Document:

EXHIBIT
10.08

 

LEHMAN
BROTHERS HOLDINGS INC.

EMPLOYEE
INCENTIVE PLAN

As amended through February 19, 2003

 

SECTION 1 — PURPOSE

 

The purpose of the Lehman
Brothers Holdings Inc. Employee Incentive Plan (the “Plan”) is to strengthen
Lehman Brothers Holdings Inc. (the “Company”) by providing selected employees
of the Company with the opportunity to acquire a proprietary and vested
interest in the growth and performance of the Company, thus generating an
increased incentive to contribute to the Company’s future success and
prosperity, enhancing the value of the Company for the benefit of stockholders,
and enhancing the Company’s ability to attract and retain individuals of
exceptional talent.

 

The purposes of the Plan
are to be achieved through the grant of various types of stock-based awards.

 

SECTION 2 — DEFINITIONS

 

For purposes of the Plan,
the capitalized terms shall have the meanings ascribed to them in Exhibit A
hereof.

 

SECTION 3 — SHARES SUBJECT TO THE PLAN

 

(a)               Shares of Common
Stock which may be issued under the Plan may be either authorized and unissued
shares of Common Stock or authorized and issued shares of Common Stock held in
the Company’s treasury, or any combination thereof. Subject to adjustment as
provided in Section 14, the number of shares of Common Stock with respect
to which Awards (whether distributable in shares of Common Stock or in cash)
may be granted under the Plan shall be 246
million shares. The maximum number of shares of Common Stock available
for stock options, stock appreciation rights or Other Stock-based Awards that
may be granted to a Participant during a calendar year shall not exceed two million.

 

(b)              Notwithstanding the
last sentence of Section 3(a), to the extent that the number of shares of
Common Stock with respect to which Awards may be granted under the Plan to an
individual in any calendar year exceeds the number of shares of Common Stock
with respect to which Awards were granted under the Plan during that calendar
year, such excess shall be available for grant under the Plan in succeeding
calendar years.

 

(c)               In the event that
any other Award subject to repurchase or forfeiture rights is reacquired by the
Company or if any Award is canceled, terminates or expires unexercised (except
with respect to a stock option which terminates on the exercise of a stock
appreciation right) for any reason under the Plan, any Common Stock allocated
in connection with such Award shall thereafter again be available for grant
pursuant to the Plan.

 

SECTION 4 — ELIGIBILITY

 

Selected employees,
officers, directors and consultants to the Company and its Affiliates are
eligible to be Participants in the Plan.

 

SECTION 5 — ADMINISTRATION

 

The Plan shall be
administered by the Committee, which shall have the power to select those
Participants who shall receive Awards and to determine the terms of such
Awards. As to the selection of, and the terms of Awards granted the Committee
may delegate any or all of its responsibilities to officers or employees of the
Company.

 

The Committee’s authority
hereunder shall include, without limitation, the establishment of vesting
schedules or exercisability in installments with respect to Awards. The
Committee may, in its sole discretion, accelerate or waive vesting or exercise
periods or the lapse of restrictions on all or any portion of any Award, or
extend the exercisability (including to extend or provide for post-termination
exercisability) of stock options or stock

 

 

appreciation rights; provided that such exercisability shall not extend
past ten years from the date of grant of any incentive stock options.

 

Subject to the provisions
of the Plan, the Committee shall be authorized to interpret the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan, to
determine the terms and provisions of any agreements entered into hereunder,
and to make all other determinations necessary or advisable for the
administration of the Plan. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any Award in the
manner and to the extent it shall deem desirable to carry the Plan or any such
Award into effect. The determinations of the Committee in the administration of
the Plan, as described herein, shall be final and conclusive.

 

The validity, construction
and effect of the Plan and any rules and regulations relating to the Plan shall
be determined in accordance with the laws of the State of Delaware and
applicable Federal law.

 

SECTION 6 — STOCK OPTIONS

 

(a)               Any stock options
granted under the Plan shall be in such form as the Committee may from time to
time approve and shall be subject to the terms and conditions provided herein
and such additional terms and conditions not inconsistent with the terms of the
Plan as the Committee shall deem desirable.

 

(b)              Stock options may be
granted to any Participant. Each grant of stock options shall specify whether
the underlying options are intended to be incentive stock options or
non-incentive stock options. In the case of incentive stock options, the terms
and conditions of such grants shall be subject to and comply with such
requirements as may be prescribed by Section 422(b) of the Code, as from
time to time amended, and any implementing regulations, including, but not
limited to, the requirement that such stock options are exercisable during the
Participant’s lifetime only by such Participant. The Committee shall establish
the option price at the time each stock option is granted, which price shall
not be less than 100 percent of the Fair Market Value of the Common Stock on
the date of grant.

 

(c)               No stock options
may be exercisable later than ten years after their date of grant. The option
price of each share of Common Stock as to which a stock option is exercised
shall be paid in full at the time of such exercise or as otherwise permitted by
the Committee. Such payment may be made at the sole discretion of the
Committee, pursuant to and in accordance with criteria and guidelines
established by the Committee (which criteria and guidelines may be different for
executive officers and for other Participants), as the same may be modified
from time to time, (i) in cash (in any form of currency acceptable to the
Committee), (ii) by tender of shares of Common Stock already owned by the
Participant, valued at Fair Market Value as of the date of exercise, (iii) if
authorized by the Committee, by withholding pursuant to the election of the
Participant, which election is subject to the disapproval of the Committee,
from those shares that would otherwise be obtained upon exercise of the option
a number of shares having a Fair Market Value equal to the option price, (iv)
if authorized by the Committee, and in combination with services rendered by
the exercising Participant, by delivery of a properly executed exercise notice
together with irrevocable instructions to a securities broker (or, in the case
of pledges, lender) approved by the Company to, (a) sell shares of Common Stock
subject to the option and to deliver promptly to the Company a portion of the
proceeds of such sale transaction on behalf of the exercising Participant to
pay the option price, or (b) pledge shares of Common Stock subject to the
option to a margin account maintained with such broker or lender, as security
for a loan, and such broker or lender, pursuant to irrevocable instructions,
delivers to the Company the loan proceeds, at the time of exercise to pay the
option price, (v) by any combination of (i), (ii), (iii) or (iv) above or (vi)
by other means that the Committee deems appropriate.

 

(d)              A stock option
holder may, in the discretion of the Committee, have the right to surrender a
stock option or any portion thereof to the Company within 30 days following a
Change in Control and to receive from the Company in exchange therefor a cash
payment in an amount equal to (a) the number of unexercised shares of Common
Stock under the option which are being surrendered multiplied by (b) the excess
of (i) the greater of (A) the highest price per share of Common Stock paid in
connection with the Change in Control or (B) the highest Fair Market Value per
share of Common Stock in the 90-day period preceding such Change in Control,
over (ii) the purchase price of the option as set forth in the underlying
option agreement (the foregoing, a “Limited SAR”).

 

2

 

SECTION 7 — STOCK APPRECIATION RIGHTS

 

(a)               Stock appreciation
rights may be granted independent of any stock option or in conjunction with
all or any part of any stock option granted under the Plan, either at the same
time as the stock option is granted or at any later time during the term of the
option. Stock appreciation rights shall be subject to such terms and conditions
as determined by the Committee, not inconsistent with the provisions of the
Plan.

 

(b)              Upon exercise, a
stock appreciation right shall entitle the Participant to receive from the
Company an amount equal to the excess of the Fair Market Value of a share of
Common Stock on the date of exercise of the stock appreciation right over the
per share grant or option price, as applicable (or such lesser amount as the
Committee may determine at the time of grant), multiplied by the number of
shares of Common Stock with respect to which the stock appreciation right is
exercised. Upon the exercise of a stock appreciation right granted in
connection with a stock option, the stock option shall be canceled to the
extent of the number of shares as to which the stock appreciation right is
exercised, and upon the exercise of a stock option granted in connection with a
stock appreciation right or the surrender of such stock option, the stock
appreciation right shall be canceled to the extent of the number of shares as
to which the stock option is exercised or surrendered. The Committee shall
determine whether the stock appreciation right shall be settled in cash, Common
Stock or a combination of cash and Common Stock.

 

(c)               A holder of a stock
appreciation right may, in the discretion of the Committee, have the right to
surrender the stock appreciation right or any portion thereof to the Company
within 30 days following a Change in Control and to receive from the Company in
exchange therefor a cash payment in an amount equal to (a) the number of shares
of Common Stock under the stock appreciation right which are being exercised,
multiplied by (b) the excess of (i) the greater of (A) the highest price per
share of Common Stock paid in connection with the Change in Control or (B) the
highest Fair Market Value per share of Common Stock in the 90 day period
preceding such Change in Control, over (ii) the per share grant price of the
stock appreciation right as set forth in the underlying agreement.

 

SECTION 8 — OTHER STOCK-BASED AWARDS

 

(a)               Other Awards of
Common Stock and Awards that are valued in whole or in part by reference to, or
otherwise based on, the Fair Market Value of Common Stock (all such Awards
being referred to herein as “Other Stock-based Awards”), may be granted under
the Plan in the discretion of the Committee. Other Stock-based Awards shall be
in such form as the Committee shall determine, including without limitation,
(i) the right to purchase shares of Common Stock, (ii) shares of Common Stock
subject to restrictions on transfer until the completion of a specified period
of service, the occurrence of an event or the attainment of performance
objectives, each as specified by the Committee, and (iii) shares of Common
Stock issuable upon the completion of a specified period of service, the
occurrence of an event or the attainment of performance objectives, each as
specified by the Committee. Other Stock-based Awards may be granted alone or in
addition to any other Awards made under the Plan. All references in the
preceding sentence to “specified period of service,” in the case of Other
Stock-based Awards which (i) are not in lieu of cash compensation to employees
generally, (ii) are not paid to recruit a new employee in an amount of less
than 5% of the total awards available for grant under the Plan or (iii) are not
subject to the attainment of performance objectives, shall provide that
vesting, restrictions on transfer or some other comparable restriction which
incents continued performance of the recipient, will be for a period of not
less than three years (although vesting or lapsing may occur in tranches over
the three years), unless there is a Change in Control or the recipient retires,
becomes disabled or dies. Subject to the provisions of the Plan, the Committee
shall have sole and absolute discretion to determine to whom and when such
Other Stock-based Awards will be made, the number of shares of Common Stock to
be awarded under (or otherwise related to) such Other Stock-based Awards and
all other terms and conditions of such Awards. The Committee shall determine
whether Other Stock-based Awards shall be settled in cash, Common Stock or a
combination of cash and Common Stock.

 

(b)              With respect to any
restricted stock units granted under the Plan, the obligations of the Company
or any Subsidiary are limited solely to the delivery of shares of Common Stock
on the date when such shares of Common Stock are due to be delivered under each
Agreement, and in no event shall the Company or any Subsidiary become obligated
to pay cash in respect of such obligation (except that the Company or any
Subsidiary may pay to

 

3

 

Participants amounts in cash in respect of a restricted stock unit
equal to cash dividends paid to a holder of shares of Common Stock, for
fractional shares or for any amounts payable in cash upon the occurrence of a
Change in Control).

 

SECTION 9 — DIVIDENDS, EQUIVALENTS AND VOTING RIGHTS

 

Awards other than stock
options and stock appreciation rights may, at the discretion of the Committee,
provide the Participant with dividends or dividend equivalents and voting
rights prior to either vesting or earnout.

 

SECTION 10 — AWARD AGREEMENTS

 

Each Award under the Plan
shall be evidenced by an agreement setting forth the terms and conditions, not
inconsistent with the provisions of the Plan, as determined by the Committee,
which shall apply to such Award.

 

SECTION 11 — WITHHOLDING

 

The Company shall have
the right to deduct from all amounts paid to any Participant in cash (whether
under this Plan or otherwise) any taxes required by law to be withheld
therefrom. In the case of payments of Awards in the form of Common Stock, at
the Committee’s discretion, the Participant may be required to pay to the
Company the amount of any taxes required to be withheld with respect to such
Common Stock, or, in lieu thereof, the Company shall have the right to retain
the number of shares of Common Stock the Fair Market Value of which equals the
amount required to be withheld. Without limiting the foregoing, the Committee
may, in its discretion and subject to such conditions as it shall impose,
permit share withholding to be done at the Participant’s election.

 

SECTION 12 — NON-TRANSFERABILITY

 

No Award shall be
assignable or transferable, and no right or interest of any Participant in any
Award shall be subject to any lien, obligation or liability of the Participant,
except by will, the laws of descent and distribution, or as otherwise set forth
in the Award agreement.

 

SECTION 13 — NO RIGHT TO EMPLOYMENT OR CONTINUED
PARTICIPATION IN PLAN/NO RIGHTS AS STOCKHOLDERS

 

(a)               No person shall
have any claim or right to the grant of an Award, and the grant of an Award
shall not be construed as giving a Participant the right to be retained in the
employ of the Company or to be eligible for any subsequent Awards. Further, the
Company expressly reserves the right at any time to dismiss a Participant free
from any liability or any claim under the Plan, except as provided herein or in
any agreement entered into hereunder.

 

(b)              The grant of an
Award shall not be construed as giving a Participant the rights of a
stockholder of Common Stock unless and until shares of Common Stock have been
issued to Participants pursuant to Awards hereunder.

 

SECTION 14 — ADJUSTMENT OF AND CHANGES IN COMMON STOCK

 

In the event of any
change in the outstanding shares of Common Stock by reason of any Common Stock
dividend or split, recapitalization, merger, consolidation, spin-off,
combination or exchange of shares or other corporate exchange, or any
distribution to stockholders of Common Stock other than regular cash dividends,
the Committee shall make a substitution or adjustment to the number or kind of
shares of Common Stock or other securities issued or reserved for issuance
pursuant to the Plan, and to outstanding Awards, as well as the option price or
other affected terms of such Awards as in its judgment shall be necessary to
preserve the Participant’s rights substantially proportionate to the rights
existing prior to such event.

 

Unless otherwise provided
in an award agreement, after a merger of one or more corporations into the
Company or after a consolidation of the Company and one or more corporations (a
“Merger Event”) in which the Company shall be the surviving or resulting
corporation, an Award holder shall, where applicable, at the same cost, be
entitled upon the exercise of an Award, to receive (subject to any action
required by stockholders) such securities of the surviving or resulting
corporation as shall be equivalent to the shares underlying such Award as
nearly as practicable

 

4

 

to the nearest whole number and class of shares of stock or other
securities.

 

Unless otherwise provided
in an award agreement, if the Company enters into any agreement with respect to
any transaction which would, if consummated, result in a Merger Event in which
the Company will not be the surviving corporation, the Committee in its sole
discretion and without liability to any person shall determine what actions
shall be taken with respect to outstanding Awards, if any, including, without
limitation, the payment of a cash amount in exchange for the cancellation of an
Award or the requiring of the issuance of substitute Awards that will
substantially preserve the value, rights and benefits of any affected Awards
previously granted hereunder as of the date of the consummation of the Merger
Event.

 

SECTION 15 — AMENDMENT

 

The Committee or the
Board may amend, suspend or terminate the Plan or any portion hereof at any
time.

 

SECTION 16 — UNFUNDED STATUS OF PLAN

 

The Plan is intended to
constitute an “unfunded” plan for long-term incentive compensation. With
respect to any payments not yet made to a Participant, including any
Participant optionee, by the Company, nothing herein contained shall give any
Participant any rights that are greater than those of a general creditor of the
Company. In its sole discretion, the Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Common Stock or payments in lieu thereof or with respect to options,
stock appreciation rights and other Awards under the Plan; provided, however,
that the existence of such trusts or other arrangements is consistent with the
unfunded status of the Plan.

 

SECTION 17 — EFFECTIVE DATE

 

This Plan shall be effective
on April 5, 1995. No Awards may be granted under the Plan on or after April 30,
2006.

 

5

 

EXHIBIT
A

 

(a)               “Affiliate” shall
mean any entity designated by the Committee in which the Company pr an Affiliate
has an interest.

 

(b)              “Award” shall mean
any type of stock-based award granted pursuant to the Plan.

 

(c)               “Board” shall mean
the Board of Directors of the Company; provided, however, that any action taken
by a duly authorized committee of the Board within the scope of authority
delegated to such committee by the Board shall be considered an action of the
Board for purposes of this Plan.

 

(d)              “Change in Control”
shall mean the occurrence during the term of the Plan of:

 

a)         The
commencement (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934 (the “Exchange Act”)) of a tender offer for more than 20%
of the Company’s outstanding shares of capital stock having ordinary voting
power in the election of directors (the “Voting Securities”);

 

b)        An
acquisition (other than directly from the Company) of any voting securities of
the Company by any “Person” (as the term person is used for purposes of
Section 13(d) or 14(d) of the Exchange Act) immediately after which such
Person has “Beneficial Ownership” (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the combined voting power
of the Company’s then outstanding Voting Securities; provided, however, in
determining whether a Change in Control has occurred, Voting Securities which
are acquired in a “Non-Control Acquisition” (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A “Non-Control
Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a
trust forming a part thereof or a trustee thereof acting solely in its capacity
as trustee) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its voting equity securities
or equity interest is owned, directly or indirectly, by the Company (for
purposes of this definition, a “Subsidiary”), (ii) the Company or its
Subsidiaries, or (iii) any Person who files in connection with such acquisition
a Schedule 13D which expressly disclaims any intention to seek control of the
Company and does not expressly reserve the right to seek such control;
provided, however, that any amendment to such statement of intent which either
indicates an intention or reserves the right to seek control shall be deemed an
“acquisition” of the securities of the Company reported in such filing as
beneficially owned by such Person for purposes of this paragraph (b);

 

c)         The
individuals who, as of the effective date of the 1994 initial public trading in
Company shares, are members of the Board (the “Incumbent Board”), ceasing for
any reason to constitute at least a majority of the members of the Board;
provided, however, that if the election, or nomination for election by the
Company’s common stockholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall, for purposes
of this Plan, be considered as a member of the Incumbent Board; provided
further, however, that no individual shall be considered a member of the Incumbent
Board if such individual initially assumed office as a result of either an
actual or threatened “Election Contest” (as described in Rule 14a-11
promulgated under the Exchange Act or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board (a
“Proxy Contest”) including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or

 

d)              Approval
by stockholders of the Company of:

 

(i)              A
merger, consolidation or reorganization involving the Company, unless such
merger, consolidation or reorganization is a “Non-Control Transaction”; i.e.,
meets each of the requirements described in (A), (B) and (C) below:

 

(A)           the stockholders of the
Company, immediately before such merger, consolidation or reorganization, own,
directly or indirectly, immediately following such merger, consolidation or
reorganization, at least the Applicable
Minimum Percentage (as defined below)  of the combined
voting power of the outstanding voting securities of the corporation resulting
from such merger or consolidation or reorganization (the “Surviving

 

A-1

 

Corporation”) in
substantially the same proportion as their ownership of the Voting Securities immediately
before such merger, consolidation or reorganization;

 

(B)             the individuals who
were members of the Incumbent Board immediately prior to the execution of the
agreement providing for such merger, consolidation or reorganization constitute
at least the Applicable Minimum
Proportion (as defined below) of the members of the board of directors
of the Surviving Corporation immediately following the consummation of such
merger, consolidation or reorganization; and

 

(C)             no Person other than
the Company, any Subsidiary, any employee benefit plan (or any trust forming a
part thereof or a trustee thereof acting solely in its capacity as trustee)
maintained by the Company, the Surviving Corporation, or any Subsidiary, or any
Person who, immediately prior to such merger, consolidation or reorganization
had Beneficial Ownership of 20% or more of the then outstanding Voting
Securities has Beneficial Ownership of 20% or more of the combined voting power
of the Surviving Corporation’s then outstanding voting securities immediately
following the consummation of such merger, consolidation or reorganization;

 

(ii)           A
complete liquidation or dissolution of the Company; or

 

(iii)        An agreement for the sale or other disposition
of all or substantially all of the assets of the Company to any Person (other
than a transfer to a Subsidiary).

 

With respect to paragraph
(d)(i) above, “Applicable Minimum Percentage” means (1) eighty percent (80%)
with respect to Awards made prior to November 14, 2000, and (2) fifty percent
(50%) with respect to Awards made on or after November 14, 2000; and
“Applicable Minimum Proportion” means (1) two-thirds with respect to Awards
made prior to November 14, 2000, and (2) a majority with respect to Awards made
on or after November 14, 2000.

 

Notwithstanding the
foregoing, a Change in Control shall not be deemed to occur solely because any
Person (the “Subject Person”) acquired Beneficial Ownership of more than the
permitted amount of the outstanding Voting Securities as a result of the
acquisition of Voting Securities by the Company which, by reducing the number
of Voting Securities outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Persons, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company, and thereafter such Beneficial
Owner acquires any additional Voting Securities which increases the percentage
of the then outstanding Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.

 

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

 

(f)                 “Committee” shall
mean the Compensation and Benefits Committee of the Company.

 

(g)              “Common Stock” shall
mean the common stock of the Company, $.10 par value.

 

(h)              “Company” shall mean
Lehman Brothers Holdings Inc. and, except as otherwise specified in this Plan
in a particular context, any successor thereto, whether by merger,
consolidation, purchase of substantially all its assets or otherwise.

 

(i)                  “Fair Market
Value” on any date means the closing price of the shares on such date on the
principal national securities exchange on which such shares are listed or
admitted to trading (or, if such exchange is not open on such date, the
immediately preceding date on which such exchange is open), the arithmetic mean
of the per share closing bid price and per share closing asked price on such
date as quoted on the National Association of Securities Dealers Automated
Quotation System, or such other market in which such prices are regularly
quoted, or, if there have been no published bid or asked quotations with
respect to such shares on such date, the Fair Market Value shall be the value
established by the Committee in good faith and, in the case of an incentive
stock option, in accordance with Section 422 of the Code.

 

(j)                  “Other
Stock-based Award” shall mean any of those Awards described in Section 8
hereof.

 

A-2

 

(k)               “Participant” shall
mean an employee, officer, director or consultant of the Company.

 

(l)                  “Subsidiary”
shall mean any corporation which at the time qualifies as a subsidiary of the
Company under the definition of “subsidiary corporation” in Section 424(f)
of the Code, as amended from time to time.

 

A-3EXHIBIT 10.09

 

LEHMAN
BROTHERS HOLDINGS INC.

CASH
AWARD PLAN

As
amended

 

1. 
Effectiveness of Contingent Payment Rights

 

1.1  Pursuant to the action of the Compensation
and Benefits Committee (a) on November 29, 1994, each member (a “Grantee”)  of the Corporate Management Committee (the
“CMC”) of Lehman Brothers Holdings Inc. (the “Company”) is granted Contingent
Payment Rights (the “Rights”), upon a grant to the Grantee of Restricted Stock
Units (“RSUs”) and (b) on March 23, 1995, the CMC and certain Senior Officers
who are specified in the March 23, 1995 Committee resolutions (a “Grantee”) are
granted Rights upon a grant of Performance Stock Units, each under the
Company’s  Management Ownership Plan
(the “MOP”).

 

1.2  Rights held by a Grantee shall be effective
for a period of six months following the award to the Grantee (i) of a
definitive number of RSUs or (ii) of a definitive number of shares of Common
Stock (or RSUs) in satisfaction of Performance Stock Units, (each, as
applicable, an “Effective Period”) unless such (i) RSUs or (ii) shares of
Common Stock or RSUs are sooner terminated, in which case the Rights shall be
void.

 

2.  Timing and Amount of Payment with Respect to
Rights.

 

2.1  Upon the
occurrence of a Change of Control, as hereafter defined, a cash payment in
respect to each Right as provided in Section 2.2 shall become immediately
payable; provided, however that if the Change of Control occurs due to a tender
offer such Right shall become payable in cash only if shares are purchased
during the Effective Period pursuant to the tender offer.

 

2.2

 

(a) On the date
Rights become payable under this Section 2, each Grantee shall be entitled to
receive from the Company a cash payment in an amount equal to (i) in the case
of the Chief Executive Officer and the President of the Company, 350% of such
Grantee’s total cash compensation paid or accrued in respect of the calendar
year preceding the occurrence of a Change in Control, (ii) in the case of the
Chief Legal Officer and Chief Financial Officer of the Company, 200% of such
Grantee’s total cash compensation paid or accrued in respect of the calendar
year preceding the occurrence of a Change in Control and (iii) in the case of
any other Grantee, including the Chief Administrative Officer of the Company,
300% of such Grantee’s total cash compensation paid or accrued in respect of
the calendar year preceding the occurrence of a Change of Control.

 

(b) In the event,
however, that a Grantee was (i) employed by the Company for a portion but not
all of the calendar year preceding the occurrence of a Change in Control, or
(ii) not employed by the Company at any time during the calendar year preceding
the occurrence of a Change in Control, such Grantee’s cash compensation
utilized in making the calculations called for by  Section 2.2(a) shall equal the highest annual rate of salary
which such Grantee was paid by the Company during the calendar year of the
occurrence of the Change in Control plus such Grantee’s target cash bonus for
such calendar year.

 

3.  Withholding of Taxes.

 

3.1  The Company shall have the right to deduct
from any distribution of cash to any Grantee hereunder, an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld with respect to any payment in respect of a Right.

 

 

 

4.  Parachute Tax.

 

4.1  If all or any portion of the payments with
respect to Rights, either alone or together with other payments and benefits a
Grantee receives or is then entitled to receive from the Company, would
constitute a payment described in Section 280G(b) (2) (or its successors) of
the Internal Revenue Code (the “Code”), such payments and benefits provided to
Grantee shall be reduced to the extent necessary so that no portion thereof
shall be subject to the excise tax imposed by Section 4999 of the Code; but
only if, by reason of such reduction, the net after tax benefit of Grantee
shall exceed the net after tax benefit if such reduction were not made.  For this purpose, the determination as to
whether such payments and benefits constitute a payment described in Code
Section 280G (b) (2) and as to the amount of such reduction, if any, necessary
to avoid the excise tax shall be based upon the agreement of the Company and
the Grantee, or in the absence of such agreement, a determination by the
accounting firm as described in Section 4.2 below.  In the event of a determination that such reduction is to take
place, the Grantee shall be entitled to designate which payments and benefits
shall be reduced, but in the event the Grantee fails to make such designation
within 15 days following notification of such determination, the Company shall
allocate the reduction among such payments and benefits in its sole discretion.

 

4.2  “Net after tax benefit” for purposes of this
Section 4 shall mean the sum of (i) the total payments payable to Grantee
hereunder, plus (ii) all other payments and benefits which the Grantee receives
or is then entitled to receive from the Company that would constitute a payment
described in Section 280G(b)(2) of the Code, less (iii) the amount of federal,
state and local income taxes payable with respect to the foregoing calculated
at the maximum marginal income tax rate for each year in which the foregoing
shall be paid to Grantee (based upon the rate in effect for such year as set
forth in the Code at the time of termination of Grantee’s employment), less
(iv) the amount of excise taxes imposed with respect to the payments and
benefits described in (i) and (ii) above by Section 4999 of the Code.  The foregoing calculations shall be made, at
the Company’s expense, by the Company and Grantee.  If no agreement on the calculations is reached, Grantee and the
Company shall agree to the selection of an accounting firm to make the
calculations.  If no agreement can be
reached regarding the selection of an accounting firm, the Company shall select
a nationally recognized accounting firm which has no current or recent business
relationship with the Company.  The determination
of any such firm selected shall be conclusive and binding on all parties.

 

4.3  In the event a determination is made as
described in Sections 4.1 and 4.2 above that payments with respect to Rights
are to be reduced pursuant to this Section 4 and if such determination occurs
after the Grantee has received payments as described in Section 2.2 without
such reduction having been made, the amount by which such payment is to be
reduced as provided in Section 4.2 above shall be deemed to be a loan from the
Company to the Grantee and shall be due and payable by the Grantee to the
Company three days following notification by the Company to the Grantee of such
determination and the amount owing.  No
interest shall be due on such amount.

 

5.  Non-Transferability.

 

5.1  No Right granted hereunder shall be
transferred, hypothecated, pledged or otherwise disposed of by the Grantee to
whom granted otherwise than by will or the laws of descent and
distribution.  The terms of such Right
shall be final, binding and conclusive upon the beneficiaries, executors,
administrators, heirs and successors of the Grantee.

 

6.  Definitions.

 

6.1  “Change of Control” shall mean the
occurrence of any of the following:

 

(a) The
commencement (within the meaning of Rule 14d-2 under the Securities Exchange
Act of 1934 (the “Exchange Act”)) of a tender offer for more than 20% of the
Company’s outstanding shares of capital stock having ordinary voting power in
the election of directors (“Voting Securities”).

 

 

2

 

 

(b) An acquisition
(other than directly from the Company) of any Voting Securities by any “Person”
(as the term person is used for purposes of Section 13(d) or 14(d) of the
Exchange Act) immediately after which such Person has “Beneficial Ownership”
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty
percent (20%) or more of the combined voting power of the Company’s then
outstanding Voting Securities, provided, however, in determining whether a
Change of Control has occurred, Voting Securities which are acquired in a
“Non-Control Acquisition” (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control.  A “Non-Control Acquisition” shall mean an acquisition by (i) an
employee benefit plan (or a trust forming a part thereof or a trustee thereof
acting solely in its capacity as trustee) maintained by (A) the Company or (B)
any corporation or other Person of which a majority of its voting power or its
voting equity securities or equity interest is owned, directly or indirectly,
by the Company (for purposes of this definition, a “Subsidiary”), (ii) the
Company or its Subsidiaries, or (iii) any Person who files in connection with
such acquisition a Schedule 13D which expressly disclaims any intention to seek
control of the Company and does not expressly reserve the right to seek such
control; provided that any amendment to such statement of intent which either
indicates an intention or reserves the right to seek control shall be deemed to
be an “acquisition” of the securities of the Company reported in such filing as
beneficially owned by such Person for purposes of this subparagraph (b).

 

(c) The individuals who, as of the effective date of
the 1994 initial public trading in Company shares, are members of the Board of
Directors (the “Incumbent Board”), ceasing for any reason to constitute at
least a majority of the members of the Board of Directors;  provided, however, that if the election, or
nomination for election by the Company’s common stockholders, of any new director
was approved by a vote of at least a majority of the Incumbent Board, such new
director shall, for purposes of this Plan, be considered as a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened “Election Contest” (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board (a “Proxy Contest”) including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest.

 

(d) Approval by
stockholders of the Company of:

 

(i) A merger,
consolidation or reorganization involving the Company, unless such merger,
consolidation or reorganization is a “Non-Control Transaction”; i.e., meets
each of the requirements described in (A), (B), and (C) below:

 

(A) the stockholders of
the Company, immediately before such merger, consolidation or reorganization,
own, directly or indirectly immediately following such merger, consolidation or
reorganization, at least eighty percent (80%) of the combined voting power of
the outstanding voting securities of the corporation resulting from such merger
or consolidation or reorganization (the “Surviving Corporation”) in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization;

 

(B) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement providing for such
merger, consolidation or reorganization constitute at least two-thirds of the
members of the Board of Directors of the Surviving Corporation immediately
following the consummation of such merger, consolidation or reorganization; and

 

(C) no Person, other than
the Company, a Subsidiary, any employee benefit plan (or any trust forming a
part thereof or a trustee thereof acting solely in its capacity as trustee)
maintained by the Company, the Surviving Corporation, or any Subsidiary, or any
Person who, immediately prior to such merger, consolidation or reorganization
had Beneficial Ownership of twenty percent (20%) or more of the then
outstanding Voting Securities, has Beneficial Ownership of twenty percent (20%)
or more of the combined voting power of the Surviving Corporation’s then
outstanding Voting Securities immediately following the consummation of such
merger, consolidation or reorganization.

 

 

3

 

 

(ii) A complete liquidation or dissolution of the
Company; or

 

(iii)  An agreement for the sale or other
disposition of all or substantially all of the assets of the Company to any
Person (other than a transfer to a Subsidiary).

 

6.2  “Hostile
Change of Control” shall mean the occurrence of 6.1 (a), (b), (c) or (d)
without the prior approval of a majority of the independent members of the
Incumbent Board.

 

6.3. “Friendly Change of Control” shall mean any
Change of Control which is not a Hostile Change of Control.

 

7.   Reimbursement Provision.

 

7.1. Each Grantee who
incurs federal, state or local income tax prior to 1999, as a result of the
acceleration and distribution of Company shares in connection with a tender
offer constituting a Hostile Change of Control which is not completed, shall be
reimbursed by the Company an amount equal to the federal, state and local
income taxes (based on the highest marginal rate) related to the excess of (i)
the amount of taxable income caused by the distribution of the shares over (ii)
the value of the shares following the withdrawal or termination of such a
tender (the “Spread”); plus such additional amounts as shall be required so
that the net after-tax amount payable to the Grantee in respect of such
distribution is the same as it would be if the tax on the Spread had not been
imposed.

 

8.   Amendments.

 

8.1  This plan may be amended or terminated by
the Compensation and Benefits Committee, but no amendment or termination may in
any way adversely impact any outstanding Rights.

 

 

4

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