Document:

Exhibit
10.3

2006 EXECUTIVE
LONG-TERM INCENTIVE PLAN

A.            Executives

The following executive
long-term incentive plan (“LTIP”) shall apply for the following officers of the
Corporation (the “Executives”):

	
  1. John J. McDonnell, Jr.

  	
   

  	
  Chairman and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  2. Brian J.
  Bates

  	
   

  	
  President and Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
  3. Henry H.
  Graham, Jr.

  	
   

  	
  Executive Vice President, Chief Financial Officer
  and Treasurer

  
	
   

  	
   

  	
   

  
	
  4. Raymond Low

  	
   

  	
  President, International Services Division (Transaction
  Network Services (UK) Limited)

  
	
   

  	
   

  	
   

  
	
  5. John J.
  McDonnell III

  	
   

  	
  Executive Vice President and Chief Strategy Officer

  
	
   

  	
   

  	
   

  
	
  6. Matthew M.
  Mudd

  	
   

  	
  Executive Vice President and Chief Development
  Officer

  
	
   

  	
   

  	
   

  
	
  7. Michael Q.
  Keegan

  	
   

  	
  Executive Vice President, General Counsel and
  Secretary

  
	
   

  	
   

  	
   

  
	
  8. Edward C.
  O’Brien

  	
   

  	
  Executive Vice President and Controller

  
	
   

  	
   

  	
   

  

B.            Grants

In respect of the
Corporation’s 2006 fiscal year, each of the Executives shall receive a grant,
subject to the provisions and limitations contained in the Corporation’s 2004
Long-Term Incentive Plan (the “Plan”) and the terms contained herein, of:

(1)                                                        restricted
stock (the “2006 RSU Award”) equal to 40% of the Executive’s LTIP Annual Target
(as such term is defined in the Executive’s management agreement); and

(2)                                                        options
(the “2006 Option Award”) to purchase shares of the Corporation’s common stock
having an aggregate value equal to 60% of the Executive’s LTIP Target.

 1
 

 

The aggregate target
number of shares of restricted stock subject to the 2006 RSU Award (“Target
2006 RSUs”) shall be determined by dividing (x) 40% of the Executive’s LTIP
Annual Target by (y) the closing price of the Corporation’s common shares on
the New York Stock Exchange on June 1, 2006 (the “Grant Date”) discounted by
11.5% to reflect the expected value of the Target 2006 RSUs taking into account
the four year vesting period.

The aggregate
target number of shares subject to the 2006 Option Award (“Target 2006 Options”)
shall be determined using the Black-Scholes method.  The exercise price for the Target 2006
Options shall be the closing price of the Corporation’s common shares on the
New York Stock Exchange on the Grant Date.

C.            Award Determination

The amount of
shares of restricted stock subject to each of the 2006 RSU Award and the 2006
Option Award shall be adjusted up or down based upon the attainment of gross
revenue and EBITDA(1) targets, as set forth below, by the Corporation during
fiscal year 2006 (“Target 2006 Gross Revenue” and “Target 2006 EBITDA,”
respectively), with the amount calibrated based on over- or under-achievement
of these targets to between 0% and 200% of Target 2006 RSUs and Target 2006
Options.

1.                                      2006
Revenue and EBITDA Targets

With respect to Messrs. McDonnell, Jr., Graham, McDonnell III, Mudd,
Keegan and O’Brien, the Target 2006 Gross Revenue and Target 2006 shall be set
by the Board of Directors in accordance with the Corporation’s 2006 fiscal year
budget approved by the Board of Directors. 
Attainment of these targets shall be determined based on the
consolidated 2006 operating results of TNS, Inc. and its subsidiaries.

With respect to Mr. Bates, the Target 2006 Gross Revenue and Target
2006 EBITDA shall be as set by the Board of Directors in accordance with the
Corporation’s 2006 fiscal year budget approved by the Board of Directors.  Attainment of these targets shall be
determined based on the 2006 operating results of TNS, Inc. and its
subsidiaries domiciled in the United States and Canada (“Domestic Subsidiaries”).

With respect to Mr. Low, the Target 2006 Gross Revenue and Target 2006
EBITDA shall be as set by the Board of Directors in accordance with the
Corporation’s 2006 fiscal year budget approved by the Board of Directors.  Attainment of these targets shall be
determined based on the 2006 operating 

(1)             EBITDA
shall be determined by taking income from operations and adding back certain
non-cash items, including amortization of intangible assets, depreciation and
amortization of property and equipment and stock compensation expense.

 2
 

 

performance of all subsidiaries of TNS, Inc. (other than the Domestic
Subsidiaries).

The 2006 Gross Revenue and 2006 EBITDA Targets shall be adjusted by the
Compensation Committee of the Board of Directors to reflect acquisitions and
dispositions of businesses and assets by the Corporation to the extent not
reflected in the 2006 fiscal year budget for the Corporation approved by the
Board of Directors.

2.             Determination
of RSU and Option Awards

For each Executive, the amount of shares of restricted stock subject to
the Executive’s 2006 RSU Award shall equal:

(i)                                     50%
of the respective Target 2006 RSUs multiplied by the appropriate
percentage set forth in the table contained in Section C(3) below that
represents the percentage of the Target 2006 Gross Revenue attained during the
Corporation’s 2006 fiscal year, plus

(ii)                                  50%
of the respective Target 2006 RSUs multiplied by the appropriate
percentage set forth in the table contained in Section C(3) below that
represents the percentage of the Target 2006 EBITDA attained during the
Corporation’s 2006 fiscal year.

For each Executive, the amount of option shares subject to the
Executive’s 2006 Option Award shall equal:

(x)                                   50%
of the respective Target 2006 Options multiplied by the appropriate
percentage set forth in the table contained in Section C(3) below that
represents the percentage of the Target 2006 Gross Revenue attained during the
Corporation’s 2006 fiscal year, plus

(y)                                 50%
of the respective Target 2006 Options multiplied by the appropriate
percentage set forth in the table contained in Section C(3) below that
represents the percentage of the Target 2006 EBITDA attained during the
Corporation’s 2006 fiscal year.

 3
 

 

3.    Vesting Percentage

 

	
  Percentage of Target Attained

  	
   

  	
  Percentage of Target Award Earned

  
	
  110% and above[MAXIMUM]

  	
   

  	
  200%

  
	
  109%

  	
   

  	
  190%

  
	
  108%

  	
   

  	
  180%

  
	
  107%

  	
   

  	
  170%

  
	
  106%

  	
   

  	
  160%

  
	
  105%

  	
   

  	
  150%

  
	
  104%

  	
   

  	
  140%

  
	
  103%

  	
   

  	
  130%

  
	
  102%

  	
   

  	
  120%

  
	
  101%

  	
   

  	
  110%

  
	
  100% [TARGET]

  	
   

  	
  100%

  
	
  99%

  	
   

  	
  90%

  
	
  98%

  	
   

  	
  80%

  
	
  97%

  	
   

  	
  70%

  
	
  96%

  	
   

  	
  60%

  
	
  95%

  	
   

  	
  50%

  
	
  94%

  	
   

  	
  40%

  
	
  93%

  	
   

  	
  30%

  
	
  92%

  	
   

  	
  20%

  
	
  91% [THRESHOLD]

  	
   

  	
  10%

  
	
  90% and below

  	
   

  	
  0%

  

 

D.            Vesting and Reservation of Shares

The Board of
Directors shall make a determination as to the final number of shares of
restricted stock subject to each Executive’s 2006 RSU Award and the final
number of options to purchase shares of common stock subject to each Executive’s
2006 Option Award within the 60-day period immediately following December 31,
2006. Upon the making of such determination, one quarter of the 2006 RSUs, if
any, and 2006 Options, if any, granted to the Executive shall immediately vest
with the remainder vesting in equal annual installments over a three-year
period (with the second tranche vesting on January 1, 2008, the third tranche
vesting on January 1, 2009 and the fourth tranche vesting on January 1, 2010).

The Corporation shall reserve for issuance under the
Plan that number of shares of common stock necessary to satisfy the Target 2006
Options and the Target 2006 RSUs granted to Executives hereunder.

 

 4EXHIBIT 10.1

DRS
Technologies, Inc.

2006 Omnibus Plan

1.     Establishment
and Purpose.

There is hereby adopted
the DRS Technologies, Inc. 2006 Omnibus Plan (the “Plan”).  This Plan is intended to promote the
interests of the Company (as defined below) and the stockholders of DRS
Technologies, Inc. (“DRS”) by providing officers and other employees of the
Company (including directors who are also employees of the Company) with
appropriate incentives and rewards to encourage them to enter into and continue
in the employ of the Company and to acquire a proprietary interest in the
long-term success of the Company; to compensate DRS’s non-employee directors
and provide incentives to such non-employee directors which are directly linked
to increases in stock value; and to reward the performance of individual
officers, other employees, consultants and non-employee directors in fulfilling
their responsibilities.

2.     Definitions.

As used in the Plan, the
following definitions apply to the terms indicated below:

(a)                                  “1996 Plan” shall mean the DRS
Technologies, Inc. Amended and Restated 1996 Omnibus Plan, as amended.

(b)                                 “Agreement” shall mean the written
agreement between DRS and a Participant evidencing an Incentive Award.

(c)                                  “Board of Directors” shall mean the
Board of Directors of DRS.

(d)                                 “Cause” shall mean (1) the willful
and continued failure by the Participant substantially to perform his or her
duties and obligations to the Company (other than any such failure resulting
from his or her incapacity due to physical or mental illness); (2) the willful
engaging by the Participant in misconduct which is materially injurious to the
Company; (3) the commission by the Participant of a felony; or (4) the
commission by the Participant of a crime against the Company which is materially
injurious to the Company.  For purposes
of this Section 2(d), no act, or failure to act, on a Participant’s part shall
be considered “willful” unless done, or omitted to be done, by the Participant
in bad faith and without reasonable belief that his or her action or omission
was in the best interest of the Company. 
Determination of Cause shall be made by the Committee in its sole
discretion.

(e)                                  A “Change in Control” shall mean the
occurrence of the event set forth in any one of the following paragraphs:

(i)                                           any Person is or becomes the “Beneficial
Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of DRS (not including in the 

 

securities beneficially owned by such Person any securities
acquired directly from the Company or its “Affiliates” (as defined in Rule
12b-2 under the Exchange Act)) representing 20% or more of the combined voting
power of DRS’s then outstanding securities, excluding any Person who becomes
such a Beneficial Owner in connection with a transaction described in clause
(i) of paragraph (3) below; or

(ii)                                        the following individuals cease for
any reason to constitute a majority of the number of directors then serving:
individuals who, on the Effective Date, constitute the Board of Directors and
any new director (other than a director whose initial assumption of office is
in connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors of
DRS) whose appointment or election by the Board of Directors or nomination for
election by DRS’s stockholders was approved or recommended by a vote of at
least two-thirds (2/3) of the directors then still in office who either were
directors on the Effective Date or whose appointment, election or nomination
for election was previously so approved or recommended; or

(iii)                                     there is consummated a merger or
consolidation of the Company or any direct or indirect subsidiary of the
Company with any other corporation, other than (i) a merger or consolidation
which would result in the voting securities of DRS, outstanding immediately
prior to such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving
entity or any parent thereof) at least 60% of the combined voting power of the
voting securities of DRS or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of DRS (or similar
transaction) in which no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of DRS (not including in the securities Beneficially
Owned by such Person any securities acquired directly from the Company or its
Affiliates other than in connection with the acquisition the Company or its
Affiliates of a business) representing 20% or more of the combined voting power
of DRS’s then outstanding securities; or

(iv)                                    the stockholders of DRS approve a
plan of complete liquidation or dissolution of DRS or there is consummated an
agreement for the sale or disposition by DRS of all or substantially all of DRS’s
assets, other than a sale or disposition by DRS of all or substantially all of
DRS’s assets to an entity, at least 60% of the combined voting power of the
voting securities of which are owned by the stockholders of the Company in
substantially the same proportions as their ownership of DRS immediately prior
to such sale.

Notwithstanding the
foregoing, any event or transaction which would otherwise constitute a Change
in Control (a “Transaction”) shall not constitute a Change in Control for
purposes of this Plan with respect to a Participant if, in connection with the
Transaction, such Participant participates as an equity investor in the
acquiring entity or any of its Affiliates (the “Acquiror”).  For purposes of the preceding sentence, a
Participant shall not be deemed to have participated as an equity investor in
the Acquiror by virtue of (i) obtaining beneficial ownership of any equity
interest in the Acquiror as a result of the grant to the Participant of an
incentive compensation award under one or more incentive plans of the Acquiror
(including, but not limited to, the conversion in connection with the
Transaction of incentive compensation awards of the Company into incentive
compensation awards of the Acquiror), on terms and conditions substantially
equivalent to those applicable to other executives of the 

 

Company immediately prior to
the Transaction, after taking into account normal differences attributable to
job responsibilities, title and the like, or (ii) obtaining beneficial
ownership of any equity interest in the Acquiror on terms and conditions
substantially equivalent to those obtained in the Transaction by all other
stockholders of the Company.

(f)                                    “Code” shall mean the Internal
Revenue Code of 1986, as amended from time to time, and any regulations
promulgated thereunder.

(g)                                 “Committee” shall mean the Executive
Compensation Committee of the Board of Directors or any other committee
designated by the Board of Directors from time to time to fulfill such
function.  The Committee shall consist of
two or more persons, each of whom is an “outside director” within the meaning
of Section 162(m) of the Code and a “non-employee director” within the meaning
of Rule 16b-3.

(h)                                 “Company” shall mean, collectively,
DRS and each of its Subsidiaries now held or hereinafter acquired.

(i)                                     “Company Stock” shall mean the
common stock of DRS, par value $.01 per share.

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

(k)                                  “Effective Date” shall mean the date
upon which this Plan is adopted by the Board of Directors.

(l)                                     “Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended from time to time.

(m)                               “Executive Officer” shall have the
meaning set forth in Rule 3b-7 promulgated under the Exchange Act.

(n)                                 The “Fair Market Value” of a share
of Company Stock, as of a date of determination, shall mean (1) the closing
sales price per share of Company Stock on the national securities exchange on
which such stock is principally traded for the last preceding date on which
there was a sale of such stock on such exchange, or (2) if the shares of
Company Stock are not then listed on the New York Stock Exchange, the average
of the highest reported bid and lowest reported asked prices for the shares of
Company Stock as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System for the last preceding date on which there was
a sale of such stock in such market, or (3) if the shares of Company Stock are
not then listed on a national securities exchange or traded in an
over-the-counter market or the value of such shares is not otherwise
determinable, such value as determined by the Committee in good faith and in
accordance with Section 409A of the Code.

(o)                                 “Full Value Award” shall mean any
Incentive Award, other than an Option, Tandem SAR, or Stand-Alone SAR, which
Incentive Award is settled in Company Stock.

(p)                                 “Good Reason” shall have the meaning
set forth in the Participant’s employment or other agreement with Company or
any Subsidiary, provided that if the Participant is not a party to any 

 

such employment or other agreement or such employment or
other agreement does not contain a definition of Good Reason, then Good Reason
shall mean, the occurrence, on or after the date of a Change in Control and
without the affected Participant’s written consent, of (1) the assignment to
the Participant of duties in the aggregate that are inconsistent with the
Participant’s level of responsibility immediately prior to the date of the
Change in Control or any diminution in the nature or status of the Participant’s
responsibilities from those in effect immediately prior to the date of the
Change in Control including, without limitation, in the case of a Participant
who was, immediately prior to the Change in Control, an executive officer of
the Company, such employee ceasing to be an executive officer of a public
company; (2) a reduction in the Participant’s annual base salary, annual
incentive compensation opportunity, or long term incentive compensation
opportunity (including an adverse change in performance criteria or a decrease
in the target amount of annual or long term incentive compensation) from that
in effect immediately prior to the Change in Control; or (3) the relocation of
the Participant’s principal place of employment to a location more than fifty
(50) miles from the Participant’s principal place of employment immediately
prior to the date of the Change in Control, if such relocation also requires a
material change in the Participant’s commute.

(q)                                 “Incentive Award” shall mean any
Option, Tandem SAR, Stand-Alone SAR, Restricted Stock, Restricted Stock Unit,
Stock Bonus or Other Award granted pursuant to the terms of the Plan.

(r)                                    “Incentive Stock Option” shall mean
an Option that is an “incentive stock option” within the meaning of Section 422
of the Code, or any successor provision, and that is designated by the
Committee as an Incentive Stock Option.

(s)                                  “Initial Director” shall mean a
Non-Employee Director of DRS who is a member of the Board of Directors on the
Effective Date.

(t)                                    “Issue Date” shall mean the date
established by DRS on which certificates representing shares of Restricted
Stock shall be issued by DRS pursuant to the terms of Section 10(e).

(u)                                 “Non-Employee Director” shall mean a
member of the Board of Directors who is not an employee of the Company.

(v)                                 “Non-Qualified Stock Option” shall
mean an Option other than an Incentive Stock Option.

(w)                               “Option” shall mean an option to
purchase shares of Company Stock granted pursuant to Section 7 (or, with
respect to a Non-Employee Director, pursuant to Section 14).

(x)                                   “Other Award” shall mean an award
granted pursuant to Section 13.

(y)                                 “Partial Exercise” shall mean an
exercise of an Incentive Award for less than the full extent permitted at the
time of such exercise.

(z)                                   “Participant” shall mean an
employee, consultant or Non-Employee Director of the Company to whom an
Incentive Award is granted pursuant to the Plan and, upon the death of such an
individual, his or her successors, heirs, executors and administrators, as the
case may be.

(aa)                            “Person” shall have the meaning set
forth in Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (1) the
Company, (2) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (3) an underwriter temporarily holding securities
pursuant to an offering of such securities or (4) a

 

corporation owned, directly or
indirectly, by the stockholders of DRS in substantially the same proportions as
their ownership of stock of DRS.

(bb)                          “Restricted Stock” shall mean a
share of Company Stock which is granted pursuant to the terms of Section 10 and
which is subject to the restrictions set forth in Section 10(c).

(cc)                            “Restricted Stock Unit” shall mean
the right, granted pursuant to Section 11, to receive, subject to such
restrictions as the Committee may determine, the Fair Market Value of a share
of Company Stock in shares.

(dd)                          “Rule 16b-3” shall mean the Rule
16b-3 promulgated under the Exchange Act, as amended from time to time.

(ee)                            “Securities Act” shall mean the
Securities Act of 1933, as amended from time to time.

(ff)                                “Stand-Alone SAR” shall mean a stock
appreciation right which is granted pursuant to Section 9 and which is not
related to any Option.

(gg)                          “Stock Bonus” shall mean a bonus
payable in shares of Company Stock granted pursuant to Section 12.

(hh)                          “Subsequent Director” shall mean a
Non-Employee Director of DRS who becomes a member of the Board of Directors
subsequent to the Effective Date.

(ii)                                  “Subsidiary” shall mean a “subsidiary
corporation” within the meaning of Section 424(f) of the Code.

(jj)                                  “Tandem SAR” shall mean a stock
appreciation right which is granted pursuant to Section 8 and which is related
to an Option.

(kk)                            “Vesting Date” shall mean the date
established by the Committee on which a share of Restricted Stock or a
Restricted Stock Unit may vest.

 

 

3.     Stock
Subject to the Plan.

(a)                                  Shares Available
for Awards.

The maximum number of
shares of Company Stock reserved for issuance under the Plan (the “Share Limit”)
shall be 4,000,000 shares (subject to adjustment as provided herein); provided
that each share issued under the Plan pursuant to a Full Value Award shall
reduce the Share Limit by 2 shares for every one share actually issued in
connection with such Incentive Award. 
(For example, if 100 shares of Restricted Stock are granted under this
Plan, 200 shares shall reduce the Share Limit in connection with that Incentive
Award).  Such shares may be authorized
but unissued Company Stock or shares that
shall have been or may be reacquired by the Company in the open market, in
private transactions or otherwise.  The
Committee may direct that any stock certificate evidencing shares issued
pursuant to the Plan shall bear a legend setting forth such restrictions on
transferability as may apply to such shares pursuant to the Plan.  The following will not reduce the number of
shares of Company Stock available under the Plan;  (1) the grant of a Tandem SAR, a Stand-Alone
SAR or Restricted Stock Unit, (2) the exchange by a Participant of any
Tandem SAR, Stand-Alone SAR or Restricted Stock Unit for a cash payment by the
Company, or (3) the grant of any Incentive Award made in connection with an
acquisition and in substitution of awards otherwise cancelled in connection
with such acquisition.  Notwithstanding
anything contained herein to the contrary: 
(A) shares of Company Stock tendered in payment of the exercise price of
an Option shall not be added to the maximum share limitations described above;
(B) shares of Company Stock withheld by the Company to satisfy the tax
withholding obligations shall not be added to the maximum share limitations
described above; and (C) all shares of Company Stock covered by a Stand-Alone
SAR or Tandem SAR, to the extent that such Stand-Alone SAR or Tandem SAR is
exercised and whether or not shares of Company Stock are actually issued upon
exercise of the right, shall be considered issued or transferred pursuant to
the Plan.  Upon the exercise of any Incentive
Award granted in tandem with any other Incentive Awards, such related Incentive
Awards shall be cancelled to the extent of the number of shares of Company
Stock as to which the Incentive Award is exercised.

(b)                                 Individual
Limitation.

The total number of
shares of Company Stock subject to Incentive Awards (including Incentive Awards
which may be payable in cash but denominated as shares of Company Stock, i.e.,
Stand-Alone SARs and Restricted Stock Units), granted to any employee during
any tax year of the Company, shall not exceed 200,000 shares (subject to
adjustment as provided herein). 
Determinations under the preceding sentence shall be made in a manner
that is consistent with Section 162(m) of the Code.

(c)                                  Adjustment for
Change in Capitalization.

If the Committee should
determine that any dividend or other distribution (whether in the form of cash,
Company Stock, or other property), recapitalization, Company Stock split,
reverse Company Stock split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar corporate
transaction or event, affects the Company Stock such that an adjustment is
appropriate in order to prevent dilution or enlargement of the rights of
Participants under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of
(1) the number and kind of shares of Company Stock which may thereafter be
issued in connection with Incentive Awards, (2) the number and kind of shares
of Company Stock issued or issuable in respect of outstanding Incentive Awards,
(3) the

 

exercise price, grant
price or purchase price relating to any Incentive Award, and (4) the maximum
number of shares subject to Incentive Awards which may be awarded to any
employee during any tax year of the Company; provided that, with respect to
Incentive Stock Options, such adjustment shall be made in accordance with
Section 424 of the Code, and provided further that no such adjustment shall
cause any Award hereunder which is or becomes subject to Section 409A of the
Code to fail to comply with the requirements of such section.

(d)                                  Re-Use of Shares.

Except as provided below,
any shares subject to an Incentive Award, including an Incentive Award granted
under the 1996 Plan, that remain unissued upon the cancellation, surrender,
exchange or termination of such award for any reason whatsoever and any
forfeited shares of Restricted Stock, including any forfeited shares of
Restricted Stock granted under the 1996 Plan, shall again become available for
Incentive Awards.  Notwithstanding the
foregoing, shares of Company Stock that are exchanged by a Participant or
withheld by the Company as full or partial payment in connection with any
Incentive Award under the Plan, as well as any shares of Company Stock
exchanged by a Participant or withheld by the Company or any Subsidiary to
satisfy the tax withholding obligations related to any Incentive Award under
the Plan, shall not be available for subsequent Incentive Awards under the
Plan.  Upon the exercise of any Incentive
Award granted in tandem with any other Incentive Awards, such related Awards
shall be cancelled to the extent of the number of shares of Company Stock as to
which the Incentive Award is exercised and such number of shares shall no
longer be available for Incentive Awards under the Plan.

 

4.     Administration
of the Plan.

The Plan shall be
administered by the Committee. The Committee shall have the authority in its
sole discretion, subject to and not inconsistent with the express provisions of
the Plan, to administer the Plan and to exercise all the powers and authorities
either specifically granted to it under the Plan or necessary or advisable in
the administration of the Plan, including, without limitation, the authority to
grant Incentive Awards; to determine the persons to whom and the time or times
at which Incentive Awards shall be granted; to determine the type and number of
Incentive Awards to be granted, the number of shares of Stock to which an Award
may relate and the terms, conditions, restrictions and performance criteria
relating to any Incentive Award; to determine whether, to what extent, and
under what circumstances an Incentive Award may be settled, cancelled,
forfeited, exchanged, or surrendered; to make adjustments in the performance
goals in recognition of unusual or non-recurring events affecting the Company
or the financial statements of the Company (to the extent not inconsistent with
Section 162(m) of the Code, if applicable), or in response to changes in
applicable laws, regulations, or accounting principles; to construe and
interpret the Plan and any Incentive Award; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of Agreements; and to make all other determinations deemed necessary
or advisable for the administration of the Plan.  Notwithstanding the foregoing,
the Committee shall not take any action with respect to an Incentive Award that
would be treated, for accounting purposes, as a “repricing” of such Incentive
Award unless such action is approved by the Company’s shareholders.

The Committee may, in its
absolute discretion, without amendment to the Plan, upon the death, Disability,
retirement or termination by the Company without Cause of any Participant (a)
accelerate the date on which any Option or Stand-Alone SAR granted to such
Participant under the Plan becomes exercisable, waive or amend the operation of
Plan provisions respecting exercise after termination of employment or
otherwise adjust any of the terms of such Option or Stand-Alone SAR, and (b)
accelerate the Vesting Date or Issue Date, or waive any condition imposed
hereunder, with respect to any share of Restricted Stock, Restricted Stock Unit
or other Incentive Award granted to such Participant or otherwise adjust any of
the terms applicable to any such Incentive Award.

No member of the
Committee shall be liable for any action, omission or determination relating to
the Plan, and the Company shall indemnify (to the extent permitted under
Delaware law and the certificate of incorporation of the Company) and hold
harmless each member of the Committee and each other director or employee of
the Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of
a claim with the approval of the Committee) arising out of any action, omission
or determination relating to the Plan, unless, in either case, such action,
omission or determination was taken or made by such member, director or
employee in bad faith and without reasonable belief that it was in the best
interests of the Company.

 

5.     Eligibility.

Incentive Awards pursuant
to the Plan may be granted to employees of the Company, including officers of
the Company, whether or not they are directors of DRS, consultants and
Non-Employee Directors of the Company.

6.     Awards
Under the Plan; Agreement.

The Committee may grant
Options, Tandem SARs, Stand-Alone SARs, shares of Restricted Stock, Stock
Bonuses, Restricted Stock Units and Other Awards in such amounts and with such
terms and conditions as the Committee shall determine, subject to the
provisions of the Plan.  Non-Qualified
Stock Options shall be granted to Non-Employee Directors in accordance with
Section 14.

Each Incentive Award
granted under the Plan (except an unconditional Stock Bonus) shall be evidenced
by an Agreement which shall contain such provisions as the Committee may in its
sole discretion deem necessary or desirable. By accepting an Incentive Award, a
Participant thereby agrees that the award shall be subject to all of the terms
and provisions of the Plan and the applicable Agreement.

7.     Options.

(a)                                  Identification of
Options.

Each Option shall be
clearly identified in the applicable Agreement as either an Incentive Stock
Option or a Non-Qualified Stock Option.

(b)                                  Exercise Price.

Each Agreement with
respect to an Option shall set forth the amount (the ”option exercise
price”) payable by the grantee to the Company upon exercise of the Option.  The option exercise price per share shall be
determined by the Committee; provided, however, that the option exercise price
shall in no event be less than the Fair Market Value of a share of Company
Stock on the date the Option is granted.

(c)                                  Term and Exercise
of Options.

(i)             Unless the applicable Agreement
provides otherwise, an Option shall become cumulatively exercisable as to 25 percent
of the shares covered thereby on each of the first, second, third and fourth
anniversaries of the date of grant.  The
Committee shall determine the expiration date of each Option; provided,
however, that no Option shall be exercisable more than 10 years after the date
of grant.  Unless the applicable
Agreement provides otherwise, no Option shall be exercisable prior to the first
anniversary of the date of grant.

(ii)          An Option may be exercised for all
or any portion of the shares as to which it is exercisable, provided that no
Partial Exercise of an Option shall be for an aggregate exercise price of less
than $1,000.  The Partial Exercise of an
Option shall not cause the expiration, termination or cancellation of the
remaining portion thereof.

(iii)       An Option shall be exercised in a
manner prescribed by the Company. 
Payment for 

 

shares of Company Stock purchased upon the exercise of
an Option shall be made on the effective date of such exercise by one or a
combination of the following means: (i) by personal check, certified check,
bank cashier’s check or wire transfer; (ii) subject to the approval of the
Committee, in shares of Company Stock owned by the Participant valued at their
Fair Market Value on the effective date of such exercise; or (iii) subject to
the approval of the Committee, by such other provision as the Committee may
from time to time authorize.  Any payment
in shares of Company Stock shall be effected by (A) the delivery of such shares
to the Secretary of DRS, duly endorsed in blank or accompanied by stock powers
duly executed in blank, together with any other documents and evidences as the
Secretary of DRS shall require, or (B) such other manner prescribed by the
Company.

(iv)      Reasonably promptly after the
exercise of an Option, unless otherwise determined by the Committee, DRS, in
its sole discretion, may either (i) issue a stock certificate, registered in
the name of the Participant to whom such shares were granted, evidencing such
shares or (ii) establish and maintain, or cause a representative to establish
and maintain, an account to record the Company Stock granted to such
Participant and transactions and events affecting such stock.  No adjustment to any Option shall be made for
dividends or other rights for which the record date occurs prior to the date
such stock certificate is issued.

(d)                                  Limitations on
Incentive Stock Options.

(i)             To the extent that the aggregate
Fair Market Value of shares of Company Stock with respect to which Incentive
Stock Options are exercisable for the first time by a Participant during any
calendar year under the Plan and any other stock option plan of the Company (or
any Subsidiary) shall exceed $100,000, such Options shall be treated as
Non-Qualified Stock Options. Such Fair Market Value shall be determined as of
the date on which each such Incentive Stock Option is granted.

(ii)                      No Incentive Stock Option may be
granted to an individual if, at the time of the proposed grant, such individual
owns (or is attributed to own by virtue of the Code) stock possessing more than
ten percent of the total combined voting power of all classes of stock of the
Company or any Subsidiary unless (i) the exercise price of such Incentive Stock
Option is at least 110 percent of the Fair Market Value of a share of Company
Stock at the time such Incentive Stock Option is granted and (ii) such
Incentive Stock Option is not exercisable after the expiration of five years
from the date such Incentive Stock Option is granted.

(e)                                  Effect of
Termination of Employment.

(i)             Unless the applicable Agreement
provides otherwise, in the event that the employment of a Participant with the
Company shall terminate for any reason other than Cause, Disability or death,
(i) Options granted to such Participant, to the extent that they are exercisable
at the time of such termination, shall remain exercisable until the date that
is three months after such termination, on which date they shall expire, and
(ii) Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at 5:00 pm New York
City time on the date of such termination. The three-month period described in
this Section 7(e)(1) shall be extended to one year from the date of such
termination in

 

the event of the Participant’s death during such three-month
period. Notwithstanding the foregoing, no Option shall be exercisable after the
expiration of its term.

(ii)          Unless the applicable Agreement
provides otherwise, in the event that the employment of a Participant with the
Company shall terminate on account of the Disability or death of the
Participant, (i) Options granted to such Participant, to the extent that they
were exercisable at the time of such termination, shall remain exercisable
until the first anniversary of such termination, on which date they shall
expire, and (ii) Options granted to such Participant, to the extent that they
were not exercisable at the time of such termination, shall expire at the close
of business on the date of such termination; provided, however, that no Option
shall be exercisable after the expiration of its term.

(iii)       In the event of the termination of a
Participant’s employment for Cause, all outstanding Options granted to such
Participant shall expire at the commencement of business on the date of such
termination.

(f)                                    Acceleration of
Exercise Date Upon Change in Control.

Upon the occurrence of a
Change in Control, each Option granted under the Plan and outstanding at such
time shall become fully and immediately vested and exercisable and shall remain
exercisable until its expiration, termination or cancellation unless such
Options are converted, assumed, or replaced by a successor with an award of equivalent
economic value containing equivalent terms.  With respect to any converted, assumed, or replaced Options,
if a Participant’s employment is subsequently terminated without Cause or for
Good Reason within 24 months of the Change in Control, such Options shall become
fully and immediately vested and exercisable upon the date of the Participant’s
termination.

8.     Tandem
SARs.

The Committee may grant
in connection with any Option granted hereunder, except a Non-Qualified Stock
Option granted to a Non-Employee Director pursuant to Section 14, one or more
Tandem SARs relating to a number of shares of Company Stock less than or equal
to the number of shares of Company Stock subject to the related Option. A
Tandem SAR granted in connection with an Option must be granted at the same
time that such Option is granted; provided, however, that a Tandem SAR granted
in connection with a Non-Qualified Stock Option may be granted subsequent to
the time that such Non-Qualified Stock Option is granted.

(a)                                  Benefit Upon
Exercise.

The exercise of a Tandem
SAR with respect to any number of shares of Company Stock shall entitle the
Participant to a cash payment, for each such share, equal to the excess of (1)
the Fair Market Value of a share of Company Stock on the exercise date over (2)
the option exercise price of the related Option. Such payment shall be made as
soon as practicable after the effective date of 
such exercise.

(b)                                  Term and Exercise
of Tandem SAR.

(i)             A Tandem SAR shall be exercisable
only if and to the extent that its related Option

 

is exercisable.

(ii)          The exercise of a Tandem SAR with
respect to a number of shares of Company Stock shall cause the immediate and
automatic cancellation of its related Option with respect to an equal number of
shares.  The exercise of an Option, or
the cancellation, termination or expiration of an Option (other than pursuant to
this Section 8(b)(2)), with respect to a number of shares of Company Stock
shall cause the automatic and immediate cancellation of any related Tandem SARs
to the extent of the number of shares of Company Stock subject to such Option
which is so exercised, cancelled, terminated or expired.

(iii)       A Tandem SAR may be exercised for
all or any portion of the shares as to which it is exercisable; provided, that
no Partial Exercise of a Tandem SAR shall be for an aggregate exercise price of
less than $1,000.

(iv)      No Tandem SAR shall be assignable or
transferable otherwise than together with its related Option.

(v)         A Tandem SAR shall be exercised by
delivering notice to DRS’s principal office, to the attention of its Secretary.
Such notice shall be accompanied by the applicable Agreement, shall specify the
number of shares of Company Stock with respect to which the Tandem SAR is being
exercised and the effective date of the proposed exercise and shall be signed
by the Participant or other person then having the right to exercise the Option
to which the Tandem SAR is related.

9.     Stand-Alone
SARs.

(a)                                  Exercise Price.

The exercise price per
share of a Stand-Alone SAR shall be determined by the Committee at the time of
grant, but shall in no event be less than the Fair Market Value of a share of
Company Stock on the date of grant.

(b)                                  Benefit Upon
Exercise.

The exercise of a
Stand-Alone SAR with respect to any number of shares of Company Stock shall
entitle the Participant to a payment, for each such share, equal to the excess
of (1) the Fair Market Value of a share of Company Stock on the exercise date
over (2) the exercise price of the Stand-Alone SAR.  Such payments shall be made as soon as
practicable after such exercise, in cash and/or shares of Company Stock, as determined
by the Committee.  No adjustment shall be
made to any Stand-Alone SAR for dividends or other rights for which the record
date occurs prior to the date shares of Company Stock are issued.

(c)                                  Term and Exercise
of Stand-Alone SARs.

(i)             Unless the applicable Agreement
provides otherwise, a Stand-Alone SAR shall become cumulatively exercisable as
to 25 percent of the shares covered thereby on each of the first, second, third
and fourth anniversaries of the date of grant. The Committee shall determine the
expiration date of each Stand-Alone SAR. Unless the applicable Agreement
provides otherwise, no Stand-Alone SAR shall be exercisable prior to the first
anniversary of the date of grant.

 

(ii)          A Stand-Alone SAR may be exercised
for all or any portion of the shares as to which it is exercisable; provided,
that no Partial Exercise of a Stand-Alone SAR shall be for an aggregate
exercise price of less than $1,000.

(iii)       A Stand-Alone SAR shall be exercised
by delivering notice to DRS’s principal office, to the attention of its
Secretary.  Such notice shall be
accompanied by the applicable Agreement, shall specify the number of shares of
Company Stock with respect to which the Stand-Alone SAR is being exercised, and
the effective date of the proposed exercise, and shall be signed by the
Participant.

(d)                                  Effect of
Termination of Employment.

The provisions set forth
in Section 7(e) with respect to the exercise of Options following termination
of employment shall apply as well to such exercise of Stand-Alone SARs.

(e)                                  Acceleration of
Exercise Date Upon Change in Control.

Upon the occurrence of a
Change in Control any Stand-Alone SAR granted under the Plan and outstanding at
such time shall become fully and immediately exercisable and shall remain
exercisable until its expiration, termination or cancellation unless such
Stand-Alone SARs are converted, assumed, or replaced by a successor with an
award of equivalent economic value containing equivalent terms.  With respect to any converted, assumed, or replaced
Stand-Alone SARs, if a Participant’s employment is subsequently
terminated without Cause or for Good Reason within 24 months of the Change in Control,
such Stand-Alone SARs shall become fully and immediately vested upon the date
of the Participant’s termination.

10.  Restricted
Stock.

(a)                                  Issue Date and
Vesting Date.

At the time of the grant
of shares of Restricted Stock, the Committee shall establish an Issue Date or
Issue Dates and a Vesting Date or Vesting Dates with respect to such
shares.  The Committee may divide such
shares into classes and assign a different Issue Date and/or Vesting Date for
each class.  If the grantee is employed
by the Company on an Issue Date (which may be the date of grant), the specified
number of shares of Restricted Stock shall be issued in accordance with the
provisions of Section 10(e). Provided that all conditions to the vesting of a
share of Restricted Stock imposed pursuant to Section 10(b) are satisfied, and
except as provided in Section 10(g), upon the occurrence of the Vesting Date
with respect to a share of Restricted Stock, such share shall vest and the
restrictions of Section 10(c) shall lapse.

(b)                                  Conditions to
Vesting.

At the time of the grant
of shares of Restricted Stock, the Committee may impose such restrictions or
conditions to the vesting of such shares as it, in its absolute discretion,
deems appropriate.

(c)                                  Restrictions on
Transfer Prior to Vesting.

Prior to the vesting of a
share of Restricted Stock, no transfer of a Participant’s rights with respect
to such share, whether voluntary or involuntary, by operation of law or
otherwise, shall be permitted. Immediately upon any attempt to transfer such
rights, such share, and all of the rights related thereto, shall be forfeited
by the Participant.

 

(d)                                  Dividends on Restricted
Stock.

The Committee in its
discretion may require that any dividends paid on shares of Restricted Stock be
held in escrow until all restrictions on such shares have lapsed.

(e)                                  Issuance of
Certificates.

(i)             Reasonably promptly after the Issue
Date with respect to shares of Restricted Stock, unless otherwise determined by
the Committee, DRS, in its sole discretion, may either (i) issue a stock
certificate, registered in the name of the Participant to whom such shares were
granted, evidencing such shares; provided, however that DRS shall not cause
such a stock certificate to be issued unless it has received a stock power duly
endorsed in blank with respect to such shares; and provided further that unless
determined otherwise by the Committee such stock certificates shall be held by
the Company or its representative or (ii) establish and maintain, or cause a
representative to establish and maintain, an account to record the shares of
Restricted Stock granted to such Participant and transactions and events affecting
such stock.

(ii)          The following legend shall be (i)
inscribed on any certificate issued or (ii) notated on any account established,
for Restricted Stock prior to the lapse of any outstanding restrictions:

THE
TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY
ARE SUBJECT TO THE RESTRICTIONS, TERMS AND CONDITIONS (INCLUDING FORFEITURE
PROVISIONS AND RESTRICTIONS AGAINST TRANSFER) CONTAINED IN THE DRS
TECHNOLOGIES, INC. 2006 OMNIBUS PLAN, AND AN AGREEMENT ENTERED INTO BETWEEN THE
REGISTERED OWNER OF SUCH SHARES AND DRS. A COPY OF THE PLAN AND AGREEMENT IS ON
FILE IN THE OFFICE OF THE SECRETARY OF DRS, 5 SYLVAN WAY, PARSIPPANY, NEW
JERSEY 07054.

Such legend shall not be
removed until such shares vest pursuant to the terms hereof.  Reasonably promptly after the Vesting Date
with respect to shares of Restricted Stock, unless otherwise determined by the
Committee, DRS, in its sole discretion, may either issue to the Participant or
the Participant’s personal representative or deposit in such Participant’s or
the Participant’s personal representative’s brokerage account via electronic
transfer, a stock certificate representing one share of Company Stock, with
respect to each whole share of Restricted Stock.

(f)                                    Consequences of
Vesting.

Upon the vesting of a
share of Restricted Stock, the restrictions of Section 10(c) shall lapse with
respect to such share. Reasonably promptly after a share of Restricted Stock
vests, DRS shall cause to be delivered to the Participant to whom such shares
were granted, a certificate evidencing such share, free of the legend set forth
in Section 10(e).

(g)                                 Effect of
Termination of Employment.

(i)             Subject to such other provision as
the Committee may set forth in the applicable Agreement, and to the Committee’s
amendment authority pursuant to Section 4, upon the termination of a
Participant’s employment for any reason other than Cause, any and all shares to
which restrictions on transferability apply shall be

 

immediately forfeited by the Participant and transferred to,
and reacquired by, DRS; provided that if the Committee, in its sole discretion,
shall within thirty (30) days after such termination of employment notify the
Participant in writing of its decision not to terminate the Participant’s
rights in such shares, then the Participant shall continue to be the owner of
such shares subject to such continuing restrictions as the Committee may
prescribe in such notice. In the event of a forfeiture of shares pursuant to
this section, DRS shall repay to the Participant (or the Participant’s estate)
any amount paid by the Participant for such shares. In the event that DRS
requires a return of shares, it shall also have the right to require the return
of all dividends paid on such shares, whether by termination of any escrow
arrangement under which such dividends are held or otherwise.

(ii)          In the event of the termination of a
Participant’s employment for Cause, all shares of Restricted Stock granted to
such Participant which have not vested as of the date of such termination shall
immediately be returned to DRS, together with any dividends paid on such
shares, in return for which DRS shall repay to the Participant any amount paid
by the Participant for such shares.

(h)                                 Effect of Change in
Control.

Upon the occurrence of a
Change in Control all outstanding shares of Restricted Stock which have not
theretofore vested shall immediately vest and all restrictions on such shares
shall immediately lapse unless such shares of Restricted Stock are converted,
assumed, or replaced by a successor with an award of equivalent
economic value containing equivalent terms.  With respect to any converted, assumed, or replaced shares
of Restricted Stock, if a Participant’s employment is subsequently
terminated without Cause or for Good Reason within 24 months of the Change in Control,
such shares of Restricted Stock shall become fully and immediately vested upon
the date of the Participant’s termination.

(i)                                    Special Provisions
Regarding Awards.

Notwithstanding anything
to the contrary contained herein, Restricted Stock granted to Executive
Officers pursuant to this Section 10 may be subject to attainment by the
Company (or a Subsidiary or division of DRS if applicable) of performance goals
pre-established by the Committee, based on one or more of the following
criteria: (1) earnings including operating income, earnings before or
after taxes, earnings before or after interest, depreciation, amortization, or
extraordinary or special items or book value per share (which may exclude nonrecurring
items); (2) pre-tax income or after-tax income; (3) earnings per common share
(basic or diluted); (4) operating profit; (5) revenue, revenue growth or rate
of revenue growth; (6) return on assets (gross or net), return on investment,
return on capital, or return on equity; (7) returns on sales or revenues;
(8) operating expenses; (9) stock price appreciation; (10) cash flow, free
cash flow, cash flow return on investment (discounted or otherwise), net cash
provided by operations, or cash flow in excess of cost of capital;
(11) implementation or completion of critical projects or processes;
(12) economic value created; (13) cumulative earnings per share growth;
(14) operating margin or profit margin; (15) common stock price or total
stockholder return; (16) cost targets, reductions and savings, productivity and
efficiencies; (17) strategic business criteria, consisting of one or more
objectives based on meeting specified market penetration, geographic business
expansion, customer satisfaction, employee satisfaction, human resources
management, supervision of litigation, information technology, and goals
relating to acquisitions, divestitures, joint ventures and similar
transactions, and budget comparisons; (18) personal professional objectives,
including any of the

 

foregoing performance
goals, the implementation of policies and plans, the negotiation of
transactions, the development of long term business goals, formation of joint
ventures, research or development collaborations, and the completion of other
corporate transactions; and (19) any combination of, or a specified increase
in, any of the foregoing.  Where
applicable, the performance goals may be expressed in terms of attaining a
specified level of the particular criteria or the attainment of a percentage
increase or decrease in the particular criteria, and may be applied to one or
more of the Company, any Subsidiary, or a division or strategic business unit
of the Company, or may be applied to the performance of the Company relative to
a market index, a group of other companies or a combination thereof, all as
determined by the Committee.  The
performance goals may include a threshold level of performance below which no
payment will be made (or no vesting will occur), levels of performance at which
specified payments will be made (or specified vesting will occur), and a
maximum level of performance above which no additional payment will be made (or
at which full vesting will occur).  Each
of the foregoing performance goals shall be determined in accordance with
generally accepted accounting principles; provided that the Committee shall
have the authority to make equitable adjustments to the performance goals in
recognition of unusual or non-recurring events affecting the Company or any
Subsidiary or the financial statements of the Company or any Subsidiary, in
response to changes in applicable laws or regulations, or to account for items
of gain, loss or expense determined to be extraordinary or unusual in nature or
infrequent in occurrence or related to the disposal of a segment of a business
or related to a change in accounting principles.  Shares of Restricted Stock granted to
Executive Officers pursuant to this Section 10 and subject to the attainment by
DRS of the Company (or a Subsidiary or division of DRS if applicable), shall be
released from restrictions only after the attainment of such performance
measures has been certified by the Committee.

(j)                                    Consent to Electronic Delivery.

In lieu of issuing
documents in paper format, to the fullest extent permitted by law, the
Committee may, in its discretion provide for electronic delivery of any
documents that DRS may be required to deliver (including, but not limited to,
prospectuses, prospectus supplements, grant or award notifications and
agreements, account statements, annual and quarterly reports, and all other
forms or communications) in connection with the grant of awards and any other
prior or future incentive award or program made or offered by DRS or its
predecessors or successors.

11.  Restricted
Stock Units.

(a)                                  Vesting Date.

At the time of the grant
of Restricted Stock Units, the Committee shall establish a Vesting Date or
Vesting Dates with respect to such units. 
The Committee may divide such units into classes and assign a different
Vesting Date for each class.  Provided
that all conditions to the vesting of a Restricted Stock Unit imposed pursuant
to Section 11(c) are satisfied, and except as provided in Section 11(d), upon
the occurrence of the Vesting Date with respect to a Restricted Stock Unit,
such unit shall vest.

(b)                                  Benefit Upon
Vesting.

Upon the vesting of a
Restricted Stock Unit, the Participant shall be entitled to receive, within 30
days of the date on which such unit vests, an amount, in cash and/or shares of
Company Stock, as determined by the Committee, equal to the sum of (1) the Fair
Market Value of a share of Company Stock on the date on which such Restricted
Stock Unit vests and (2) the aggregate amount of cash dividends paid with
respect to a share of Company Stock during the period 

 

commencing on the date on
which the Restricted Stock Unit was granted and terminating on the date on
which such unit vests.

(c)                                  Conditions to
Vesting.

At the time of the grant
of Restricted Stock Units, the Committee may impose such restrictions or
conditions to the vesting of such units as it, in its absolute discretion,
deems appropriate.

(d)                                  Effect of
Termination of Employment.

Subject to such other
provision as the Committee may set forth in the applicable Agreement, and to
the Committee’s amendment authority pursuant to Section 4, Restricted Stock
Units that have not vested, together with any dividends credited on such units,
shall be forfeited upon the Participant’s termination of employment for any
reason.

(e)                                  Effect of Change in
Control.

Upon the occurrence of a
Change in Control, all outstanding Restricted Stock Units which have not
theretofore vested shall immediately vest and payment in respect of such units
shall be made in accordance with the terms of this Plan unless such Restricted Stock
Units are converted, assumed, or replaced by a successor with an award of equivalent
economic value containing equivalent terms.  If a Participant’s employment is subsequently
terminated without Cause or for Good Reason within 24 months of the Change in Control,
any such Restricted Stock Units so converted, assumed, or replaced that remain
unvested shall become fully and immediately vested upon the date of the
Participant’s termination.

(f)                                    Special Provisions
Regarding Awards.

Notwithstanding anything
to the contrary contained herein, the vesting of Restricted Stock Units granted
pursuant to this Section 11 to Executive Officers may be based on the
attainment by DRS or the Company (or a Subsidiary or division of DRS if
applicable) of one or more of the performance criteria set forth in Section
10(i), in each case, as determined in accordance with generally accepted
accounting principles. No payment in respect of any such Restricted Stock Unit
award will be made to an Executive Officer until the attainment of the
respective performance measures have been certified by the Committee.

(g)                                 Bookkeeping.

The Company shall
establish and maintain an account for the participant to record Restricted
Stock Units and transactions and events affecting such units. Restricted Stock
Units and other items reflected in the account will represent only bookkeeping
entries by the Company to evidence unfunded obligations of the Company.

12.  Stock
Bonuses.

In the event that the
Committee grants a Stock Bonus, as soon as practicable after the date on which
such Stock Bonus is payable, unless otherwise determined by the Committee, DRS,
in its sole discretion, may either (i) issue a stock certificate, registered in
the name of the Participant to whom such grant was made, evidencing such shares
or (ii) establish and maintain, or cause a representative to establish and
maintain, an account to record the Stock Bonus granted to such Participant and
transactions and events affecting such stock.

 

 

Executive Officers
shall be eligible to receive Stock Bonus grants hereunder only after a
determination of eligibility is made by the Committee, in its sole discretion.

13.  Other
Awards.

Other forms of Incentive
Awards (“Other Awards”) valued in whole or in part by reference to, or
otherwise based on, Company Stock may be granted either alone or in addition to
other Incentive Awards under the Plan. Subject to the provisions of the Plan,
the Committee shall have sole and complete authority to determine the persons
to whom and the time or times at which such Other Awards shall be granted, the
number of shares of Company Stock to be granted pursuant to such Other Awards
and all other conditions of such Other Awards.

14.  Non-Employee
Director Formula Stock Options.

The provisions of this
Section 14 shall apply only to grants of Non-Qualified Stock Options to
Non-Employee Directors.

(a)                                  General.

Non-Employee Directors
shall receive Non-Qualified Stock Options under the Plan, in addition to any
other Incentive Awards granted to Non-Employee Directors.  The exercise price per share of Company Stock
purchasable under Non-Qualified Stock Options granted to Non-Employee Directors
shall be the Fair Market Value of a share of Company Stock on the date of
grant.  No Non-Qualified Stock Option
granted to a Non-Employee Director may be subject to an acceleration of
exercisability except upon a Change in Control as described in Section 7(f).

(b)                                  Initial Grants to
Subsequent Directors.

Unless otherwise
determined, each Subsequent Director shall, at the time such director becomes a
member of the Board of Directors, be granted automatically a Non-Qualified
Stock Option to purchase 5,000 shares of Company Stock.

(c)                                  Subsequent Grants
to Directors.

On the date of each
annual meeting of the stockholders of DRS subsequent to the annual meeting
immediately following the Effective Date, unless otherwise determined, each
continuing Initial Director will be granted automatically a Non-Qualified Stock
Option to purchase 2,500 shares of Company Stock; provided, however, that in no
event shall a continuing Initial Director be granted Non-Qualified Stock
Options to purchase more than 2,500 shares of Company Stock under the Plan or
any other stock option plan of the Company during any tax year of the
Company.  On the date of each annual
meeting of the stockholders of DRS subsequent to a Subsequent Director’s
becoming a member of the Board of Directors, unless otherwise determined, such
Subsequent Director shall be granted automatically a Non-Qualified Stock Option
to purchase 2,500 shares of Company Stock.

(d)                                  Method and Time of
Payment.

The Option exercise price
shall be paid in full, at the time of exercise, in cash (including cash
received from the Company as compensation), in shares of Company Stock having a
Fair Market Value equal to such Option exercise price, in a combination of cash
and Company Stock or through a cashless exercise procedure.

 

(e)                                  Term
and Exercisability.

Each Non-Qualified Stock
Option granted under this Section 14 shall (1) be exercisable as to 100% of the
shares of Company Stock covered thereby on the first anniversary of the date
that the Non-Qualified Stock Option is granted and (2) expire ten years from
the date of grant.

(f)                                    Termination.

In the event of the
termination of a Non-Employee Director’s service with DRS other than for Cause,
any Non-Qualified Stock Option granted to such Non-Employee Director under this
Section 14, to the extent that it is exercisable on the date of such
termination, may be exercised by such Non-Employee Director (or, if applicable,
by his or her executors, administrator, legatees or distributees) until the
earlier of (1) the date that is two years from the date of such termination or
(2) the expiration of such Non-Qualified Stock Option. In the event of the
termination of a Non-Employee Director’s service with DRS for Cause, all
outstanding Non-Qualified Stock Options granted to such Non-Employee Director
shall expire at the commencement of business on the date of such termination.

15.  Rights
as a Stockholder.

No person shall have any
rights as a stockholder with respect to any shares of Company Stock covered by
or relating to any Incentive Award until the date of issuance of a stock
certificate with respect to such shares. 
Except as otherwise expressly provided in Section 3(c), no adjustment to
any Incentive Award shall be made for dividends or other rights for which the
record date occurs prior to the date such stock certificate is issued.

16.  No
Special Employment Rights; No Right to Incentive Award.

Nothing contained in the
Plan or any Agreement shall confer upon any Participant any right with respect
to the continuation of employment by the Company or interfere in any way with
the right of the Company, subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to
increase or decrease the compensation of the Participant.

No person shall have any
claim or right to receive an Incentive Award hereunder. The Committee’s
granting of an Incentive Award to a participant at any time shall neither
require the Committee to grant any other Incentive Award to such Participant or
other person at any time or preclude the Committee from making subsequent
grants to such Participant or any other person.

 

17.  Securities
Matters.

(a)                                  DRS shall be under no obligation to
effect the registration pursuant to the Securities Act of any interests in the
Plan or any shares of Company Stock to be issued hereunder or to effect similar
compliance under any state laws. Notwithstanding anything herein to the
contrary, DRS shall not be obligated to cause to be issued or delivered any
certificates evidencing shares of Company Stock pursuant to the Plan unless and
until DRS is advised by its counsel that the issuance and delivery of such
certificates is in compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities exchange on which
shares of Company Stock are traded.  The
Committee may require, as a condition of the issuance and delivery of
certificates evidencing shares of Company Stock pursuant to the terms hereof,
that the recipient of such shares make such agreements and representations, and
that such certificates bear  such legends,
as the Committee, in its sole discretion, deems necessary or desirable.

(b)                                 The transfer of any shares of
Company Stock hereunder shall be effective only at such time as counsel to DRS
shall have determined that the issuance and delivery of such shares is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of any securities exchange on which shares of Company Stock
are traded. The Committee may, in its sole discretion, defer the effectiveness
of any transfer of shares of Company Stock hereunder in order to allow the
issuance of such shares to be made pursuant to registration or an exemption
from registration or other methods for compliance available under federal or
state securities laws. The Committee shall inform the Participant in writing of
its decision to defer the effectiveness of a transfer. During the period of
such deferral in connection with the exercise of an Option, the Participant
may, by written notice, withdraw such exercise and obtain the refund of any
amount paid with respect thereto.

18.  Withholding
Taxes.

Whenever cash is to be
paid pursuant to an Incentive Award, the Company shall have the right to deduct
therefrom an amount sufficient to satisfy any federal, state and local
withholding tax requirements related thereto.

Whenever shares of
Company Stock are to be delivered pursuant to an Incentive Award, the Company
shall have the right to require the Participant to remit to the Company in cash
an amount sufficient to satisfy any federal, state and local withholding tax
requirements related thereto.  With the
approval of the Committee, a Participant may satisfy the foregoing requirement
by electing to have the Company withhold from delivery shares of Company Stock
having a value less than or equal to the amount of tax to be withheld, but not
greater than the statutory minimum. Such shares shall be valued at their Fair
Market Value on the date on which the amount of tax to be withheld is
determined (the “Tax Date”). Fractional share amounts shall be settled in cash.
Such a withholding election may be made with respect to all or any portion of
the shares to be delivered pursuant to an Incentive Award.

19.  Notification
of Election Under Section 83(b) of the Code.

If any Participant shall,
in connection with the acquisition of shares of Company Stock under the Plan,
make the election permitted under Section 83(b) of the Code (i.e., an election
to include in gross income in the year of transfer the amounts specified in
Section 83(b)), such Participant shall notify the Company of such election
within 10 days of filing notice of the election with the Internal Revenue
Service, in addition to any filing

 

and a notification
required pursuant to regulation issued under the authority of Section 83(b) of
the Code.

20.       Notification Upon
Disqualifying Disposition Under Section 421(b) of the Code.

Each Agreement with
respect to an Incentive Stock Option shall require the Participant to notify
the Company of any disposition of shares of Company Stock issued pursuant to
the exercise of such Option under the circumstances described in Section 421(b)
of the Code (relating to certain disqualifying dispositions), within 10 days of
such disposition.

21.  Amendment
or Termination of the Plan.

The Board of Directors
may, at any time, suspend or terminate the Plan or revise or amend it in any
respect whatsoever; provided, however, that stockholder approval shall be
required if and to the extent the Board of Directors determines that such
approval is appropriate for purposes of satisfying Sections 162(m) or 422 of
the Code.  Incentive Awards may be
granted under the Plan prior to the receipt of such stockholder approval but
each such grant shall be subject in its entirety to such approval and no award
may be exercised, vested or otherwise satisfied prior to the receipt of such
approval. Nothing herein shall restrict the Committee’s ability to exercise its
discretionary authority pursuant to Section 4, which discretion may be
exercised without amendment to the Plan. No action hereunder may, without the
consent of a Participant, reduce the Participant’s rights under any outstanding
Incentive Award.

22.  Transfers
Upon Death; Nonassignability.

Upon the death of a
Participant, outstanding Incentive Awards granted to such Participant may be
exercised only by the executor or administrator of the Participant’s estate or
by a person who shall have acquired the right to such exercise by will or by
the laws of descent and distribution.  No
transfer of an Incentive Award by will or the laws of descent and distribution
shall be effective to bind the Company unless the Committee shall have been
furnished with (a) written notice thereof and with a copy of the will and/or
such evidence as the Committee may deem necessary to establish the validity of
the transfer and (b) an agreement by the transferee to comply with all the
terms and conditions of the Incentive Award that are or would have been
applicable to the Participant and to be bound by the acknowledgements made by
the Participant in connection with the grant of the Incentive Award.

A Participant may, upon
providing written notice to the Secretary of DRS and subject to any conditions
as the Committee may prescribe, elect to transfer any or all Options granted to
such Participant pursuant to the Plan only to members of his or her immediate
family, including, but not limited to, children, grandchildren and spouse or to
trusts for the benefit of such immediate family members or to partnerships in
which such family members are the only partners; provided, however, that no
such transfer by any Participant may be made in exchange for consideration.

23.  Expenses
and Receipts.

The
expenses of the Plan shall be paid by the Company. Any proceeds received by the
Company in connection with any Incentive Award will be used for general
corporate purposes.

 

24.  Failure
to Comply.

In addition to the
remedies of the Company elsewhere provided for herein, failure by a Participant
(or beneficiary) to comply with any of the terms and conditions of the Plan or
the applicable Agreement, unless such failure is remedied by such Participant
(or beneficiary) within ten days after notice of such failure by the Committee,
shall be grounds for the cancellation and forfeiture of such Incentive Award,
in whole or in part, as the Committee, in its absolute discretion, may
determine.

25.  Effective
Date and Term of Plan.

The Plan became effective
on the Effective Date, but the Plan (and any grants of Incentive Awards made
prior to stockholder approval of the Plan) shall be subject to the requisite
approval of the stockholders of DRS. In the absence of such approval, such
Incentive Awards shall be null and void. Unless earlier terminated by the Board
of Directors, the right to grant Incentive Awards under the Plan will terminate
on the tenth anniversary of the Effective Date. 
Incentive Awards outstanding at Plan termination will remain in effect
according to their terms and the provisions of the Plan.

26.  Applicable
Law.

Except to the extent
preempted by any applicable federal law, the Plan will be construed and administered
in accordance with the laws of the State of Delaware, without reference to its
principles of conflicts of law.

27.  Participant
Rights.

No Participant shall have
any claim to be granted any award under the Plan, and there is no obligation
for uniformity of treatment for Participants. Except as provided specifically
herein, a Participant or a transferee of an Incentive Award shall have no
rights as a stockholder with respect to any shares covered by any award until
the date of the issuance of a Company Stock certificate to him or her for such
shares.

 

28.  Unfunded Status of Awards.

The Plan is intended to
constitute an “unfunded” plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant pursuant to an Incentive
Award, nothing contained in the Plan or any Agreement shall give any such
Participant any rights that are greater than those of a general creditor of the
Company.

29.  No
Fractional Shares.

No fractional shares of
Company Stock shall be issued or delivered pursuant to the Plan. The Committee
shall determine whether cash, other Incentive Awards, or other property shall
be issued or paid in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.

30.  Beneficiary.

A Participant may file
with the Committee a written designation of a beneficiary on such form as may
be prescribed by the Committee and may, from time to time, amend or revoke such
designation. If no designated beneficiary survives the Participant, the
executor or administrator of the Participant’s estate shall be deemed to be the
grantee’s beneficiary.

31.  Interpretation.

The Plan is designated
and intended to comply with Rule 16b-3 and, to the extent applicable, with
Section 162(m) of the Code, and all provisions hereof shall be construed in a
manner to so comply.

32.  Severability.

If any provision of the
Plan is held to be invalid or unenforceable, the other provisions of the Plan
shall not be affected but shall be applied as if the invalid or unenforceable
provision had not been included in the Plan.

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