Document:

Amended & Restated 1996 Incentive Plan

 

EXHIBIT 10.1

CLAIRE’S STORES, INC.

AMENDED AND RESTATED

1996 INCENTIVE COMPENSATION PLAN

 

 

 

 

 

 

 

CLAIRE’S STORES, INC.

1996 INCENTIVE COMPENSATION PLAN

     1. Purpose; Effective Date. The purpose of this 1996 INCENTIVE COMPENSATION PLAN (the “Plan”)
is to assist CLAIRE’S STORES, INC., a Florida corporation (the “Company”) and its Related Entities
in attracting, motivating, retaining and rewarding high-quality executives and other Employees,
officers, Directors, and Consultants by enabling such persons to acquire or increase a proprietary
interest in the Company in order to strengthen the mutuality of interests between such persons and
the Company’s shareholders, and providing such persons with annual and long term performance
incentives to expend their maximum efforts in the creation of shareholder value. The Plan is
intended to qualify certain compensation awarded under the Plan for tax deductibility under Section
162(m) of the Code (as hereafter defined) to the extent deemed appropriate by the Committee (or any
successor committee) of the Board of Directors of the Company.

          The Plan first became effective upon approval of the same by the Board of Directors of the
Company on August 13, 1996 (the “Effective Date”), and was also approved by the shareholders of the
Company at their 1997 annual shareholders meeting. The Plan was subsequently amended on February
16, 2000 to increase the number of shares of Common Stock available for grant hereunder, which was
approved by the shareholders of the Company at their 2001 annual shareholders meeting. In an
effort to expand the types of incentive compensation awards that may be granted under this Plan,
the Board of Directors of the Company adopted this amended and restated Plan on March 12, 2003 (the
“Amended Plan”). In the discretion of the Committee, Awards (as defined below) may be made to
Covered Employees (as defined below) which are intended to constitute qualified performance-based
compensation under Section 162(m) of the Code (as defined below). Any such Awards shall be
contingent upon the shareholders having approved the Amended Plan.

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

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

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

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

 

 

Beneficiary, then the term Beneficiary means the person, persons, trust or trusts entitled by
will or the laws of descent and distribution to receive such benefits.

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

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

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

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

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

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

          (j) “Consultant” means any person (other than an Employee or a Director, solely with respect
to rendering services in such person’s capacity as a director) who is engaged by the Company or any
Related Entity to render consulting or advisory services to the Company or such Related Entity.

          (k) “Continuous Service” means uninterrupted provision of services to the Company in any
capacity of Employee, Director, or Consultant. Continuous Service shall not be considered to be
interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any
Related Entities, or any successor entities, in any capacity of Employee Director, or Consultant,
or (iii) any change in status as long as the individual remains in the service of the Company or a
Related Entity in any capacity of Employee, Director, or Consultant (except as otherwise provided
in the Option Agreement). An approved leave of absence shall include sick leave, military leave,
or any other authorized personal leave.

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

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

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

          (o) “Director” means a member of the Board or the board of directors of any Related Entity.

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

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

          (r) “Effective Date” means the effective date of the Plan, which shall be August 13, 1996.

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

          (t) “Employee” means any person, including an officer or Director, who is an employee of the
Company or any Related Entity. The Payment of a director’s fee by the Company or a Related Entity
shall not be sufficient to constitute “employment” by the Company.

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

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

          (w) “Fair Market Value” means the fair market value of Stock, Awards or other property as
determined by the Committee or the Board, or under procedures established by the Committee or the
Board. Unless otherwise determined by the Committee or the Board, the Fair Market Value of Stock
as of any given date after which the Company is a Publicly Held Corporation shall mean the “Closing
Price” (as defined below) of the Common Stock on the business day immediately preceding the date of
reference. For the purpose of determining Fair Market Value, the “Closing Price” of the Common
Stock on any business day shall be (i) if the Common Stock is listed or admitted for trading on any
United States national securities exchange, or if actual transactions are otherwise reported on a
consolidated transaction reporting system, the last reported sale price of Common Stock on such
exchange or reporting system, as reported in any newspaper of general circulation, (ii) if the
Common Stock is quoted on the National Association of Securities Dealers Automated Quotations
System (“NASDAQ”), or any similar system of automated dissemination of quotations of securities
prices in common use, the last reported sale price of Common Stock on such system or, if sales
prices are not reported, the

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mean between the closing high bid and low asked quotations for such day of Common Stock on
such system, as reported in any newspaper of general circulation or (iii) if neither clause (i) or
(ii) is applicable, the mean between the high bid and low asked quotations for the Common Stock as
reported by the National Quotation Bureau, Incorporated if at least two securities dealers have
inserted both bid and asked quotations for Common Stock on at least five of the ten preceding days.
If neither (i), (ii), or (iii) above is applicable, then Fair Market Value shall be determined by
the Committee or the Board in a fair and uniform manner.

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

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

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

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

          (bb) “Optionee” means a person to whom an Option or Incentive Stock Option is granted under
this Plan or any person who succeeds to the rights of such person under this Plan.

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

          (dd) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in
Section 424(e) of the Code.

          (ee) “Participant” means a person who has been granted an Award under the Plan which remains
outstanding, including a person who is no longer an Eligible Person.

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

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

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

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

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

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

          (ll) “Stock Appreciation Right” means a right granted to a Participant under Section 6(c)
hereof.

          (mm) “Subsidiary” means a “subsidiary corporation” whether now or hereafter existing, as
defined in Section 424(f) of the Code.

     3. Administration.

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

          (b) Manner of Exercise of Committee Authority. As long as the Company is a Publicly Held
Corporation, the Committee, and not the Board, shall exercise sole and exclusive discretion on any
matter relating to a Participant then subject to Section 16 of the Exchange Act with respect to the
Company to the extent necessary in order that transactions by such Participant shall be exempt
under Rule 16b-3 under the Exchange Act. Any action of the Committee or the Board shall be final,
conclusive and binding on all persons, including the Company, its Related Entities, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons claiming rights from or
through a Participant, and shareholders. The express grant of any specific power to the Committee
or the Board, and the taking of any action by the Committee or the Board, shall not be construed as
limiting any power or authority of the Committee or the Board. The Committee or the Board may
delegate to officers or managers of the Company or any Related Entity, or committees thereof, the
authority, subject to such terms as the Committee or the Board shall determine, (i) to perform
administrative functions, (ii) with respect to Participants not subject to Section 16 of the
Exchange Act, to perform such other functions as the Committee or the Board may determine, and
(iii) with respect to Participants subject to Section 16, to perform such other functions of the
Committee or the Board as the Committee or the

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Board may determine to the extent performance of such functions will not result in the loss of
an exemption under Rule 16b-3 otherwise available for transactions by such persons, in each case to
the extent permitted under applicable law and subject to the requirements set forth in Section
8(d). The Committee or the Board may appoint agents to assist it in administering the Plan.

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

     4. Stock Subject to Plan.

          (a) Limitation on Overall Number of Shares Subject to Awards. Subject to adjustment as
provided in Section 10(c) hereof, the total number of shares of Stock reserved and available for
delivery in connection with Awards under the Plan shall be 4,000,000 (plus the number of shares
unused or recaptured under the Company’s 1991 Stock Option Plan). If any Awards previously granted
under the Plan terminate without being exercised, expire, are forfeited or canceled, or are
surrendered in payment of any Awards or any tax withholding with regard thereto, new Awards may
thereafter be granted covering such shares of Stock. Any shares of Stock delivered under the Plan
may consist, in whole or in part, of authorized and unissued shares or treasury shares. Subject to
adjustment as provided in Section 10(c) hereof, the number of shares of Stock which may be issued
pursuant to Incentive Stock Options shall not exceed 4,000,000 shares.

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

     5. Eligibility; Per-Person Award Limitations. Awards may be granted under the Plan only to
Eligible Persons. In each fiscal year during any part of which the Plan is in effect, an Eligible
Person may not be granted Awards relating to more than 500,000 shares of Stock, subject to
adjustment as provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g),
6(h), 8(b) and 8(c). In addition, the maximum amount that may be earned as an Annual Incentive
Award or other cash Award in any fiscal year by any one Participant shall be $1,000,000, and the
maximum amount that may be earned as a Performance Award or other cash Award in respect of a
performance period by any one Participant shall be $5,000,000.

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     6. Specific Terms of Awards.SpecificTermsofAwards.

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

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

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

     (ii) Time and Method of Exercise. The Committee or the Board shall determine
the time or times at which or the circumstances under which an Option may be
exercised in whole or in part (including based on achievement of performance goals
and/or future service requirements), the time or times at which Options shall cease
to be or become exercisable following termination of Continuous Service or upon
other conditions, the methods by which such exercise price may be paid or deemed to
be paid (including in the discretion of the Committee or the Board a cashless
exercise procedure), the form of such payment, including, without limitation, cash,
Stock, other Awards or awards granted under other plans of the Company or a Related
Entity, or other property (including notes or other contractual obligations of
Participants to make payment on a deferred basis), and the methods by or forms in
which Stock will be delivered or deemed to be delivered to Participants.

     (iii) Incentive Stock Options. The terms of any Incentive Stock Option granted
under the Plan shall comply in all respects with the provisions of Section

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

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

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

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

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

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

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be less than the Fair Market Value of a share of Stock on the date of grant
except as provided under Section 7(a) hereof.

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

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

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

     (ii) Forfeiture. Except as otherwise determined by the Committee or the Board
at the time of the Award, upon termination of a Participant’s Continuous Service
during the applicable restriction period, the Participant’s Restricted Stock that is
at that time subject to restrictions shall be forfeited and reacquired by the
Company; provided that the Committee or the Board may provide, by rule or regulation
or in any Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock shall be waived
in whole or in part in the event of terminations resulting

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from specified causes, and the Committee or the Board may in other cases waive
in whole or in part the forfeiture of Restricted Stock.

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

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

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

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

     (ii) Forfeiture. Except as otherwise determined by the Committee or the Board,
upon termination of a Participant’s Continuous Service during the applicable
deferral period thereof to which forfeiture conditions apply (as provided in the
Award agreement evidencing the Deferred Stock), the Participant’s Deferred Stock
that is at that time subject to deferral (other than a deferral at the election of
the Participant) shall be forfeited; provided that the

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

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

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

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

          (h) Other Stock-Based Awards. The Committee and the Board each is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards that may be
denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or
related to, Stock, as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment
contingent upon performance of the Company or any other factors designated by the Committee or the
Board, and Awards valued by reference to the book value of Stock or the value of securities of or
the performance of specified Related Entities or business units. The Committee or the Board shall
determine the terms and conditions of such Awards. Stock delivered pursuant to an Award in the
nature of a purchase right granted under this Section 6(h) shall be purchased for such
consideration (including without limitation loans from the Company or a Related Entity), paid for
at such times, by such methods, and in such

11

 

forms, including, without limitation, cash, Stock, other Awards or other property, as the
Committee or the Board shall determine. The Committee and the Board shall have the discretion to
grant such other Awards which are exercisable for unvested shares of Common Stock. Should the
Optionee’s Continuous Service cease while holding such unvested shares, the Company shall have the
right to repurchase, at the exercise price paid per share, any or all of those unvested shares.
The terms upon which such repurchase right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the purchased shares) shall be established by
the Committee or the Board and set forth in the document evidencing such repurchase right. Cash
awards, as an element of or supplement to any other Award under the Plan, may also be granted
pursuant to this Section 6(h).

     7. Certain Provisions Applicable to Awards.

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

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

          (c) Form and Timing of Payment Under Awards; Deferrals. Subject to the terms of the Plan and
any applicable Award agreement, payments to be made to the Company or a Related Entity upon the
exercise of an Option or other Award or settlement of an Award may be made in such forms as the
Committee or the Board shall determine, including, without limitation, cash, other Awards or other
property, and may be made in a single payment or transfer, in installments, or on a deferred basis.
The settlement of any Award may be accelerated, and cash paid in lieu of Stock in connection with
such settlement, in the discretion of the Committee or the Board or upon occurrence of one or more
specified events (in addition to a Change in Control). Installment or deferred payments may be
required by the Committee or the Board (subject to Section 10(e) of the Plan) or permitted at the
election of the Participant on terms and conditions established by the Committee or the Board.
Payments may include, without limitation, provisions for the payment or crediting of a reasonable
interest rate on

12

 

installment or deferred payments or the grant or crediting of Dividend Equivalents or other
amounts in respect of installment or deferred payments denominated in Stock.

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

     8. Performance and Annual Incentive Awards.

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

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

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

13

 

of any one performance goal or that two or more of the performance goals must
be achieved as a condition to grant, exercise and/or settlement of such Performance
Awards. Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.

     (ii) Business Criteria. One or more of the following business criteria for the
Company, on a consolidated basis, and/or specified Related Entities or business
units of the Company (except with respect to the total shareholder return and
earnings per share criteria), shall be used exclusively by the Committee in
establishing performance goals for such Performance Awards: (1) total shareholder
return; (2) such total shareholder return as compared to total return (on a
comparable basis) of a publicly available index such as, but not limited to, the
Standard & Poor’s 500 Stock Index or the S&P Specialty Retailer Index; (3) net
income; (4) pretax earnings; (5) earnings before interest expense, taxes,
depreciation and amortization; (6) pretax operating earnings after interest expense
and before bonuses, service fees, and extraordinary or special items; (7) operating
margin; (8) earnings per share; (9) return on equity; (10) return on capital; (11)
return on investment; (12) operating earnings; (13) working capital or inventory;
(14) ratio of debt to shareholders’ equity; (15) comparable store sales; (16)
inventory turn; (17) markdowns as a percentage of sales; and (18) selling general
and administrative expenses as a percentage of sales. One or more of the foregoing
business criteria shall also be exclusively used in establishing performance goals
for Annual Incentive Awards granted to a Covered Employee under Section 8(c) hereof
that are intended to qualify as “performance-based compensation under Code Section
162(m).

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

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

     (v) Settlement of Performance Awards; Other Terms. Settlement of such
Performance Awards shall be in cash, Stock, other Awards or other property,

14

 

in the discretion of the Committee. The Committee may, in its discretion,
reduce the amount of a settlement otherwise to be made in connection with such
Performance Awards. The Committee shall specify the circumstances in which such
Performance Awards shall be paid or forfeited in the event of termination of
Continuous Service by the Participant prior to the end of a performance period or
settlement of Performance Awards.

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

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

     (ii) Potential Annual Incentive Awards. Not later than the end of the 90th day
of each fiscal year, or at such other date as may be required or permitted in the
case of Awards intended to be “performance-based compensation” under Code Section
162(m), the Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable thereunder, for
that fiscal year, either out of an Annual Incentive Award pool established by such
date under Section 8(c)(i) hereof or as individual Annual Incentive Awards. In the
case of individual Annual Incentive Awards intended to qualify under Code Section
162(m), the amount potentially payable shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria set forth in
Section 8(b)(ii) hereof in the given performance year, as specified by the
Committee; in other cases, such amount shall be based on such criteria as shall be
established by the Committee. In all cases, the maximum Annual Incentive Award of
any Participant shall be subject to the limitation set forth in Section 5 hereof.

     (iii) Payout of Annual Incentive Awards. After the end of each fiscal year,
the Committee shall determine the amount, if any, of (A) the Annual Incentive Award
pool, and the maximum amount of potential Annual Incentive Award payable to each
Participant in the Annual Incentive Award pool, or (B) the amount of potential
Annual Incentive Award otherwise payable to each Participant. The Committee may, in
its discretion, determine that the amount payable to any Participant as an Annual
Incentive Award shall be reduced from

15

 

the amount of his or her potential Annual Incentive Award, including a
determination to make no Award whatsoever. The Committee shall specify the
circumstances in which an Annual Incentive Award shall be paid or forfeited in the
event of termination of Continuous Service by the Participant prior to the end of a
fiscal year or settlement of such Annual Incentive Award.

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

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

     9. Change in Control.

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

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

     (ii) The Committee may, within its discretion, accelerate the exercisability of
any limited Stock Appreciation Rights (and other Stock Appreciation Rights if so
provided by their terms) and provide for the settlement

16

 

of such Stock Appreciation Rights for amounts, in cash, determined by reference
to the Change in Control Price;

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

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

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

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

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

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

17

 

Exchange Act) of a Controlling Interest or (3) any employee benefit plan of the Company a
Related Entity.

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

     10. General Provisions.

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

          (b) Limits on Transferability; Beneficiaries. No Award or other right or interest of a
Participant under the Plan, including any Award or right which constitutes a derivative security as
generally defined in Rule 16a-1(c) under the Exchange Act, shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such Participant to any
party (other than the Company or a Subsidiary), or assigned or transferred by such Participant
otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death
of a Participant, and such Awards or rights that may be exercisable shall be exercised during the
lifetime of the Participant only by the Participant or his or her guardian or legal representative,
except that Awards and other rights (other than Incentive Stock Options and Stock Appreciation
Rights in tandem therewith) may be transferred to one or more Beneficiaries or other transferees
during the lifetime of the Participant, and may be exercised by such transferees in accordance with
the terms of such Award, but only if and to the extent such transfers and exercises are permitted
by the Committee or the Board pursuant to the express terms of an Award agreement (subject to any
terms and conditions which the Committee or the Board may impose thereon, and further subject to
any prohibitions or restrictions on such transfers pursuant to Rule 16b-3). A Beneficiary,
transferee, or other person claiming any rights

18

 

under the Plan from or through any Participant shall be subject to all terms and conditions of
the Plan and any Award agreement applicable to such Participant, except as otherwise determined by
the Committee or the Board, and to any additional terms and conditions deemed necessary or
appropriate by the Committee or the Board.

          (c) Adjustments.

               (i) Adjustments to Awards. In the event that any dividend or other distribution (whether in
the form of cash, Stock, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange,
liquidation, dissolution or other similar corporate transaction or event affects the Stock and/or
such other securities of the Company or any other issuer such that a substitution, exchange, or
adjustment is determined by the Committee or the Board to be appropriate, then the Committee or the
Board shall, in such manner as it may deem equitable, substitute, exchange or adjust any or all of
(A) the number and kind of shares of Stock which may be delivered in connection with Awards granted
thereafter, (B) the number and kind of shares of Stock by which annual per-person Award limitations
are measured under Section 5 hereof, (C) the number and kind of shares of Stock subject to or
deliverable in respect of outstanding Awards, (D) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment of cash or other property in respect of any
outstanding Award, and (E) any other aspect of any Award that the Committee or Board determines to
be appropriate.

               (ii) Adjustments in Case of Certain Corporate Transactions. In the event of a proposed sale
of all or substantially all of the Company’s assets or any reorganization, merger, consolidation,
or other form of corporate transaction in which the Company does not survive, or in which the
shares of Stock are exchanged for or converted into securities issued by another entity, then the
successor or acquiring entity or an affiliate thereof may, with the consent of the Committee or the
Board, assume each outstanding Option or substitute an equivalent option or right. If the
successor or acquiring entity or an affiliate thereof, does not cause such an assumption or
substitution, then each Option shall terminate upon the consummation of sale, merger,
consolidation, or other corporate transaction. The Committee or the Board shall give written
notice of any proposed transaction referred to in this Section 10(c)(ii) a reasonable period of
time prior to the closing date for such transaction (which notice may be given either before or
after the approval of such transaction), in order that Optionees may have a reasonable period of
time prior to the closing date of such transaction within which to exercise any Options that are
then exercisable (including any Options that may become exercisable upon the closing date of such
transaction). An Optionee may condition his exercise of any Option upon the consummation of the
transaction.

               (iii) Other Adjustments. In addition, the Committee (and the Board if and only to the extent
such authority is not required to be exercised by the Committee to comply with Code Section 162(m))
is authorized to make adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual Incentive Awards and any
Annual Incentive Award pool or performance goals relating thereto) in recognition of unusual or
nonrecurring events (including, without limitation, acquisitions and dispositions of businesses and
assets) affecting the Company, any Related Entity or any business unit, or the financial statements
of the Company or any Related Entity, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and

19

 

regulations or business conditions or in view of the Committee’s assessment of the business
strategy of the Company, any Related Entity or business unit thereof, performance of comparable
organizations, economic and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that no such adjustment shall be authorized or made
if and to the extent that such authority or the making of such adjustment would cause Options,
Stock Appreciation Rights, Performance Awards granted under Section 8(b) hereof or Annual Incentive
Awards granted under Section 8(c) hereof to Participants designated by the Committee as Covered
Employees and intended to qualify as “performance-based compensation” under Code Section 162(m) and
the regulations thereunder to otherwise fail to qualify as “performance-based compensation” under
Code Section 162(m) and regulations thereunder.

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

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

20

 

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

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

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

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

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

          (k) Amended Plan Effective Date and Shareholder Approval; Termination of Plan. The Plan
became effective on the Effective Date. The Amended Plan became effective as of March 12, 2003,
subject to subsequent approval within 12 months by the shareholders of the Company eligible to vote
in the election of directors, by a vote sufficient to meet the requirements of Code Sections 162(m)
(if applicable) and 422, Rule 16b-3 under the Exchange
Act (if applicable), applicable NASDAQ requirements, and other laws, regulations, and
obligations of the Company applicable to the Plan. Awards may be granted subject to shareholder
approval, but may not be exercised or otherwise settled in the event shareholder approval is not
obtained. The Amended Plan shall terminate at such time as no shares of Common Stock remain
available for issuance under the Amended Plan and the Company has no further rights or obligations
with respect to outstanding Awards under the Amended Plan.

21Amended & Restated 2005 Incentive Plan

 

EXHIBIT 10.2

 

 

 

 

 

CLAIRE’S STORES, INC.

AMENDED AND RESTATED

2005 INCENTIVE COMPENSATION PLAN

 

 

 

 

 

 

 

CLAIRE’S STORES, INC.

2005 INCENTIVE COMPENSATION PLAN

     1. Purpose. The purpose of this CLAIRE’S STORES, INC. 2005 INCENTIVE COMPENSATION PLAN (the
“Plan”) is to assist CLAIRE’S STORES, INC., a Florida corporation (the “Company”) and its Related
Entities (as hereinafter defined) in attracting, motivating, retaining and rewarding high-quality
executives and other employees, officers, directors, consultants and other persons who provide
services to the Company or its Related Entities by enabling such persons to acquire or increase a
proprietary interest in the Company in order to strengthen the mutuality of interests between such
persons and the Company’s shareholders, and providing such persons with long term performance
incentives to expend their maximum efforts in the creation of shareholder value.

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

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

          (b) “Award Agreement” means any written agreement, contract or other instrument or document
evidencing any Award granted by the Committee hereunder.

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

          (d) “Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 under the
Exchange Act and any successor to such Rule.

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

          (f) “Cause” shall, with respect to any Participant have the meaning specified in the Award
Agreement. In the absence of any definition in the Award Agreement, “Cause” shall have the
equivalent meaning or the same meaning as “cause” or “for cause” set forth in any employment,
consulting, or other agreement for the performance of services between the Participant and the
Company or a Related Entity or, in the absence of any such agreement or any such definition in such
agreement, such term shall mean (i) the failure by the Participant to perform, in a reasonable
manner, his or her duties as assigned by the Company or a Related Entity, (ii) any violation or
breach by the Participant of his or her employment, consulting or other similar agreement with the
Company or a Related Entity, if any, (iii) any violation or

 

 

breach by the Participant of any non-competition, non-solicitation, non-disclosure and/or
other similar agreement with the Company or a Related Entity, (iv) any act by the Participant of
dishonesty or bad faith with respect to the Company or a Related Entity, (v) use of alcohol, drugs
or other similar substances in a manner that adversely affects the Participant’s work performance,
or (vi) the commission by the Participant of any act, misdemeanor, or crime reflecting unfavorably
upon the Participant or the Company or any Related Entity. The good faith determination by the
Committee of whether the Participant’s Continuous Service was terminated by the Company for “Cause”
shall be final and binding for all purposes hereunder.

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

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

          (i) “Committee” means a committee designated by the Board to administer the Plan; provided,
however, that if the Board fails to designate a committee or if there are no longer any members on
the committee so designated by the Board, then the Board shall serve as the Committee. The
Committee shall consist of at least two directors, and each member of the Committee shall be (i) a
“non-employee director” within the meaning of Rule 16b-3 (or any successor rule) under the
Exchange Act, unless administration of the Plan by “non-employee directors” is not then required in
order for exemptions under Rule 16b-3 to apply to transactions under the Plan, (ii) an “outside
director” within the meaning of Section 162(m) of the Code, and (iii) “Independent”.

          (j) “Consultant” means any person (other than an Employee or a Director, solely with respect
to rendering services in such person’s capacity as a director) who is engaged by the Company or any
Related Entity to render consulting or advisory services to the Company or such Related Entity.

          (k) “Continuous Service” means the uninterrupted provision of services to the Company or any
Related Entity in any capacity of Employee, Director, Consultant or other service provider.
Continuous Service shall not be considered to be interrupted in the case of (i) any approved leave
of absence, (ii) transfers among the Company, any Related Entities, or any successor entities, in
any capacity of Employee, Director, Consultant or other service provider, or (iii) any change in
status as long as the individual remains in the service of the Company or a Related Entity in any
capacity of Employee, Director, Consultant or other service provider (except as otherwise provided
in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or
any other authorized personal leave.

          (l) “Covered Employee” means an Eligible Person who is a “covered employee” within the meaning
of Section 162(m)(3) of the Code, or any successor provision thereto.

          (m) “Deferred Stock” means a right to receive Shares, including Restricted Stock, cash or a
combination thereof, at the end of a specified deferral period.

2

 

          (n) “Deferred Stock Award” means an Award of Deferred Stock granted to a Participant under
Section 6(e) hereof.

          (o) “Director” means a member of the Board or the board of directors of any Related Entity.

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

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

          (r) “Effective Date” means the effective date of the Plan, which shall be the date on which
this Plan is approved by the shareholders of the Company.

          (s) “Eligible Person” means each officer, Director, Employee, Consultant and other person who
provides services to the Company or any Related Entity. The foregoing notwithstanding, only
employees of the Company, or any parent corporation or subsidiary corporation of the Company (as
those terms are defined in Sections 424(e) and (f) of the Code, respectively), shall be Eligible
Persons for purposes of receiving any Incentive Stock Options. An Employee on leave of absence may
be considered as still in the employ of the Company or a Related Entity for purposes of eligibility
for participation in the Plan.

          (t) “Employee” means any person, including an officer or Director, who is an employee of the
Company or any Related Entity. The payment of a director’s fee by the Company or a Related Entity
shall not be sufficient to constitute “employment” by the Company.

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

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

          (w) “Good Reason” shall, with respect to any Participant, have the meaning specified in the
Award Agreement. In the absence of any definition in the Award Agreement, “Good Reason” shall have
the equivalent meaning or the same meaning as “good reason” or “for good reason” set forth in any
employment, consulting or other agreement for the performance of services between the Participant
and the Company or a Related Entity or, in the absence of any such agreement or any such definition
in such agreement, such term shall mean (i) the assignment to the Participant of any duties
inconsistent in any material respect with the Participant’s position (including status, offices,
titles and reporting requirements), authority,

3

 

duties or responsibilities as assigned by the Company or a Related Entity, or any other action
by the Company or a Related Entity which results in a material diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company or a Related Entity
promptly after receipt of notice thereof given by the Participant; (ii) any material failure by the
Company or a Related Entity to comply with its obligations to the Participant as agreed upon, other
than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company or a Related Entity promptly after receipt of notice thereof given by the
Participant; or (iii) the Company’s or Related Entity’s requiring the Participant to be based at
any office or location outside of fifty miles from the location of employment or service as of the
date of Award, except for travel reasonably required in the performance of the Participant’s
responsibilities.

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

          (y) “Independent”, when referring to either the Board or members of the Committee, shall have
the same meaning as used in the rules of the New York Stock Exchange or any national securities
exchange on which any securities of the Company are listed for trading, and if not listed for
trading, by the rules of the Nasdaq Stock Market.

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

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

          (bb) “Optionee” means a person to whom an Option is granted under this Plan or any person who
succeeds to the rights of such person under this Plan.

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

          (dd) “Participant” means a person who has been granted an Award under the Plan which remains
outstanding, including a person who is no longer an Eligible Person.

          (ee) “Performance Award” shall mean any Award of Performance Shares or Performance Units
granted pursuant to Section 6(h).

          (ff) “Performance Period” means that period established by the Committee at the time any
Performance Award is granted or at any time thereafter during which any performance goals specified
by the Committee with respect to such Award are to be measured.

          (gg) “Performance Share” means any grant pursuant to Section 6(h) of a unit valued by
reference to a designated number of Shares, which value may be paid to the Participant by delivery
of such property as the Committee shall determine, including cash, Shares, other property, or any
combination thereof, upon achievement of such performance goals

4

 

during the Performance Period as the Committee shall establish at the time of such grant or
thereafter.

          (hh) “Performance Unit” means any grant pursuant to Section 6(h) of a unit valued by reference
to a designated amount of property (including cash) other than Shares, which value may be paid to
the Participant by delivery of such property as the Committee shall determine, including cash,
Shares, other property, or any combination thereof, upon achievement of such performance goals
during the Performance Period as the Committee shall establish at the time of such grant or
thereafter.

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

          (jj) “Prior Plan” means the Claire’s Stores, Inc. 1996 Incentive Compensation Plan.

          (kk) “Related Entity” means any Subsidiary, and any business, corporation, partnership,
limited liability company or other entity designated by Board in which the Company or a Subsidiary
holds a substantial ownership interest, directly or indirectly.

          (ll) “Restricted Stock” means any Share issued with the restriction that the holder may not
sell, transfer, pledge or assign such Share and with such risks of forfeiture and other
restrictions as the Committee, in its sole discretion, may impose (including any restriction on the
right to vote such Share and the right to receive any dividends), which restrictions may lapse
separately or in combination at such time or times, in installments or otherwise, as the Committee
may deem appropriate.

          (mm) “Restricted Stock Award” means an Award granted to a Participant under Section 6(d)
hereof.

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

          (oo) “Shareholder Approval Date” means the date on which this Plan is approved shareholders of
the Company eligible to vote in the election of directors, by a vote sufficient to meet the
requirements of Code Sections 162(m) (if applicable) and 422, Rule 16b-3 under the Exchange Act (if
applicable), applicable requirements under the rules of any stock exchange or automated quotation
system on which the Shares may be listed on quoted, and other laws, regulations and obligations of
the Company applicable to the Plan.

          (pp) “Shares” means the shares of common stock of the Company, par value $.05 per share, and
such other securities as may be substituted (or resubstituted) for Shares pursuant to Section 10(c)
hereof.

          (qq) “Stock Appreciation Right” means a right granted to a Participant under Section 6(c)
hereof.

5

 

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

          (ss) “Substitute Awards” shall mean Awards granted or Shares issued by the Company in
assumption of, or in substitution or exchange for, awards previously granted, or the right or
obligation to make future awards, by a company acquired by the Company or any Related Entity or
with which the Company or any Related Entity combines.

     3. Administration.

          (a) Authority of the Committee. The Plan shall be administered by the Committee except to the
extent the Board elects to administer the Plan, in which case the Plan shall be administered by
only those directors who are Independent Directors, in which case references herein to the
“Committee” shall be deemed to include references to the Independent members of the Board. The
Committee shall have full and final authority, subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant Awards, determine the type, number
and other terms and conditions of, and all other matters relating to, Awards, prescribe Award
Agreements (which need not be identical for each Participant) and rules and regulations for the
administration of the Plan, construe and interpret the Plan and Award Agreements and correct
defects, supply omissions or reconcile inconsistencies therein, and to make all other decisions and
determinations as the Committee may deem necessary or advisable for the administration of the Plan.
In exercising any discretion granted to the Committee under the Plan or pursuant to any Award, the
Committee shall not be required to follow past practices, act in a manner consistent with past
practices, or treat any Eligible Person or Participant in a manner consistent with the treatment of
other Eligible Persons or Participants.

          (b) Manner of Exercise of Committee Authority. The Committee, and not the Board, shall
exercise sole and exclusive discretion on any matter relating to a Participant then subject to
Section 16 of the Exchange Act with respect to the Company to the extent necessary in order that
transactions by such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee shall be final, conclusive and binding on all persons, including the
Company, its Related Entities, Participants, Beneficiaries, transferees under Section 10(b) hereof
or other persons claiming rights from or through a Participant, and shareholders. The express
grant of any specific power to the Committee, and the taking of any action by the Committee, shall
not be construed as limiting any power or authority of the Committee. The Committee may delegate
to officers or managers of the Company or any Related Entity, or committees thereof, the authority,
subject to such terms as the Committee shall determine, to perform such functions, including
administrative functions as the Committee may determine to the extent that such delegation will not
result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to Participants
subject to Section 16 of the Exchange Act in respect of the Company and will not cause Awards
intended to qualify as “performance-based compensation” under Code Section 162(m) to fail to so
qualify. The Committee may appoint agents to assist it in administering the Plan.

6

 

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

     4. Shares Subject to Plan.

          (a) Limitation on Overall Number of Shares Available for Delivery Under Plan. Subject to
adjustment as provided in Section 10(c) hereof, the total number of Shares reserved and available
for delivery under the Plan shall be 2,000,000, plus any Shares remaining available for delivery
under the Prior Plan on the Effective Date of the Plan. Any Shares delivered under the Plan may
consist, in whole or in part, of authorized and unissued shares or treasury shares.

          (b) Application of Limitation to Grants of Award. No Award may be granted if the number of
Shares to be delivered in connection with such an Award or, in the case of an Award relating to
Shares but settled only in cash (such as cash-only Stock Appreciation Rights), the number of Shares
to which such Award relates, exceeds the number of Shares remaining available for delivery under
the Plan, minus the number of Shares deliverable in settlement of or relating to then outstanding
Awards. The Committee may adopt reasonable counting procedures to ensure appropriate counting,
avoid double counting (as, for example, in the case of tandem or substitute awards) and make
adjustments if the number of Shares actually delivered differs from the number of Shares previously
counted in connection with an Award.

          (c) Availability of Shares Not Delivered under Awards and Adjustments to Limits.

               (i) If any Shares subject to an Award are forfeited, expire or otherwise terminate without
issuance of such Shares, or any Award is settled for cash or otherwise does not result in the
issuance of all or a portion of the Shares subject to such Award, the Shares shall, to the extent
of such forfeiture, expiration, termination, cash settlement or non-issuance, again be available
for Awards under the Plan, subject to Section 4(c)(iv) below.

               (ii) In the event that any Option or other Award granted hereunder is exercised through the
tendering of Shares (either actually or by attestation) or by the withholding of Shares by the
Company, or withholding tax liabilities arising from such option or other award are satisfied by
the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the
Company, then only the number of Shares issued net of the Shares tendered or withheld shall be
counted for purposes of determining the maximum number of Shares available for grant under the
Plan.

               (iii) Substitute Awards shall not reduce the Shares authorized for grant under the Plan or
authorized for grant to a Participant in any period. Additionally, in the event

7

 

that a company acquired by the Company or any Related Entity or with which the Company or any
Related Entity combines has shares available under a pre-existing plan approved by shareholders and
not adopted in contemplation of such acquisition or combination, the shares available for delivery
pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the
exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or
combination to determine the consideration payable to the holders of common stock of the entities
party to such acquisition or combination) may be used for Awards under the Plan and shall not
reduce the Shares authorized for delivery under the Plan; provided that Awards using such available
shares shall not be made after the date awards or grants could have been made under the terms of
the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals
who were not Employees or Directors prior to such acquisition or combination.

               (iv) Any Shares that again become available for delivery pursuant to this Section 4(c) shall
be added back as one (1) Share.

               (v) Notwithstanding anything in this Section 4(c) to the contrary and solely for purposes of
determining whether Shares are available for the delivery of Incentive Stock Options, the maximum
aggregate number of shares that may be granted under this Plan shall be determined without regard
to any Shares restored pursuant to this Section 4(c) that, if taken into account, would cause the
Plan to fail the requirement under Code Section 422 that the Plan designate a maximum aggregate
number of shares that may be issued.

          (d) No Further Awards Under Prior Plan. In light of the adoption of this Plan, no further
awards shall be made under the Prior Plan after the Effective Date.

     5. Eligibility; Per-Person Award Limitations. Awards may be granted under the Plan only to
Eligible Persons. Subject to adjustment as provided in Section 10(c), in any fiscal year of the
Company during any part of which the Plan is in effect, no Participant may be granted (i) Options
or Stock Appreciation Rights with respect to more than 500,000 Shares or (ii) Restricted Stock,
Deferred Stock, Performance Shares and/or Other Stock-Based Awards with respect to more than
500,000 Shares. In addition, the maximum dollar value payable to any one Participant with respect
to Performance Units is (x) $5,000,000 with respect to any 12 month Performance Period, and (y)
with respect to any Performance Period that is more than 12 months, $10,000,000.

     6. Specific Terms of Awards.

          (a) General. Awards may be granted on the terms and conditions set forth in this Section 6.
In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or
thereafter (subject to Section 10(e)), such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture
of Awards in the event of termination of the Participant’s Continuous Service and terms permitting
a Participant to make elections relating to his or her Award. The Committee shall retain full
power and discretion to accelerate, waive or modify, at any time, any term or condition of an Award
that is not mandatory under the Plan. Except in cases in which the Committee is authorized to
require other forms of consideration under the Plan, or to the

8

 

extent other forms of consideration must be paid to satisfy the requirements of Florida law,
no consideration other than services may be required for the grant (but not the exercise) of any
Award.

          (b) Options. The Committee is authorized to grant Options to any Eligible Person on the
following terms and conditions:

               (i) Exercise Price. Other than in connection with Substitute Awards, the exercise price per
Share purchasable under an Option shall be determined by the Committee, provided that such exercise
price shall not, in the case of Incentive Stock Options, be less than 100% of the Fair Market Value
of a Share on the date of grant of the Option and shall not, in any event, be less than the par
value of a Share on the date of grant of the Option. If an Employee owns or is deemed to own (by
reason of the attribution rules applicable under Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company (or any parent corporation or
subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the
Code, respectively) and an Incentive Stock Option is granted to such employee, the exercise price
of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be
no less than 110% of the Fair Market Value a Share on the date such Incentive Stock Option is
granted.

               (ii) Time and Method of Exercise. The Committee shall determine the time or times at which or
the circumstances under which an Option may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements), the time or times at which
Options shall cease to be or become exercisable following termination of Continuous Service or upon
other conditions, the methods by which the exercise price may be paid or deemed to be paid
(including in the discretion of the Committee a cashless exercise procedure), the form of such
payment, including, without limitation, cash, Shares, other Awards or awards granted under other
plans of the Company or a Related Entity, or other property (including notes or other contractual
obligations of Participants to make payment on a deferred basis provided that such deferred
payments are not in violation of the Sarbanes-Oxley Act of 2002, or any rule or regulation adopted
thereunder or any other applicable law), and the methods by or forms in which Shares will be
delivered or deemed to be delivered to Participants.

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

                    (A) the Option shall not be exercisable more than ten years after the date such Incentive
Stock Option is granted; provided, however, that if a Participant

9

 

owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the Company (or any parent
corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e)
and (f) of the Code, respectively) and the Incentive Stock Option is granted to such Participant,
the term of the Incentive Stock Option shall be (to the extent required by the Code at the time of
the grant) for no more than five years from the date of grant; and

                    (B) The aggregate Fair Market Value (determined as of the date the Incentive Stock Option is
granted) of the Shares with respect to which Incentive Stock Options granted under the Plan and all
other option plans of the Company (and any parent corporation or subsidiary corporation of the
Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) during
any calendar year exercisable for the first time by the Participant during any calendar year shall
not (to the extent required by the Code at the time of the grant) exceed $100,000.

          (c) Stock Appreciation Rights. The Committee may grant Stock Appreciation Rights to any
Eligible Person in conjunction with all or part of any Option granted under the Plan or at any
subsequent time during the term of such Option (a “Tandem Stock Appreciation Right”), or without
regard to any Option (a “Freestanding Stock Appreciation Right”), in each case upon such terms and
conditions as the Committee may establish in its sole discretion, not inconsistent with the
provisions of the Plan, including the following:

               (i) Right to Payment. A Stock Appreciation Right shall confer on the Participant to whom it
is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of
one Share on the date of exercise over (B) the grant price of the Stock Appreciation Right as
determined by the Committee. The grant price of a Stock Appreciation Right shall not be less than
the Fair Market Value of a Share on the date of grant, in the case of a Freestanding Stock
Appreciation Right, or less than the associated Option exercise price, in the case of a Tandem
Stock Appreciation Right.

               (ii) Other Terms. The Committee shall determine at the date of grant or thereafter, the time
or times at which and the circumstances under which a Stock Appreciation Right may be exercised in
whole or in part (including based on achievement of performance goals and/or future service
requirements), the time or times at which Stock Appreciation Rights shall cease to be or become
exercisable following termination of Continuous Service or upon other conditions, the method of
exercise, method of settlement, form of consideration payable in settlement, method by or forms in
which Shares will be delivered or deemed to be delivered to Participants, whether or not a Stock
Appreciation Right shall be in tandem or in combination with any other Award, and any other terms
and conditions of any Stock Appreciation Right.

               (iii) Tandem Stock Appreciation Rights. Any Tandem Stock Appreciation Right may be granted at
the same time as the related Option is granted or, for Options that are not Incentive Stock
Options, at any time thereafter before exercise or expiration of such Option. Any Tandem Stock
Appreciation Right related to an Option may be exercised only when the related Option would be
exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the
exercise price at which Shares can be acquired pursuant to the Option. In addition, if a Tandem
Stock Appreciation Right exists with respect to less than

10

 

the full number of Shares covered by a related Option, then an exercise or termination of such
Option shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies
until the number of Shares then exercisable under such Option equals the number of Shares to which
the Tandem Stock Appreciation Right applies. Any Option related to a Tandem Stock Appreciation
Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been
exercised, and any Tandem Stock Appreciation Right shall no longer be exercisable to the extent the
related Option has been exercised.

          (d) Restricted Stock Awards. The Committee is authorized to grant Restricted Stock Awards to
any Eligible Person on the following terms and conditions:

               (i) Grant and Restrictions. Restricted Stock Awards shall be subject to such restrictions on
transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, or
as otherwise provided in this Plan, covering a period of time specified by the Committee (the
“Restriction Period”). The terms of any Restricted Stock Award granted under the Plan shall be set
forth in a written Award Agreement which shall contain provisions determined by the Committee and
not inconsistent with the Plan. The restrictions may lapse separately or in combination at such
times, under such circumstances (including based on achievement of performance goals and/or future
service requirements), in such installments or otherwise, as the Committee may determine at the
date of grant or thereafter. Except to the extent restricted under the terms of the Plan and any
Award Agreement relating to a Restricted Stock Award, a Participant granted Restricted Stock shall
have all of the rights of a shareholder, including the right to vote the Restricted Stock and the
right to receive dividends thereon (subject to any mandatory reinvestment or other requirement
imposed by the Committee). During the Restriction Period, subject to Section 10(b) below, the
Restricted Stock may not be sold, transferred, pledged, hypothecated, margined or otherwise
encumbered by the Participant.

               (ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of a
Participant’s Continuous Service during the applicable Restriction Period, the Participant’s
Restricted Stock that is at that time subject to a risk of forfeiture that has not lapsed or
otherwise been satisfied shall be forfeited and reacquired by the Company; provided that the
Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any
individual case, that forfeiture conditions relating to Restricted Stock Awards shall be waived in
whole or in part in the event of terminations resulting from specified causes.

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

               (iv) Dividends and Splits. As a condition to the grant of a Restricted Stock Award, the
Committee may require or permit a Participant to elect that any cash dividends paid on a Share of
Restricted Stock be automatically reinvested in additional Shares of Restricted Stock or applied to
the purchase of additional Awards under the Plan. Unless otherwise

11

 

determined by the Committee, Shares distributed in connection with a stock split or stock
dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk
of forfeiture to the same extent as the Restricted Stock with respect to which such Shares or other
property have been distributed.

          (e) Deferred Stock Award. The Committee is authorized to grant Deferred Stock Awards to any
Eligible Person on the following terms and conditions:

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

               (ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of a
Participant’s Continuous Service during the applicable deferral period or portion thereof to which
forfeiture conditions apply (as provided in the Award Agreement evidencing the Deferred Stock
Award), the Participant’s Deferred Stock Award that is at that time subject to a risk of forfeiture
that has not lapsed or otherwise been satisfied shall be forfeited; provided that the Committee may
provide, by rule or regulation or in any Award Agreement, or may determine in any individual case,
that forfeiture conditions relating to a Deferred Stock Award shall be waived in whole or in part
in the event of terminations resulting from specified causes, and the Committee may in other cases
waive in whole or in part the forfeiture of any Deferred Stock Award.

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

          (f) Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant
Shares to any Eligible Persons as a bonus, or to grant Shares or other Awards in lieu of
obligations to pay cash or deliver other property under the Plan or under other plans or
compensatory arrangements, provided that, in the case of Eligible Persons subject to Section 16 of
the Exchange Act, the amount of such grants remains within the discretion of the Committee to the
extent necessary to ensure that acquisitions of Shares or other Awards are exempt from

12

 

liability under Section 16(b) of the Exchange Act. Shares or Awards granted hereunder shall
be subject to such other terms as shall be determined by the Committee.

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

          (h) Performance Awards. The Committee is authorized to grant Performance Awards to any
Eligible Person payable in cash, Shares, or other Awards, on terms and conditions established by
the Committee, subject to the provisions of Section 8 if and to the extent that the Committee
shall, in its sole discretion, determine that an Award shall be subject to those provisions. The
performance criteria to be achieved during any Performance Period and the length of the Performance
Period shall be determined by the Committee upon the grant of each Performance Award. Except as
provided in Section 9 or as may be provided in an Award Agreement, Performance Awards will be
distributed only after the end of the relevant Performance Period. The performance goals to be
achieved for each Performance Period shall be conclusively determined by the Committee and may be
based upon the criteria set forth in Section 8(b), or in the case of an Award that the Committee
determines shall not be subject to Section 8 hereof, any other criteria that the Committee, in its
sole discretion, shall determine should be used for that purpose. The amount of the Award to be
distributed shall be conclusively determined by the Committee. Performance Awards may be paid in a
lump sum or in installments following the close of the Performance Period or, in accordance with
procedures established by the Committee, on a deferred basis.

          (i) Other Stock-Based Awards. The Committee is authorized, subject to limitations under
applicable law, to grant to any Eligible Person such other Awards that may be denominated or
payable in, valued in whole or in part by reference to, or otherwise based on, or related to,
Shares, as deemed by the Committee to be consistent with the purposes of the Plan. Other
Stock-Based Awards may be granted to Participants either alone or in addition to other Awards
granted under the Plan, and such Other Stock-Based Awards shall also be available as a form of
payment in the settlement of other Awards granted under the Plan. The Committee shall determine
the terms and conditions of such Awards. Shares delivered pursuant to an Award in the nature of a
purchase right granted under this Section 6(i) shall be purchased for such consideration,
(including without limitation loans from the Company or a Related Entity provided that such loans
are not in violation of the Sarbanes Oxley Act of 2002, or any rule or regulation adopted
thereunder or any other applicable law) paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Shares, other Awards or other property, as the Committee shall
determine.

     7. Certain Provisions Applicable to Awards.

13

 

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

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

          (c) Form and Timing of Payment Under Awards; Deferrals. Subject to the terms of the Plan and
any applicable Award Agreement, payments to be made by the Company or a Related Entity upon the
exercise of an Option or other Award or settlement of an Award may be made in such forms as the
Committee shall determine, including, without limitation, cash, Shares, other Awards or other
property, and may be made in a single payment or transfer, in installments, or on a deferred basis.
Any installment or deferral provided for in the preceding sentence shall, however, be subject to
the Company’s compliance with the provisions of the Sarbanes-Oxley Act of 2002, the rules and
regulations adopted by the Securities and Exchange Commission thereunder, and all applicable rules
of the New York Stock Exchange or any national securities exchange on which the Company’s
securities are listed for trading and, if not listed for trading on either the New York Stock
Exchange or a national securities exchange, then the rules of the Nasdaq Stock Market. The
settlement of any Award may be accelerated, and cash paid in lieu of Stock in connection with such
settlement, in the discretion of the Committee or upon occurrence of one or more specified events
(in addition to a Change in Control). Installment or deferred payments may be required by the
Committee (subject to Section 10(e) of the Plan, including the consent provisions thereof in the
case of any deferral of an outstanding Award not provided for in the original Award Agreement) or
permitted at the election of the Participant on terms and conditions established by the Committee.
Payments may include, without limitation, provisions for the payment or crediting of a reasonable
interest rate on installment or deferred payments or the grant or crediting of Dividend Equivalents
or other amounts in respect of installment or deferred payments denominated in Shares.

          (d) Exemptions from Section 16(b) Liability. It is the intent of the Company that the grant
of any Awards to or other transaction by a Participant who is subject to Section 16 of the Exchange
Act shall be exempt from Section 16 pursuant to an applicable exemption

14

 

(except for transactions acknowledged in writing to be non-exempt by such Participant).
Accordingly, if any provision of this Plan or any Award Agreement does not comply with the
requirements of Rule 16b-3 then applicable to any such transaction, such provision shall be
construed or deemed amended to the extent necessary to conform to the applicable requirements of
Rule 16b-3 so that such Participant shall avoid liability under Section 16(b).

     8. Code Section 162(m) Provisions.

          (a) Covered Employees. The Committee, in its discretion, may determine at the time an Award
is granted to an Eligible Person who is, or is likely to be, as of the end of the tax year in which
the Company would claim a tax deduction in connection with such Award, a Covered Employee, that the
provisions of this Section 8 shall be applicable to such Award.

          (b) Performance Criteria. If an Award is subject to this Section 8, then the lapsing of
restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as
applicable, shall be contingent upon achievement of one or more objective performance goals.
Performance goals shall be objective and shall otherwise meet the requirements of Section 162(m) of
the Code and regulations thereunder including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of performance goals being
“substantially uncertain.” One or more of the following business criteria for the Company, on a
consolidated basis, and/or for Related Entities, or for business or geographical units of the
Company and/or a Related Entity (except with respect to the total shareholder return and earnings
per share criteria), shall be used by the Committee in establishing performance goals for such
Awards: (1) earnings per share; (2) revenues or margins; (3) cash flow; (4) operating margin; (5)
return on net assets, investment, capital, or equity; (6) economic value added; (7) direct
contribution; (8) net income; pretax earnings; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; earnings after interest expense and before
extraordinary or special items; operating income; income before interest income or expense, unusual
items and income taxes, local, state or federal and excluding budgeted and actual bonuses which
might be paid under any ongoing bonus plans of the Company; (9) working capital; (10) management of
fixed costs or variable costs; (11) identification or consummation of investment opportunities or
completion of specified projects in accordance with corporate business plans, including strategic
mergers, acquisitions or divestitures; (12) total shareholder return; (13) debt reduction; (14)
comparable store sales; (15) inventory turn; (16) markdowns as a percentage of sales; and (17)
selling, general and administrative expenses as a percentage of sales. Any of the above goals may
be determined on an absolute or relative basis or as compared to the performance of a published or
special index deemed applicable by the Committee including, but not limited to, the Standard &
Poor’s 500 Stock Index or a group of companies that are comparable to the Company. The Committee
may exclude the impact of an event or occurrence which the Committee determines should
appropriately be excluded, including without limitation (i) restructurings, discontinued
operations, extraordinary items, and other unusual or non-recurring charges, (ii) an event either
not directly related to the operations of the Company or not within the reasonable control of the
Company’s management, or (iii) a change in accounting standards required by generally accepted
accounting principles.

15

 

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

          (d) Adjustments. The Committee may, in its discretion, reduce the amount of a settlement
otherwise to be made in connection with Awards subject to this Section 8, but may not exercise
discretion to increase any such amount payable to a Covered Employee in respect of an Award subject
to this Section 8. The Committee shall specify the circumstances in which such Awards shall be
paid or forfeited in the event of termination of Continuous Service by the Participant prior to the
end of a Performance Period or settlement of Awards.

          (e) Committee Certification. No Participant shall receive any payment under the Plan unless
the Committee has certified, by resolution or other appropriate action in writing, that the
performance criteria and any other material terms previously established by the Committee or set
forth in the Plan, have been satisfied to the extent necessary to qualify as “performance based
compensation” under Code Section 162(m).

     9. Change in Control.

          (a) Effect of “Change in Control.” Subject to Section 9(a)(iv), and if and only to the extent
provided in the Award Agreement, or to the extent otherwise determined by the Committee, upon the
occurrence of a “Change in Control,” as defined in Section 9(b):

               (i) Any Option or Stock Appreciation Right that was not previously vested and exercisable as
of the time of the Change in Control, shall become immediately vested and exercisable, subject to
applicable restrictions set forth in Section 10(a) hereof.

               (ii) Any restrictions, deferral of settlement, and forfeiture conditions applicable to a
Restricted Stock Award, Deferred Stock Award or an Other Stock-Based Award subject only to future
service requirements granted under the Plan shall lapse and such Awards shall be deemed fully
vested as of the time of the Change in Control, except to the extent of any waiver by the
Participant and subject to applicable restrictions set forth in Section 10(a) hereof.

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

          (b) Definition of “Change in Control". Unless otherwise specified in an Award Agreement, a
“Change in Control” shall mean the occurrence of any of the following:

               (i) The acquisition by any Person of Beneficial Ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than fifty percent (50%) of either (A) the then
outstanding shares of common stock of the Company (the “Outstanding

16

 

Company Common Stock”) or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities) (the foregoing Beneficial Ownership hereinafter being referred to as a
“Controlling Interest”); provided, however, that for purposes of this Section 9(b), the following
acquisitions shall not constitute or result in a Change of Control: (v) any acquisition directly
from the Company; (w) any acquisition by the Company; (x) any acquisition by any Person that as of
the Effective Date owns Beneficial Ownership of a Controlling Interest; (y) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary;
or (z) any acquisition by any corporation pursuant to a transaction which complies with clauses
(A), (B) and (C) of subsection (iii) below; or

               (ii) During any period of two (2) consecutive years (not including any period prior to the
Effective Date) individuals who constitute the Board on the Effective Date (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Effective Date whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

               (iii) Consummation of a reorganization, merger, statutory share exchange or consolidation or
similar corporate transaction involving the Company or any of its Subsidiaries, a sale or other
disposition of all or substantially all of the assets of the Company, or the acquisition of assets
or stock of another entity by the Company or any of its Subsidiaries (each a “Business
Combination”), in each case, unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the Beneficial Owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%)
of the then outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including, without limitation,
a corporation which as a result of such transaction owns the Company or all or substantially all of
the Company’s assets either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination or any Person that as of the Effective Date owns
Beneficial Ownership of a Controlling Interest) beneficially owns, directly or indirectly, fifty
percent (50%) or more of the then outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the Board of Directors of the
corporation resulting

17

 

from such Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for such Business
Combination; or

               (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of
the Company.

     10. General Provisions.

          (a) Compliance With Legal and Other Requirements. The Company may, to the extent deemed
necessary or advisable by the Committee, postpone the issuance or delivery of Shares or payment of
other benefits under any Award until completion of such registration or qualification of such
Shares or other required action under any federal or state law, rule or regulation, listing or
other required action with respect to any stock exchange or automated quotation system upon which
the Shares or other Company securities are listed or quoted, or compliance with any other
obligation of the Company, as the Committee, may consider appropriate, and may require any
Participant to make such representations, furnish such information and comply with or be subject to
such other conditions as it may consider appropriate in connection with the issuance or delivery of
Shares or payment of other benefits in compliance with applicable laws, rules, and regulations,
listing requirements, or other obligations.

          (b) Limits on Transferability; Beneficiaries. No Award or other right or interest granted
under the Plan shall be pledged, hypothecated or otherwise encumbered or subject to any lien,
obligation or liability of such Participant to any party, or assigned or transferred by such
Participant otherwise than by will or the laws of descent and distribution or to a Beneficiary upon
the death of a Participant, and such Awards or rights that may be exercisable shall be exercised
during the lifetime of the Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than Incentive Stock Options and Stock
Appreciation Rights in tandem therewith) may be transferred to one or more Beneficiaries or other
transferees during the lifetime of the Participant, and may be exercised by such transferees in
accordance with the terms of such Award, but only if and to the extent such transfers are permitted
by the Committee pursuant to the express terms of an Award Agreement (subject to any terms and
conditions which the Committee may impose thereon). A Beneficiary, transferee, or other person
claiming any rights under the Plan from or through any Participant shall be subject to all terms
and conditions of the Plan and any Award Agreement applicable to such Participant, except as
otherwise determined by the Committee, and to any additional terms and conditions deemed necessary
or appropriate by the Committee.

          (c) Adjustments.

               (i) Adjustments to Awards. In the event that any extraordinary dividend or other distribution
(whether in the form of cash, Shares, or other property), recapitalization, forward or reverse
split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange,
liquidation, dissolution or other similar corporate transaction or event affects the Shares and/or
such other securities of the Company or any other issuer such that a substitution, exchange, or
adjustment is determined by the Committee to be

18

 

appropriate, then the Committee shall, in such manner as it may deem equitable, substitute,
exchange or adjust any or all of (A) the number and kind of Shares which may be delivered in
connection with Awards granted thereafter, (B) the number and kind of Shares by which annual
per-person Award limitations are measured under Section 5 hereof, (C) the number and kind of Shares
subject to or deliverable in respect of outstanding Awards, (D) the exercise price, grant price or
purchase price relating to any Award and/or make provision for payment of cash or other property in
respect of any outstanding Award, and (E) any other aspect of any Award that the Committee
determines to be appropriate.

               (ii) Adjustments in Case of Certain Corporate Transactions. In the event of any merger,
consolidation or other reorganization in which the Company does not survive, or in the event of any
Change in Control, any outstanding Awards may be dealt with in accordance with any of the following
approaches, as determined by the agreement effectuating the transaction or, if and to the extent
not so determined, as determined by the Committee: (a) the continuation of the outstanding Awards
by the Company, if the Company is a surviving corporation, (b) the assumption or substitution for,
as those terms are defined in Section 9(b)(iv) hereof, the outstanding Awards by the surviving
corporation or its parent or subsidiary, (c) full exercisability or vesting and accelerated
expiration of the outstanding Awards, or (d) settlement of the value of the outstanding Awards in
cash or cash equivalents or other property followed by cancellation of such Awards (which value, in
the case of Options or Stock Appreciation Rights, shall be measured by the amount, if any, by which
the Fair Market Value of a Share exceeds the exercise or grant price of the Option or Stock
Appreciation Right as of the effective date of the transaction). The Committee shall give written
notice of any proposed transaction referred to in this Section 10(c)(ii) a reasonable period of
time prior to the closing date for such transaction (which notice may be given either before or
after the approval of such transaction), in order that Participants may have a reasonable period of
time prior to the closing date of such transaction within which to exercise any Awards that are
then exercisable (including any Awards that may become exercisable upon the closing date of such
transaction). A Participant may condition his exercise of any Awards upon the consummation of the
transaction.

               (iii) Other Adjustments. The Committee (and the Board if and only to the extent such
authority is not required to be exercised by the Committee to comply with Section 162(m) of the
Code) is authorized to make adjustments in the terms and conditions of, and the criteria included
in, Awards (including Performance Awards, or performance goals relating thereto) in recognition of
unusual or nonrecurring events (including, without limitation, acquisitions and dispositions of
businesses and assets) affecting the Company, any Related Entity or any business unit, or the
financial statements of the Company or any Related Entity, or in response to changes in applicable
laws, regulations, accounting principles, tax rates and regulations or business conditions or in
view of the Committee’s assessment of the business strategy of the Company, any Related Entity or
business unit thereof, performance of comparable organizations, economic and business conditions,
personal performance of a Participant, and any other circumstances deemed relevant; provided that
no such adjustment shall be authorized or made if and to the extent that such authority or the
making of such adjustment would cause Options, Stock Appreciation Rights, Performance Awards
granted pursuant to Section 8(b) hereof to Participants designated by the Committee as Covered
Employees and intended to qualify as “performance-based compensation” under Code Section 162(m) and
the regulations

19

 

thereunder to otherwise fail to qualify as “performance-based compensation” under Code Section
162(m) and regulations thereunder.

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

          (e) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue or
terminate the Plan, or the Committee’s authority to grant Awards under the Plan, without the
consent of shareholders or Participants, except that any amendment or alteration to the Plan shall
be subject to the approval of the Company’s shareholders not later than the annual meeting next
following such Board action if such shareholder approval is required by any federal or state law or
regulation (including, without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any
stock exchange or automated quotation system on which the Shares may then be listed or quoted, and
the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to
shareholders for approval; provided that, without the consent of an affected Participant, no such
Board action may materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee may waive any conditions or rights under,
or amend, alter, suspend, discontinue or terminate any Award theretofore granted and any Award
Agreement relating thereto, except as otherwise provided in the Plan; provided that, without the
consent of an affected Participant, no such Committee or the Board action may materially and
adversely affect the rights of such Participant under such Award.

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

          (g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an
“unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made
to a Participant or obligation to deliver Shares pursuant to an Award, nothing contained in the
Plan or any Award shall give any such Participant any rights that are greater than those of a
general creditor of the Company; provided that the Committee may authorize the creation of trusts
and deposit therein cash, Shares, other Awards or other property,

20

 

or make other arrangements to meet the Company’s obligations under the Plan. Such trusts or
other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee
otherwise determines with the consent of each affected Participant. The trustee of such trusts may
be authorized to dispose of trust assets and reinvest the proceeds in alternative investments,
subject to such terms and conditions as the Committee may specify and in accordance with applicable
law.

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

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

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

          (k) Non-U.S. Laws. The Committee shall have the authority to adopt such modifications,
procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of
foreign countries in which the Company or its Subsidiaries may operate to assure the viability of
the benefits from Awards granted to Participants performing services in such countries and to meet
the objectives of the Plan.

          (l) Plan Effective Date and Shareholder Approval; Termination of Plan. The Plan shall become
effective on the Effective Date, subject to subsequent approval, within 12 months of its adoption
by the Board, by shareholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) (if applicable) and 422, Rule
16b-3 under the Exchange Act (if applicable), applicable requirements under the rules of any stock
exchange or automated quotation system on which the Shares may be listed or quoted, and other laws,
regulations, and obligations of the Company applicable to the Plan. Awards may be granted subject
to shareholder approval, but may not be exercised or otherwise settled in the event the shareholder
approval is not obtained. The Plan shall terminate at the earliest of (a) such time as no Shares
remain available for issuance under the Plan, (b) termination of this Plan by the Board, or (c) the
tenth anniversary of the Effective Date. Awards outstanding upon expiration of the Plan shall
remain in effect until they have been exercised or terminated, or have expired.

21

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