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Exhibit 10.2

DISCOVERY HOLDING COMPANY

2005 NON-EMPLOYEE DIRECTOR INCENTIVE PLAN

(As Amended and Restated Effective August 15, 2007)

ARTICLE I

Purpose and Amendment of Plan

     1.1 Purpose. The purpose of the Plan is to provide a method whereby eligible Nonemployee
Directors of the Company may be awarded additional remuneration for services rendered and
encouraged to invest in capital stock of the Company, thereby increasing their proprietary interest
in the Company’s businesses and increasing their personal interest in the continued success and
progress of the Company. The Plan is also intended to aid in attracting Persons of exceptional
ability to become Nonemployee Directors of the Company.

     1.2 Amendment and Restatement of Plan. The Plan is hereby amended and restated as of August
15, 2007 by the Board of the Company to make certain clarifying changes to Section 4.2 hereof.

ARTICLE II

Definitions

     2.1 Certain Defined Terms. Capitalized terms not defined elsewhere in the Plan shall have the
following meanings (whether used in the singular or plural):

     “Affiliate” of the Company means any corporation, partnership or other business
association that, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with the Company.

     “Agreement” means a stock option agreement, stock appreciation rights agreement,
restricted shares agreement, stock units agreement or an agreement evidencing more than one
type of Award, specified in Section 10.5, as any such Agreement may be supplemented or
amended from time to time.

     “Approved Transaction” means any transaction in which the Board (or, if approval of the
Board is not required as a matter of law, the stockholders of the Company) shall approve (i)
any consolidation or merger of the Company, or binding share exchange, pursuant to which
shares of Common Stock of the Company would be changed or converted into or exchanged for
cash, securities or other property, other than any such transaction in which the common
stockholders of the Company immediately prior to such transaction have the same
proportionate ownership of the Common Stock of, and voting power with respect to, the
surviving corporation immediately after such transaction, (ii) any merger, consolidation or
binding share exchange to which the

 

 

Company is a party as a result of which the Persons who are common stockholders of the
Company immediately prior thereto have less than a majority of the combined voting power of
the outstanding capital stock of the Company ordinarily (and apart from the rights accruing
under special circumstances) having the right to vote in the election of directors
immediately following such merger, consolidation or binding share exchange, (iii) the
adoption of any plan or proposal for the liquidation or dissolution of the Company, or (iv)
any sale, lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company.

     “Award” means a grant of Options, SARs, Restricted Shares, Stock Units and/or cash
under the Plan.

     “Board” means the Board of Directors of the Company.

     “Board Change” means, during any period of two consecutive years, individuals who at
the beginning of such period constituted the entire Board cease for any reason to constitute
a majority thereof unless the election, or the nomination for election, of each new director
was approved by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any
successor statute or statutes thereto. Reference to any specific Code section shall include
any successor section.

     “Common Stock” means each or any (as the context may require) series of the Company‘s
common stock.

     “Company” means Discovery Holding Company, a Delaware corporation.

     “Control Purchase” means any transaction (or series of related transactions) in which
(i) any person (as such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange
Act), corporation or other entity (other than the Company, any Subsidiary of the Company or
any employee benefit plan sponsored by the Company or any Subsidiary of the Company) shall
purchase any Common Stock of the Company (or securities convertible into Common Stock of the
Company) for cash, securities or any other consideration pursuant to a tender offer or
exchange offer, without the prior consent of the Board, or (ii) any person (as such term is
so defined), corporation or other entity (other than the Company, any Subsidiary of the
Company, any employee benefit plan sponsored by the Company or any Subsidiary of the Company
or any Exempt Person (as defined below)) shall become the “beneficial owner” (as such term
is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing 20% or more of the combined voting power of the then outstanding
securities of the Company ordinarily (and apart from the rights accruing under special
circumstances) having the right to vote in the election of directors (calculated as provided
in Rule 13d-3(d) under the Exchange Act in the case of rights to acquire the Company’s
securities), other than in a transaction (or series of related transactions) approved by the

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Board. For purposes of this definition, "Exempt Person” means each of (a) the Chairman
of the Board, the President and each of the directors of Discovery Holding Company as of the
Distribution Date, and (b) the respective family members, estates, and heirs of each of the
persons referred to in clause (a) above and any trust or other investment vehicle for the
primary benefit of any of such persons or their respective family members or heirs. As used
with respect to any person, the term “family member” means the spouse, siblings and lineal
descendants of such person.

     “Disability” means the inability to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous period of
not less than 12 months.

     “Distribution Date” means the date on which the Company ceases to be a wholly-owned
subsidiary of Liberty Media Corporation, a Delaware corporation.

     “Dividend Equivalents” means, with respect to Restricted Shares to be issued at the end
of the Restriction Period, to the extent specified by the Board only, an amount equal to all
dividends and other distributions (or the economic equivalent thereof) which are payable to
stockholders of record during the Restriction Period on a like number and kind of shares of
Common Stock.

     “Domestic Relations Order” means a domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act, or the rules thereunder.

     “Effective Date” means May 3, 2005, the date on which the Plan originally became
effective.

     “Equity Security” shall have the meaning ascribed to such term in Section 3(a)(11) of
the Exchange Act, and an equity security of an issuer shall have the meaning ascribed
thereto in Rule 16a-1 promulgated under the Exchange Act, or any successor Rule.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time,
or any successor statute or statutes thereto. Reference to any specific Exchange Act
section shall include any successor section.

     “Fair Market Value” of a share of any series of Common Stock on any day means the last
sale price (or, if no last sale price is reported, the average of the high bid and low asked
prices) for a share of such series of Common Stock on such day (or, if such day is not a
trading day, on the next preceding trading day) as reported on the consolidated transaction
reporting system for the principal national securities exchange on which shares of such
series of Common Stock are listed on such day or if such shares are not then listed on a
national securities exchange, then as reported on Nasdaq. If for any day the Fair Market
Value of a share of the applicable series of Common Stock is not determinable by any of the
foregoing means, then the Fair Market Value for such day

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shall be determined in good faith by the Board on the basis of such quotations and
other considerations as the Board deems appropriate.

     “Free Standing SAR” has the meaning ascribed thereto in Section 7.1.

     “Holder” means a person who has received an Award under the Plan.

     “Nasdaq” means The NASDAQ Stock Market.

     “Nonemployee Director” means an individual who is a member of the Board and who is not
an employee of the Company or any Subsidiary.

     “Nonqualified Stock Option” means a stock option granted under Article VI.

     “Option” means a Nonqualified Stock Option.

     “Person” means an individual, corporation, limited liability company, partnership,
trust, incorporated or unincorporated association, joint venture or other entity of any
kind.

     “Plan” means this Discovery Holding Company 2005 Non-Employee Director Incentive Plan.”

     “Restricted Shares” means shares of any series of Common Stock or the right to receive
shares of any specified series of Common Stock, as the case may be, awarded pursuant to
Article VIII.

     “Restriction Period” means a period of time beginning on the date of each Award of
Restricted Shares and ending on the Vesting Date with respect to such Award.

     “Retained Distribution” has the meaning ascribed thereto in Section 8.3.

     “SARs” means stock appreciation rights, awarded pursuant to Article VII, with respect
to shares of any specified series of Common Stock.

     “Stock Unit Awards” has the meaning ascribed thereto in Section 9.1.

     “Subsidiary” of a Person means any present or future subsidiary (as defined in Section
424(f) of the Code) of such Person or any business entity in which such Person owns,
directly or indirectly, 50% or more of the voting, capital or profits interests. An entity
shall be deemed a subsidiary of a Person for purposes of this definition only for such
periods as the requisite ownership or control relationship is maintained.

     “Tandem SARs” has the meaning ascribed thereto in Section 7.1.

     “Vesting Date,” with respect to any Restricted Shares awarded hereunder, means the date
on which such Restricted Shares cease to be subject to a risk of forfeiture, as

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designated in or determined in accordance with the Agreement with respect to such Award
of Restricted Shares pursuant to Article VIII. If more than one Vesting Date is designated
for an Award of Restricted Shares, reference in the Plan to a Vesting Date in respect of
such Award shall be deemed to refer to each part of such Award and the Vesting Date for such
part.

ARTICLE III

Administration

     3.1 Administration. The Plan shall be administered by the Board, provided that it may
delegate to employees of the Company certain administrative or ministerial duties in carrying out
the purposes of the Plan.

     3.2 Powers. The Board shall have full power and authority to grant to eligible persons
Options under Article VI of the Plan, SARs under Article VII of the Plan, Restricted Shares under
Article VIII of the Plan and/or Stock Units under Article IX of the Plan, to determine the terms
and conditions (which need not be identical) of all Awards so granted, to interpret the provisions
of the Plan and any Agreements relating to Awards granted under the Plan and to supervise the
administration of the Plan. The Board in making an Award may provide for the granting or issuance
of additional, replacement or alternative Awards upon the occurrence of specified events, including
the exercise of the original Award. The Board shall have sole authority in the selection of
persons to whom Awards may be granted under the Plan and in the determination of the timing,
pricing, and amount of any such Award, subject only to the express provisions of the Plan. In
making determinations hereunder, the Board may take into account such factors as the Board in its
discretion deems relevant.

     3.3 Interpretation. The Board is authorized, subject to the provisions of the Plan, to
establish, amend and rescind such rules and regulations as it deems necessary or advisable for the
proper administration of the Plan and to take such other action in connection with or in relation
to the Plan as it deems necessary or advisable. Each action and determination made or taken
pursuant to the Plan by the Board, including any interpretation or construction of the Plan, shall
be final and conclusive for all purposes and upon all persons. No member of the Board shall be
liable for any action or determination made or taken by him or the Board in good faith with respect
to the Plan.

ARTICLE IV

Shares Subject to the Plan

     4.1 Number of Shares. Subject to the provisions of this Article IV, the maximum number of
shares of Common Stock with respect to which Awards may be granted during the term of the Plan
shall be 5 million shares. Shares of Common Stock will be made available from the authorized but
unissued shares of the Company or from shares reacquired by the Company, including shares purchased
in the open market. The shares of Common Stock subject to (a) any Award granted under the Plan
that shall expire, terminate or be annulled for any reason without

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having been exercised (or considered to have been exercised as provided in Section 7.2), (b)
any Award of any SARs granted under the Plan that shall be exercised for cash, and (c) any Award of
Restricted Shares or Stock Units that shall be forfeited prior to becoming vested (provided that
the Holder received no benefits of ownership of such Restricted Shares or Stock Units other than
voting rights and the accumulation of Retained Distributions and unpaid Dividend Equivalents that
are likewise forfeited) shall again be available for purposes of the Plan.

     4.2 Adjustments. If the Company subdivides its outstanding shares of any series of Common
Stock into a greater number of shares of such series of Common Stock (by stock dividend, stock
split, reclassification, or otherwise) or combines its outstanding shares of any series of Common
Stock into a smaller number of shares of such series of Common Stock (by reverse stock split,
reclassification, or otherwise) or if the Board determines that any stock dividend, extraordinary
cash dividend, reclassification, recapitalization, reorganization, split-up, spin-off, combination,
exchange of shares, warrants or rights offering to purchase such series of Common Stock or other
similar corporate event (including mergers or consolidations other than those which constitute
Approved Transactions, adjustments with respect to which shall be governed by Section 10.1(b))
affects any series of Common Stock so that an adjustment is required to preserve the benefits or
potential benefits intended to be made available under the Plan, then the Board, in such manner as
the Board, in its sole discretion, deems equitable and appropriate, shall make such adjustments to
any or all of (a) the number and kind of shares of stock which thereafter may be awarded, optioned,
or otherwise made subject to the benefits contemplated by the Plan, (b) the number and kind of
shares of stock subject to outstanding Awards, and (c) the purchase or exercise price and the
relevant appreciation base with respect to any of the foregoing, provided, however, that the number
of shares subject to any Award shall always be a whole number. Notwithstanding the foregoing, if
all shares of any series of Common Stock are redeemed, then each outstanding Award shall be
adjusted to substitute for the shares of such series of Common Stock subject thereto the kind and
amount of cash, securities or other assets issued or paid in the redemption of the equivalent
number of shares of such series of Common Stock and otherwise the terms of such Award, including,
in the case of Options or similar rights, the aggregate exercise price, and, in the case of Free
Standing SARs, the aggregate base price, shall remain constant before and after the substitution
(unless otherwise determined by the Board and provided in the applicable Agreement). The Board
may, if deemed appropriate, provide for a cash payment to any Holder of an Award in connection with
any adjustment made pursuant to this Section 4.2.

ARTICLE V

Eligibility

     5.1 General. The persons who shall be eligible to participate in the Plan and to receive
Awards under the Plan shall, subject to Section 5.2, be such persons who are Nonemployee Directors
as the Board shall select. Awards may be made to Nonemployee Directors who hold or have held
Awards under the Plan or any similar or other awards under any other plan of the Company or any of
its Affiliates.

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     5.2 Ineligibility. No person who is not a Nonemployee Director shall be eligible to receive
an Award.

ARTICLE VI

Stock Options

     6.1 Grant of Options. Subject to the limitations of the Plan, the Board shall designate from
time to time those eligible persons to be granted Options, the time when each Option shall be
granted to such eligible persons, the series and number of shares of Common Stock subject to such
Option, and, subject to Section 6.2, the purchase price of the shares of Common Stock subject to
such Option.

     6.2 Option Price. The price at which shares may be purchased upon exercise of an Option shall
be fixed by the Board and may be no less than the Fair Market Value of the shares of the applicable
series of Common Stock subject to the Option as of the date the Option is granted.

     6.3 Term of Options. Subject to the provisions of the Plan with respect to death, retirement
and termination of service, the term of each Option shall be for such period as the Board shall
determine as set forth in the applicable Agreement.

     6.4 Exercise of Options. An Option granted under the Plan shall become (and remain)
exercisable during the term of the Option to the extent provided in the applicable Agreement and
the Plan and, unless the Agreement otherwise provides, may be exercised to the extent exercisable,
in whole or in part, at any time and from time to time during such term; provided, however, that
subsequent to the grant of an Option, the Board, at any time before complete termination of such
Option, may accelerate the time or times at which such Option may be exercised in whole or in part
(without reducing the term of such Option).

     6.5 Manner of Exercise.

     (a) Form of Payment. An Option shall be exercised by written notice to the Company
upon such terms and conditions as the Agreement may provide and in accordance with such
other procedures for the exercise of Options as the Board may establish from time to time.
The method or methods of payment of the purchase price for the shares to be purchased upon
exercise of an Option and of any amounts required by Section 10.9 shall be determined by the
Board and may consist of (i) cash, (ii) check, (iii) whole shares of any series of Common
Stock, (iv) the withholding of shares of the applicable series of Common Stock issuable upon
such exercise of the Option, (v) the delivery, together with a properly executed exercise
notice, of irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds required to pay the purchase price, or (vi) any combination
of the foregoing methods of payment, or such other consideration and method of payment as
may be permitted for the issuance of shares under the Delaware General Corporation Law. The
permitted method or methods of payment of the amounts payable upon exercise of an Option, if
other than in

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cash, shall be set forth in the applicable Agreement and may be subject to such
conditions as the Board deems appropriate.

     (b) Value of Shares. Unless otherwise determined by the Board and provided in the
applicable Agreement, shares of any series of Common Stock delivered in payment of all or
any part of the amounts payable in connection with the exercise of an Option, and shares of
any series of Common Stock withheld for such payment, shall be valued for such purpose at
their Fair Market Value as of the exercise date.

     (c) Issuance of Shares. The Company shall effect the transfer of the shares of Common
Stock purchased under the Option as soon as practicable after the exercise thereof and
payment in full of the purchase price therefor and of any amounts required by Section 10.9,
and within a reasonable time thereafter, such transfer shall be evidenced on the books of
the Company. Unless otherwise determined by the Board and provided in the applicable
Agreement, (i) no Holder or other person exercising an Option shall have any of the rights
of a stockholder of the Company with respect to shares of Common Stock subject to an Option
granted under the Plan until due exercise and full payment has been made, and (ii) no
adjustment shall be made for cash dividends or other rights for which the record date is
prior to the date of such due exercise and full payment.

     6.6 Nontransferability. Unless otherwise determined by the Board and provided in the
applicable Agreement, Options shall not be transferable other than by will or the laws of descent
and distribution or pursuant to a Domestic Relations Order, and, except as otherwise required
pursuant to a Domestic Relations Order, Options may be exercised during the lifetime of the Holder
thereof only by such Holder (or his or her court-appointed legal representative).

ARTICLE VII

SARs

     7.1 Grant of SARs. Subject to the limitations of the Plan, SARs may be granted by the Board
to such eligible persons in such numbers, with respect to any specified series of Common Stock, and
at such times during the term of the Plan as the Board shall determine. A SAR may be granted to a
Holder of an Option (hereinafter called a “related Option”) with respect to all or a portion of the
shares of Common Stock subject to the related Option (a “Tandem SAR”) or may be granted separately
to an eligible Nonemployee Director (a “Free Standing SAR”). Subject to the limitations of the
Plan, SARs shall be exercisable in whole or in part upon notice to the Company upon such terms and
conditions as are provided in the Agreement.

     7.2 Tandem SARs. A Tandem SAR may be granted either concurrently with the grant of the
related Option or at any time thereafter prior to the complete exercise, termination, expiration or
cancellation of such related Option. Tandem SARs shall be exercisable only at the time and to the
extent that the related Option is exercisable (and may be subject to such additional limitations on
exercisability as the Agreement may provide) and in no event after the complete termination or full
exercise of the related Option. Upon the exercise or termination of the related Option, the Tandem
SARs with respect thereto shall be canceled automatically to the

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extent of the number of shares of Common Stock with respect to which the related Option was so
exercised or terminated. Subject to the limitations of the Plan, upon the exercise of a Tandem SAR
and unless otherwise determined by the Board and provided in the applicable Agreement, (a) the
Holder thereof shall be entitled to receive from the Company, for each share of the applicable
series of Common Stock with respect to which the Tandem SAR is being exercised, consideration (in
the form determined as provided in Section 7.4) equal in value to the excess of the Fair Market
Value of a share of the applicable series of Common Stock with respect to which the Tandem SAR was
granted on the date of exercise over the related Option purchase price per share, and (b) the
related Option with respect thereto shall be canceled automatically to the extent of the number of
shares of Common Stock with respect to which the Tandem SAR was so exercised.

     7.3 Free Standing SARs. Free Standing SARs shall be exercisable at the time, to the extent
and upon the terms and conditions set forth in the applicable Agreement. The base price of a Free
Standing SAR may be no less than the Fair Market Value of the applicable series of Common Stock
with respect to which the Free Standing SAR was granted as of the date the Free Standing SAR is
granted. Subject to the limitations of the Plan, upon the exercise of a Free Standing SAR and
unless otherwise determined by the Board and provided in the applicable Agreement, the Holder
thereof shall be entitled to receive from the Company, for each share of the applicable series of
Common Stock with respect to which the Free Standing SAR is being exercised, consideration (in the
form determined as provided in Section 7.4) equal in value to the excess of the Fair Market Value
of a share of the applicable series of Common Stock with respect to which the Free Standing SAR was
granted on the date of exercise over the base price per share of such Free Standing SAR.

     7.4 Consideration. The consideration to be received upon the exercise of a SAR by the Holder
shall be paid in the applicable series of Common Stock with respect to which the SAR was granted
(valued at Fair Market Value on the date of exercise of such SAR). No fractional shares of Common
Stock shall be issuable upon exercise of a SAR, and unless otherwise provided in the applicable
Agreement, the Holder will receive cash in lieu of fractional shares. Unless the Board shall
otherwise determine, to the extent a Free Standing SAR is exercisable, it will be exercised
automatically on its expiration date.

     7.5 Limitations. The applicable Agreement may provide for a limit on the amount payable to a
Holder upon exercise of SARs at any time or in the aggregate, for a limit on the time periods
during which a Holder may exercise SARs, and for such other limits on the rights of the Holder and
such other terms and conditions of the SAR, including a condition that the SAR may be exercised
only in accordance with rules and regulations adopted from time to time, as the Board may
determine. Unless otherwise so provided in the applicable Agreement, any such limit relating to a
Tandem SAR shall not restrict the exercisability of the related Option. Such rules and regulations
may govern the right to exercise SARs granted prior to the adoption or amendment of such rules and
regulations as well as SARs granted thereafter.

     7.6 Exercise. For purposes of this Article VII, the date of exercise of a SAR shall mean the
date on which the Company shall have received notice from the Holder of the SAR of

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the exercise of such SAR (unless otherwise determined by the Board and provided in the
applicable Agreement).

     7.7 Nontransferability. Unless otherwise determined by the Board and provided in the
applicable Agreement, (a) SARs shall not be transferable other than by will or the laws of descent
and distribution or pursuant to a Domestic Relations Order, and (b) except as otherwise required
pursuant to a Domestic Relations Order, SARs may be exercised during the lifetime of the Holder
thereof only by such Holder (or his or her court-appointed legal representative).

ARTICLE VIII

Restricted Shares

     8.1 Grant. Subject to the limitations of the Plan, the Board shall designate those eligible
persons to be granted Awards of Restricted Shares, shall determine the time when each such Award
shall be granted, shall determine whether shares of Common Stock covered by Awards of Restricted
Shares will be issued at the beginning or the end of the Restriction Period and whether Dividend
Equivalents will be paid during the Restriction Period in the event shares of the applicable series
of Common Stock are to be issued at the end of the Restriction Period, and shall designate (or set
forth the basis for determining) the Vesting Date or Vesting Dates for each Award of Restricted
Shares, and may prescribe other restrictions, terms and conditions applicable to the vesting of
such Restricted Shares in addition to those provided in the Plan. The Board shall determine the
price, if any, to be paid by the Holder for the Restricted Shares; provided, however, that the
issuance of Restricted Shares shall be made for at least the minimum consideration necessary to
permit such Restricted Shares to be deemed fully paid and nonassessable. All determinations made
by the Board pursuant to this Section 8.1 shall be specified in the Agreement.

     8.2 Issuance of Restricted Shares at Beginning of the Restriction Period. If shares of the
applicable series of Common Stock are issued at the beginning of the Restriction Period, the stock
certificate or certificates representing such Restricted Shares shall be registered in the name of
the Holder to whom such Restricted Shares shall have been awarded. During the Restriction Period,
certificates representing the Restricted Shares and any securities constituting Retained
Distributions shall bear a restrictive legend to the effect that ownership of the Restricted Shares
(and such Retained Distributions), and the enjoyment of all rights appurtenant thereto, are subject
to the restrictions, terms and conditions provided in the Plan and the applicable Agreement. Such
certificates shall remain in the custody of the Company or its designee, and the Holder shall
deposit with the custodian stock powers or other instruments of assignment, each endorsed in blank,
so as to permit retransfer to the Company of all or any portion of the Restricted Shares and any
securities constituting Retained Distributions that shall be forfeited or otherwise not become
vested in accordance with the Plan and the applicable Agreement.

     8.3 Restrictions. Restricted Shares issued at the beginning of the Restriction Period shall
constitute issued and outstanding shares of the applicable series of Common Stock for all corporate
purposes. The Holder will have the right to vote such Restricted Shares, to receive and

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retain such dividends and distributions, as the Board may designate, paid or distributed on
such Restricted Shares, and to exercise all other rights, powers and privileges of a Holder of
shares of the applicable series of Common Stock with respect to such Restricted Shares; except,
that, unless otherwise determined by the Board and provided in the applicable Agreement, (a) the
Holder will not be entitled to delivery of the stock certificate or certificates representing such
Restricted Shares until the Restriction Period shall have expired and unless all other vesting
requirements with respect thereto shall have been fulfilled or waived; (b) the Company or its
designee will retain custody of the stock certificate or certificates representing the Restricted
Shares during the Restriction Period as provided in Section 8.2; (c) other than such dividends and
distributions as the Board may designate, the Company or its designee will retain custody of all
distributions (“Retained Distributions”) made or declared with respect to the Restricted Shares
(and such Retained Distributions will be subject to the same restrictions, terms and vesting, and
other conditions as are applicable to the Restricted Shares) until such time, if ever, as the
Restricted Shares with respect to which such Retained Distributions shall have been made, paid or
declared shall have become vested, and such Retained Distributions shall not bear interest or be
segregated in a separate account; (d) the Holder may not sell, assign, transfer, pledge, exchange,
encumber or dispose of the Restricted Shares or any Retained Distributions or his interest in any
of them during the Restriction Period; and (e) a breach of any restrictions, terms or conditions
provided in the Plan or established by the Board with respect to any Restricted Shares or Retained
Distributions will cause a forfeiture of such Restricted Shares and any Retained Distributions with
respect thereto.

     8.4 Issuance of Stock at End of the Restriction Period. Restricted Shares issued at the end
of the Restriction Period shall not constitute issued and outstanding shares of the applicable
series of Common Stock, and the Holder shall not have any of the rights of a stockholder with
respect to the shares of Common Stock covered by such an Award of Restricted Shares, in each case
until such shares shall have been transferred to the Holder at the end of the Restriction Period.
If and to the extent that shares of Common Stock are to be issued at the end of the Restriction
Period, the Holder shall be entitled to receive Dividend Equivalents with respect to the shares of
Common Stock covered thereby either (a) during the Restriction Period or (b) in accordance with the
rules applicable to Retained Distributions, as the Board may specify in the Agreement.

     8.5 Cash Payments. In connection with any Award of Restricted Shares, an Agreement may
provide for the payment of a cash amount to the Holder of such Restricted Shares after such
Restricted Shares shall have become vested. Such cash amounts shall be payable in accordance with
such additional restrictions, terms and conditions as shall be prescribed by the Board in the
Agreement and shall be in addition to any other compensation payments which such Holder shall be
otherwise entitled or eligible to receive from the Company.

     8.6 Completion of Restriction Period. On the Vesting Date with respect to each Award of
Restricted Shares and the satisfaction of any other applicable restrictions, terms and conditions,
(a) all or the applicable portion of such Restricted Shares shall become vested, (b) any Retained
Distributions and any unpaid Dividend Equivalents with respect to such Restricted Shares shall
become vested to the extent that the Restricted Shares related thereto shall have become vested,
and (c) any cash amount to be received by the Holder with respect to such

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Restricted Shares shall become payable, all in accordance with the terms of the applicable
Agreement. Any such Restricted Shares, Retained Distributions and any unpaid Dividend Equivalents
that shall not become vested shall be forfeited to the Company, and the Holder shall not thereafter
have any rights (including dividend and voting rights) with respect to such Restricted Shares,
Retained Distributions and any unpaid Dividend Equivalents that shall have been so forfeited. The
Board may, in its discretion, provide that the delivery of any Restricted Shares, Retained
Distributions and unpaid Dividend Equivalents that shall have become vested, and payment of any
cash amounts that shall have become payable, shall be deferred until such date or dates as the
recipient may elect. Any election of a recipient pursuant to the preceding sentence shall be filed
in writing with the Board in accordance with such rules and regulations, including any deadline for
the making of such an election, as the Board may provide, and shall be made in compliance with
Section 409A of the Code.

ARTICLE IX

Stock Units

     9.1 Grant. In addition to granting Awards of Options, SARs and Restricted Shares, the Board
shall, subject to the limitations of the Plan, have authority to grant to eligible persons Awards
of Stock Units which may be in the form of shares of any specified series of Common Stock or units,
the value of which is based, in whole or in part, on the Fair Market Value of the shares of any
specified series of Common Stock. Subject to the provisions of the Plan, including any rules
established pursuant to Section 9.2, Awards of Stock Units shall be subject to such terms,
restrictions, conditions, vesting requirements and payment rules as the Board may determine in its
discretion, which need not be identical for each Award. The determinations made by the Board
pursuant to this Section 9.1 shall be specified in the applicable Agreement.

     9.2 Rules. The Board may, in its discretion, establish any or all of the following rules for
application to an Award of Stock Units:

     (a) Any shares of Common Stock which are part of an Award of Stock Units may not be
assigned, sold, transferred, pledged or otherwise encumbered prior to the date on which the
shares are issued or, if later, the date provided by the Board at the time of the Award.

     (b) Such Awards may provide for the payment of cash consideration by the person to whom
such Award is granted or provide that the Award, and any shares of Common Stock to be issued
in connection therewith, if applicable, shall be delivered without the payment of cash
consideration; provided, however, that the issuance of any shares of Common Stock in
connection with an Award of Stock Units shall be for at least the minimum consideration
necessary to permit such shares to be deemed fully paid and nonassessable.

     (c) Awards of Stock Units may relate in whole or in part to performance or other
criteria established by the Board at the time of grant.

-12-

 

     (d) Awards of Stock Units may provide for deferred payment schedules, vesting over a
specified period of service, the payment (on a current or deferred basis) of dividend
equivalent amounts with respect to the number of shares of Common Stock covered by the
Award, and elections by the Holder to defer payment of the Award or the lifting of
restrictions on the Award, if any, provided that any such deferrals shall comply with the
requirements of Section 409A of the Code.

     (e) In such circumstances as the Board may deem advisable, the Board may waive or
otherwise remove, in whole or in part, any restrictions or limitations to which a Stock Unit
Award was made subject at the time of grant.

ARTICLE X

General Provisions

     10.1 Acceleration of Awards.

     (a) Death or Disability. If a Holder’s service shall terminate by reason of death or
Disability, notwithstanding any contrary waiting period, installment period, vesting
schedule or Restriction Period in any Agreement or in the Plan, unless the applicable
Agreement provides otherwise: (i) in the case of an Option or SAR, each outstanding Option
or SAR granted under the Plan shall immediately become exercisable in full in respect of the
aggregate number of shares covered thereby; (ii) in the case of Restricted Shares, the
Restriction Period applicable to each such Award of Restricted Shares shall be deemed to
have expired and all such Restricted Shares, any related Retained Distributions and any
unpaid Dividend Equivalents shall become vested and any related cash amounts payable
pursuant to the applicable Agreement shall be adjusted in such manner as may be provided in
the Agreement; and (iii) in the case of Stock Units, each such Award of Stock Units shall
become vested in full.

     (b) Approved Transactions; Board Change; Control Purchase. In the event of any
Approved Transaction, Board Change or Control Purchase, notwithstanding any contrary waiting
period, installment period, vesting schedule or Restriction Period in any Agreement or in
the Plan, unless the applicable Agreement provides otherwise: (i) in the case of an Option
or SAR, each such outstanding Option or SAR granted under the Plan shall become exercisable
in full in respect of the aggregate number of shares covered thereby; (ii) in the case of
Restricted Shares, the Restriction Period applicable to each such Award of Restricted Shares
shall be deemed to have expired and all such Restricted Shares, any related Retained
Distributions and any unpaid Dividend Equivalents shall become vested and any related cash
amounts payable pursuant to the applicable Agreement shall be adjusted in such manner as may
be provided in the Agreement; and (iii) in the case of Stock Units, each such Award of Stock
Units shall become vested in full, in each case effective upon the Board Change or Control
Purchase or immediately prior to consummation of the Approved Transaction. Notwithstanding
the foregoing, unless otherwise provided in the applicable Agreement, the Board may, in its
discretion, determine that any or all outstanding Awards of any or all types granted
pursuant to the

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Plan will not vest or become exercisable on an accelerated basis in connection with an
Approved Transaction if effective provision has been made for the taking of such action
which, in the opinion of the Board, is equitable and appropriate to substitute a new Award
for such Award or to assume such Award and to make such new or assumed Award, as nearly as
may be practicable, equivalent to the old Award (before giving effect to any acceleration of
the vesting or exercisability thereof), taking into account, to the extent applicable, the
kind and amount of securities, cash or other assets into or for which the applicable series
of Common Stock may be changed, converted or exchanged in connection with the Approved
Transaction.

     10.2 Termination of Service.

     (a) General. If a Holder’s service shall terminate prior to an Option or SAR becoming
exercisable or being exercised (or deemed exercised, as provided in Section 7.2) in full, or
during the Restriction Period with respect to any Restricted Shares or prior to the vesting
or complete exercise of any Stock Units, then such Option or SAR shall thereafter become or
be exercisable, such Stock Units to the extent vested shall thereafter be exercisable, and
the Holder’s rights to any unvested Restricted Shares, Retained Distributions, unpaid
Dividend Equivalents and related cash amounts, and any such unvested Stock Units shall
thereafter vest, in each case solely to the extent provided in the applicable Agreement;
provided, however, that, unless otherwise determined by the Board and provided in the
applicable Agreement, (i) no Option or SAR may be exercised after the scheduled expiration
date thereof; (ii) if the Holder’s service terminates by reason of death or Disability, the
Option or SAR shall remain exercisable for a period of at least one year following such
termination (but not later than the scheduled expiration of such Option or SAR); and (iii)
any termination of the Holder‘s service for cause will be treated in accordance with the
provisions of Section 10.2(b).

     (b) Termination for Cause. If a Holder’s service on the Board shall be terminated by
the Company for “cause” during the Restriction Period with respect to any Restricted Shares,
or prior to any Option or SAR becoming exercisable or being exercised in full or prior to
the vesting or complete exercise of any Stock Unit (for these purposes, “cause” shall
include dishonesty, incompetence, moral turpitude, other misconduct of any kind and the
refusal to perform his duties and responsibilities for any reason other than illness or
incapacity; provided, however, that if such termination occurs within 12 months after an
Approved Transaction or Control Purchase or Board Change, termination for “cause” shall mean
only a felony conviction for fraud, misappropriation or embezzlement), then, unless
otherwise determined by the Board and provided in the applicable Agreement, (i) all Options
and SARs and all unvested or unexercised Stock Units held by such Holder shall immediately
terminate, and (ii) such Holder’s rights to all Restricted Shares, Retained Distributions,
any unpaid Dividend Equivalents and any related cash amounts shall be forfeited immediately.

     10.3 Nonalienation of Benefits. Except as set forth herein, no right or benefit under the
Plan shall be subject to anticipation, alienation, sale, assignment, hypothecation, pledge,
exchange, transfer, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign,

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hypothecate, pledge, exchange, transfer, encumber or charge the same shall be void. No right
or benefit hereunder shall in any manner be liable for or subject to the debts, contracts,
liabilities or torts of the person entitled to such benefits.

     10.4 Written Agreement. Each Award of Options shall be evidenced by a stock option agreement;
each Award of SARs shall be evidenced by a stock appreciation rights agreement; each Award of
Restricted Shares shall be evidenced by a restricted shares agreement; and each Award of Stock
Units shall be evidenced by a stock units agreement, each in such form and containing such terms
and provisions not inconsistent with the provisions of the Plan as the Board from time to time
shall approve; provided, however, that if more than one type of Award is made to the same Holder,
such Awards may be evidenced by a single Agreement with such Holder. Each grantee of an Option,
SAR, Restricted Shares or Stock Units shall be notified promptly of such grant, and a written
Agreement shall be promptly executed and delivered by the Company. Any such Agreement may be
supplemented or amended from time to time as approved by the Board as contemplated by Section
10.6(b).

     10.5 Designation of Beneficiaries. Each person who shall be granted an Award under the Plan
may designate a beneficiary or beneficiaries and may change such designation from time to time by
filing a written designation of beneficiary or beneficiaries with the Board on a form to be
prescribed by it, provided that no such designation shall be effective unless so filed prior to the
death of such person.

     10.6 Termination and Amendment.

     (a) General. Unless the Plan shall theretofore have been terminated as hereinafter
provided, no Awards may be made under the Plan on or after the tenth anniversary of the
Effective Date. The Plan may be terminated at any time prior to the tenth anniversary of
the Effective Date and may, from time to time, be suspended or discontinued or modified or
amended if such action is deemed advisable by the Board.

     (b) Modification. No termination, modification or amendment of the Plan may, without
the consent of the person to whom any Award shall theretofore have been granted, adversely
affect the rights of such person with respect to such Award, except as otherwise permitted
by Section 10.17. No modification, extension, renewal or other change in any Award granted
under the Plan shall be made after the grant of such Award, unless the same is consistent
with the provisions of the Plan. With the consent of the Holder, or as otherwise permitted
under Section 10.17, and subject to the terms and conditions of the Plan (including Section
10.6(a)), the Board may amend outstanding Agreements with any Holder, including any
amendment which would (i) accelerate the time or times at which the Award may be exercised
and/or (ii) extend the scheduled expiration date of the Award. Without limiting the
generality of the foregoing, the Board may, but solely with the Holder’s consent unless
otherwise provided in the Agreement, agree to cancel any Award under the Plan and grant a
new Award in substitution therefor, provided that the Award so substituted shall satisfy all
of the requirements of the Plan as of the date such new Award is made. Nothing contained in
the foregoing provisions of this Section 10.6(b) shall be construed to prevent the Board
from providing in any

-15-

 

Agreement that the rights of the Holder with respect to the Award evidenced thereby
shall be subject to such rules and regulations as the Board may, subject to the express
provisions of the Plan, adopt from time to time or impair the enforceability of any such
provision.

     10.7 Government and Other Regulations. The obligation of the Company with respect to Awards
shall be subject to all applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including the effectiveness of any registration statement
required under the Securities Act of 1933, and the rules and regulations of any securities exchange
or association on which the Common Stock may be listed or quoted. For so long as any series of
Common Stock are registered under the Exchange Act, the Company shall use its reasonable efforts to
comply with any legal requirements (a) to maintain a registration statement in effect under the
Securities Act of 1933 with respect to all shares of the applicable series of Common Stock that may
be issued to Holders under the Plan and (b) to file in a timely manner all reports required to be
filed by it under the Exchange Act.

     10.8 Withholding. The Company’s obligation to deliver shares of Common Stock or pay cash in
respect of any Award under the Plan shall be subject to applicable federal, state and local tax
withholding requirements. Federal, state and local withholding tax due at the time of an Award,
upon the exercise of any Option or SAR or upon the vesting of, or expiration of restrictions with
respect to, Restricted Shares or Stock Units, as appropriate, may, in the discretion of the Board,
be paid in shares of the applicable series of Common Stock already owned by the Holder or through
the withholding of shares otherwise issuable to such Holder, upon such terms and conditions
(including the conditions referenced in Section 6.5) as the Board shall determine. If the Holder
shall fail to pay, or make arrangements satisfactory to the Board for the payment to the Company
of, all such federal, state and local taxes required to be withheld by the Company, then the
Company shall, to the extent permitted by law, have the right to deduct from any payment of any
kind otherwise due to such Holder an amount equal to any federal, state or local taxes of any kind
required to be withheld by the Company with respect to such Award.

     10.9 Nonexclusivity of the Plan. The adoption of the Plan by the Board shall not be construed
as creating any limitations on the power of the Board to adopt such other incentive arrangements as
it may deem desirable, including the granting of stock options and the awarding of stock and cash
otherwise than under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.

     10.10 Exclusion from Other Plans. By acceptance of an Award, unless otherwise provided in the
applicable Agreement, each Holder shall be deemed to have agreed that such Award is special
incentive compensation that will not be taken into account, in any manner, as compensation or bonus
in determining the amount of any payment under any pension, retirement or other benefit plan,
program or policy of the Company or any Subsidiary of the Company. In addition, each beneficiary
of a deceased Holder shall be deemed to have agreed that such Award will not affect the amount of
any life insurance coverage, if any, provided by the Company on the life of the Holder which is
payable to such beneficiary under any life insurance plan of the Company or any Subsidiary of the
Company.

-16-

 

     10.11 Unfunded Plan. Neither the Company nor any Subsidiary of the Company shall be required
to segregate any cash or any shares of Common Stock which may at any time be represented by Awards,
and the Plan shall constitute an “unfunded” plan of the Company. Except as provided in Article
VIII with respect to Awards of Restricted Shares and except as expressly set forth in an Agreement,
no Holder shall have voting or other rights with respect to the shares of Common Stock covered by
an Award prior to the delivery of such shares. Neither the Company nor any Subsidiary of the
Company shall, by any provisions of the Plan, be deemed to be a trustee of any shares of Common
Stock or any other property, and the liabilities of the Company to any Holder pursuant to the Plan
shall be those of a debtor pursuant to such contract obligations as are created by or pursuant to
the Plan, and the rights of any Holder under the Plan shall be limited to those of a general
creditor of the Company. In its sole discretion, the Board may authorize the creation of trusts or
other arrangements to meet the obligations of the Company under the Plan, provided, however, that
the existence of such trusts or other arrangements is consistent with the unfunded status of the
Plan.

     10.12 Governing Law. The Plan shall be governed by, and construed in accordance with, the
laws of the State of Delaware.

     10.13 Accounts. The delivery of any shares of Common Stock and the payment of any amount in
respect of an Award shall be for the account of the Company or the applicable Subsidiary of the
Company, as the case may be, and any such delivery or payment shall not be made until the recipient
shall have paid or made satisfactory arrangements for the payment of any applicable withholding
taxes as provided in Section 10.8.

     10.14 Legends. Each certificate evidencing shares of Common Stock subject to an Award shall
bear such legends as the Board deems necessary or appropriate to reflect or refer to any terms,
conditions or restrictions of the Award applicable to such shares, including any to the effect that
the shares represented thereby may not be disposed of unless the Company has received an opinion of
counsel, acceptable to the Company, that such disposition will not violate any federal or state
securities laws.

     10.15 Company’s Rights. The grant of Awards pursuant to the Plan shall not affect in any way
the right or power of the Company to make reclassifications, reorganizations or other changes of or
to its capital or business structure or to merge, consolidate, liquidate, sell or otherwise dispose
of all or any part of its business or assets.

     10.16 Interpretation. The words “include,” “includes,” “included” and “including” to the
extent used in the Plan shall be deemed in each case to be followed by the words “without
limitation.”

     10.17 Section 409A. Notwithstanding anything in this Plan to the contrary, if any Plan
provision or Award under the Plan would result in the imposition of an additional tax under Code
Section 409A and related regulations and United States Department of the Treasury pronouncements
(“Section 409A”), that Plan provision or Award will be reformed to avoid imposition of the
applicable tax and no action taken to comply with Section 409A shall be
deemed to adversely affect the Holder’s rights to an Award or require the consent of the Holder.

-17-exv10w3

 

Exhibit 10.3

DISCOVERY HOLDING COMPANY

TRANSITIONAL STOCK ADJUSTMENT PLAN

(As Amended and Restated Effective August 15, 2007)

ARTICLE I

Purpose and Amendment of Plan

     1.1 Purpose. The purpose of the Plan is to provide for the supplemental grant of both stock
options to purchase the common stock of Discovery Holding Company (the “Company”) and of restricted
shares of the Company’s common stock to holders of certain outstanding options, stock appreciation
rights and restricted shares issued under certain stock-based plans administered by Liberty Media
Corporation (“LMC”) in connection with adjustments made to outstanding LMC stock incentive awards
and restricted shares of LMC common stock as a result of the spin off of the Company from LMC.

     1.2 Amendment and Restatement of Plan. The Plan is hereby amended and restated as of August
15, 2007 by the Board of the Company to make certain clarifying changes to Section 9.3 hereof.

ARTICLE II

Definitions

     2.1 Definitions. For purposes of the Plan, the following terms shall have the meanings below
stated.

          “Approved Transaction” means any transaction in which the Board (or, if approval of the Board
is not required as a matter of law, the stockholders of the Company) shall approve (i) any
consolidation or merger of the Company, or binding share exchange, pursuant to which shares of
Common Stock of the Company would be changed or converted into or exchanged for cash, securities,
or other property, other than any such transaction in which the common stockholders of the Company
immediately prior to such transaction have the same proportionate ownership of the Common Stock of,
and voting power with respect to, the surviving corporation immediately after such transaction,
(ii) any merger, consolidation or binding share exchange to which the Company is a party as a
result of which the Persons who are common stockholders of the Company immediately prior thereto
have less than a majority of the combined voting power of the outstanding capital stock of the
Company ordinarily (and apart from the rights accruing under special circumstances) having the
right to vote in the election of directors immediately following such merger, consolidation or
binding share exchange, (iii) the adoption of any plan or proposal for the liquidation or
dissolution of the Company, or (iv) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets of the Company.

 

 

          “Board” means the Board of Directors of the Company.

          “Board Change” means, during any period of two consecutive years, individuals who at the
beginning of such period constituted the entire Board cease for any reason to constitute a majority
thereof unless the election, or the nomination for election, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were directors at the
beginning of the period.

          “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor
statute or statutes thereto. Reference to any specific Code section shall include any successor
section.

          “Committee” means the committee of the Board appointed to administer this Plan pursuant to
Article VII.

          “Common Stock” each or any (as the context may require) series of the Company’s common stock.

          “Company” means Discovery Holding Company, a Delaware corporation, and any successor thereto.

          “Control Purchase” means any transaction (or series of related transactions) in which (1) any
person (as such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation
or other entity (other than the Company, any Subsidiary of the Company or any employee benefit plan
sponsored by the Company or any Subsidiary of the Company) shall purchase any Common Stock of the
Company (or securities convertible into Common Stock of the Company) for cash, securities or any
other consideration pursuant to a tender offer or exchange offer, without the prior consent of the
Board, or (2) any person (as such term is so defined), corporation or other entity (other than the
Company, any Subsidiary of the Company, any employee benefit plan sponsored by the Company or any
Subsidiary of the Company or any Exempt Person (as defined below)) shall become the “beneficial
owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power of the then
outstanding securities of the Company ordinarily (and apart from the rights accruing under special
circumstances) having the right to vote in the election of directors (calculated as provided in
Rule 13d-3(d) under the Exchange Act in the case of rights to acquire the Company’s securities),
other than in a transaction (or series of related transactions) approved by the Board. For
purposes of this definition, “Exempt Person” means each of (a) the Chairman of the Board, the
President and each of the directors of the Company as of the Distribution Date, and (b) the
respective family members, estates and heirs of each of the persons referred to in clause (a) above
and any trust or other investment vehicle for the primary benefit of any of such persons or their
respective family members or heirs. As used with respect to any person, the term “family member”
means the spouse, siblings and lineal descendants of such person.

          “Distribution” means the distribution by LMC to the holders of LMC Common Stock of all of the
issued and outstanding shares of Common Stock.

-2-

 

          “Distribution Date” means the date on which the Distribution occurs.

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

          “Fair Market Value” of a share of any series of Common Stock on any day means the last sale
price (or, if no last sale price is reported, the average of the high bid and low asked prices) for
a share of such series of Common Stock on such day (or, if such day is not a trading day, on the
next preceding trading day) as reported on the consolidated transaction reporting system for the
principal national securities exchange on which shares of such series of Common Stock are listed on
such day or if such shares are not then listed on a national securities exchange, then as reported
on Nasdaq. If for any day the Fair Market Value of a share of the applicable series of Common
Stock is not determinable by any of the foregoing means, then the Fair Market Value for such day
shall be determined in good faith by the Committee on the basis of such quotations and other
considerations as the Committee deems appropriate.

          “Incentive Plan” means the Liberty Media Corporation 2000 Incentive Plan (As Amended and
Restated Effective April 19, 2004 ) and any other stock option or incentive plan assumed by LMC
pursuant to which any Participant holds an outstanding LMC Award as of the Record Date. Depending
on the context, “Incentive Plan” shall mean all of such plans or a particular one of such plans.

          “LMC” means Liberty Media Corporation, a Delaware corporation.

          “LMC Award” means (1) an unexercised and unexpired option to purchase LMC Common Stock, (2) an
LMC SAR or (3) an unvested award of restricted shares of LMC Common Stock.

          “LMC Committee” means the Incentive Plan Committee of the Board of Directors of LMC.

          “LMC Common Stock” means each or any (as the context may require) series of LMC’s common
stock.

          “LMC Corporate Holder” means an individual who, as of Record Date, is (1) an LMC employee, (2)
a member of the Board of Directors of LMC or (3) a holder of unvested restricted shares of LMC
Common Stock. The Committee may, in its discretion, determine that (i) an individual who does not
meet any of the foregoing criteria should be classified as an LMC Corporate Holder or (ii) an
individual who otherwise would qualify as an LMC Corporate Holder, should not be classified as
such.

          “LMC SAR” means a stock appreciation right with respect to any series of LMC Common Stock.

          “Nasdaq” means The NASDAQ Stock Market.

          “Option” means an option to purchase Common Stock, granted by the Company to a Participant
pursuant to Section 6.1 of the Plan.

-3-

 

          “Participant” means a person who is an LMC Corporate Holder and who, as of the Record Date,
holds an outstanding LMC Award.

          “Person” means an individual, corporation, limited liability company, partnership, trust,
incorporated or unincorporated association, joint venture or other entity of any kind.

          “Plan” means the Discovery Holding Company Transitional Stock Adjustment Plan, as set forth
herein and as from time to time amended.

          “Record Date” means 5:00 p.m., New York City time, on July 15, 2005.

          “Restricted Stock Award” means an award of restricted shares of Common Stock, granted by the
Company to a Participant pursuant to Section 5.1.

          “Stock Incentives” refers collectively to Restricted Stock Awards and Options.

          “Subsidiary” of a Person means any present or future subsidiary (as defined in Section 424(f)
of the Code) of such Person or any business entity in which such Person owns, directly or
indirectly, 50% or more of the voting, capital or profits interests. An entity shall be deemed a
subsidiary of a Person for purposes of this definition only for such periods as the requisite
ownership or control relationship is maintained.

ARTICLE III

Reservation of Shares

          The aggregate number of shares of Common Stock which may be issued under this Plan shall not
exceed 5,600,000 shares, subject to adjustment as hereinafter provided. Any part of such 5,600,000
shares may be issued pursuant to Restricted Stock Awards. The shares of Common Stock which may be
granted pursuant to Stock Incentives will consist of either authorized but unissued shares of
Common Stock or shares of Common Stock which have been issued and reacquired by the Company,
including shares purchased in the open market. The total number of shares authorized under this
Plan shall be subject to increase or decrease in order to give effect to the adjustment provision
of Section 9.3 and to give effect to any amendment adopted as provided in Section 8.1.

ARTICLE IV

Participation in Plan

     4.1 Eligibility to Receive Stock Incentives. Stock Incentives under this Plan may be granted
only to persons who are Participants.

     4.2 Participation Not Guarantee of Employment. Nothing in this Plan or in the instrument
evidencing the grant of a Stock Incentive shall in any manner be construed to limit in any way the
right of the Company, LMC or any of their respective Subsidiaries to terminate a

-4-

 

Participant’s employment at any time, without regard to the effect of such termination on any
rights such Participant would otherwise have under the Plan or any Incentive Plan, or give any
right to such a Participant to remain employed by the Company, LMC or any of their respective
Subsidiaries in any particular position or at any particular rate of compensation.

ARTICLE V

Stock Awards

     5.1 Grant of Restricted Stock Awards.

     (a) Grant. Restricted Stock Award(s) shall be granted to each Participant who, as of
the Record Date, holds an outstanding LMC Award(s) consisting of unvested restricted shares
of LMC Common Stock.

     (b) Award of Shares. Each Restricted Stock Award shall be for the same series of
Common Stock as the corresponding award of restricted shares of LMC Common Stock to which
such Restricted Stock Award relates. The number of shares of Common Stock covered by a
Restricted Stock Award shall be 0.10 shares of Common Stock for each share of LMC Common
Stock under the corresponding award of restricted shares of LMC Common Stock which such
Restricted Stock Award replaces; provided, however, no fractional shares of Common Stock
shall be awarded under a Restricted Stock Award, and, if the foregoing adjustment results in
any fractional shares, LMC will deliver cash in lieu of such fractional share interest to
the applicable Participant in the same manner as cash in lieu of fractional share interests
is paid to record holders of LMC Common Stock in the Distribution. Each Restricted Stock
Award and the restricted shares of Common Stock issued thereunder shall continue to be
subject to all the terms and conditions of the applicable Incentive Plan and associated
instrument under which the corresponding award of restricted shares of LMC Common Stock was
made and any such terms, conditions and restrictions as may be determined to be appropriate
by the Committee.

     (c) Lapse of Restrictions. The restrictions on each Restricted Stock Award shall lapse
in accordance with the terms and conditions of the applicable Incentive Plan and associated
instrument under which the corresponding award of restricted shares of LMC Common Stock was
made; provided, however, that a Participant’s employment or service with the Company, LMC or
any of their respective Subsidiaries shall be deemed to be employment or service with the
Company and LMC for all purposes under a Restricted Stock Award.

     (d) Award Documentation. Restricted Stock Awards shall be evidenced in such form as
the Committee shall approve and contain such terms and conditions as shall be contained
therein or incorporated by way of reference to the Incentive Plan or any associated
instrument governing the corresponding award of restricted shares of LMC Common Stock, which
need not be the same for all Restricted Stock Awards.

-5-

 

     (e) Rights with Respect to Shares. No Participant who is granted a Restricted Stock
Award shall have any rights as a stockholder by virtue of such grant until shares are
actually issued or delivered to the Participant.

ARTICLE VI

Options

     6.1 Grant of Options.

     (a) Grant. Option(s) shall be granted to each Participant who, as of the Record Date,
holds an outstanding LMC Award(s) consisting of an option to purchase shares of LMC Common
Stock or an LMC SAR. Except as otherwise provided in this Plan, each Option shall continue
to be subject to all the terms and conditions of the applicable Incentive Plan and
associated instrument under which the corresponding option to purchase LMC Common Stock or
LMC SAR (to the extent such terms and conditions would be applicable to the grant of an
Option) was made and any such terms, conditions and restrictions as may be determined to be
appropriate by the Committee.

     (b) Option Shares. Each Option shall be for the same series of Common Stock as the
corresponding option for LMC Common Stock or LMC SAR to which such Option relates. The
number of shares of Common Stock exercisable under an Option shall be the number of shares
of Common Stock that a Participant would have received in the Distribution if the applicable
option for LMC Common Stock had been exercised immediately prior to the Record Date or, in
the case of an LMC SAR, the same number of shares of Common Stock that would have been
received in the Distribution if the LMC SAR has been an option exercised immediately prior
to the Record Date for the number of shares of LMC Common Stock, subject to the LMC SAR;
provided, however, no fractional shares of Common Stock shall be awarded under an Option,
and, if the conversion of an option to purchase shares of LMC Common Stock or an LMC SAR
into an Option results in any fractional shares, the number of shares of Common Stock to be
exercisable under an Option shall be rounded up to the nearest whole number of shares.

     (c) Option Price. The purchase price per share of Common Stock under each Option shall
be established by the Committee. The Option price shall be subject to adjustment in
accordance with the provisions of Section 9.3 hereof.

     (d) Option Documentation. Options shall be evidenced in such form as the Committee
shall approve and contain such terms and conditions as shall be contained therein or
incorporated by way of reference to the Incentive Plan or any associated instrument
governing the corresponding option to purchase LMC Common Stock or LMC SAR (to the extent
such terms and conditions would be applicable to the grant of an Option), which need not be
the same for all Options.

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     6.2 Exercise and/or Termination of Options.

     (a) Terms of Option. Options granted under this Plan may be exercised at the same time
and in the same manner as the corresponding option to purchase LMC Common Stock or LMC SAR
(to the extent applicable to the grant of an Option). Options granted under this Plan shall
expire at the same time and in the same manner as the corresponding option to purchase LMC
Common Stock or LMC SAR (to the extent applicable to the grant of an Option), as provided in
the applicable Incentive Plan and any associated instrument governing such option to
purchase LMC Common Stock or LMC SAR; provided, however, that a Participant’s employment or
service with the Company, LMC or any of their respective Subsidiaries shall be deemed to be
employment or service with the Company and LMC for all purposes under an Option.

     (b) Payment on Exercise. No shares of Common Stock shall be issued on the exercise of
an Option unless paid for in full at the time of purchase. Payment for shares of Common
Stock purchased upon the exercise of an Option and any amounts required under Section 9.4
shall be determined by the Committee and may consist of (i) cash, (ii) check, (iii)
promissory note (subject to applicable law), (iv) whole shares of any series of Common
Stock, (v) the withholding of shares of the applicable series of Common Stock issuable upon
such exercise of the Option, (vi) the delivery, together with a properly executed exercise
notice, of irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds required to pay the purchase price, or (vii) any combination
of the foregoing methods of payment, or such other consideration and method of payment as
may be permitted for the issuance of shares under the Delaware General Corporation Law. The
permitted method or methods of payment of the amounts payable upon exercise of an Option, if
other than in cash, shall be set forth in the applicable Option agreement and may be subject
to such conditions as the Committee deems appropriate.

     (c) Value of Shares. Unless otherwise determined by the Committee and provided in the
applicable Option agreement, shares of any series of Common Stock delivered in payment of
all or any part of the amounts payable in connection with the exercise of an Option, and
shares of any series of Common Stock withheld for such payment, shall be valued for such
purpose at their Fair Market Value as of the exercise date.

     (d) Issuance of Shares. The Company shall effect the transfer of the shares of Common
Stock purchased under the Option as soon as practicable after the exercise thereof and
payment in full of the purchase price therefor and of any amounts required by Section 9.4,
and within a reasonable time thereafter, such transfer shall be evidenced on the books of
the Company. Unless otherwise determined by the Committee and provided in the applicable
Option agreement, (i) no Participant or other person exercising an Option shall have any of
the rights of a stockholder of the Company with respect to shares of Common Stock subject to
an Option granted under the Plan until due exercise and full payment has been made, and (ii)
no adjustment shall be made for cash dividends

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or other rights for which the record date is prior to the date of such due exercise and
full payment.

ARTICLE VII

Administration of Plan

     7.1 The Committee. This Plan shall be administered solely by the Compensation Committee of
the Board or such other committee of the Board as the Board shall designate to administer the Plan.
A majority of the Committee shall constitute a quorum thereof and the actions of a majority of the
Committee at a meeting at which a quorum is present, or actions unanimously approved in writing by
all members of the Committee, shall be the actions of the Committee. Vacancies occurring on the
Committee shall be filled by the Board. The Committee shall have full and final authority to
interpret this Plan and any instruments evidencing Stock Incentives granted hereunder, to
prescribe, amend and rescind rules and regulations, if any, relating to this Plan and to make all
determinations necessary or advisable for the administration of this Plan. The Committee’s
determination in all matters referred to herein shall be conclusive and binding for all purposes
and upon all persons including, but without limitation, the Company, LMC, the shareholders of the
Company, the shareholders of LMC, the Committee and each of the members thereof, and the
Participants, and their respective successors in interest. The Committee may delegate any of its
rights, powers and duties to any one or more of its members, or to any other person, by written
action as provided herein, acknowledged in writing by the delegate or delegates, except that the
Committee may not delegate to any person the authority to grant Stock Incentives to, or take other
action with respect to, Participants who are subject to Section 16 of the Exchange Act. Such
delegation may include, without limitation, the power to execute any documents on behalf of the
Committee.

     7.2 Liability of Committee. No member of the Committee shall be liable for any action or
determination made or taken by him or the Committee in good faith with respect to the Plan. The
Committee shall have the power to engage outside consultants, auditors or other professionals to
assist in the fulfillment of the Committee’s duties under this Plan at the Company’s expense.

     7.3 Determinations of the Committee. The Committee may, in its sole discretion, waive any
provisions of any Stock Incentive, provided such waiver is not inconsistent with the terms of the
applicable Incentive Plan, any associated instrument or this Plan as then in effect.

ARTICLE VIII

Amendment and Termination of Plan

     8.1 Amendment, Modification, Suspension or Termination. The Board may from time to time
amend, modify, suspend or terminate the Plan for the purpose of meeting or addressing any changes
in legal requirements or for any other purpose permitted by law except that (i) subject to Section
9.6, no amendment or alteration that would impair the rights of any Participant under any Stock
Incentive awarded to such Participant shall be made without such Participant’s

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consent and (ii) no amendment or alteration shall be effective prior to approval by the
Company’s shareholders to the extent such approval is then required pursuant to applicable legal
requirements or the applicable requirements of the securities exchange on which the Company’s
Common Stock is listed. With the consent of the Participant, or as otherwise permitted under
Section 9.6, and subject to the terms and conditions of the Plan, the Committee may amend
outstanding Stock Incentive agreements with any Participant, including any amendment which would
(i) accelerate the time or times at which the Stock Incentive may be exercised and/or (ii) extend
the scheduled expiration date of the Stock Incentive.

     8.2 Termination. The Board may at any time terminate this Plan as of any date specified in a
resolution adopted by the Board. If not earlier terminated, this Plan shall terminate on the last
date that any Option granted hereunder may be exercised or any restriction applicable to a
Restricted Stock Award granted hereunder has lapsed, whichever occurs later.

ARTICLE IX

Miscellaneous Provisions

     9.1 Exclusion from Pension and Profit-Sharing Computation. By acceptance of a Stock
Incentive, unless otherwise provided in the applicable Stock Incentive agreement, each Participant
shall be deemed to have agreed that such Stock Incentive is special incentive compensation that
will not be taken into account, in any manner, as salary, compensation or bonus in determining the
amount of any payment under any pension, retirement or other employee benefit plan, program or
policy of the Company or any Subsidiary of the Company. In addition, each beneficiary of a
deceased Participant shall be deemed to have agreed that such Stock Incentive will not affect the
amount of any life insurance coverage, if any, provided by the Company on the life of the
Participant which is payable to such beneficiary under any life insurance plan covering employees
of the Company or any Subsidiary of the Company.

     9.2 Government and Other Regulations. The obligation of the Company with respect to Stock
Incentives shall be subject to all applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including the effectiveness of any registration statement
required under the Securities Act of 1933, and the rules and regulations of any securities exchange
or association on which the Common Stock may be listed or quoted. For so long as any series of
Common Stock is registered under the Exchange Act, the Company shall use its reasonable efforts to
comply with any legal requirements (i) to maintain a registration statement in effect under the
Securities Act of 1933 with respect to all shares of the applicable series of Common Stock that may
be issued to Participants under the Plan and (ii) to file in a timely manner all reports required
to be filed by it under the Exchange Act.

     9.3 Adjustments.

     (a) If the Company subdivides its outstanding shares of any series of Common Stock into
a greater number of shares of such series of Common Stock (by stock dividend, stock split,
reclassification, or otherwise) or combines its outstanding shares of any series of Common
Stock into a smaller number of shares of such series of

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Common Stock (by reverse stock split, reclassification, or otherwise) or if the
Committee determines that any stock dividend, extraordinary cash dividend, reclassification,
recapitalization, reorganization, split-up, spin-off, combination, exchange of shares,
warrants or rights offering to purchase such series of Common Stock or other similar
corporate event (including mergers or consolidations other than those which constitute
Approved Transactions, adjustments with respect to which shall be governed by Section
9.3(b)) affects any series of Common Stock so that an adjustment is required to preserve the
benefits or potential benefits intended to be made available under the Plan, then the
Committee, in such manner as the Committee, in its sole discretion, deems equitable and
appropriate, shall make such adjustments to any or all of (i) the number and kind of shares
of stock subject to outstanding Stock Incentives, and (ii) the purchase or exercise price
with respect to any of the foregoing, provided, however, that the number of shares subject
to any Stock Incentive shall always be a whole number. Notwithstanding the foregoing, if
all shares of any series of Common Stock are redeemed, then each outstanding Stock Incentive
shall be adjusted to substitute for the shares of such series of Common Stock subject
thereto the kind and amount of cash, securities or other assets issued or paid in the
redemption of the equivalent number of shares of such series of Common Stock and otherwise
the terms of such Stock Incentive, including, in the case of Options or similar rights, the
aggregate exercise price, shall remain constant before and after the substitution (unless
otherwise determined by the Committee and provided in the applicable Stock Incentive
agreement). The Committee may, if deemed appropriate, provide for a cash payment of a Stock
Incentive to a Participant in connection with any adjustment made pursuant to this Section
9.3(a).

     (b) Approved Transactions; Board Change; Control Purchase. In the event of any
Approved Transaction, Board Change or Control Purchase, notwithstanding any contrary waiting
period, installment period, vesting schedule or restriction period in any Stock Incentive
agreement or in the Plan, unless the applicable Stock Incentive agreement provides
otherwise: (i) in the case of an Option, each such outstanding Option granted under the
Plan shall become exercisable in full in respect of the aggregate number of shares covered
thereby; and (ii) in the case of Common Stock awarded under a Restricted Stock Award, any
restriction period applicable to each such Common Stock shall be deemed to have expired and
all such Common Stock shall become vested. Notwithstanding the foregoing, unless otherwise
provided in the applicable Stock Incentive agreement, the Committee may, in its discretion,
determine that any or all outstanding Stock Incentives of any or all types granted pursuant
to the Plan will not vest or become exercisable on an accelerated basis in connection with
an Approved Transaction if effective provision has been made for the taking of such action
which, in the opinion of the Committee, is equitable and appropriate to substitute a new
Stock Incentive or to assume such Stock Incentive and to make such new or assumed Stock
Incentive, as nearly as may be practicable, equivalent to the old Stock Incentive (before
giving effect to any acceleration of the vesting or exercisability thereof), taking into
account, to the extent applicable, the kind and amount of securities, cash or other assets
into or for which the applicable series of Common Stock may be changed, converted or
exchanged in connection with the Approved Transaction.

-10-

 

     9.4 Withholding of Taxes. The Company’s obligation to deliver shares of Common Stock or pay
cash in respect of any Stock Incentives under the Plan shall be subject to applicable federal,
state and local tax withholding requirements. Federal, state and local withholding tax due upon
the exercise of any Option or upon the vesting of, or expiration of restrictions with respect to
Common Stock granted under Restricted Stock Awards, may, in the discretion of the Committee, be
paid in shares of the applicable series of Common Stock already owned by the Participant or through
the withholding of shares otherwise issuable to such Participant, upon such terms and conditions
(including the conditions referenced in Section 6.2) as the Committee shall determine. If the
Participant shall fail to pay, or make arrangements satisfactory to the Committee for the payment
of, all such federal, state and local taxes required to be withheld with respect to a Stock
Incentive, then the Company shall, to the extent permitted by law, have the right to deduct from
any payment of any kind otherwise due to such Participant an amount equal to any federal, state or
local taxes of any kind required to be withheld with respect to such Stock Incentive.

     9.5 Restrictions on Benefit. Notwithstanding any provision of this Plan to the contrary, the
provisions of any Incentive Plan concerning restrictions on benefits (in order to avoid excise
taxes on the Participant under Section 4999 of the Code or the disallowance of a deduction to the
Company pursuant to Section 280G of the Code) are specifically incorporated by this reference.

     9.6 Section 409A. Notwithstanding any provision in this Plan or the Incentive Plan to the
contrary, if any Plan or Incentive Plan provision or any Stock Incentive thereunder would result in
the imposition of an additional tax under Code Section 409A and related regulations and United
States Department of the Treasury pronouncements (“Section 409A”), that Plan or Incentive Plan
provision and/or that Stock Incentive will be reformed to avoid imposition of the applicable tax
and no action taken to comply with Section 409A shall be deemed to adversely affect the
Participant’s right to a Stock Incentive or require the consent of the Participant.

-11-

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