termination
of Employment may be exercised at any time prior to the first to occur of (i) three years after
such Termination of Employment or (ii) the expiration date of the Stock Options/SARs, and shall
thereafter expire. Any portion of the Stock Options/SARs that is not exercisable at the time of
such Termination of Employment due to retirement at or after age 65 shall expire as of such
Termination of Employment.

          d. If the Employee incurs a voluntary Termination of Employment by the Employee (other than
retirement at or after age 65), the portion of the Stock Options/SARs, if any, which is exercisable
at the time of such Termination of Employment may be exercised at any time prior to the first to
occur of (i) 30 days after such Termination of Employment or (ii) the expiration date of the Stock
Options/SARs, and shall thereafter expire. Any portion of the Stock Option/SAR that is not
exercisable at the time of such Termination of Employment shall expire as of such Termination of
Employment.

     e. If the Employee incurs a Termination of Employment by ALC without Cause, the portion of the
Stock Options/SARs, if any, which is exercisable at the time of such Termination of Employment may
be exercised at any time prior to the first to occur of (i) 90 days after such Termination of
Employment or (ii) the expiration date of the Stock Option/SAR, and shall thereafter expire. Any
portion of the Stock Options/SARs that is not exercisable at the time of such Termination of
Employment shall expire as of such Termination of Employment. For purposes of this Award
Agreement, Cause means, unless otherwise provided by the Committee, (1) “Cause” as defined in any
Employment Agreement, or (2) if there is no such Employment Agreement or if it does not define
Cause: (A) conviction of Employee for committing a felony under federal law or the law of the state
in which such action occurred, (B) dishonesty in the course of fulfilling Employee’s employment
duties, (C) willful and deliberate failure on the part of Employee to perform his or her employment
duties in any material respect, or (D) prior to a Change in Control, such other events as shall be
determined by the Committee. The Committee shall, unless otherwise provided in any employment or
similar agreement between Employee and ALC, have the sole discretion to determine whether “Cause”
exists, and its determination shall be final.

8. Voting Rights; Dividend Equivalents. Prior to the date on which your rights with
respect to Options/SARs have become vested and you exercise such Options/SARs, you shall not be
entitled to exercise any voting rights with respect to such Options/SARs or any Shares with respect
thereto, and shall not be entitled to receive dividends or other distributions with respect
thereto.

9. Non-Transferability of Options/SARs. Unless otherwise provided by the Committee in its
discretion, Options/SARs may not be sold, assigned, alienated, transferred, pledged, attached or
otherwise encumbered except as provided in Section 9(a) of the Plan. Any purported sale,
assignment, alienation, transfer, pledge, attachment or other encumbrance of Options/SARs in
violation of the provisions of this Section 9 and Section 9(a) of the Plan shall be void.

10. Adjustment in the Event of Change in Stock. In the event of any change in corporate
capitalization (including, but not limited to, a change in the number of shares of Common Stock
outstanding), such as a stock split or a corporate transaction, such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock or property of ALC, any
reorganization (whether or not such reorganization comes within the definition of such term in
Section 368 of the Code), or any partial or complete liquidation of ALC, the number and kind of
shares subject to the Stock Option/SAR and/or the exercise price per share shall be adjusted by the
Board or Committee as the Board or Committee may determine to be appropriate in its sole
discretion; provided, however, that the number of shares subject to the Stock Options/SARs shall
always be a whole number. The determination of the Board or Committee regarding any adjustment
will be final and conclusive.

11. Payment of Transfer Taxes, Fees and Other Expenses. ALC agrees to pay any and all
original issue taxes and stock transfer taxes that may be imposed on the issuance of Shares
acquired pursuant to exercise of the Stock Options/SARs, together with any and all other fees and
expenses necessarily incurred by ALC in connection therewith.

12. Other Restrictions on Exercisability. The exercise of the Stock Options/SARs and the
delivery of share certificates upon such exercise shall be subject to the requirement that, if at
any time the Committee shall determine that (a) the listing, registration or qualification of the
shares of Common Stock subject or related thereto upon any securities exchange or under any state
or federal law or (b) the consent or approval of any government regulatory body is, in the case or
(a) or (b), necessary or desirable as a condition of, or in connection with, such exercise or the
delivery or purchase of shares pursuant

 

 

thereto, then in any such event such exercise shall not be effective unless such listing,
registration, qualification, consent, or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.

13. Taxes and Withholdings. No later than the date of exercise of the Stock Options/SARs
granted hereunder, the Employee shall pay to ALC or make arrangements satisfactory to the Committee
regarding payment of any federal, state and local taxes, and any non-U.S. taxes applicable to the
Employee, of any kind required by law to be withheld upon the exercise of such Stock Options/SARs.
In the event that there is withholding tax liability in connection with the exercise of
Options/SARs, you may satisfy, in whole or in part, any withholding tax liability by having ALC
withhold from the number of Shares you would be entitled to receive pursuant to the exercise of the
Options/SARs, a number of Shares having a Fair Market Value equal to such withholding tax
liability. ALC shall, to the extent permitted or required by law, have the right to deduct from
any payment of any kind otherwise due to the Employee federal, state, local and applicable non-U.S.
taxes of any kind required by law to be withheld upon the exercise of such Stock Options/SARs.

14. Consents and Legends.

     a. Consents. Your rights in respect of the Options/SARs that are subject to this
Award are conditioned on the receipt to the full satisfaction of the Committee of any required
consents that the Committee may reasonably determine to be necessary or advisable (including,
without limitation, your consenting to ALC’s supplying to any third-party record keeper of the Plan
such personal information as ALC or the Committee deems advisable to administer the Plan).

     b. Legends. ALC may affix to certificates for Shares issued pursuant to this Award
Agreement any legend that ALC or the Committee determines to be necessary or advisable (including
to reflect any restrictions to which you may be subject under any applicable securities laws). ALC
may advise the transfer agent to place a stop order against any legended Shares.

15. Successors and Assigns of ALC. The terms and conditions of this Award Agreement shall
be binding upon and shall inure to the benefit of ALC and its successors and assigns.

16. Committee Discretion. Subject to the terms of your Employment Agreement, the Committee
shall have full and plenary discretion with respect to any actions to be taken or determinations to
be made in connection with this Award Agreement, and its determinations shall be final, binding and
conclusive.

17. Dispute Resolution.

     a. Jurisdiction and Venue. Notwithstanding any provision in your Employment
Agreement, you and ALC irrevocably submit to the exclusive jurisdiction of (i) the United States
District Court for the Eastern District of Wisconsin and (ii) the courts of the State of Wisconsin
for the purposes of any suit, action or other proceeding arising out of this Award Agreement or the
Plan. You and ALC agree to commence any such action, suit or proceeding either in the United
States District Court for the Eastern District of Wisconsin or, if such suit, action or other
proceeding may not be brought in such court for jurisdictional reasons, in the courts of the State
of Wisconsin. You and ALC further agree that service of any process, summons, notice or document
by U.S. registered mail to the other party’s address set forth below shall be effective service of
process for any action, suit or proceeding in Wisconsin with respect to any matters to which you
have submitted to jurisdiction in this Section 17(a). You and ALC irrevocably and unconditionally
waive any objection to the laying of venue of any action, suit or proceeding arising out of this
Award Agreement or the Plan in (A) the United States District Court for the Eastern District of
Wisconsin or (B) the courts of the State of Wisconsin, and hereby and thereby further irrevocably
and unconditionally waive and agree not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient forum.

     b. Waiver of Jury Trial. You and ALC hereby waive, to the fullest extent permitted by
applicable law, any right either of you may have to a trial by jury in respect to any litigation
directly or indirectly arising out of, under or in connection with this Award Agreement or the
Plan.

     c. Confidentiality. You hereby agree to keep confidential the existence of, and any
information concerning, a dispute described in this Section 17, except that you may disclose
information concerning such dispute to the court that is considering such dispute or to your legal
counsel or other advisors (provided that such counsel or other advisors agree not to disclose any
such information other than as necessary to the prosecution or defense of the dispute).

     18. Notice. All notices, requests, demands and other communications required or
permitted to be given under the terms of this Award Agreement shall be in writing and shall be
deemed to have been duly given when delivered by hand or

 

 

overnight courier or three Business Days after they have been mailed by U.S. registered mail,
return receipt requested, postage prepaid, addressed to the other party as set forth below:

	 	 	 
	If to ALC:

	 	Assisted Living Concepts, Inc.
	 

	 	111 West Michigan Street
	 

	 	Milwaukee, WI 53203
	 

	 	Attention: Corporate Secretary
	 
	 	 
	If to Employee:
	 	 

     The parties may change the address to which notices under this Award Agreement shall be sent
by providing written notice to the other in the manner specified above.

19. Headings. Headings are given to the Sections and subsections of this Award Agreement
solely as a convenience to facilitate reference. Such headings shall not be deemed in any way
material or relevant to the construction or interpretation of this Award Agreement or any provision
thereof.

20. Amendment of this Award Agreement. The Committee may waive any conditions or rights
under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Award Agreement
prospectively or retroactively; provided, however, that any such waiver, amendment,
alteration, suspension, discontinuance, cancellation or termination that would materially and
adversely impair your rights under this Award Agreement shall not to that extent be effective
without your consent (it being understood, notwithstanding the foregoing proviso, that this Award
Agreement and the Options/SARs shall be subject to the provisions of Section 7(c) of the Plan).

21. Counterparts. This Award Agreement may be signed in counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.

     IN WITNESS WHEREOF, the parties have duly executed this Award Agreement as of the date first
written above.exv10w3

 

EXHIBIT 10.3

APAC CUSTOMER SERVICES, INC.

AMENDED AND RESTATED 2005 INCENTIVE STOCK PLAN

EFFECTIVE APRIL 4, 2007

 

 

APAC CUSTOMER SERVICES, INC.

AMENDED AND RESTATED 2005 INCENTIVE STOCK PLAN

     1. Purpose. APAC Customer Services, Inc. (the “Company”) established the APAC
CUSTOMER SERVICES, INC. 2005 Incentive Stock Plan (the “Plan”) effective as of June 3,
2005, and hereby amends the Plan by this restatement, to provide incentives to attract and retain
highly competent persons as officers and key employees of the Company and its Subsidiaries and
members of its Board of Directors as well as independent contractors providing consulting or
advisory services to the Company, by providing them opportunities to acquire shares of Common Stock
and to receive monetary payments based on the value of such shares pursuant to the Awards described
herein. The Plan is the successor to the Predecessor Plan.

     2. Definitions.

          (a) “Award” means, Stock Options (including Incentive Stock Options), Stock
Appreciation Rights, Restricted Stock or Restricted Stock Unit awards, Performance Share or
Performance Unit awards, Dividend or Dividend Equivalent Rights, Stock Awards, MIP Awards, Director
Options, or other awards (“Other Incentive Awards”), that are valued in whole or in part by
reference to, or are otherwise based on, Common Stock or other factors, all on a stand-alone,
combination or tandem basis, as described in or granted under the Plan.

          (b) “Award Agreement” means a writing provided by the Company to each Participant
setting forth the terms and conditions of each Award made under the Plan.

          (c) “Board” means the Board of Directors of the Company.

          (d) “Change of Control” shall be deemed to have occurred upon the happening of any of
the following events:

          (i) A tender offer shall be made and consummated for the ownership of more than 50% of
the outstanding voting securities of the Company;

          (ii) The Company shall be merged or consolidated with another corporation and as a
result of such merger or consolidation less than 50% of the outstanding voting securities of
the surviving or resulting corporation shall be owned in the aggregate by the former
shareholders of the Company, as the same shall have existed immediately prior to such merger
or consolidation;

          (iii) The Company shall sell all or substantially all of its assets to another
corporation which is not a wholly-owned Subsidiary or affiliate;

          (iv) As the result of, or in connection with, any contested election for the Board of
Directors of the Company, or any tender or exchange offer,

 

 

merger or business combination or sale of assets, or any combination of the foregoing
(a “Transaction”), the persons who were Directors of the Company before the
Transaction shall cease to constitute a majority of the Board of Directors of the Company,
or any successor thereto; or

          (v) A person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as in
effect on the date hereof) of the Securities Exchange Act of 1934 (“Exchange Act”),
other than any employee benefit plan then maintained by the Company, shall acquire more than
50% of the outstanding voting securities of the Company (whether, directly, indirectly,
beneficially or of record). For purposes hereof, ownership of voting securities shall take
into account and shall include ownership as determined by applying the provisions of Rule
13d-3(d)(1)(i) (as in effect on the date hereof) pursuant to the Exchange Act.

     Notwithstanding the foregoing, (A) a Change in Control will not occur for purposes of
the Plan merely due to the death of Theodore G. Schwartz, or as a result of the acquisition
by Theodore G. Schwartz, alone or with one or more affiliates or associates, as defined in
the Exchange Act, of securities of the Company, as part of a going-private transaction or
otherwise, unless Mr. Schwartz or his affiliates, associates, family members or trusts for
the benefit of family members (collectively, the “Schwartz Entities”) do not
control, directly or indirectly, at least twenty-seven percent (27%) of the resulting
entity, and (B) if the Schwartz Entities control, directly or indirectly, less than
twenty-seven (27%) percent of the Company’s voting securities while it is a public company,
then “33 1/3%” shall be substituted for “50%” in clauses (i) and (v) of this Section 1(d),
and “66 2/3%” shall be substituted for “50%” in clause (ii) of this Section 1(d).

          (e) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

          (f) “Committee” means the Compensation Committee of the Board or such other committee
of the Board as may be designated by the Board from time to time to administer the Plan. Unless
the Board otherwise determines, and such determination is reduced to writing articulating the
reasons for such determination, the Committee shall at all times be comprised of not less than two
members, each of whom shall qualify as (i) a “Non-Employee Director” within the meaning of Rule
16b-3(b)(3) (or any successor rule) under the Exchange Act, (ii) an “outside director” within the
meaning of Section 162(m) of the Code and the regulations thereunder (or any successor law or
regulation), and (iii) an “independent director” as such term is defined or used by the rules of
the exchange or system on which Common Stock is listed.

          (g) “Common Stock” means the Common Stock, $0.01 par value, of the Company.

          (h) “Company” means APAC Customer Services, Inc., an Illinois corporation, and any
successor thereto.

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

          (j) “Director Plan” means the former APAC Teleservices, Inc. Amended and Restated 1995
Non-Employee Director Stock Option Plan, which plan previously was merged into the Predecessor
Plan.

          (k) “Director Option” has the meaning specified in Section 6(i).

          (l) “Dividend or Dividend Equivalent Rights” has the meaning specified in Section
6(f).

          (m) “Effective Date” has the meaning specified in Section 18.

          (n) “Employee” means an employee of the Company or a Subsidiary.

          (o) “Fair Market Value” means the closing sales price on the NASDAQ Stock Market on
the relevant valuation date or, if there were no sales on the valuation date, on the next preceding
date on which such selling prices were recorded; provided, if Common Stock is not at any time
readily tradable on a national securities exchange or other market system, “Fair Market Value”
shall mean the amount determined in good faith by the Committee as the fair market value of the
Common Stock of the Company.

          (p) “Incentive Stock Option” has the meaning specified in Section 6(b).

          (q) “Independent Contractor” means an independent contractor providing consulting or
advisory services to the Company at any time or from time to time.

          (r) “Other Incentive Award” has the meaning specified in Section 2(a).

          (s) “MIP Award” has the meaning specified in Section 6(h).

          (t) “Non-Employee Director” means a member of the Board who is not an Employee of the
Company or any Subsidiary.

          (u) “Participant” means an Employee, Non-Employee Director or Independent Contractor
who has been granted an Award under the Plan, including the Predecessor Plan.

          (v) “Performance-Based Award” has the meaning specified in Section 7.

          (w) “Performance Criteria” has the meaning specified in Section 7.

          (x) “Performance Share” has the meaning specified in Section 6(d).

          (y) “Performance Unit” has the meaning specified in Section 6(e).

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          (z) “Plan” means this APAC Customer Services, Inc. Incentive Stock Plan, as amended
from time to time.

          (aa) “Plan Year” means a twelve-month period beginning on the first day of each fiscal
year of the Company.

          (bb) “Predecessor Plan” means the Company’s Second Amended and Restated 1995 Incentive
Stock Plan.

          (cc) “Previously-Acquired Shares” means shares of Common Stock acquired by the
Participant or any beneficiary of Participant other than pursuant to an Award under the Plan, the
Predecessor Plan or any similar plan maintained by the Company, or if so acquired under the Plan,
the Predecessor Plan or such other plan, and such shares of Common Stock have been held for a
period of not less than six months or such shorter period as the Committee may permit (or such
longer period as may be required to avoid a charge to earnings for financial reporting purposes).

          (dd) “Restriction Period” means a period of time beginning as of the date upon which
an Award subject to restrictions or forfeiture provisions is made pursuant to the Plan and ending
as of the date upon which the Common Stock subject to such Award is no longer restricted or subject
to forfeiture provisions.

          (ee) “Restricted Share” has the meaning specified in Section 6(d).

          (ff) “Restricted Unit” has the meaning specified in Section 6(e).

          (gg) “Stock Appreciation Right” has the meaning specified in Section 6(c).

          (hh) “Stock Award” has the meaning specified in Section 6(g).

          (ii) “Stock Option” has the meaning specified in Section 6(a).

          (jj) “Subsidiary” means any corporation or other entity, whether domestic or foreign,
in which the Company has or obtains, directly or indirectly, a proprietary interest of at least 50%
by reason of stock ownership or otherwise.

     3. Eligibility. Any Employee, Non-Employee Director or Independent Contractor
selected by the Committee is eligible to receive an Award. Designation of a Participant in any
year shall not require the Committee to designate such person to receive an Award in any other year
or, once designated, to receive the same type or amount of Awards as granted to the Participant in
any year.

     4. Plan Administration.

          (a) Authority. Except as otherwise determined by the Board, the Plan shall be
administered by the Committee. The Committee shall make determinations with respect to the
participation of Employees, Non-Employee Directors and

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Independent Contractors in the Plan and, except as otherwise required by law or the Plan, the
type and amount of Awards, the terms of Awards, including vesting schedules, price, length of
relevant performance, Restriction Period, option period, dividend rights, post-retirement and
termination rights, payment alternatives such as cash, stock, contingent awards or other means of
payment consistent with the purposes of the Plan, and such other terms and conditions as the
Committee deems appropriate. For such purposes, the Committee may reprice or otherwise decrease
the exercise price applicable to any outstanding Stock Option, cancel a Stock Option or Stock
Appreciation Right when its exercise price exceeds the Fair Market Value of the underlying Common
Stock in exchange for another Stock Option or Stock Appreciation Right, or other action that is
treated as a repricing under generally accepted accounting principles, whether or not in connection
with an adjustment contemplated by Section 11.

          (b) Determinations.

          (i) The Committee shall have authority to supply any omission, correct any defect, or
reconcile any inconsistency in the Plan in such manner and to such extent as it shall deem
appropriate in its sole discretion to carry the same into effect; to issue administrative
guidelines as an aid to administer the Plan and make changes in such guidelines as it from
time to time deems proper; to establish such rules and regulations as it deems necessary for
the proper administration of the Plan, to interpret and construe the provisions of the Plan
and the Award Agreements; to decide all questions of fact arising in its application; to the
extent permitted under the Plan, grant waivers of Plan terms, conditions, restrictions, and
limitations; to accelerate the exercisability of any Stock Option, Incentive Stock Option or
Stock Appreciation Right and the elimination of any restrictions on any Restricted Stock,
Restricted Stock Unit, Performance Share or Performance Unit Award, when such action or
actions would be in the best interest of the Company; and to make all other determinations
pursuant to any Plan provision or Award Agreement which shall be final and binding on all
persons.

          (ii) The Committee may act only by a majority of its members. Any determination of the
Committee may be made, without a meeting, by a writing or writings signed by all of the
members of the Committee. In addition, the Committee may authorize any one or more of its
members to execute and deliver documents on behalf of the Committee.

          (iii) To the extent deemed necessary or advisable for purposes of Section 16 of the
Exchange Act or Section 162(m) of the Code, a member or members of the Committee may recuse
himself or themselves from any action, in which case action taken by the majority of the
remaining members shall constitute action by the Committee.

          (c) Delegation. To the extent permitted by applicable law, the Committee may, by a
resolution adopted by the Committee, authorize one or more officers of the Company to do one or
more of the following: (i) designate officers and

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other Employees, Non-Employee Directors, and Independent Contractors of the Company to be
Participants to receive an Award under the Plan, (ii) determine the amount, terms, conditions, and
form of any such Awards and (iii) take such other actions which the Committee is authorized to take
under the Plan; provided, however, that the resolution so authorizing such Participant shall
specify the total number of shares of Common Stock or the amount of cash payable under such Awards
which such Participant may be so awarded; provided, further, that the Committee may not delegate to
any person the authority to grant Awards to, or take other action with respect to, Participants who
at the time of such Awards or action are subject to Section 16 of the Exchange Act or are “covered
employees” as defined in Section 162(m) of the Code. Further, the Committee may not authorize an
officer to designate himself or herself as a recipient of any such Awards. To the extent deemed
necessary or advisable for purposes of Section 16 of the Exchange Act or otherwise, the Board may
act as the Committee hereunder.

          (d) Liability; Indemnification. No member of the Board, no member of the Committee
and no Employee shall be liable for any act or failure to act hereunder, except in circumstances
involving his bad faith, gross negligence or fraud, or for any act or failure to act hereunder by
any other member or employee or by any agent to whom duties in connection with the administration
of the Plan have been delegated. The Company shall indemnify members of the Committee and any
agent of the Committee who is an Employee, against any and all liabilities or expenses to which
they may be subjected by reason of any act or failure to act with respect to their duties on behalf
of the Plan, except in circumstances involving such person’s bad faith, gross negligence or willful
misconduct.

     5. Stock Subject to the Plan.

          (a) Available Shares. The stock subject to the provisions of the Plan may be shares
of authorized but unissued Common Stock, treasury shares held by the Company or any Subsidiary, or
shares acquired by the Company through open market purchases or otherwise. Subject to adjustment
in accordance with the provisions of Section 11, the total number of shares of Common Stock which
may be issued under the Plan shall not exceed the number of shares under the Predecessor Plan
heretofore authorized for issuance and not previously issued and not issued after the Effective
Date (or which, after the Effective Date, become available as provided herein). To the extent that
shares of Common Stock subject to an outstanding Award or an award under the Predecessor Plan are
not issued by reason of the forfeiture, termination, surrender, cancellation or expiration while
unexercised of such award, by reason of the tendering or withholding of shares (by either actual
delivery or by attestation) to pay all or a portion of the purchase price or to satisfy all or a
portion of the tax withholding obligations relating to such an Award under the Plan or award under
the Predecessor Plan, by reason of being settled in cash in lieu of Common Stock or settled in a
manner such that some or all of the shares covered by the Award are not issued to a Participant, or
being exchanged for an Award under the Plan that does not involve Common Stock, then such shares
shall immediately again be available for issuance under the Plan. The foregoing provisions of this
Section 5(a) to the contrary

-6-

 

notwithstanding, no shares attributable to the Director Plan may be subject to Incentive Stock
Option Awards under the Plan. The Committee may from time to time adopt and observe such
procedures concerning the counting of shares against the Plan maximum as it may deem appropriate.
Shares of Common Stock issued in connection with awards that are assumed, converted or substituted
pursuant to a merger, acquisition or similar transaction entered into by the Company or any of its
Subsidiaries shall not reduce the number of shares of Common Stock available under the Plan.

          (b) Limitations. Subject to Section 11, the maximum number of shares of Common Stock
that may be covered by Awards granted under the Plan to any single Participant during any one Plan
Year shall be 1,000,000 shares; provided, any Awards or portion of Awards that are cancelled or
repriced shall continue to be counted in determining such maximum aggregate number of shares of
Common Stock that may be granted to any single Participant. If an Award is granted in tandem with
a Stock Appreciation Right, such that the exercise of the Award right or Stock Appreciation Right
with respect to a share of Common Stock cancels the tandem Stock Appreciation Right or Award right,
respectively, with respect to such share, the tandem Award right and Stock Appreciation Right with
respect to each share of Common Stock shall be counted as covering but one share of Common Stock
for purposes of applying the limitations of this paragraph (b).

     6. Awards under the Plan. As the Committee may determine, the following types of
Awards may be granted under the Plan on a stand alone, combination or tandem basis:

          (a) Stock Option. A right to buy a specified number of shares of Common Stock at a fixed
exercise price during a specified time, all as the Committee may determine; provided that the
exercise price of any Stock Option shall not be less than 100% of the Fair Market Value of a share
of Common Stock on the date of grant of such Award; and, provided, further, that in no event shall
the term of any Stock Option extend to a date which is more than ten years after the date of grant
of such Award.

          (b) Incentive Stock Option. A right to buy a specified number of shares of Common Stock at a
fixed exercise price during a specified time, all as the Committee may determine; provided that
Incentive Stock Options shall be awarded only to Participants who are Employees of the Company or
one of its subsidiaries (under Section 424(f) of the Code), have an exercise price that is not less
than 100% Fair Market Value of a share of Common Stock on the date of grant of such Award and a
term that extends to a date that is not more than ten years after the date of grant of such Award.
An Award in the form of an Incentive Stock Option shall otherwise comply with all requirements of
Section 422 of the Code or any successor Section of the Code as it may be amended from time to
time. Options granted as Incentive Stock Options that at any time fail to satisfy the requirements
of Section 422 of the Code shall thereafter constitute Stock Options other than Incentive Stock
Options without action by the Committee.

-7-

 

          (c) Stock Appreciation Right. A right to receive the excess of the Fair Market Value of a
share of Common Stock on the date the Stock Appreciation Right is exercised over the Fair Market
Value of a share of Common Stock on the date the Stock Appreciation Right was granted, payable in
shares of Common Stock, in cash or a combination of Common Stock and cash, in accordance with the
terms of the Award.

          (d) Restricted Shares and Performance Shares. A transfer of Common Stock to a Participant,
subject to such restrictions on transfer or other incidents of ownership, or in the case of
Performance Shares subject to performance standards established pursuant to Section 7 below, for
such periods of time as the Committee may determine. The terms of a Performance Share Award also
may provide for payment in cash or a combination of Common Stock and cash.

          (e) Restricted Units and Performance Units. A fixed or variable share or dollar denominated
unit subject to such conditions of vesting, and time of payment, or in the case of Performance
Share Units, performance standards established pursuant to Section 7 below, as the Committee may
determine, which are valued at the Committee’s discretion in whole or in part by reference to, or
otherwise based on, the Fair Market Value of a share of Common Stock and which may be paid in
Common Stock, cash or in a combination of Common Stock and cash.

          (f) Dividend or Dividend Equivalent Right. A right to receive dividends or their equivalent
in value, equal to the amount of the dividend actually paid with respect to one share of Common
Stock, which shall be payable in Common Stock, cash or in a combination of Common Stock and cash
with respect to any new or previously existing Award, as the Committee shall determine.

          (g) Stock Award. An unrestricted transfer of ownership of Common Stock.

          (h) MIP Awards. A Stock Award, Restricted Stock Award or a Restricted Stock Unit Award,
together with or without an Award of Dividend or Dividend Equivalent Rights, or a Stock Option
Award, as payment for an award granted and earned under the Company’s Management Incentive Plan, as
amended and restated effective January 3, 2005 and as may be amended thereafter from time to time
(subject to shareholder approval as provided thereunder and at Section 14 hereunder).

          (i) Director Options. As a component of a Non-Employee Director’s compensation for services
as a member of the Board, a Stock Option Award (other than an Incentive Stock Option), to purchase
shares of Common Stock of the Company at an exercise price equal to the Fair Market Value of Common
Stock on the date of the Award, and providing such terms and conditions as determined by the
Committee. Nothing contained in this Section 6(i) shall limit or otherwise prohibit the Committee
from granting to Directors other Awards, including Stock Option Awards, with terms inconsistent
with the requirements of this Section 6(i). With respect to Director Option Awards granted under
this Section 6(i):

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          (i) No Director Option may be exercised during the first year following the date such
option was granted. Thereafter, each Director Option may be exercised:

          (A) to a maximum cumulative extent of one-third (1/3) of the total shares
covered by the option on or after the first anniversary of the date the option was
granted;

          (B) to a maximum cumulative extent of two-thirds (2/3) of the total shares
covered by the option on or after the second anniversary of the date the option was
granted; and

          (C) to a maximum cumulative extent of 100% of the total option shares on or
after the third anniversary of the date the option was granted.

Notwithstanding the above limitations, any Director Option granted under the Plan shall
become fully exercisable upon the death of the Non-Employee Director while serving on the
Board or upon the retirement of the Non-Employee Director. For these purposes,
“retirement” means a Non-Employee Director’s termination of Service on or after the
date on which the Non-Employee Director’s age plus service as a member of the Board equals
or exceeds 62, provided that the Non-Employee Director has attained age 50 and has served as
a member of the Board for not less than six years, or at any time with the consent of the
Board. “Service” shall mean (i) an employee-employer relationship between the Non-Employee
Director and the Company or any of its subsidiaries, (ii) service to the Company or any of
its subsidiaries provided by the Non-Employee Director as a member of the Company’s or such
Subsidiary’s Board of Directors, or (iii) service by the Non-Employee Director as a
consultant or independent contractor. Non-Employee Director will not be treated as
terminating Service (A) where there is a simultaneous reemployment or continuing employment
of the Non-Employee Director by the Company or any of its subsidiaries, (B) where there is a
simultaneous establishment of a consulting relationship or continuing consulting
relationship between the Non-Employee Director and the Company or any of its subsidiaries,
or (C) if the Non-Employee Director continues to serve as a member of the Board of Directors
of the Company or any of its subsidiaries after the termination of an employee-employer or
consulting relationship, in which case, the Non-Employee Director’s Service will cease on
the date the Non-Employee Director no longer is employed by the Company or any of its
subsidiaries, no longer performs services as a consultant, and is no longer a member of the
Board of Directors of the Company or any of its subsidiaries. The Committee, in its sole
discretion, shall determine the effect of all matters and questions relating to terminations
of Service, including, but not by way of limitation, the question of whether a particular
leave of absence constitutes a termination of Service.

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          (ii) Any Director Option may not be exercised after the earliest to occur of the
following events: (A) after the fifth anniversary of the termination of the Non-Employee
Director’s Service (as defined above) for any reason (and, subject to Section 15(d), then
only to the extent that the Non-Employee Director could have exercised such option on the
date of termination); or (B) more than ten (10) years after the date the option is granted.

          (j) Other Incentive Awards. Other Incentive Awards which are related to or serve a similar
function to those Awards set forth in this Section 6, including, but not limited to, Other
Incentive Awards related to the establishment or acquisition by the Company or any Subsidiary of a
new or start-up business or facility.

     7. Performance-Based Awards. The Committee may from time to time, establish
Performance Criteria with respect to an Award (a “Performance-Based Award”). The
Performance Criteria or standards for an Award shall be determined by the Committee in writing,
shall be measured for achievement or satisfaction during the period in which the Committee
permitted such Participant to satisfy or achieve such Performance Criteria and may be absolute in
their terms or measured against or in relationship to other companies comparably, similarly or
otherwise situated or other external or internal measure and may be based on or adjusted for any
other objective goals, events, or occurrences established by the Committee, provided that such
criteria or standards relate to one or more of the following: (a) earnings before interest, taxes,
depreciation and amortization, (b) revenue, (c) sales, (d) earnings per share, (e) funds from
operations, (f) pretax income before allocation of corporate overhead and bonus, (g) budget, (h)
cash flow, (i) net income, (j) division, group or corporate financial goals, (k) appreciation in or
maintenance of the price of the Stock or any other publicly traded securities of the Company, (l)
dividends, (m) total shareholder return, (n) return on shareholders’ equity, (o) return on assets,
(p) return on investment, (q) internal rate of return, (r) attainment of strategic and operational
initiatives, (s) market share, (t) operating margin, (u) profit margin, (v) gross profits, (w)
earnings before interest and taxes, (x) economic value-added models, (y) comparisons with various
stock market indices, (z) increase in number of customers, and (aa) reductions in costs, as
determined by the Committee. Such Performance Criteria may be particular to a line of business,
Subsidiary or other unit or the Company generally, and may, but need not be, based upon a change or
an increase or positive result. In interpreting Plan provisions applicable to Performance Criteria
and to Performance-Based Awards to Participants who are “covered employees” under Section 162(m) of
the Code, it is the intent of the Plan to conform with the standards of Section 162(m) of the Code
and the regulations thereunder. The Committee in establishing Performance Criteria applicable to
such Performance-Based Awards, and in interpreting the Plan, shall be guided by such standards,
including, but not limited to providing that the Performance-Based Award shall be paid, vested or
otherwise delivered solely as a function of attainment of objective Performance Criteria based on
one or more of the specific factors set forth in this Section 7 established by the Committee not
later than 90 days after the period of service applicable to the Award has commenced (or, if such
period of service is less than one year, not later than the date on which 25% of such period has
elapsed).

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Pursuant to such standards, the Committee may reduce, but not increase, the amount so vested,
paid or delivered.

     8. Award Agreements. Each Award under the Plan shall be evidenced by an Award
Agreement. Delivery of an Award Agreement to each Participant shall constitute an agreement,
subject to Section 9 hereof, between the Company and the Participant as to the terms and conditions
of the Award; provided, that, in the event of any conflict between a provision of the Plan and any
provision of an Award Agreement, the provision of the Plan shall prevail.

     9. Other Terms and Conditions.

          (a) No Assignment; Limited Transferability of Stock Options. Except as provided below, no
Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and distribution. Notwithstanding
the foregoing, the Committee may, in its discretion, authorize all or a portion of the Stock
Options (other than Incentive Stock Options) granted to a Participant to be on terms which permit
transfer by such Participant to:

          (i) the spouse, children or grandchildren of the Participant (“Immediate Family
Members”);

          (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members; or

          (iii) a partnership in which such Immediate Family Members are the only partners, provided that:

          (A) there may be no consideration for any such transfer;

          (B) the Award Agreement pursuant to which such Stock Options are granted
expressly provides for transferability in a manner consistent with this Section
9(a); and

          (C) subsequent transfers of transferred Stock Options shall be prohibited
except those in accordance with this Section 9(a).

          Following transfer, any such Stock Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for purposes of this
Section 9(a) hereof the term “Participant” shall be deemed to refer to the transferee. The
provisions of the Stock Option relating to the period of exercisability and expiration of the Stock
Option shall continue to be applied with respect to the original Participant, and the Stock Options
shall be exercisable or received by the transferee only to the extent, and for the periods, set
forth in said Stock Option.

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          (b) Beneficiary Designation. Each Participant under the Plan may name, from time to time, any
beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit
under the Plan is to be paid in case of his death before he receives any or all of such benefit.
Each designation will revoke all prior designations by the same Participant, shall be in a form
prescribed by the Committee, and will be effective only when filed by the Participant in writing
with the Committee during his lifetime. In the absence of any such designation, benefits remaining
unpaid at the Participant’s death shall be paid to his estate.

          (c) Termination of Employment. The disposition of the grant of each Award in the event of the
retirement, disability, death or other termination of a Participant’s employment or service to the
Company as an Independent Contractor or Director shall be as determined by the Committee and set
forth in the Award Agreement.

          (d) Predecessor Plan Awards. Unless expressly provided otherwise by the Committee, references
to the “Plan” set forth in any agreement representing an award granted under the Predecessor Plan
prior to the Effective Date shall refer to the terms of the Predecessor Plan.

          (e) Rights as a Shareholder. A Participant shall have no rights as a stockholder with respect
to shares covered by an Award until the date the Participant or his nominee, guardian or legal
representative is the holder of record; provided, however, that Participants holding Restricted
Shares may exercise full voting rights with respect to those shares during the Restriction Period.
Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the Company and any
Participant, beneficiary, legal representative or any other person. To the extent that any person
acquires a right to receive payments from the Company under the Plan, such right shall be no
greater than the right of an unsecured general creditor of the Company. All payments to be made
hereunder shall be paid from the general funds of the Company and no special or separate fund shall
be established and no segregation of assets shall be made to assure payment of such amounts except
as expressly set forth in the Plan. The Plan is not intended to be subject to the Employee
Retirement Income Security Act of 1974, as amended.

          (f) Dividends and Dividend Equivalents. Dividend and Dividend Equivalent Rights may be
extended to and made a part of any Award, subject to such terms, conditions and restrictions as the
Committee may establish. The Committee may also establish rules and procedures for the crediting
of Dividend Equivalents for Awards.

          (g) Payments by Participants. The Committee may determine that Awards for which a payment is
due from a Participant may be payable: (i) via personal check, bank draft, money order, certified
check, or cashier’s check payable to the order of the Company or by money transfers or direct
account debits; (ii) through the delivery or deemed delivery based on attestation to the ownership
of Previously Acquired Shares of Common Stock with a Fair Market Value equal to the total payment
due from

-12-

 

the Participant, or delivery by the Participant of a written attestation of the same; or (iii)
a copy of irrevocable instructions to a broker to promptly deliver to the Company the amount of
proceeds from a sale of Shares equal to the exercise price. To facilitate the foregoing, the
Company may enter into agreements for coordinated procedures with one or more brokerage firms;
provided, such payment pursuant to clause (iii) shall be subject to compliance with Federal Reserve
Board Regulation T, federal and state securities laws and trading policies established by the
Company and applicable to the Participant.

          (h) Withholding. Except as otherwise provided by the Committee in the Award Agreement or
otherwise (i) the deduction of withholding and any other taxes required by law shall be made from
all amounts paid in cash, and (ii) in the case of the exercise of Stock Options or payments of
Awards in shares of Common Stock, the Participant shall be required to pay the amount of any taxes
required to be withheld in cash prior to receipt of such stock, or alternatively, to elect to have
a number of shares the Fair Market Value of which equals the amount required to be withheld
deducted from the shares to be received upon such exercise or payment or deliver such number of
Previously-Acquired Shares of Common Stock. In no event shall such withholding amount exceed the
minimum amount required by law to be withheld.

          (i) Other Restrictions. The Committee shall impose such other restrictions on any Awards
granted pursuant to the Plan as it may deem advisable, including, without limitation, restrictions
under applicable Federal or state securities laws, post-vesting or exercise holding periods, or
requirements to comply with restrictive covenants, and may legend the certificates issued in
connection with an Award to give appropriate notice of any such restrictions.

          (j) Compliance with Code Section 409A. To the extent that any Awards become subject to Code
Section 409A, it is intended that such Awards be in compliance with Code Section 409A and the terms
of the Plan and any Award Agreement shall be construed, to the fullest extent possible, to be in
compliance with Code Section 409A.

     10. Amendments, Modification and Termination.

          (a) The Plan. The Board may at any time and from time to time, alter, amend, suspend
or terminate the Plan in whole or in part, subject to any requirement of shareholder approval
imposed by applicable law, rule or regulation. No termination, amendment, or modification of the
Plan shall adversely affect in any material way any Award previously granted under the Plan,
without the written consent of the Participant holding such Award.

          (b) Award Agreements. The Committee may amend or modify any Award Agreement at any
time, provided that if the amendment or modification adversely affects the Participant, such
amendment or modification shall be by mutual agreement between the Committee and the Participant or
such other persons as may then have an interest therein. In addition, and subject to shareholder
approval in accordance with

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Section 14(c), by mutual agreement between the Committee and a Participant or such other
persons as may then have an interest therein, Awards may be granted to a Participant in
substitution and exchange for, and in cancellation of, any Awards previously granted to such
Participant under the Plan, or any award previously granted to such Participant under any other
present or future plan of the Company or any present or future plan of an entity which (i) is
purchased by the Company, (ii) purchases the Company, or (iii) merges into or with the Company.

     11. Adjustment. The aggregate number of shares of Common Stock as to which Awards may
be granted to Participants, the number of shares of Common Stock set forth in the limitations in
Section 5(b), the number of shares of Common Stock covered by each outstanding Award, and the price
per share of Common Stock in each such Award, shall all be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting from a subdivision,
consolidation or split of shares or other capital adjustment, or the payment of a stock dividend or
other increase or decrease in such shares, effected without receipt of consideration by the
Company, or other change in corporate or capital structure; provided, however, that:

          (a) any fractional shares resulting from any such adjustment shall be eliminated;

          (b) that with respect to Awards that may be subject to Section 162(m) of the Code, such
modifications and/or changes do not disqualify compensation attributable to such Awards as
“performance-based compensation” under Section 162(m) of the Code; and

          (c) any adjustment with respect to an Incentive Stock Option due to a change or distribution
described in this Section 11 shall comply with the rules of Section 424(a) of the Code, and in no
event shall any adjustment be made which would render any Incentive Stock Option granted hereunder
other than an incentive stock option for purposes of Section 422 of the Code. The Committee may
also make the foregoing changes and any other changes, including changes in the classes of
securities available, to the extent it is deemed necessary or desirable to preserve the intended
benefits of the Plan for the Company and the Participants in the event of any other reorganization,
recapitalization, merger, consolidation, spinoff, extraordinary dividend or other distribution or
similar transaction.

     12. Rights as Employees, Directors or Independent Contractors. No person shall have
any claim or right to be granted an Award, and the grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of, as a Director of, or as an
Independent Contractor of the Company or a Subsidiary. Further, the Company and each Subsidiary
expressly reserve the right at any time to dismiss a Participant free from any liability, or any
claim under the Plan, except as provided herein or in any Award Agreement issued hereunder.

     13. Listing of Shares and Related Matters. If at any time the Committee shall
determine that the listing, registration or qualification of the shares of Common Stock

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subject to any Award on any securities exchange or under any applicable law, or the consent or
approval of any governmental regulatory authority, is necessary or desirable as a condition of, or
in connection with, the granting of an Award or the issuance of shares of Common Stock thereunder,
such Award may not be exercised, distributed or paid out, as the case may be, in whole or in part,
unless such listing, registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.

     14. Shareholder Approval.

          (a) Initial Approval. The Plan shall be approved by the shareholders of the Company
at the first annual meeting following the date adopted by the Board. Approval of the Plan by the
shareholders of the Company shall be a condition to the right of each Participant to receive or
retain Awards hereunder.

          (b) Reapproval. If required by Treasury Regulation Section 1.162-27(e)(4)(vi) or any
successor regulation or rule, the material terms of Performance Criteria as described in Section 7
shall be disclosed to and reapproved by the shareholders of the Company no later than the first
shareholder meeting that occurs in the 5th year following the year in which the Company’s
shareholders previously approved such performance goals.

          (c) Repricing. Any amendment, revision, replacement, cancellation and regrant, or
other change to an outstanding Award, not otherwise provided herein, that is determined to be a
“repricing” (or word(s) of similar effect) under the rules of the exchange or system on which
Common Stock is listed shall be approved by the shareholders of the Company before such “repriced”
Award shall be effective.

     15. Change of Control. Unless otherwise specified in a Participant’s Award Agreement
at the time of grant, in the event of a Change of Control, the following shall occur with respect
to any and all Awards outstanding as of such Change of Control:

          (a) To the extent any Stock Option, Incentive Stock Option or Stock Appreciation Right
(including any Stock Option, Incentive Stock Option or Stock Appreciation Right granted under the
Predecessor Plan) is not exercisable, it shall become exercisable as to one-half of the shares
subject to the unexercisable portion of the Stock Option and one-half of the shares subject to the
unexercisable portion of the Stock Appreciation Right;

          (b) Any restrictions imposed on Restricted Shares and Restricted Units shall lapse as to
one-half of the Restricted Shares and one-half of the Restricted Units subject to such
restrictions;

          (c) Unless otherwise specified in a Participant’s Award Agreement at time of grant, the
maximum payout opportunities attainable under all outstanding Awards of Performance Units,
Performance Shares and Other Incentive Awards shall be deemed to have been fully earned for the
entire performance period(s) as of the effective date of the Change of Control. The vesting of all
such Awards shall be

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accelerated as of the effective date of the Change of Control, and in full settlement of such
Awards, there shall be paid out in cash, or in the sole discretion of the Committee, shares of
Common Stock with a Fair Market Value equal to the amount of such cash, to Participants within
thirty (30) days following the effective date of the Change of Control the maximum of payout
opportunities associated with such outstanding Awards; and

          (d) To the extent that any Director Option (including a Director Option granted under the
Predecessor Plan) is not exercisable, it shall become exercisable as to all of the shares subject
to the unexercisable portion of the Director Option.

     16. Governing Law. To the extent that federal laws do not otherwise control, the Plan
and all Award Agreements hereunder shall be construed in accordance with and governed by the law of
the State of Illinois (without regard for its conflict of laws principles).

     17. Construction. The descriptive headings in the Plan are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or interpretation of
the Plan. The use of the word “including” in the Plan shall be by way of example rather than by
limitation. Except where otherwise indicated by the context, any masculine term used herein also
shall include the feminine, the plural shall include the singular, and the singular shall include
the plural.

     18. Effective Date and Term. The original effective date of the Plan was June 3, 2005
(the “Effective Date”), subject to approval by the shareholders of the Company. The
effective date of this Amended and Restated Plan is April 4, 2007. No Award shall be granted after
June 3, 2015; provided, however, that the terms and conditions applicable to any Award granted
prior to such date may thereafter be amended or modified by mutual agreement between the Company
and the Participant or such other persons as may then have an interest therein. Also, by mutual
agreement between the Company and a Participant hereunder, under the Plan or under any other
present or future plan of the Company, and subject to the limitations under Section 5(b)(ii),
Awards may be granted to such Participant in substitution and exchange for, and in cancellation of,
any Awards previously granted such participant under the Plan, or any other present or future plan
of the Company.

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