Document:

Exhibit 10.1

 

MATHSTAR, INC.

AMENDED AND RESTATED

2004 LONG-TERM INCENTIVE PLAN

 

Effective Date:  October 8,
2004

 

 

MATHSTAR, INC.

AMENDED AND RESTATED

2004 LONG-TERM INCENTIVE PLAN

 

Table of Contents

 

	
  Section

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Purpose of the Plan

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Shares Subject to the Plan

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Administration

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Term of Plan

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Terms and Conditions of Qualified Options

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Terms and Conditions of Non-Qualified
  Options

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Automatic Grants of Director Options to
  Non-employee Directors

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Terms and Conditions of Stock Appreciation
  Rights

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Awards of Restricted Stock

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Other Awards

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Performance-Based Awards

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  Adjustments Upon Certain Events

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  Shares Acquired for Investment

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  No Right to Employment, Service as a
  Director or Awards

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  Other Benefit and Compensation Programs

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  Successors and Assigns

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  Nontransferability of Awards; Designation
  of Beneficiary

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
  Amendments or Termination

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  20.

  	
  International Participants

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  21.

  	
  General

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  22.

  	
  Effective Date

  	
   

  	
  24

  

 

ii

 

MATHSTAR, INC.

AMENDED AND RESTATED

2004 LONG-TERM INCENTIVE PLAN

 

1.                                      Purpose of the Plan

 

The purpose of
the Plan is to aid the Company and its Affiliates in recruiting and retaining
employees, directors, independent contractors and other service providers to
the Company and to motivate such employees, directors, independent contractors
and other service providers to exert their best efforts on behalf of the
Company and its Affiliates by providing incentives through the granting of
Awards. The Company expects that it will benefit from the stock ownership opportunities
and other benefits provided to such Participants under this Plan to encourage
alignment of their interest in the Company’s success with that of other stakeholders.

 

2.                                      Definitions

 

The following capitalized
terms used in the Plan have the respective meanings set forth in this Section;
other terms are defined elsewhere in the Plan:

 

(a)                                  “Affiliate” means a
Parent or Subsidiary.

 

(b)                                 “Award” means an
Option, Stock Appreciation Right, Share of Restricted Stock, Other Stock-Based
Award or Other Cash-Based Award granted pursuant to the Plan.

 

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

 

(d)                                 “Code” means the
Internal Revenue Code of 1986, as amended, or any successor thereto.

 

(e)                                  “Committee” means the
Compensation Committee of the Board or, if the Board has not appointed a
separate Compensation Committee, the entire Board.

 

(f)                                    “Common Stock” means
the Company’s common stock, $0.01 par value per share.

 

(g)                                 “Company” means
MathStar, Inc., a Minnesota corporation.

 

(h)                                 “Director” means a member
of the Board of Directors of the Company.

 

(i)                                     “Director Option”
means a Non-Qualified Option granted to a Director to a Director pursuant to Section 8.

 

(j)                                     “Effective Date”
means the earlier of the date the Company’s initial public offering is declared
effective by the Securities and Exchange Commission or December 31, 2005.

 

(k)                                  “Employee” means any
person, including officers and Directors, employed by the Company or any
Subsidiary. The payment to a Director by the Company of directors’ fees shall
not be sufficient to constitute employment by the Company.

 

 

(l)                                     “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

 

(m)                               “Exercise Price” means the purchase price per Share under
the terms of an Option.

 

(n)                                 “Fair Market Value” means,
on a given date, (i) if the Common Stock is listed or admitted to unlisted
trading privileges on any national securities exchange, the average of the
closing sales prices of the Common Stock on the end of any day on all national
securities exchanges on which the Common Stock may at the time be listed
or, if there have been no sales on any such exchange on any day, the average of
the highest bid and lowest asked prices on all such exchanges at the end of
such day or, (ii) if the Common Stock is not so listed or admitted but
transactions in the Common Stock are reported on The NASDAQ Stock Market, the
closing price quoted on The NASDAQ Stock Market on such day, or (iii) if
the Common Stock is not so listed or admitted to unlisted trading privileges or
quoted on The NASDAQ Stock Market, and bid and asked prices therefor in the
domestic over-the-counter market are reported by Pink Sheets LLC (or any
comparable reporting service), the average of the closing bid and asked prices
on such day as reported by Pink Sheets LLC (or any comparable reporting
service), or (iv) if the Common Stock is not listed on any national
securities exchange or quoted on The NASDAQ Stock Market or in the domestic
over-the-counter market, the fair value of the Common Stock determined by the
Committee in good faith in the exercise of its reasonable discretion.

 

(o)                                 “Non-employee Director”
means a Director who is not an Employee of the Company.

 

(p)                                 “Non-Qualified Option”
means a stock option granted pursuant to Section 7 that does not qualify
as an incentive stock option as defined in Section 422 of the Code.

 

(q)                                 “Option” means a
Qualified Option or a Non-Qualified Option (including a Director Option).

 

(r)                                    “Other Stock-Based Awards” means
Awards granted pursuant to Section 11(a) or Section 12.

 

(s)                                  “Other Cash-Based
Awards” means Awards granted pursuant to Section 11(b) or
Section 12.

 

(t)                                    “Parent” means any “parent
corporation” of the Company, as such term is defined in Section 424(e) of
the Code or any successor provision. The term shall include any Parent which
becomes such after adoption of the Plan.

 

(u)                                 “Participant” means
an employee of the Company or an Affiliate who is selected by the Committee to
participate in the Plan; a Director of the Company who receives Director
Options or other Awards under the Plan; or any consultant, agent, advisor or
independent contractor who is selected by the Committee to participate in the
Plan and who renders bona fide services to the Company or an Affiliate that (i) are
not in connection with the offer and sale of the Company’s

 

2

 

securities in a capital-raising transaction and (ii) do not
directly or indirectly promote or maintain a market for the Company’s
securities. Except where the context otherwise requires, references in this
Plan to “employment” and related terms shall apply to services in any such
capacity.

 

(v)                                 “Performance-Based Awards” means
Options, Awards of Restricted Stock, Other Stock-Based Awards and Other
Cash-Based Awards granted pursuant to Section 12.

 

(w)                               “Plan” means this MathStar, Inc. 2004
Long-Term Incentive Plan, as amended or supplemented from time to time.

 

(x)                                   “Qualified Option”
means a stock option granted pursuant to Section 6 that is intended to
qualify as an incentive stock option under Section 422 of the Code.

 

(y)                                 “Restricted Stock” means
any shares of Common Stock granted under Section 10.

 

(z)                                   “Stock Appreciation Right” means
a stock appreciation right granted pursuant to Section 9.

 

(aa)                            “Subsidiary” means any “subsidiary corporation” of the
Company, as such term is defined in Section 424(f) of the Code. The
term shall include any Subsidiary which becomes such after adoption of the
Plan.

 

3.                                      Shares Subject to
the Plan

 

The total number of shares of Common Stock
which may be issued under the Plan is 1,633,334 shares. The full number of
shares of Common Stock available under the Plan may be used for any Option
or other type of Award. The aggregate number of shares of Common Stock
available under the Plan shall be subject to adjustment upon the occurrence of
any of the events and in the manner set forth in Section 13. If all or any
potion of an Option or Stock Appreciation Right expires or is terminated,
surrendered or cancelled without having been fully exercised, if Restricted
Stock is forfeited, or if any other grant of an Award results in any shares of
Common Stock not being issued, the shares of Common Stock covered by such Award
shall again be available for the grant of Awards under the Plan. Any shares of
Common Stock which are used as full or partial payment to the Company upon
exercise of an Option or for any other Award that requires a payment to the
Company and any shares surrendered or withheld to pay employment taxes or other
withholding obligations also shall be available for the grant of Awards under
the Plan. The issuance of shares of Common Stock upon the exercise or
satisfaction of an Award shall reduce the total number of shares of Common
Stock available under the Plan. No fractional shares of Common Stock will be
issued under the Plan, but instead any fractional Share will be rounded
downward to the next lowest whole Share.

 

4.                                      Administration

 

(a)                                  Delegation of Authority. The
Plan shall be administered by the Committee. The Committee shall consist of the
Board, unless the Board appoints a Committee

 

3

 

consisting of at least two but fewer than all the members of the Board.
If the Committee does not consist of the entire Board, the Committee’s members
shall serve at the pleasure of the Board, which may from time to time
appoint members in substitution for members previously appointed and fill
vacancies, however caused, in the Committee. The Committee may select one
of its members as its Chairperson and shall hold its meetings at such times and
places as it may determine. A majority of the Committee’s members shall
constitute a quorum. All determinations of the Committee made at a meeting in
which a quorum is present shall be made by a majority of its members present at
the meeting. Any decision or determination of the Committee reduced to writing
and signed by a majority of the members shall be fully as effective as if it
had been made by a majority vote at a meeting duly called and held.

 

(b)                                 Authority
of Committee. The
Committee shall have exclusive power to make Awards and to determine when and
to whom Awards shall be granted, and the form, amount and other terms and
conditions of each Award, subject to the provisions of this Plan and any
applicable law or regulation. The Committee may determine whether, to what
extent and under what circumstances Awards may be settled, paid or
exercised in cash, shares of Common Stock or other Awards or other property, or cancelled, forfeited or
suspended. The Committee shall have the authority to interpret this Plan and
any Award or agreement made under this Plan, to establish, amend, waive and
rescind any rules and regulations relating to the administration of this
Plan, to determine the terms and provisions of any agreements entered into
hereunder (not inconsistent with this Plan), and to make all other
determinations necessary or advisable for the administration of this Plan. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in this Plan or in any Award or agreement in the manner and to
the extent it shall deem desirable. The determinations of the Committee in the
administration of this Plan, as described herein, shall be final, binding and
conclusive.

 

(c)                                  Indemnification.
To the full extent
permitted by law, each member and former member of the Committee and each
person to whom the Committee delegates or has delegated authority under this
Plan shall be entitled to indemnification by the Company against and from any
loss, liability, judgment, damages, cost and reasonable expense incurred by
such member, former member or other person by reason of any action taken,
failure to act or determination made in good faith under or with respect to
this Plan.

 

(d)                                 Tax Withholding. The
Committee shall have the right to require payment by a Participant of any
amount it may determine to be necessary to withhold for federal, state,
local, non-U.S. income, payroll or other taxes as a result of the exercise,
grant or vesting of an Award. With the consent of the Committee, the
Participant may pay a portion or all of such withholding taxes by
delivering shares of Common Stock to the Company or having the Company withhold
shares of Common Stock with a Fair Market Value or cash equal to the amount of
such taxes that would have otherwise been payable by the Participant.

 

(e)                                  Deferral. In the
discretion of the Committee, in accordance with any procedures established by
the Committee and consistent with the provisions of

 

4

 

Section 162(m) of the Code when applied to Participants who may be
“covered employees” thereunder, a Participant may be permitted to defer
the issuance of shares of Common Stock or cash deliverable upon the exercise of
an Option or Stock Appreciation Right, vesting of Restricted Stock, or
satisfaction of Other Stock-Based Awards or Other Cash-Based Awards, for a
specified period or until a specified date, but not beyond the expiration of
the term of such Option, Stock Appreciation Right, Restricted Stock grant, or
other Award.

 

(f)                                    Dividends or Dividend Equivalents. If
the Committee so determines, any Award granted under the Plan may be
credited with dividends or dividend equivalents paid with respect to any
underlying shares of Common Stock. The Committee may apply any
restrictions to the dividends or dividend equivalents that the Committee deems
appropriate and may determine the form of payment, including cash,
shares of Common Stock, Restricted Stock or otherwise.

 

5.                                      Term of Plan

 

This Plan shall commence on October 8, 2004 (the “Effective Date”)
and shall terminate on October 7, 2014 or at such earlier date as the
Board of Directors shall determine. The termination of this Plan shall not
affect any Awards then outstanding under the Plan. No Award may be granted
under the Plan after October 7, 2014.

 

6.                                      Terms
and Conditions of Qualified Options

 

Options granted under the Plan may be Qualified Options. When the
Committee approves a grant of a Qualified Option to a Participant, it shall
prepare or cause to be prepared an option agreement (“Qualified Option
Agreement”) setting forth the terms of the Qualified Option, and such Qualified
Option Agreement shall be signed on behalf of the Company and by the
Participant. Qualified Options granted under this Plan shall be subject to the
foregoing and to the following terms and conditions and to such other terms and
conditions, not inconsistent therewith, as the Committee shall determine:

 

(a)                                  Number of Shares and Exercise Price.
The Qualified Option Agreement shall state the total number of
shares of Common Stock subject to the Qualified Option it evidences, the
Exercise Price per share of Common Stock and the other terms of the Qualified
Option. The number of shares of Common Stock subject to the Qualified Option
and the Exercise Price shall be adjustable as provided in Section 12(a) of
this Plan.

 

(b)                                 Exercisability; Term. Qualified
Options granted under the Plan shall be exercisable at such time(s) and upon
such terms and conditions as may be determined by the Committee. However,
subject to Section 6(l), a Qualified Option shall not be exercisable more
than ten (10) years after the date it is granted. The period during which
a Qualified Option may be exercised once it is granted may not be
reduced, except as provided in Sections 6(e), (f) and (g) of this
Plan.

 

(c)                                  Exercise of Qualified Options.
Except as otherwise provided in the applicable Qualified Option Agreement, a
Qualified Option may be exercised for all, or from time to time any part,
of the shares of Common Stock for which it is then

 

5

 

exercisable. For purposes of this Section 6, the exercise date of
a Qualified Option shall be the date a written notice of exercise and full
payment of the purchase price are received by the Company in accordance with
this Section 6(c) and Section 6(d) below. The purchase
price for the shares of Common Stock as to which a Qualified Option is
exercised shall be paid to the Company in cash or its equivalent, such as by
check or wire transfer, or, if provided in the Qualified Option Agreement or
with the consent of the Committee:  (i) in
shares of Common Stock having a Fair Market Value equal to the aggregate
Exercise Price of the shares of Common Stock being purchased and satisfying
such other requirements as may be imposed by the Committee; provided, that
such shares were then purchased on the open market or have been held by the
Participant for at least six months (or such other period as established from
time to time by the Committee in order to avoid adverse accounting treatment
under generally accepted accounting principles); (ii) partly in cash and
partly in such shares; or (iii) if there is a public market for the shares
of Common Stock at such time, through the delivery of irrevocable instructions
to a broker to sell shares of Common Stock obtained upon the exercise of the
Qualified Option and to deliver promptly to the Company an amount out of the
proceeds of such sale equal to the aggregate Exercise Price for the shares
being purchased.

 

(d)                                 Manner of Exercise of Qualified
Options. A Qualified Option shall be exercised only by the
Participant (i) delivering a completed and signed written notice of
exercise to the Company in the form prescribed by the Company specifying the
number of shares of Common Stock as to which the Qualified Option is being
exercised; (ii) delivering the original Qualified Option Agreement to the
Company; and (iii) paying to the Company the full amount of the Exercise
Price for the number of shares of Common Stock with respect to which the
Qualified Option is being exercised as provided in Section 6(c) above.
When shares of Common Stock are issued to the Participant upon the exercise of
that Participant’s Qualified Option, the fact of such issuance shall be noted
on the Qualified Option Agreement by the Company before the Qualified Option
Agreement is returned to the Participant. When all shares of Common Stock
covered by the Qualified Option Agreement have been issued by the Company to
the Participant or when the Qualified Option expires, the Participant shall
deliver the Qualified Option Agreement to the Company, which shall cancel it. After
the receipt by the Company of the written notice of exercise and payment in
full of the Exercise Price in accordance with Sections 6(c) and 6(d), the
Company shall deliver to the Participant exercising the Qualified Option stock
certificates evidencing the number of shares with respect to which the
Qualified Option has been exercised, issued in the Participant’s name;
provided, however, that such delivery shall be deemed effective for all
purposes when the Company or its stock transfer agent (if any) has deposited
such stock certificates in the United States mail, postage prepaid, addressed
to the Participant at the address specified in the written notice of exercise.

 

(e)                                  Termination of Employment or Service.
If a Participant who holds a Qualified Option shall cease to be
employed by or performing services for the Company or any Affiliate for any
reason other than death, unless the applicable Qualified Option Agreement
provides otherwise, such Qualified Option shall immediately

 

6

 

and automatically terminate and be forfeited, whether or not
exercisable, and neither such Participant nor any of the Participant’s heirs,
personal representatives, successors or assigns shall have any rights with
respect to such Qualified Option. Notwithstanding the foregoing, if an
independent contractor or other non-employment relationship between the
Participant and the Company or an Affiliate is terminated due to the
commencement of an employment relationship with the Company or an Affiliate,
this provision shall apply only upon termination of both the independent
contractor and employment relationship between the Participant and the Company
or an Affiliate. In the case of a Participant who is a natural person and who
ceases to be employed by or performing services for the Company or an Affiliate
due to his or her disability (with disability being determined in the sole
discretion of the Committee), the Committee, at its discretion, may permit
exercise of the portion of the Qualified Option that is exercisable upon such
termination of employment until the earlier of the originally stated date of
termination of the Qualified Option or up to one (1) year after such
termination of employment or other service.

 

(f)                                    Death of Participant. Unless
otherwise provided in the applicable Qualified Option Agreement, if a
Participant who is a natural person shall cease to be employed by or performing
services for the Company or any Affiliate as a result of the Participant’s
death, any Qualified Option held by such Participant may be exercised to
the same extent that the Participant would have been entitled to exercise it at
the date of death and may be exercised within a period of one (1) year
after the date of death, but in no case later than the expiration date of such
Qualified Option. Such Qualified Option shall be exercised pursuant to Sections
6(c) and (d) of this Plan by the person or persons to whom the
Participant’s rights under the Qualified Option shall pass by will or the laws
of descent and distribution.

 

(g)                                 Termination of Qualified Options Not
Exercisable. Unless the applicable Qualified Option Agreement
provides otherwise, upon termination of a Participant’s employment or other
services with the Company or an Affiliate for any reason, including by reason
of death or disability of the Participant, any portion of the Participant’s
Qualified Option that is not exercisable shall automatically and immediately
terminate as to such Participant, and the shares of Common Stock subject to
such portion of the Qualified Option shall be available for the grant of Awards
under the Plan.

 

(h)                                 No Obligation to Exercise Qualified
Option. The grant of a Qualified Option under the Plan shall
impose no obligation on the Participant to exercise such Qualified Option.

 

(i)                                     Eligible Recipients. Qualified
Options may be granted only to persons who are employees of the Company or
an Affiliate.

 

(j)                                     Exercise Price. Subject
to the provisions of Section 6(l), the exercise price of shares of Common
Stock that are subject to a Qualified Option shall not be less than 100% of the
Fair Market Value of such shares at the time the Qualified Option is granted,
as determined in good faith by the Committee.

 

7

 

(k)                                  Limit on Exercisability. The
aggregate Fair Market Value (determined at the time the Qualified Option is
granted) of the shares of Common Stock with respect to which Qualified Options
are exercisable by the Participant for the first time during any calendar year,
under this Plan or any other plan of the Company or any Affiliate, shall not
exceed $100,000. To the extent a Qualified Option exceeds this $100,000 limit,
the portion of the Qualified Option in excess of such limit shall be deemed a
Non-Qualified Option.

 

(l)                                     Restrictions for Certain
Shareholders. The purchase price of shares of Common Stock that
are subject to a Qualified Option granted to an employee of the Company or any
Affiliate who, at the time such Qualified Option is granted, owns 10% or more
of the total combined voting power of all classes of stock of the Company or of
any Affiliate, shall not be less than 110% of the Fair Market Value of such
shares on the date such Qualified Option is granted, and such Qualified Option may not
be exercisable more than five (5) years after the date on which it is
granted. For the purposes of this subparagraph, the rules of Section 424(d) of
the Code shall apply in determining the stock ownership of any employee of the
Company or any Affiliate.

 

(m)                               Limits on Transferability and
Exercise of Qualified Options. Qualified Options shall not be
transferable except by will or the laws of descent and distribution, and
Qualified Options shall be exercisable during a Participant’s lifetime only by
such Participant.

 

(n)                                 Effect of Not Meeting Requirements. Subject
to the discretion of the Committee to provide otherwise, if the terms of a Qualified
Option do not meet any requirements of this Plan or the Code necessary to be
treated as a Qualified Option under the Code, such Qualified Option shall not
terminate but shall be a Non-Qualified Option granted under this Plan.

 

7.                                      Terms and Conditions of
Non-Qualified Options

 

Options granted under the
Plan may be Non-Qualified Options. When the Committee approves a
grant of a Non-Qualified Option to a Participant, it shall prepare or cause to
be prepared an option agreement (“Non-Qualified Option Agreement”) setting
forth the terms of the Non-Qualified Option, and such Non-Qualified Option
Agreement shall be signed on behalf of the Company and by the Participant. Non-Qualified
Options granted under this Plan shall
be subject to the foregoing and to the following terms and conditions and to
such other terms and conditions, not inconsistent therewith, as the Committee
shall determine; provided, however, that Non-Qualified Options that are
Director Options shall be governed by the provisions of Section 8 to the
extent that they are inconsistent with the provisions of this Section 7.

 

(a)                                  Number of Shares and Exercise Price. The Non-Qualified Option Agreement shall
state the total number of shares of Common Stock subject to the Non-Qualified
Option it evidences, the Exercise Price per share of Common Stock and the other
terms of the Non-Qualified Option. The Exercise Price of any Non-Qualified
Option may be less than, equal to or greater than Fair Market Value. The
number of shares of Common Stock subject to the Non-Qualified Option and the
Exercise Price shall be adjustable as provided in Section 13(a) of
this Plan.

 

8

 

(b)                                 Exercisability; Term. Non-Qualified Options granted under the
Plan shall be exercisable at such time(s) and upon such terms and conditions as
may be determined by the Committee, but in no event shall a Non-Qualified
Option be exercisable more than ten (10) years after the date it is
granted, except as the Committee may determine under Section 13(d) of
the Plan. The period during which a Non-Qualified Option may be exercised
once it is granted may not be reduced, except as provided in Sections
7(e), (f) and (g) of this Plan.

 

(c)                                  Exercise of Non-Qualified Options. Except as otherwise provided in the
applicable Non-Qualified Option Agreement, a Non-Qualified Option may be
exercised for all, or from time to time any part, of the shares of Common Stock
for which it is then exercisable. For purposes of this Section 7, the
exercise date of a Non-Qualified Option shall be the date a written notice of
exercise and full payment of the purchase price are received by the Company in
accordance with this Section 7(c) and Section 7(d) below. The
purchase price for the shares of Common Stock as to which a Non-Qualified
Option is exercised shall be paid to the Company in cash or its equivalent,
such as by check or wire transfer or, if provided in the Non-Qualified Option
Agreement or with the consent of the Committee: 
(i) in shares of Common Stock having a Fair Market Value equal to
the aggregate Exercise Price of the shares of Common Stock being purchased and
satisfying such other requirements as may be imposed by the Committee;
provided, that such shares were then purchased on the open market or have been
held by the Participant for at least six months (or such other period as
established from time to time by the Committee in order to avoid adverse
accounting treatment under generally accepted accounting principles); (ii) partly
in cash and partly in such shares; or (iii) if there is a public market
for the shares of Common Stock at such time, through the delivery of
irrevocable instructions to a broker to sell shares of Common Stock obtained
upon the exercise of the Non-Qualified Option and to deliver promptly to the
Company an amount out of the proceeds of such sale equal to the aggregate
Exercise Price for the shares being purchased.

 

(d)                                 Manner of Exercise of Non-Qualified
Options. A Non-Qualified Option shall be exercised only by the
Participant (i) delivering a completed and signed written notice of
exercise to the Company in the form prescribed by the Company specifying
the number of shares of Common Stock as to which the Non-Qualified Option is
being exercised; (ii) delivering the original Non-Qualified Option
Agreement to the Company; and (iii) paying to the Company the full amount
of the Exercise Price for the number of shares of Common Stock with respect to
which the Non-Qualified Option is being exercised as provided in Section 7(c) above.
When shares of Common Stock are issued to the Participant upon the exercise of
that Participant’s Non-Qualified Option, the fact of such issuance shall be
noted on the Non-Qualified Option Agreement by the Company before the Non-Qualified
Option Agreement is returned to the Participant. When all shares of Common
Stock covered by the Non-Qualified Option Agreement have been issued by the
Company to the Participant or when the Non-Qualified Option expires, the
Participant shall deliver the Non-Qualified Option Agreement to the Company,
which shall cancel it. After the receipt by the Company of the written notice
of exercise and payment in full of the Exercise Price in accordance with
Sections 7(c) and 7(d), the Company shall deliver to the Participant
exercising the

 

9

 

Non-Qualified Option stock certificates evidencing the number of shares
with respect to which the Non-Qualified Option has been exercised, issued in
the Participant’s name; provided, however, that such delivery shall be deemed
effective for all purposes when the Company or its stock transfer agent (if
any) has deposited such stock certificates in the United States mail, postage
prepaid, addressed to the Participant at the address specified in the written
notice of exercise.

 

(e)                                  Termination of Employment or Service.
If a Participant who holds a Non-Qualified Option shall cease to
be employed by or performing services for the Company or any Affiliate for any
reason other than death, unless the applicable Non-Qualified Option Agreement
provides otherwise, such Non-Qualified Option shall immediately and
automatically terminate and be forfeited, whether or not exercisable, and
neither such Participant nor any of the Participant’s heirs, personal
representatives, successors or assigns shall have any rights with respect to
such Non-Qualified Option. Notwithstanding the foregoing, if an independent
contractor or other non-employment relationship between the Participant and the
Company or an Affiliate is terminated due to the commencement of an employment
relationship with the Company or an Affiliate, this provision shall apply only
upon termination of both the independent contractor and employment relationship
between the Participant and the Company or an Affiliate. In the case of a
Participant who is a natural person and who ceases to be employed by or
performing services for the Company or an Affiliate due to his or her
disability (with disability being determined in the sole discretion of the
Committee), the Committee, at its discretion, may permit exercise of the
portion of the Non-Qualified Option that is exercisable upon such termination
of employment until the earlier of the originally stated date of termination of
the Non-Qualified Option or up to one year after such termination of employment
or other service.

 

(f)                                    Death of Participant. Unless
otherwise provided in the applicable Non-Qualified Option Agreement, if a
Participant who is a natural person shall cease to be employed by or performing
services for the Company or any Affiliate as a result of the Participant’s
death, any Non-Qualified Option held by such Participant may be exercised
to the same extent that the Participant would have been entitled to exercise it
at the date of death and may be exercised within a period of one (1) year
after the date of death, but in no case later than the expiration date of such
Non-Qualified Option. Such Non-Qualified Option shall be exercised pursuant to
Sections 7(c) and (d) of this Plan by the person or persons to whom
the Participant’s rights under the Non-Qualified Option shall pass by will or
the laws of descent and distribution.

 

(g)                                 Termination of Non-Qualified Options
Not Exercisable. Unless the applicable Non-Qualified Option
Agreement provides otherwise, upon termination of a Participant’s employment or
other services with the Company or an Affiliate for any reason, including by
reason of death or disability of the Participant, any portion of the
Participant’s Non-Qualified Option that is not exercisable shall automatically
and immediately terminate as to such Participant, and the shares of

 

10

 

Common Stock subject to such portion of the Non-Qualified Option shall
be available for the grant of Awards under the Plan.

 

(h)                                 No Obligation to Exercise
Non-Qualified Option. The grant of a Non-Qualified Option under
the Plan shall impose no obligation on the Participant to exercise such
Non-Qualified Option.

 

8.                                      Automatic
Grants of Director Options to Non-employee Directors

 

(a)                                  Automatic Grants of Director Options.
Under the Plan, each Non-employee Director shall automatically
be granted Director Options to purchase shares of Common Stock as follows:

 

(i)                                     Initial
Grants of Director Options. Each Non-employee Director will be granted an
initial Option (the “Initial Grant”) as follows:

 

A.                                   Non-Employee
Directors. Each person serving as a Non-employee Director on the Effective
Date shall automatically be granted a Director Option on such date to purchase
twenty-five thousand (25,000) shares of Common Stock.

 

B.                                     Future
Non-Employee Directors. Each person who is first elected or appointed to
serve as a Non-employee Director after the Effective Date shall automatically
be granted a Director Option on the date of his or her initial election or
appointment to the Company’s Board of Directors to purchase 25,000 shares of
Common Stock.

 

C.                                     Vesting.
All Director Options granted under Sections 8(a)(i)(A) and (B) shall
vest and become exercisable in cumulative installments with respect to one-third
(1/3) of the shares subject to such Director Options on the first, second and
third anniversary dates of the dates of grant of such Director Options, but
only if the holder of the Director Options is then a Director of the Company.

 

(ii)                                  Additional
Grants of Director Options. On each anniversary date of the Initial Grant
of a Director Option to a Non-employee Director under the Plan, such
Non-employee Director will automatically be granted an additional Option to
purchase five thousand (5,000) shares of Common Stock, but only if such person
is a Non-employee Director on such date. All Director Options granted under
this Section 8(a)(ii) shall vest and become exercisable as to all of
the shares subject to the Director Options one (1) year after the date of
grant of such Director Option, but only if the holder of the Director Options
is then a Director of the Company.

 

(iii)                               Termination
of Director Options. Subject to Sections 8(f), 8(g) and 8(h), all
Director Options granted under this Section 8(a) shall expire ten (10) years
after the date of grant.

 

11

 

(iv)                              Exercise
Price. The exercise price of Director Options granted under this Section 8(a) shall
be equal to 100% of the Fair Market Value of one share of Common Stock on the
date of grant of the Director Option.

 

(b)                                 Discretionary Grants. In
addition to the Director Options granted pursuant to Section 8(a), a
Director may be granted one or more Options or other Awards under other
provisions of the Plan, and such Options or other Awards will be subject to
such terms and conditions, consistent with the other provisions of the Plan, as
may be determined by the Committee in its sole discretion.

 

(c)                                  Director Option Agreements. When
a Director Option is automatically granted under Section 8(a), or when the
Committee approves a grant of a Director Option, the Committee shall prepare or
cause to be prepared an option agreement (“Director Option Agreement”) setting
forth the terms of the Director Option, and such Director Option Agreement
shall be signed on behalf of the Company and by the Participant.

 

(d)                                 Exercise of Director Options. Except
as otherwise provided in the applicable Director Option Agreement, a Director
Option may be exercised for all, or from time to time any part, of the
shares of Common Stock for which it is then exercisable. For purposes of this Section 8,
the exercise date of a Director Option shall be the date a written notice of
exercise and full payment of the purchase price are received by the Company in
accordance with this Section 8(d) and Section 8(e) below. The
purchase price for the shares of Common Stock as to which a Director Option is
exercised shall be paid to the Company in cash or its equivalent, such as by
check or wire transfer or, if provided in the Director Option Agreement or with
the consent of the Committee:  (i) in
shares of Common Stock having a Fair Market Value equal to the aggregate
Exercise Price of the shares of Common Stock being purchased and satisfying
such other requirements as may be imposed by the Committee; provided, that
such shares were then purchased on the open market or have been held by the
Participant for at least six months (or such other period as established from
time to time by the Committee in order to avoid adverse accounting treatment
under generally accepted accounting principles); (ii) partly in cash and
partly in such shares; or (iii) if there is a public market for the shares
of Common Stock at such time, through the delivery of irrevocable instructions
to a broker to sell shares of Common Stock obtained upon the exercise of the
Director Option and to deliver promptly to the Company an amount out of the
proceeds of such sale equal to the aggregate Exercise Price for the shares
being purchased.

 

(e)                                  Manner of Exercise of Director
Options. A Director Option shall be exercised only by the
Participant (i) delivering a completed and signed written notice of
exercise to the Company in the form prescribed by the Company specifying
the number of shares of Common Stock as to which the Director Option is being
exercised; (ii) delivering the original Director Option Agreement to the
Company; and (iii) paying to the Company the full amount of the Exercise
Price for the number of shares of Common Stock with respect to which the
Director Option is being exercised as provided in Section 8(d) above.
When shares of Common Stock are issued to the Participant upon the exercise of
that Participant’s Director Option, the fact of such issuance shall be noted on
the Director Option Agreement

 

12

 

by the Company before the Director Option Agreement is returned to the
Participant. When all shares of Common Stock covered by the Director Option
Agreement have been issued by the Company to the Participant or when the
Director Option expires, the Participant shall deliver the Director Option
Agreement to the Company, which shall cancel it. After the receipt by the
Company of the written notice of exercise and payment in full of the Exercise
Price in accordance with Sections 8(d) and 8(e), the Company shall deliver
or cause to be delivered to the Participant exercising the Director Option
stock certificates evidencing the number of shares with respect to which the
Director Option has been exercised, issued in the Participant’s name; provided,
however, that such delivery shall be deemed effective for all purposes when the
Company or its stock transfer agent (if any) has deposited such stock
certificates in the United States mail, postage prepaid, addressed to the
Participant at the address specified in the written notice of exercise.

 

(f)                                    Termination of Status as a Director.
Subject to the provisions of Sections 8(g) and 8(h),
if a Director ceases to serve as a Director, he or she may, but only within
ninety (90) days after the date he or she ceases to be a Director of the
Company, exercise his or her Director Option to the extent that he or she was
entitled to exercise it at the date of such termination. Any portion of a
Director Option that is not exercisable on the date a Director ceases to be a
Director of the Company, and any portion of a Director Option which the
Director was entitled to exercise that is not exercised within the time
specified herein, shall immediately and automatically terminate and be
forfeited, and neither such Director nor any of the Director’s heirs, personal
representatives, successors or assigns shall have any rights with respect to
such Director Option.

 

(g)                                 Disability of Director. Notwithstanding
the provisions of Section 8(f) above, if a Director is unable to
continue his or her service as a Director with the Company as a result of his
or her total and permanent disability (as defined in Section 22(e)(3) of
the Code), he or she may, but only within ninety (90) days from the date of
termination of such service, exercise his or her Director Option to the extent
he or she was entitled to exercise it at the date of such termination. Any
portion of a Director Option that is not exercisable on the date a Director
ceases to be a Director of the Company, and any portion of a Director Option
which the Director was entitled to exercise that is not exercised within the
time specified herein, shall immediately and automatically terminate and be
forfeited, and neither such Director nor any of the Director’s heirs, personal
representatives, successors or assigns shall have any rights with respect to
such Director Option.

 

(h)                                 Death of Director. Upon
the death of a Director holding a Director Option:

 

(i)                                     during
the term of the Director Option when such Director was, at the time of his or
her death, a Director of the Company and who shall have been a Director since
the date of grant of the Director Option, the Director Option may be
exercised, at any time within one year following the date of death, by the
person who acquired the right to exercise such Director Option by bequest or
inheritance, but only to the extent of the right to exercise that existed at
the date of death;

 

13

 

(ii)                                  within
ninety (90) days after the termination of the Director’s status as a Director,
the Director Option may be exercised, at any time within ninety (90) days
following the date of death, by such Director’s estate or by a person who
acquired the right to exercise the Director Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
death; and

 

(iii)                               any
portion of a Director Option that is not exercisable on the date of a Director’s
death, and any portion of a Director Option which the Director was entitled to
exercise that is not exercised within the time specified in Section 8(h)(i) or
Section 8(h)(ii), shall immediately and automatically terminate and be
forfeited, and neither such Director nor any of the Director’s heirs, personal
representatives, successors or assigns shall have any rights with respect to
such Director Option.

 

9.                                      Terms and Conditions of
Stock Appreciation Rights

 

(a)                                  Grants. The Committee may grant a Stock
Appreciation Right independent of an Option or in connection with an Option or
a portion thereof. Any grant of a Stock Appreciation Right under the Plan shall
be evidenced by an Award agreement in such form as the Committee shall
from time to time approve and which shall set forth the terms and conditions of
the Stock Appreciation Right. The Committee may impose such terms and
conditions upon any Stock Appreciation Right as it deems fit. A Stock
Appreciation Right granted in connection with an Option or a portion thereof (i) may be
granted at the time the related Option is granted or at any time before the
exercise or cancellation of the related Option, (ii) shall cover the same
number of shares of Common Stock covered by the Option (or such fewer number of
shares of Common Stock as the Committee may determine), and (iii) shall
be subject to the same terms and conditions as such Option except for such
additional limitations as are contemplated by this Section 9 (or such
additional limitations as may be included in the Award agreement
evidencing such Stock Appreciation Right).

 

(b)                                 Terms. The exercise price per share of Common
Stock of a Stock Appreciation Right shall be an amount determined by the
Committee but in no event shall such amount be less than the Fair Market Value
of a share of Common Stock on the date the Stock Appreciation Right is granted.
In addition, in the case of a Stock Appreciation Right granted in conjunction
with an Option or a portion thereof, the exercise price shall not be less than
the Exercise Price of the related Option. Each Stock Appreciation Right granted
independent of an Option shall entitle a Participant upon exercise to an amount
equal to (i) the excess of (A) the Fair Market Value on the exercise
date of one share of Common Stock over (B) the exercise price per share,
times (ii) the number of shares of Common Stock covered by the Stock
Appreciation Right. Each Stock Appreciation Right granted in conjunction with
an Option or a portion thereof shall entitle a Participant to surrender to the
Company the unexercised Option or any portion thereof and to receive from the
Company in exchange therefor an amount equal to (I) the excess of (x) the Fair
Market Value on the exercise date of one share of Common Stock over (y) the
Exercise Price per share of Common Stock, times (II) the number of shares of
Common Stock covered by the Option, or portion thereof, which is

 

14

 

surrendered. Payment shall be made in shares of Common Stock or in
cash, or partly in shares and partly in cash (any such shares of Common Stock
valued at such Fair Market Value), all as set forth in the Award agreement
evidencing such Stock Appreciation Right or as otherwise determined in the
discretion of the Committee. Stock Appreciation Rights may be exercised
from time to time upon actual receipt by the Company of written notice of
exercise stating the number of shares of Common Stock with respect to which the
Stock Appreciation Right is being exercised. The date a notice of exercise is
received by the Company shall be the exercise date.

 

(c)                                  Termination of Employment or Service.
If a Participant who holds a Stock Appreciation Right shall
cease to be employed by or performing services for the Company or any Affiliate
for any reason other than death, unless the applicable Award agreement provides
otherwise, such Stock Appreciation Right shall immediately and automatically
terminate and be forfeited, whether or not exercisable, and neither such
Participant nor any of the Participant’s heirs, personal representatives,
successors or assigns shall have any rights with respect to such Stock
Appreciation Right. Notwithstanding the foregoing, if an independent contractor
or other non-employment relationship between the Participant and the Company or
an Affiliate is terminated due to the commencement of an employment
relationship with the Company or an Affiliate, this provision shall apply only
upon termination of both the independent contractor and employment relationship
between the Participant and the Company or an Affiliate. In the case of a
Participant who is a natural person and who ceases to be employed by or
performing services for the Company or an Affiliate due to his or her
disability (with disability being determined in the sole discretion of the
Committee), the Committee, at its discretion, may permit exercise of the
portion of the Stock Appreciation Right that is exercisable upon such
termination of employment until the earlier of the originally stated date of
termination of the Stock Appreciation Right or up to one year after such
termination of employment or other service.

 

(d)                                 Death of Participant. Unless
otherwise provided in the applicable Award agreement, if a Participant who is a
natural person shall cease to be employed by or performing services for the
Company or any Affiliate as a result of the Participant’s death, any Stock
Appreciation Right held by such Participant may be exercised to the same
extent that the Participant would have been entitled to exercise it at the date
of death and may be exercised within a period of one (1) year
after the date of death, but in no case later than the expiration date of such
Stock Appreciation Right. Such Stock Appreciation Right shall be exercised
pursuant to Section 9(b) of this Plan by the person or persons to
whom the Participant’s rights under the Stock Appreciation Right shall pass by
will or the laws of descent and distribution.

 

(e)                                  Termination of Stock Appreciation
Rights Not Exercisable. Unless the applicable Award agreement
provides otherwise, upon termination of a Participant’s employment or other
services with the Company or an Affiliate for any reason, including by reason
of death or disability of the Participant, any

 

15

 

portion of the Participant’s Stock Appreciation Rights that is not
exercisable shall automatically and immediately terminate as to such
Participant.

 

10.                               Awards of Restricted Stock

 

(a)                                  Grant. Awards of Restricted Stock subject to
forfeiture and transfer restrictions may be granted by the Committee under
the Plan. Any Awards of Restricted Stock shall be evidenced by an Award
agreement in such form as the Committee shall from time to time approve
and which shall set forth the terms and conditions of the Award of Restricted
Stock. Subject to the provisions of the Plan, the Committee shall determine the
number of shares of Restricted Stock to be granted to each Participant; the
duration of any period during which, and the conditions, if any, under which,
the Restricted Stock may be forfeited to the Company; and the other terms
and conditions of such Awards. The Committee may determine a period of
time during which the Participant receiving the Award of Restricted Stock must
remain in the continuous employment of the Company in order for the forfeiture
and transfer restrictions to lapse. If the Committee so determines, the
restrictions may lapse during any such restricted period in installments
with respect to specified portions of the shares of Restricted Stock covered by
the Award of Restricted Stock. The Committee may also impose performance
or other conditions that will subject the shares subject to the Award of
Restricted Stock to forfeiture and transfer restrictions. The Committee may, at
any time, in its discretion, waive all or any part of any restrictions
applicable to any or all outstanding Awards of Restricted Stock.

 

(b)                                 Transfer
Restrictions. Shares
of Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered, except as provided in the Plan or the applicable Award
agreement. At the time of the grant of an Award of Restricted Stock, a stock
certificate representing the number of shares of Restricted Stock awarded
thereunder shall be registered in the name of the Participant and held by the
Company. Such stock certificate may bear a legend describing the
conditions of the Restricted Stock Award. Unless the Award agreement evidencing
an Award of Restricted Stock or the Committee provides otherwise, the
Participant receiving the Award of Restricted Stock shall have all rights of a
shareholder with respect to the shares of Restricted Stock subject to such
Award, including the right to receive any dividends and the right to vote such
shares, subject to the following restrictions: 
(i) the Participant receiving the Award of Restricted Stock shall
not be entitled to delivery of the stock certificate until the expiration of
the restricted period and the fulfillment of any other restrictive conditions
set forth in the applicable Award agreement; (ii) none of the shares of
Common Stock subject to the Award of Restricted Stock may be sold,
assigned, transferred, pledged, hypothecated or otherwise encumbered or
disposed of during such restricted period or until after the fulfillment of any
such other restrictive condition; and (iii) all of the shares of
Restricted Stock shall be forfeited and all rights of the Participant to such
shares shall terminate, without any further obligation on the part of the
Company, unless the Participant remains in the continuous employment of the
Company for the entire restricted period. Any shares of Common Stock, any other
securities of the Company and any other property (except for cash dividends)
distributed with respect to the shares subject

 

16

 

to
an Award of Restricted Stock shall be subject to the same restrictions, terms
and conditions as such shares. After the lapse or termination of the
restrictions of an Award of Restricted Stock, or at such earlier time as
otherwise determined by the Committee, a stock certificate evidencing the
shares of Common Stock subject to the Award of Restricted Stock that bears no
legend describing the conditions of an Award of Restricted Stock shall be
delivered to the Participant or his or her beneficiary or estate, as the case may be.

 

(c)                                  Dividends. Dividends or dividend equivalents paid on any
shares of Restricted Stock may be paid directly to the Participant,
withheld by the Company subject to vesting of the Restricted Stock pursuant to
the terms of the applicable Award agreement, or may be reinvested in
additional Awards of Restricted Stock, as determined by the Committee in its
discretion.

 

(d)                                 Termination of Employment or Service.
If a Participant who holds a Restricted Stock Award shall cease
to be employed by or performing services for the Company or any Affiliate for
any reason other than death prior to the vesting of shares of Restricted Stock
granted to such Participant, unless the applicable Award agreement provides
otherwise, such Restricted Stock Award shall immediately and automatically
terminate and be forfeited and neither such Participant nor any of the
Participant’s heirs, personal representatives, successors or assigns shall have
any rights with respect to such unvested Restricted Stock Award. Notwithstanding
the foregoing, if an independent contractor or other non-employment
relationship between the Participant and the Company or an Affiliate is
terminated due to the commencement of an employment relationship with the
Company or an Affiliate, this provision shall apply only upon termination of
both the independent contractor and employment relationship between the
Participant and the Company or an Affiliate. In the case of a Participant who
is a natural person and who ceases to be employed by or performing services for
the Company or an Affiliate due to his or her disability (with disability being
determined in the sole discretion of the Committee), the Committee, at its
discretion, may permit a portion or all of the shares subject to the
Restricted Stock Award held by such Participant to vest on the date of such
termination.

 

(e)                                  Death of Participant. Unless
otherwise provided in the applicable Award agreement, if a Participant who is a
natural person shall cease to be employed by or performing services for the
Company or any Affiliate as a result of the Participant’s death prior to the
vesting of shares subject to the Restricted Stock Award granted to such
Participant, the Committee, at its discretion, may permit a portion or all
of the shares of Restricted Stock to vest as of the date of death or to
continue the Restricted Stock Award under such terms and conditions as the
Committee may determine. The person entitled to any such shares of
Restricted Stock shall be the person or persons to whom the Participant’s
rights under the Restricted Stock Award shall pass by will or the laws of
descent and distribution.

 

(f)                                    Termination of Restricted Stock
Awards Not Vested. Unless the applicable Award agreement
provides otherwise, upon termination of a Participant’s employment or other
services with the Company or an Affiliate for any reason, including by reason
of death or disability of the Participant, any portion of the Participant’s
Restricted Stock Award that has not vested shall automatically and

 

17

 

immediately terminate as to such Participant, and the shares subject to
such portion of the Restricted Stock Award shall be available for the grant of
Awards under the Plan.

 

(g)                                 Other Provisions.
Each Award agreement
relating to an Award of Restricted Stock authorized under this Section 10 may contain
such other provisions as the Committee shall deem advisable including, but not
limited to, a requirement that shares of Common Stock acquired under an Award
of Restricted Stock be subject to a restriction on the Participant’s ability to
transfer the shares to third parties without the consent of the Company.

 

11.                               Other Awards

 

(a)                                  Other Stock-Based Awards. The
Committee, in its sole discretion, may grant Awards of shares of Common
Stock and Awards that are valued in whole or in part by reference to, or
are otherwise based on, shares of Common Stock or on the Fair Market Value
thereof (“Other Stock-Based Awards”). Such Other Stock-Based Awards shall be in
such form, and dependent on such conditions, as the Committee shall determine
including, without limitation, the right to receive, or vest with respect to,
one or more shares of Common Stock (or the equivalent cash value of such
shares) upon the completion of a specified period of service, the occurrence of
an event and/or the attainment of performance objectives. Other Stock-Based
Awards may be granted alone or in addition to any other Awards granted
under the Plan. Subject to the provisions of the Plan, the Committee shall
determine the number of shares of Common Stock to be awarded to a Participant
under (or otherwise related to) such Other Stock-Based Awards; whether such
Other Stock-Based Awards shall be settled in cash, shares of Common Stock or a
combination of cash and such shares; and all other terms and conditions of such
Awards (including, without limitation, the vesting provisions thereof and
provisions ensuring that all shares so awarded and issued shall be fully paid
and non-assessable). Any Other Stock-Based Awards shall be evidenced by an
Award agreement in such form as the Committee shall from time to time
approve and which shall set forth the terms and conditions of the Other
Stock-Based Award. Unless the applicable Award agreement provides otherwise, if
a Participant who holds an Other Stock-Based Award shall cease to be employed
by or performing services for the Company or an Affiliate for any reason, such
Other Stock-Based Award shall be treated by the Committee as though it is either
a Non-Qualified Option or a Restricted Stock Award, as the Committee shall
determine in its discretion.

 

(b)                                 Other Cash-Based Awards. In
addition to the Awards described above, and subject to the terms of the Plan,
the Committee may grant such other incentives denominated in cash and
payable in cash under the Plan as the Committee determines to be in the best
interests of the Company and subject to such other terms and conditions as it
deems appropriate (“Other Cash-Based Awards”). Any Other Cash-Based Awards
shall be evidenced by an Award agreement in such form as the Committee
shall from time to time approve and which shall set forth the terms and
conditions of the Other Cash-Based Award. Unless the applicable Award agreement
provides otherwise, if a Participant who holds an Other Cash-Based Award shall
cease to be employed by or performing services for the 

 

18

 

Company or an Affiliate for any reason, such Other Cash-Based Award
shall be treated as though it is a Stock Appreciate Right or otherwise as the
Committee shall determine in its discretion.

 

12.                               Performance-Based
Awards.

 

(a)                                  Performance-Based Awards. Notwithstanding
anything to the contrary herein, the Committee may grant performance-based
Options, Awards of Restricted Stock, Other Stock-Based Awards and Other
Cash-Based Awards to Participants (“Performance-Based Awards”). Any such Awards
granted to Participants who may be “covered employees” under Section 162(m)
of the Code or any successor section thereto shall be consistent with the
provisions thereof. In such cases, a Participant’s Performance-Based Award
shall be determined based on the attainment of written performance goals
approved by the Committee for a performance period established by the Committee
(i) when the outcome for that performance period is substantially
uncertain and (ii) by the earlier of (A) ninety (90) days after the
commencement of the performance period to which the performance goal relates or
(B) the number of days which is equal to twenty-five percent (25%) of the
relevant performance period.

 

(b)                                 Performance Goals. The
performance goals referred to in Section 12(a) must be objective and
shall be based upon one or more of the following criteria:  (i) consolidated earnings before or
after taxes (including earnings before interest, taxes, depreciation and
amortization); (ii) net income; (iii) operating income; (iv) earnings
per share; (v) book value per share of Common Stock; (vi) return on
shareholders’ equity; (vii) expense management; (viii) return on
investment; (ix) improvements in capital structure; (x) profitability of
an identifiable business unit or product; (xi) maintenance or improvements
of profit margins; (xii) stock price; (xiii) market share; (xiv) revenues or
sales; (xv) costs; (xvi) cash flow; (xvii) working capital; (xviii) return on
assets; (xix) asset turnover; (xx) inventory turnover; (xxi) economic
value added (economic profit); and (xxii) total shareholder return. The
foregoing criteria may relate to the Company, one or more of its Parents
or Subsidiaries or one or more of its divisions or units, or any combination of
the foregoing, and may be applied on an absolute basis and/or be relative
to one or more peer group companies or indices, or any combination thereof, all
as the Committee shall determine. In addition, to the degree consistent with Section 162(m)
of the Code (or any successor section thereto), the performance goals may be
calculated without regard to the negative effect of unusual or nonrecurring
items, extraordinary items, discontinued operations or cumulative effects of
accounting changes. The Committee shall determine whether, with respect to a
performance period, the applicable performance goals have been met with respect
to a given Participant who may be a covered employee and, if they have,
shall so certify and ascertain the amount of the applicable Performance-Based
Award. No Performance-Based Awards will be paid for such performance period
until such certification is made by the Committee. The amount of the
Performance-Based Award actually paid to a given Participant may be less
than the amount determined by the applicable performance goal formula, at the
discretion of the Committee. The amount of the Performance-Based Award
determined by the Committee for a performance

 

19

 

period shall be paid to the Participant at such time as determined by
the Committee in its sole discretion after the end of such performance period.

 

13.                               Adjustments Upon Certain
Events

 

Notwithstanding any other provisions in the Plan to the contrary, the
following provisions shall apply to all Awards granted under the Plan:

 

(a)                                  Generally. Upon any change in the outstanding
shares of Common Stock after the Effective Date by reason of any stock
dividend, stock split, reverse stock split, reclassification, combination,
exchange of shares or other similar recapitalization of the Company, there
shall be an appropriate adjustment to (i) the number or kind of shares of
Common Stock or other securities issued or reserved for issuance pursuant to
the Plan or pursuant to outstanding Awards, (ii) the Exercise Price of any
Option or the exercise price of any Stock Appreciation Right, and/or (iii) any
other affected terms of such Awards. Notwithstanding the foregoing, no
fractional shares shall be issued or paid for. No adjustment shall be made
under this Section 13(a) upon the issuance by the Company of any
warrants, rights or options to acquire additional Common Stock or of securities
convertible into Common Stock unless such warrants, rights, options or
convertible securities are issued to all shareholders of the Company on a
proportionate basis.

 

(b)                                 Change in Control. Notwithstanding anything contained in
this Plan to the contrary, and unless otherwise provided in the applicable
Award agreement at the time of grant, in the event of a “Change in Control” (as
defined below), the following shall occur as of the effective date of such
Change in Control with respect to any and all Awards outstanding as of the
effective date of such Change in Control: 
(i) any and all Awards granted hereunder will be, as nearly as may reasonably
be, automatically converted into the same type of Award to acquire the kind and
amount of shares of stock or other securities or property (including cash)
which the Participant would have owned or have been entitled to receive as of
the effective date of the Change in Control had the Awards been exercised or
realized in full immediately before the effective date of the Change in
Control; (ii) any vesting schedule of all Awards shall remain
unchanged; (iii) appropriate adjustment shall be made in the application
of the provisions of all outstanding Awards with respect to the rights and
interests thereafter of each Participant, to the end that the provisions set
forth in each Award shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock or other
securities or property (including cash) thereafter deliverable under the Award;
and (iv) any restrictions imposed on Awards, including Awards of
Restricted Stock and Performance-Based Awards of Restricted Stock, shall remain
unchanged.

 

(c)                                  Definition of Change of Control. For
purposes of this Section 13, “Change in Control” means:

 

(i)                                     The
sale, lease, exchange or other transfer, directly or indirectly, of all or
substantially all of the assets of the Company (in one transaction or in a series of
related transactions) to a person or entity that is not controlled by the
Company;

 

20

 

(ii)                                  The
approval by the Company’s shareholders of any plan or proposal for the
liquidation or dissolution of the Company;

 

(iii)                               Any
person or entity becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of more than fifty percent
(50%) of the combined voting power of the outstanding securities of the Company
ordinarily having the right to vote at elections of directors who were not
beneficial owners of at least fifty percent (50%) of such combined voting power
as of the Effective Date; or

 

(iv)                              A
merger or consolidation to which the Company is a party if the shareholders of
the Company immediately prior to the effective date of such merger or
consolidation have, solely on account of ownership of securities of the Company
at such time, “beneficial ownership” (as defined in Rule 13d-3 under the
Exchange Act) immediately following the effective date of such merger or
consolidation of securities of the surviving company representing less than
fifty percent (50%) of the combined voting power of the surviving corporation’s
then outstanding securities ordinarily having the right to vote at elections of
directors.

 

The provisions of this Section shall
similarly apply to successive transactions of the types described in Sections
13(c)(i) through (iv).

 

(d)                                 Additional Adjustments of Awards.
Subject to the above provisions, the Committee shall have the discretion,
exercisable at any time before a sale, merger, consolidation, reorganization,
liquidation, dissolution or other Change in Control transaction, to take such
further action as it determines to be necessary or advisable with respect to
Awards. Such authorized action may include (but shall not be limited to)
establishing, amending or waiving the type, terms, conditions or duration of,
or restrictions on, Awards so as to provide for earlier, later, extended or
additional time for exercise and lifting restrictions and other modifications,
and the Committee may take such actions with respect to all Participants,
to certain categories of Participants or to only individual Participants. The
Committee may take such action before or after granting Awards to which
the action relates and before or after any public announcement with respect to
such sale, merger, consolidation, reorganization, liquidation, dissolution or
Change in Control that is the reason for such action. The grant of an Award
under the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge or to consolidate or to dissolve, liquidate
or sell, or transfer all or any part of its business or assets.

 

14.                               Shares
Acquired for Investment

 

Shares of Common Stock acquired
by a Participant under this Plan shall be acquired by the Participant for
investment and without intention of resale unless, in the opinion of counsel to
the Company, such shares may be purchased without any investment
representation. Where an investment representation is deemed necessary, the
Committee may require a written representation to that effect by the
Participant as a condition of a Participant exercising an Option or otherwise
obtaining shares of Common Stock pursuant an Award granted under this

 

21

 

Plan, and the Committee may place an
appropriate legend on the stock certificates evidencing the shares of Common
Stock so issued indicating that such shares have not been registered under
federal or state securities laws and describing the restrictions on transfer. Each
Award shall be subject to the requirement that if, at any time, the Committee
shall determine in its discretion that the listing, registration or
qualification of the shares of Common Stock subject to the Award upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, if necessary or desirable as a
condition of, or in connection with, the granting of such Award or the issuance
or purchase of shares of Common Stock thereunder, then such Award shall not be
granted or exercised 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.

 

15.                               No Right to Employment,
Service as a Director or Awards

 

The granting of an Award under the Plan shall impose no obligation on
the Company or any Affiliate to continue the employment of a Participant and
shall not lessen or affect the Company’s or the Affiliate’s right to terminate
the employment of such Participant. Nothing in the Plan will interfere with or
limit in nay way the right of the Company, the Board or the Company’s
stockholders to terminate the directorship of any Director at any time, nor
confer upon any Director any right to continue to serve as a Director of the
Company. No Participant or other person shall have any claim to be granted any
Award, and there is no obligation for uniform treatment of Participants or
holders or beneficiaries of Awards. The terms and conditions of Awards and the
Committee’s determinations and interpretations with respect thereto need not be
the same with respect to each Participant.

 

16.                               Other Benefit and
Compensation Programs

 

Payments and other benefits received by a Participant under an Award
shall not be deemed a part of a Participant’s regular, recurring
compensation for purposes of any termination, indemnity or severance pay laws
and shall not be included in, nor have any effect on, the determination of
benefits under any other employee benefit plan, contract or similar arrangement
provided by the Company or an Affiliate, unless expressly so provided by such
other plan, contract or arrangement or the Committee determines that an Award
or portion of an Award should be included to reflect competitive compensation
practices or to recognize that an Award has been made in lieu of a portion of
competitive cash compensation.

 

17.                               Successors and Assigns

 

The Plan shall be binding on all successors and assigns of the Company
and a Participant including, without limitation, the estate of such Participant
and the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant’s creditors.

 

18.                               Nontransferability of
Awards; Designation of Beneficiary

 

(a)                                  Nontransferability.
No Award or interest in
an Award may be sold, assigned, pledged (as collateral for a loan or as
security for the performance of an obligation or for any other purpose) or
transferred by the Participant or made subject to attachment or similar
proceedings otherwise than by will or by the applicable laws of descent and
distribution, except to the extent a Participant designates one or

 

22

 

more
beneficiaries on a Company-approved form who may exercise the Award
or receive payment under the Award after the Participant’s death. During a
Participant’s lifetime, an Award may be exercised only by the Participant.

 

(b)                                 Designation
of Beneficiary. A
Participant may designate a beneficiary to succeed to the Participant’s
Awards under the Plan in the event of the Participant’s death by filing a
beneficiary form with the Company and, upon the death of the Participant,
such beneficiary shall succeed to the rights of the Participant to the extent
permitted by law and the terms of this Plan and the applicable Award agreement.
In the absence of a validly designated beneficiary who is living at the time of
the Participant’s death, the Participant’s executor or administrator of the
Participant’s estate shall succeed to the Awards, which shall be transferable
by will or pursuant to laws of descent and distribution.

 

19.                               Amendments or Termination

 

The Board may amend,
alter or discontinue the Plan, but no amendment, alteration or discontinuation
shall be made without the consent of a Participant if such action would
diminish any of the rights of the Participant under any Award theretofore
granted to such Participant under the Plan; provided,
however, that the Committee may amend the Plan in such manner
as it deems necessary to permit the granting of Awards meeting the requirements
of the Code or other applicable laws.

 

20.                               International Participants

 

With respect to Participants
who reside or work outside the United States of America, the Committee may, in
its sole discretion, amend the terms of the Plan or adopt such modifications,
procedures or subplans with respect to such Participants as are necessary or
desirable to ensure the viability of the benefits of the Plan, comply with
applicable foreign laws or obtain more favorable tax or other treatment for a
Participant, the Company or an Affiliate; provided, however, that no such
changes shall apply to the Awards to Participants who may be “covered
employees” under Section 162(m) of the Code or any successor thereto
unless consistent with the provisions thereof.

 

21.                               General

 

(a)                                  Issuance of Shares of Common Stock.
Notwithstanding any other provision of the Plan, the Company shall have no
obligation to issue or deliver any shares of Common Stock under an Award
granted under the Plan or make any other distribution of benefits under the
Plan unless, in the opinion of the Company’s counsel, such issuance, delivery
or distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act of 1933, as amended, or any
successor thereto (the “Securities Act”) or the laws of any state or foreign
jurisdiction) and the applicable requirements of any securities exchange or
similar entity. The Company shall be under no obligation to any Participant to
register for offering or resale or to qualify for an exemption from
registration under the Securities Act, or to register or qualify under the laws
of any state or foreign jurisdiction, any Awards, shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company

 

23

 

may issue stock certificates evidencing shares of Common Stock
with such legends and subject to such restrictions on transfer and stop
transfer instructions as counsel for the Company deems necessary or desirable
for compliance by the Company with federal, state and foreign securities laws. The
Company may also require such other action or agreement by the
Participants as may from time to time be necessary to comply with applicable
securities laws.

 

(b)                                 Stock Certificates. To
the extent this Plan or any applicable Award agreement provides for the
issuance of stock certificates to reflect the issuance of shares of Common
Stock, the issuance may be effected on a non-certificated basis, to the
extent not prohibited by applicable law or the applicable rules of any
stock exchange or market on which such shares are traded or quoted.

 

(c)                                  No Rights as a Shareholder.
Unless otherwise provided by the Committee or in the Plan or an Award agreement
evidencing an Award or in any other written agreement between a Participant and
the Company or an Affiliate, no Award shall entitle the Participant to any cash
dividend, voting or other right of a shareholder unless and until the date of
issuance under the Plan of any shares of Common Stock that are subject to such
Award.

 

(d)                                 No Trust or Fund. The
Plan is intended to constitute an “unfunded” plan. Nothing contained herein
shall require the Company to segregate any monies, other property, or shares of
Common Stock, or to create any trusts, or to make any special deposits for any
immediate or deferred amounts payable to any Participant, and no Participant
shall have any rights that are greater than those of a general unsecured
creditor of the Company.

 

(e)                                  Severability. If any
provision of the Plan or any Award agreement shall be held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining
parts of the Plan or Award agreement, and such Plan or Award agreement shall be
construed and enforced as if the illegal or invalid provision had not been
included.

 

(f)                                    Choice of Law. The
validity, construction, interpretation, administration and effect of the Plan,
and rights relating to the Plan and to Awards granted under the Plan, shall be
governed by the substantive laws, but not the choice of law rules, of the State
of Minnesota.

 

22.                               Effective Date

 

The Plan shall be effective on October 8, 2004 (the “Effective
Date”), which is the date it was approved by the Board. Amendments to the Plan
were approved by the Board on May 10, 2005 and March 23, 2006 and the
Plan, as so amended, was approved by the Company’s shareholders on June 10,
2005 and May 18, 2006.

 

24Exhibit 10.1

 

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.

2004 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

amended and restated as of May 18, 2006

 

 

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.

2004 Supplemental Executive Retirement Plan

CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  

  	
  Page

  	
   

  	
   

  
	
  ARTICLE
  1

  	
   

  	
  Purposes of Plan

  	
   

  	
   

  	
  1

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  2

  	
   

  	
  Definitions

  	
   

  	
   

  	
  1

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  3

  	
   

  	
  Participation

  	
   

  	
   

  	
  3

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  4

  	
   

  	
  Restoration of Benefits

  	
   

  	
   

  	
  3

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
   

  	
  Administration and General Provisions

  	
   

  	
   

  	
  7

  	
   

  	
   

  
										

 

FINANCIAL SECURITY ASSURANCE
HOLDINGS LTD.

2004 Supplemental Executive Retirement Plan

ARTICLE 1.           Purposes of Plan.

1.1                                 Financial Security Assurance Inc. adopted the
Financial Security Assurance Inc. Supplemental Executive Retirement Plan (as
heretofore amended and restated, the “1989 Plan”), effective January 1,
1989, in order to restore the pension benefits of selected current and future
key employees whose benefits under the Financial Security Assurance Inc. Money
Purchase Plan are limited by reason of certain limitations imposed by Section 401(a)(17),
Section 415 and other provisions of the Internal Revenue Code of 1986, as
amended from time to time (the “Code”). Effective as of December 17,
2004, the Company discontinued contributions under the 1989 Plan and
established a new supplemental executive retirement plan, serving the same
purposes as the 1989 Plan. This new plan, as amended from time to time, is
known as the Financial Security Assurance Holdings Ltd. 2004 Supplemental
Executive Retirement Plan, and is referred to herein as the “Plan.”  The terms of the Plan govern credits for
contributions made commencing January 1, 2006, in respect of limited
pension benefits payable in respect of calendar year 2005, and amounts
transferred to the Plan from the 1989 Plan as described herein. The Plan is
hereby amended and restated effective as of May 18, 2006 to provide that
payments due upon a separation from service shall generally not be paid during
the six months following the separation from service and to make certain other
changes.

ARTICLE 2.           Definitions.

For purposes of the Plan, the following terms shall have the meanings
set forth below:

2.1                                 “Account” shall mean the account
established for a Participant under the Plan to which contributions and earnings
are credited.

2.2                                 “Basic Plan” shall mean the Financial
Security Assurance Inc. Money Purchase Plan as adopted and amended from time to
time.

2.3                                 “Beneficiary” shall mean the person or
persons designated by the Participant to receive benefits under the Plan in the
event of the Participant’s death. If there is no Beneficiary surviving the
Participant, any death benefit payable hereunder shall be paid to the
Participant’s estate.

2.4                                 “Board” shall mean the Board of Directors
of the Company.

2.5                                 “Code” shall mean the Internal Revenue
Code of 1986, as amended from time to time. Any references herein to a
specific section of the Code shall be deemed to refer to the rules and
regulations under the Code in respect of such section, and to the corresponding
provisions of any future internal revenue law and the rules and
regulations thereunder.

 

2.7                                 “Committee” shall mean the Human Resources
Committee of the Board acting on the majority vote of such Committee.

2.6                                 “Company” shall mean Financial Security
Assurance Holdings Ltd., a New York corporation.

2.7                                 “Compensation” shall mean, with respect to
each Plan Year, the Participant’s annual base salary, cash bonus and any amount
deferred pursuant to the Company’s 1995 Deferred Compensation Plan or 2004
Deferred Compensation Plan (other than deferrals related to “Performance Share”
awards); provided, however, that in no case shall such Compensation exceed $1
million in any Plan Year.

2.8                                 “Disability” shall mean, in the
case of a Participant, that, as determined by the Committee, the Participant is
(i) unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months or (ii) by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected
to last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than 3 months under an accident
and health plan covering employees of the Company.

2.9                                 “Discharge for Cause” shall mean an
Employee’s termination of employment by a Participating Company due to such
Employee’s willful misconduct or gross negligence in respect of his or her
duties of employment with the Participating Company including, but not limited
to, conviction for a felony or perpetration of a common law fraud, which has
resulted in or is likely to result in material economic damage to a
Participating Company.

2.10                           “Employee” shall mean any individual
employed by a Participating Company on or after January 1, 2004 to whom
benefits are payable under the Basic Plan.

2.11                           “Participant” shall mean an Employee who
is a member of a select group of management or highly compensated employees and
who has been designated by the Committee for participation in the Plan pursuant
to Section 3.1.

2.12                           “Participating Company” shall mean the
Company or any subsidiary or affiliate of the Company employing a Participant.

2.13                           “Plan” shall mean the 2004 Financial
Security Assurance Holdings Ltd. Supplemental Executive Retirement Plan as set
forth herein, and as amended from time to time.

2.14         “Plan Year” shall mean each calendar year beginning
after December 31, 2003.

2.15                                 “SERP Election Change Form” shall mean the
form prescribed or accepted by the Committee by which a Participant may change
a previous distribution election.

 2
 

 

2.16                           “Years of Service” shall mean “Years of
Service for Vesting” as defined under the Basic Plan.

Where
used herein, the masculine gender shall be deemed, where applicable, to include
the feminine gender, and references to the singular shall be deemed, where
applicable, to include the plural.

ARTICLE 3.           Participation.

3.1                                 At any time during the Plan Year, the Chief
Executive Officer may recommend an Employee to the Committee for participation
in the Plan. Upon receiving such recommendation, the Committee shall timely act
upon it and shall notify the Employee in the event he or she is designated a
Participant and the date as of which such participation commences. Unless
otherwise determined by the Chief Executive Officer or the Committee, each
Employee attaining the rank of Director, Managing Director, Associate General
Counsel, General Counsel, Executive Vice President, President or Chairman shall
be deemed to have been designated as a Participant by the Committee for all
purposes of the Plan. Unless otherwise determined by the Committee, once an
Employee has been approved by the Committee as a Participant in the Plan, such
Employee shall remain a Participant until all of his or her benefits with
respect to the Plan have been paid or forfeited.

ARTICLE 4.           Restoration of Benefits.

4.1                                 Amount of Restoration of Benefits. Subject to Sections 4.3(b), 4.5 and 5.2 of the
Plan, the Account of a Participant who is in service with a Participating
Company on the last day of the Plan Year, and whose pension benefits under the
Basic Plan for such Plan Year are limited by the application of Section 401(a)(17)
of the Code, Section 415 of the Code and other limits under the Code on
the inclusion of deferred amounts for contribution purposes, shall be credited
with an amount equal to the difference between:

(a)             the amount of contribution related to Compensation
which would have been payable to or in respect of the Participant under the
Basic Plan without regard to the maximum annual pension limitation in Section 415
of the Code or the pensionable compensation limitation in Section 401(a)(17)
of the Code or the exclusion of certain deferred amounts, and

(b)            the amount of contribution related to
Compensation actually payable to or in respect of the Participant under the
Basic Plan.

In addition to the foregoing amounts, the
Account of a Participant shall be credited with such amounts in the Participant’s
account under the 1989 Plan that are not vested on or before December 31,
2004 and that are deemed transferred to the Plan pursuant to the terms of the
1989 Plan.  Such amounts shall be subject
to the terms and conditions of the Plan.

 3
 

 

4.2                                 Vesting. A Participant shall be 100% vested in his or her Account upon
attaining age 55, upon his or her death or Disability while in the employ of a
Participating Company or upon the termination of the Plan pursuant to Section 5.2.
Except as provided in Section 5.4, if a Participant terminates employment
prior to an event specified in the preceding sentence, such Participant shall
be vested in his or her Account in accordance with the following schedule:

	
  Completed Years of Service

  	
   

  	
   

  	
  Percentage

  	
   

  
	
  Less than 2

  	
   

  	
  0

  	
   

  
	
  2 
 	
   

  	
  20

  	
   

  
	
  3 
 	
   

  	
  40

  	
   

  
	
  4 
 	
   

  	
  60

  	
   

  
	
  5 
 	
   

  	
  80

  	
   

  
	
  6 or more

  	
   

  	
  100

  	
   

  

 

4.3                                 Crediting of Investment Gain/Loss.

(a)                                  The balance of each Participant’s Account shall
be credited with earnings and investment gains and losses as provided below. The
Committee may establish procedures permitting Participants to designate one or
more investment benchmarks specified by the Chief Executive Officer or the
Committee for the purpose of determining the earnings or investment gains and
losses to be credited or debited to a Participant’s Account. Investment
benchmarks so specified may be made available to all Participants or selected
Participants as the Chief Executive Officer or the Committee may designate. The
Committee shall have the sole discretion to make such rules as it deems
desirable with respect to the administration of any such investment benchmark
procedures, including rules permitting the Participant to change the
designation of investment benchmarks to be used to measure the value of the
Account. The Committee, however, retains the discretion at any time to change
the investment benchmarks available to Participants, including any investment
benchmarks previously specified by the Chief Executive Officer, or to discontinue
the benchmark procedure. If the Committee fails to implement an investment
benchmark procedure or discontinues such procedure, or if the Participant fails
to designate properly an investment benchmark, the Participant’s Account shall
be credited with earnings at a rate determined by the Committee in its sole
discretion, utilizing whatever factors or indicia it deems appropriate;
provided, however, that the rate of return on a Participant’s Account in such
circumstances shall not be less than the Chase Bank prime rate plus one
percent.

(b)  Nothing in this Section 4.3 or in the Committee’s rules shall
give a Participant the right to require the Company or a Participating Company
to acquire any asset for the Account of the Participant, and if the Company or 

 4
 

 

a Participating
Company acquires any asset, or causes a trustee on its behalf to acquire any
asset, to permit it to satisfy its obligations to pay the balance of the
Participant’s Account, the Participant shall have no right or interest in any
such asset, which shall be held by the Company or the Participating Company
subject to the rights of all unsecured creditors of the Company or the
Participating Company. The rights of the Participant with respect to any
designation of one or more investment benchmarks for measuring the value of any
Account hereunder shall be expressly subject to the provisions of Section 5.6
of the Plan.

4.4                                 Form and
Timing of Election.

(a)                                  Except as
otherwise provided herein, payment of the Participant’s vested Account balance
shall be made as soon as administratively practicable following the Participant’s
death, Disability or other separation from service (a “Distribution Event”). Before
the taxable year for which the amounts described in Section 4.1 are
credited to a Participant’s Account, the Participant may make an election with
respect to the timing of the payment of such amounts pursuant to which the
Participant may elect a date subsequent to the Participant’s death, Disability
or other separation from service on which all or any portion of such amounts
shall be distributed. A Participant who
becomes eligible to participate in the Plan for the first time after the
beginning of a taxable year may make such an election with respect to the
timing of the amounts credited to his or her account in such taxable year at
any time within thirty days after the date the Participant becomes eligible to
participate in the Plan. Notwithstanding the foregoing, amounts that are
transferred to the Plan from the 1989 Plan shall be subject to any election
with respect to the timing of the payment of such amounts as shall be in effect
under the 1989 Plan as of December 31, 2004. A Participant may
elect to extend, but not accelerate, a previously elected distribution date at
any time at least 12 months before the date of the first scheduled payment by
the execution of a SERP Election Change Form, timely filed with the Company,
provided that a SERP Election Change Form (i) shall only be effective
in respect of amounts that would not otherwise have been distributed during the
12-month period after the filing of such Form; and (ii) must provide
for an extension of distribution of at least 5 years from the previously
established distribution date to the
extent necessary or desirable to comply with the requirements of Section 409A
of the Code as interpreted by the Committee in its sole discretion for
exclusion from gross income of amounts deferred under the Plan.
Notwithstanding the foregoing, effective as of May 18, 2006, any
distribution payments due on account of a Participant’s separation from service
and otherwise payable during the six-month period following the Participant’s
separation from service shall be paid on the first date of the seventh month
following the Participant’s separation from service (or, if earlier, the date
of death of the Participant).

 

 5

 

(b)                                         The
Participant may elect that his or her vested Account Balance be distributed in
a lump sum or in installments payable over a specified number of years, not
longer than 15 years; provided, however, that in no event may installment
payments be elected over a number of years that is more than the Participant’s
life expectancy or the life expectancy of the designated primary Beneficiary,
whichever is greater, at the time the Participant elects a form of distribution.
If a Participant elects the installment option, the Participant must also elect
whether installments should be made annually, quarterly or, if the Committee
(or the Chief Executive Officer of the Company in respect of all Participants)
shall direct to offer such alternative, monthly. A Participant may specify
different payment options (i) for different percentages or dollar amounts
of a Participant’s vested Account balance; or (ii) in the event of the
death or Disability of the Participant. Distributions will be in the form of a
lump sum (i) if the Participant did not choose a different distribution
option or (ii) in the event of death or Disability, if the Participant did
not expressly choose a different distribution option in the event of death or
Disability.

(c)                                          A
Participant shall make an election with respect to the form of distribution of amounts credited to his or her Account at
the time and in the manner described in Section 4.4(a) for making
elections with respect to the timing of the distribution of such amount. An
election with respect to the form of distribution of any amounts credited to a
Participant’s Account shall be irrevocable. Amounts that are transferred to the
Plan from the 1989 Plan shall be subject to any election with respect to the
form of distribution of such amounts as shall be in effect under the 1989 Plan
as of December 31, 2004.

(d)                                         A
form-of-distribution election shall be effective upon submission to the
Committee or its designee and compliance with all applicable requirements
established by the Committee, provided that the Committee retains the right, at
its election, to make payments in a lump sum if it elects, in its sole
discretion, to do so notwithstanding any form-of-distribution election
requesting an installment option to the
extent permitted by Section 409A of the Code as interpreted by the
Committee in its sole discretion for exclusion from gross income of amounts
deferred under the Plan. Notwithstanding any contrary provision in the
Plan, the Committee, in its sole discretion, retains the right, but shall have
no obligation, to distribute all or any portion of a Participant’s vested
Account balance in the form of any security or other investment chosen by the
Participant as an investment benchmark for measuring the value of his or her
Account pursuant to Section 4.3(a) of the Plan. Further,
notwithstanding any contrary provision in the Plan, any distribution to a
Participant otherwise payable hereunder shall be deferred until no later than January 2
in the year following termination of the Participant’s

 6
 

 

                                                employment
with the Company (and its subsidiaries) to the extent that such distribution,
if not so deferred, would be disallowed as a tax deduction by the Company
pursuant to Section 162(m) of the Code (or any successor provision).

(e)                                  Notwithstanding any other provision of the Plan,
any payment required to be made by the Company on a specified date pursuant to
the terms of the Plan, or pursuant to any election made under the Plan, may be
made as soon thereafter as administratively practicable; provided, however,
that such payment will be made no later than the end of the calendar year that
includes the specified date or, if later, by the 15th day of the
third month following the specified date. Amounts in a Participant’s
Account shall continue to be credited with earnings and investment gains and
losses pursuant to Section 4.3 until distributed to the extent
administratively practicable.

4.5                                 Benefit Restoration With Respect to Certain Bonus
Payments. In the event that a
Participating Company accelerates the payment of bonuses for any Plan Year by
paying bonuses which would otherwise be payable in the following Plan Year, and
such payment causes a Participant to be credited with a lower total
contribution under the Basic Plan and the Plan by virtue of the limitations
provided in the Basic Plan and the limitations on the amount of Compensation
provided in Section 2.7 of the Plan, then, notwithstanding any such
limitations, the Committee may, in its discretion, credit an additional
supplemental pension contribution under the Plan for the Plan Year in which the
bonuses were paid on an accelerated basis up to the amount which would
otherwise be lost to the Participant by virtue of the application of the
limitations in the Basic Plan and in the Plan. The aggregate amounts credited
under the Plan, and the contributions actually payable to or in respect of the
Participant under the Basic Plan, over a two Plan Year period consisting of the
Plan Year into which the bonus was accelerated and the following Plan Year,
shall not be increased by virtue of the application of this Section 4.5.

ARTICLE 5.           Administration and General
Provisions.

5.1                                 Administration.

(a)                                       The Plan shall be administered by the Committee
in accordance with the administrative provisions of the Basic Plan. The
Committee shall have full power and authority to interpret, construe and
administer the Plan, and review claims for benefits under the Plan, and the
Committee’s interpretations and constructions of the Plan and actions
thereunder shall be binding and conclusive on all persons and for all purposes.

(b)                                      The Committee shall establish and maintain Plan
records and may arrange for the engagement of such certified public
accountants, actuarial consultants or legal counsel, and make use of such
agents and clerical or other personnel, as they shall require or may deem
advisable for purposes of the Plan. The Committee may rely upon the written
opinion of such counsel

 7
 

 

and the consultants or accountants engaged by the Committee and may
delegate to any agent or to any sub-committee or member of the Committee its
authority to perform any act hereunder, including, without limitation, those
matters involving the exercise of discretion, provided that such delegation
shall be subject to revocation at any time by the Committee.

(c)                                   To the maximum extent permitted by applicable
law, no member of the Committee shall be personally liable by reason of any
contract or other instrument executed by him or her in his or her capacity as a
member of the Committee, nor for any mistakes of judgment made in good faith,
and the Company shall indemnify and hold harmless, directly from its own assets
(including the proceeds of any insurance policy the premiums of which are paid
from the Company’s own assets), each member of the Committee and each officer,
employee or director of the Company to whom any duty or power relating to the
administration or interpretation of the Plan or to the engagement or control of
the assets of the Plan may be delegated or allocated, against any cost or
expense (including counsel fees) or liability including any sum paid in
settlement of a claim with the approval of the Company arising out of any act
or omission to act in connection with the Plan.

5.2                                 Amendment and Termination. The Plan may be amended, suspended or
terminated, in whole or in part, by the Board, but no such action shall
retroactively impair or otherwise adversely affect the rights of any person to
receive benefits under the Plan which have accrued prior to the date of such
action, as determined by the Committee,
except to the extent necessary or desirable to comply with the requirements of Section 409A
of the Code as interpreted by the Committee in its sole discretion for
exclusion from gross income of amounts deferred under the Plan;
provided, however, that the amount of any future contribution payable to or in
respect of a Participant may be reduced by the amount of any increase in the
amount of pension actually payable to the Participant or Beneficiary under the
Basic Plan due to any increases in benefits payable under the Basic Plan
(whether due to changes in Code Sections 401(a)(17) and 415 limitations or
otherwise) subsequent to the Participant’s retirement. Anything in Section 4.4
to the contrary notwithstanding, in the event of the termination of the Plan,
the Committee may direct that all Account balances be distributed in the form
of a lump sum distribution to the extent permitted by Section 409A of the
Code as interpreted by the Committee in its sole discretion for exclusion from
gross income of amounts deferred under the Plan.

5.3                                 Company’s Right to Discharge Employees. Nothing contained herein will confer upon any
Participant or other employee the right to be retained in the employ of any
Participating Company, nor will it interfere with the right of any
Participating Company to discharge or otherwise administer the employment and
termination of Participants and other employees without regard to the existence
of the Plan.

 8
 

 

5.4                                 Discharge for Cause. Notwithstanding any other provisions contained
in the Plan, in the event of a Participant’s Discharge for Cause, such
Participant and his or her Beneficiary shall forfeit all rights to any payments
under the Plan.

5.5                                 Sale of Company. Nothing in the Plan shall preclude the Company from consolidating with
or merging into or with, or transferring all or substantially all its assets
to, another corporation which assumes the Plan and all obligations of the
Company hereunder. Under such a consolidation, merger, or transfer of assets
and assumption, the term “Company” shall refer to such other corporation and
the Plan shall continue in full force and effect.

5.6                                 Source of Payments. Participants have the status of general
unsecured creditors of the Company and the Plan constitutes a mere promise by
the Company to make benefit payments in the future from its general assets;
provided, however, that such payments shall be reduced by the amount of any
payments made to the Participant or his or her Beneficiary from any trust or
special or separate fund established by the Company to assure such payments,
and if the Company shall make any investments to aid it in meeting its
obligations hereunder, the Participant and his or her Beneficiary shall have no
right, title or interest whatever in or to any such investments except as may
otherwise be expressly provided in a separate written instrument relating to
such investments. 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
between the Company and any Participant or Beneficiary. By action of its Board
of Directors, any Participating Company may assume joint and several liability
with the Company with respect to any obligations under the Plan for
Participants employed by the Participating Company.

5.7                                 Withholding. The Company may withhold from any benefits payable under the Plan all
Federal, state, city or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.

5.8                                 Expenses. All expenses incurred in administering the Plan will be paid by the
Company and none will be paid by the Participant.

5.9                                 Assignment. No interest of any Participant or Beneficiary hereunder shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Participant
or the Participant’s Beneficiary. The Plan shall be binding upon and inure to
the benefit of the Company and its successors and assigns and the Participant,
his or her Beneficiary and estate. Notwithstanding the foregoing,
pursuant to rules comparable to those applicable to qualified domestic
relations orders, as determined by the Committee, the Committee may direct a
distribution prior to any distribution date otherwise described in the Plan, to
an alternate payee (as defined under the rules applicable to qualified
domestic relations orders) to the
extent permitted by Section 409A of the Code as interpreted by the
Committee in its sole discretion for exclusion from gross income of amounts
deferred under the Plan.

5.10                           ERISA Status of Plan. The Plan is intended to constitute an “unfunded
plan for management or other highly compensated individuals” as defined in the
Employee

 9
 

 

                                                Retirement Income Security Act of 1974, as
amended from time to time (“ERISA”), and is subject to certain provisions of
ERISA, including certain requirements relating to reporting, disclosure,
enforcement and claims.

5.11                           Applicable Law. The Plan shall be construed, regulated and administered according to
ERISA (to the extent applicable), the Code and the laws of the State of New
York.

 

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