Document:

EXHIBIT 10.1 TO THE VALSPAR CORPORATION FORM 10-Q FOR THE QUARTER ENDED 04-30-2010

Exhibit 10.1

THE VALSPAR CORPORATION

2009 OMNIBUS EQUITY PLAN

Amended Through June 8, 2010

Table of Contents

	
  

 	
  

 	
  

 	
  

 	
  

 
	
 1.

 	
 Purpose and Background

 	
  

 	
 1

 
	
  

 	
 1.1.

 	
 Purpose

 	
  

 	
 1

 
	
  

 	
 1.2.

 	
 Background

 	
  

 	
 1

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 2.

 	
 Definitions

 	
  

 	
 1

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 3.

 	
 Administration

 	
  

 	
 4

 
	
  

 	
 3.1.

 	
 Administration by Committee

 	
  

 	
 4

 
	
  

 	
 3.2.

 	
 Delegation of Authority

 	
  

 	
 5

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 4.

 	
 Eligible Participants

 	
  

 	
 5

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 5.

 	
 Types of Incentives

 	
  

 	
 5

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 6.

 	
 Shares Subject to the Plan
 and Limitations on Awards

 	
  

 	
 5

 
	
  

 	
 6.1.

 	
 Number of Shares

 	
  

 	
 5

 
	
  

 	
 6.2.

 	
 Cancellation

 	
  

 	
 5

 
	
  

 	
 6.3.

 	
 Type of Common Stock

 	
  

 	
 5

 
	
  

 	
 6.4.

 	
 Limitation on Awards

 	
  

 	
 6

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 7.

 	
 Stock Options

 	
  

 	
 6

 
	
  

 	
 7.1.

 	
 Price

 	
  

 	
 6

 
	
  

 	
 7.2.

 	
 Number

 	
  

 	
 6

 
	
  

 	
 7.3.

 	
 Duration and Time for
 Exercise

 	
  

 	
 6

 
	
  

 	
 7.4.

 	
 Manner of Exercise

 	
  

 	
 6

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8.

 	
 Stock Appreciation Rights
 (SARs)

 	
  

 	
 6

 
	
  

 	
 8.1.

 	
 Price

 	
  

 	
 7

 
	
  

 	
 8.2.

 	
 Number

 	
  

 	
 7

 
	
  

 	
 8.3.

 	
 Duration

 	
  

 	
 7

 
	
  

 	
 8.4.

 	
 Exercise

 	
  

 	
 7

 
	
  

 	
 8.5.

 	
 Issuance of Shares Upon
 Exercise

 	
  

 	
 7

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 9.

 	
 Stock Awards, Restricted
 Stock, and Restricted Stock Units

 	
  

 	
 7

 
	
  

 	
 9.1.

 	
 Number of Shares

 	
  

 	
 8

 
	
  

 	
 9.2.

 	
 Sale Price

 	
  

 	
 8

 
	
  

 	
 9.3.

 	
 Restrictions

 	
  

 	
 8

 
	
  

 	
 9.4.

 	
 Enforcement of
 Restrictions

 	
  

 	
 8

 
	
  

 	
 9.5.

 	
 End of Restrictions

 	
  

 	
 8

 
	
  

 	
 9.6.

 	
 Rights of Holders of
 Restricted Stock

 	
  

 	
 8

 
	
  

 	
 9.7.

 	
 Section 83(b) Election

 	
  

 	
 8

 
	
  

 	
 9.8.

 	
 Rights of Holders of
 Restricted Stock Units

 	
  

 	
 9

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 10.

 	
 Performance Awards

 	
  

 	
 9

 
	
  

 	
 10.1.

 	
 Establishment of
 Performance Goals

 	
  

 	
 9

 
	
  

 	
 10.2.

 	
 Levels of Performance
 Required to Earn Performance Awards

 	
  

 	
 9

 
	
  

 	
 10.3.

 	
 Other Restrictions

 	
  

 	
 9

 

i

	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 10.4.

 	
 Notification to
 Participants

 	
  

 	
 10

 
	
  

 	
 10.5.

 	
 Measurement of Performance
 Against Performance Goals

 	
  

 	
 10

 
	
  

 	
 10.6.

 	
 Treatment of Performance
 Awards Earned

 	
  

 	
 10

 
	
  

 	
 10.7.

 	
 Distribution

 	
  

 	
 10

 
	
  

 	
 10.8.

 	
 Deferral of Receipt of
 Performance Award Distributions; Compliance with Section 409A

 	
  

 	
 10

 
	
  

 	
 10.9.

 	
 Non-Disqualifying
 Termination of Employment

 	
  

 	
 11

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 11.

 	
 General

 	
  

 	
 11

 
	
  

 	
 11.1.

 	
 Effective Date

 	
  

 	
 11

 
	
  

 	
 11.2.

 	
 Duration

 	
  

 	
 11

 
	
  

 	
 11.3.

 	
 Limits on Transfer of
 Awards

 	
  

 	
 11

 
	
  

 	
 11.4.

 	
 Effect of Retirement or
 other Termination

 	
  

 	
 12

 
	
  

 	
 11.5.

 	
 Restrictions under
 Securities Laws

 	
  

 	
 12

 
	
  

 	
 11.6.

 	
 Adjustment

 	
  

 	
 12

 
	
  

 	
 11.7.

 	
 Incentive Plans and
 Agreements

 	
  

 	
 13

 
	
  

 	
 11.8.

 	
 Withholding

 	
  

 	
 13

 
	
  

 	
 11.9.

 	
 No Continued Employment,
 Engagement or Right to Corporate Assets

 	
  

 	
 13

 
	
  

 	
 11.10.

 	
 Payments Under Incentives

 	
  

 	
 13

 
	
  

 	
 11.11.

 	
 Amendment of the Plan

 	
  

 	
 13

 
	
  

 	
 11.12.

 	
 Amendment of Agreements
 for Incentives; No Stock Option or SAR Repricing Without Stockholder Approval

 	
  

 	
 13

 
	
  

 	
 11.13.

 	
 Change in Control

 	
  

 	
 14

 
	
  

 	
 11.14.

 	
 Deferred Compensation

 	
  

 	
 14

 
	
  

 	
 11.15.

 	
 Prior Plans

 	
  

 	
 15

 

ii

THE VALSPAR CORPORATION

2009 OMNIBUS EQUITY PLAN

1. Purpose and Background 

          1.1. Purpose. The purpose of
the 2009 Omnibus Equity Plan (the
“Plan”) is to increase stockholder value and to advance the interests of the
Company by furnishing a variety of Incentives designed to attract, retain and
motivate key employees and consultants of the Company and its Subsidiaries and
directors of the Company.

          1.2. Background.
Immediately prior to the date of approval of the Plan by the stockholders of
the Company, the Company maintained four, separate share reserves totaling
5,218,903 shares of Common Stock (the “Prior Reserves”) for issuance pursuant
to Stock Options and Restricted Stock granted to participants under the
Company’s 1991 Stock Option Plan, Stock Option Plan for Non-Employee Directors,
Key Employee Restricted Stock Plan and 2001 Stock Incentive Plan (the “Prior
Plans”). Upon approval of the Plan by the stockholders of the Company, no
further awards will be granted to any person under the Prior Plans, and the
Prior Reserves will be combined, transferred to the Plan and included in the
number of shares of Common Stock reserved and available to be issued pursuant
to Section 6.1 of the Plan. 

2. Definitions

          2.1. Award. An “Award” is a grant of
Stock Options, Stock Appreciation Rights, Performance Awards, Restricted Stock
or Restricted Stock Units (which may include Dividend Equivalents) under the
Plan. 

          2.2.
Board. The “Board” is the Board of Directors of the Company.

          2.3.
Change in Control. A “Change in Control” means any of the following: 

	
  

 	
  

 
	
  

 	
           (a) Any
 individual, entity or group (within the meaning of Section 13(d)(3) or
 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
 Act”)) (a “Person”) becomes the beneficial owner (within the meaning of Rule
 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the
 then-outstanding shares of Common Stock of the Company (the “Outstanding
 Company Common Stock”) or (B) the combined voting power of the
 then-outstanding voting securities of the Company entitled to vote generally
 in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section 2.3, the
 following acquisitions shall not constitute a Change in Control: (i) any
 acquisition directly from the Company, (ii) any acquisition by the Company,
 (iii) any acquisition by any employee benefit plan (or related trust)
 sponsored or maintained by the Company or any Affiliated Company or (iv) any
 acquisition pursuant to a transaction that complies with Sections 2.3(c)(1),
 2.3(c)(2) and 2.3(c)(3);

 
	
  

 	
  

 
	
  

 	
           (b)
 Individuals who, as of the date hereof, constitute the Board (the “Incumbent
 Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director
 subsequent to the date hereof whose election, or nomination for election by
 the Company’s stockholders, was approved by a vote of at least a majority of
 the directors then comprising the Incumbent Board shall be considered as
 though such individual was a member of the Incumbent Board, but excluding,
 for this purpose, any such individual whose initial assumption of office
 occurs as a result of an actual or threatened election contest with respect
 to the election or removal of directors or other actual or threatened
 solicitation of proxies or consents by or on behalf of a Person other than
 the Board;

 
	
  

 	
  

 
	
  

 	
           (c)
 Consummation of a reorganization, merger, statutory share exchange or
 consolidation or similar transaction involving the Company or any of its
 subsidiaries, a sale or other disposition of all or substantially all of the
 assets of the Company, or the acquisition of assets or stock of another
 entity by the Company or any of its 

 

1

	
  

 	
  

 
	
  

 	
 subsidiaries (each, a “Business Combination”), in each case unless,
 following such Business Combination, (1) all or substantially all of the
 individuals and entities that were the beneficial owners of the Outstanding
 Company Common Stock and the Outstanding Company Voting Securities
 immediately prior to such Business Combination beneficially own, directly or
 indirectly, more than 60% of the then-outstanding shares of common stock (or,
 for a non-corporate entity, equivalent securities) and the combined voting
 power of the then-outstanding voting securities entitled to vote generally in
 the election of directors (or, for a non-corporate entity, equivalent
 governing body), as the case may be, of the entity resulting from such
 Business Combination (including, without limitation, an entity that, as a
 result of such transaction, owns the Company or all or substantially all of
 the Company’s assets either directly or through one or more subsidiaries) in
 substantially the same proportions as their ownership immediately prior to
 such Business Combination of the Outstanding Company Common Stock and the
 Outstanding Company Voting Securities, as the case may be, (2) no Person
 (excluding any corporation resulting from such Business Combination or any
 employee benefit plan (or related trust) of the Company or such corporation
 resulting from such Business Combination) beneficially owns, directly or
 indirectly, 20% or more of, respectively, the then-outstanding shares of
 common stock of the corporation resulting from such Business Combination or
 the combined voting power of the then-outstanding voting securities of such
 corporation, except to the extent that such ownership existed prior to the
 Business Combination, and (3) at least a majority of the members of the board
 of directors (or, for a non-corporate entity, equivalent governing body) of
 the entity resulting from such Business Combination were members of the
 Incumbent Board at the time of the execution of the initial agreement or of
 the action of the Board providing for such Business Combination; or 

 
	
  

 	
  

 
	
  

 	
           (d)
 Approval by the stockholders of the Company of a complete liquidation or
 dissolution of the Company.

 

          2.4. Code.
The “Code” means the Internal Revenue Code of 1986, as amended, and rules and
regulations thereunder, as now in force or as hereafter amended.

          2.5. Committee.
The “Committee” is the Compensation Committee of the Board described in Section
3.1 hereof. 

          2.6. Company.
The “Company” is The Valspar Corporation, a Delaware corporation, and any
successor thereof.

          2.7. Common
Stock. “Common Stock” is the common stock, $.50 par value per share, of the
Company.

          2.8. Deferred
Compensation. “Deferred Compensation” means any Incentive under this Plan
that provides for the “deferral of compensation” under a “nonqualified deferred
compensation plan” (as those terms are defined under Code Section 409A and the
regulations promulgated thereunder) and that would be subject to the taxes
specified in Code Section 409A(a)(1) if and to the extent that the Plan and the
agreement evidencing the Incentive do not meet or are not operated in
compliance with the requirements of Code Section 409A(a)(2), (3) and (4) and
the regulations promulgated thereunder. Deferred Compensation shall not include
any amount that is otherwise exempt from the requirements of Code Section 409A
and the regulations promulgated thereunder.

2

          2.9. Disability.
“Disability” shall mean permanent disability as that term is defined under the
long term disability insurance coverage offered by the Company to its employees
at the time the determination is to be made.

          2.10. Dividend
Equivalents. “Dividend Equivalents”
means the right to receive cash payments with respect to Restricted Stock Units
in amounts equal to any cash dividends paid on the equivalent number of shares
of Common Stock, if and when such dividends are paid or distributed (or at such
other time as may be permitted or required under Section 9.8).

          2.11. Grant
Date. The “Grant Date” of an Incentive shall be the date established by the
Committee as the date of grant of the Award, which shall not be earlier than
the date of the Committee meeting at which the Award is approved.

          2.12. Exchange
Act. The “Exchange Act” means the Securities Exchange Act of 1934, and
rules and regulations thereunder, as now in force or as hereafter amended.

          2.13. Fair
Market Value. The “Fair Market Value” of a share of Common Stock at a
specified date shall, unless otherwise expressly provided in this Plan, be the
amount which the Committee determines in good faith to be 100% of the fair
market value of such a share as of the date in question. Notwithstanding the
foregoing, if such shares are listed on a U.S. securities exchange, then Fair
Market Value shall be determined by reference to the last sale price (also
referred to as the closing price) of a share of Common Stock on such U.S.
securities exchange on the applicable date. If such U.S. securities exchange is
closed for trading on such date, or if the Common Stock does not trade on such
date, then the last sale price used shall be the one on the date the Common
Stock last traded on such U.S. securities exchange. If such shares are not
listed on a U.S. securities exchange, then Fair Market Value shall be
determined by reference to the trading price of a shares of Common Stock on
such date (or, if the applicable market is closed on such date, the last date
on which the Common Stock was publicly traded), by a method consistently
applied by the Committee. 

          2.14. Incentives.
“Incentives” means economic incentives in one or more of the forms described in
Section 5 hereof.

          2.15. Participant.
A “Participant” is a person who has been designated as such by the Committee
and granted an Award under this Plan.

          2.16. Performance
Award. A “Performance Award” is a right to either a number of shares of
Common Stock, their cash equivalent, or a combination thereof (“performance
shares”) or a cash amount (“performance units”) determined (in either case) in
accordance with Section 10.

          2.17. Performance
Goals. “Performance Goals” are the performance conditions, if any,
established pursuant to Section 10.1 hereof by the Committee in connection with
an Award.

          2.18. Performance
Period. The “Performance Period” with respect to a Performance Award is a
period of not less than one calendar year or one fiscal year of the Company,
beginning not earlier than the year in which such Performance Award is granted,
which may be referred to herein and by the Committee by use of the calendar or
fiscal year in which a particular Performance Period commences.

          2.19. Restricted
Stock. “Restricted Stock” is Common Stock which is sold or transferred by
the Company to a Participant at a price, if any, determined by the Committee
and 

3

subject to restrictions on its sale or other transfer by the
Participant and other terms and conditions, including a risk of forfeiture, as
may be established by the Committee.

          2.20. Restricted
Stock Unit. A “Restricted Stock Unit” is a right to receive one share of
Common Stock at a future date that has been granted subject to terms and
conditions, including a risk of forfeiture, established by the Committee. If so
determined by the Committee in the applicable Award agreement or at any other
time, a Restricted Stock Unit may be paid in cash in lieu of the Common Stock;
provided, that a Participant holding Restricted Stock Units shall have no right
to receive a cash payment unless such payment is provided explicitly in the
applicable Award agreement or approved by the Committee.

          2.21. Specified
Employee. A “Specified Employee” means a Participant who is a key employee
as described in Code Section 416 (i)(1)(A)(i), (ii) and (iii) (and disregarding
paragraph (5) thereof) at any time during the Company’s fiscal year ending on
the Friday on or immediately preceding October 31, or such other “identification
date” that applies consistently for all plans of the Company that provide
“deferred compensation” that is subject to the requirements of Code Section
409A and the regulations promulgated thereunder. Each Participant will be
identified as a Specified Employee in accordance with the regulations
promulgated under Code Section 409A, including with respect to the merger of
the Company with any other company or any spin-off or similar transaction, and
such identification shall apply for the 12 month period commencing on the first
day of the fourth month following the identification date. Notwithstanding the
foregoing, no Participant shall be a Specified Employee unless the stock of the
Company (or other member of a “controlled group of corporations” as determined
under Code Section 1563) is publicly traded on an established securities market
as of the date of a Participant’s “separation from service” as defined in Code
Section 409A and the regulations promulgated thereunder.

          2.22. Stock
Appreciation Right (SAR). A “Stock Appreciation Right” or “SAR” is a right
to receive, without payment to the Company, a number of shares of Common Stock,
the amount of which is determined pursuant to the formula set forth in Section
8.5. 

          2.23. Stock
Award. A “Stock Award” is the transfer by the Company to a Participant of
shares of Common Stock, without other payment therefor, as additional
compensation for services to the Company.

          2.24. Stock
Option. A “Stock Option” is a right to purchase shares of Common Stock from
the Company. 

          2.25. Subsidiary.
“Subsidiary” means any entity (other than the Company) in an unbroken chain of
entities beginning with the Company, in which each of the entities other than
the last entity in the unbroken chain owns stock possessing fifty percent or
more of the total combined voting power of all classes of stock in one of the
other entities in such chain as determined at the point in time when reference
is made to such “Subsidiary” in this Plan.

3. Administration 

          3.1. Administration by Committee. The Plan shall be
administered by the Committee. The Committee shall consist of not less than two
directors of the Company and shall be appointed from time to time by the Board.
Each member of the Committee shall be (i) a “non-employee director” within the
meaning of Rule 16b-3 of the Exchange Act, and (ii) an “outside director”
within the meaning of Section 162(m) under the Code. The Committee shall have
complete authority to award Incentives under the Plan, to interpret the Plan,
and to make any other determination which it believes necessary and advisable
for the proper administration of the Plan. The Committee’s decisions and
matters relating to the Plan shall be final and conclusive on the Company and
the Participants.

4

          3.2. Delegation
of Authority. The Company’s Chief Executive Officer may, on a discretionary
basis and without Committee review or approval, grant Stock Options to purchase
up to 5,000 shares each to employees of the Company who are not officers of the
Company. Such discretionary Stock Option grants shall not exceed 25,000 shares in total in any fiscal year.
Subject to the foregoing limitations, the Chief Executive Officer shall
determine from time to time (i) the employees to whom grants will be made, (ii)
the number of shares to be granted, and (iii) the terms and provisions of each
Stock Option (which need not be identical).

4. Eligible Participants. Officers of the Company, employees of
the Company or a Subsidiary, members of the Board, and consultants or other
independent contractors who provide services to the Company or a Subsidiary
shall be eligible to receive Incentives under the Plan when designated by the
Committee. Participants may be designated individually or by groups or
categories (for example, by pay grade) as the Committee deems appropriate.
Participation by officers of the Company or a Subsidiary and any Performance
Goals relating to such officers must be approved by the Committee.
Participation by others and any Performance Goals relating to others may be
approved by groups or categories (for example, by pay grade) and authority to
designate Participants who are not officers and to set or modify such
Performance Goals may be delegated by the Committee to other persons.

5. Types of Incentives. Incentives under the Plan may be granted
in any one or a combination of the following forms: (a) Stock Options (Section
7); (b) Stock Appreciation Rights (SARs) (Section 8); (c) Stock Awards (Section
9); (d) Restricted Stock and Restricted Stock Units that may include Dividend
Equivalents (Section 9); and (e) Performance Awards (Section 10). Subject to
the specific limitations provided in this Plan, payment of Incentives may be in
the form of cash, Common Stock or combinations thereof as the Committee shall
determine, and with such other restrictions as it may impose.

6. Shares Subject to the Plan and Limitations on Awards 

          6.1. Number of
Shares. Subject to adjustment as provided in Section 11.6, the number of
shares of Common Stock available for Awards under the Plan shall not exceed
8,218,903; provided, however, that subject to adjustment as provided in Section
11.6, the number of shares of Common Stock awarded under the Plan pursuant to
all Incentives other than Stock Options and SARs shall reduce the number of
shares of Common Stock available to be awarded under the Plan by a multiple of
2.53 times the actual number of shares of Common Stock awarded pursuant to any
such Incentive other than Stock Options and SARs. For example, if the Committee
awards 100 shares of Restricted Stock to a Participant, the number of shares of
Common Stock remaining and available to be issued under the first sentence of
this section shall be reduced by 253 shares. Any shares of Common Stock covered
by a Stock Option or SAR granted under this Plan shall be counted in full
against the limitation in this Section 6.1, regardless of the number of shares
of Common Stock actually issued upon the exercise of such Stock Option or SAR.
For purposes of clarification, the award of any Incentives payable only in cash
will not reduce the number of shares of Common Stock remaining and available to
be issued under the Plan.

          6.2.
Cancellation. In the event that an Incentive granted hereunder (or granted
under any of the Former Plans prior to the effective date of this Plan) expires
or is terminated or canceled unexercised as to any shares of Common Stock or
forfeited or reacquired by the Company pursuant to rights reserved upon
issuance thereof, such shares may again be awarded under the Plan pursuant to
another Incentive, subject to the share counting requirements for Incentives
other than Stock Options or SARs set forth in Section 6.1. 

          6.3. Type
of Common Stock. Common Stock issued under the Plan in connection with
Incentives may be authorized and unissued shares or treasury stock, as
designated by the Committee.

5

          6.4. Limitation
on Awards. During any one fiscal year, no person shall receive Awards under
the Plan that, in the aggregate, could result in that person receiving, earning
or acquiring, subject to the adjustments described in Section 11.6: (a) Stock
Options and SARs for, in the aggregate, more than 500,000 shares of Common
Stock, (b) Stock Awards, Restricted Stock, Restricted Stock Units (whether
payable in shares of Common Stock or cash) and performance shares, in the
aggregate, covering more than 250,000 shares of Common Stock or Restricted
Stock Units; and (c) Performance Awards payable in cash (excluding Restricted
Stock Units) with a maximum amount payable exceeding $3,000,000. If Dividend
Equivalents are payable with respect to Restricted Stock Units, the Dividend
Equivalents will be considered included in the award of Restricted Stock Units
for purposes of calculating the limitation under this Section 6.4.

7. Stock Options. Stock Options granted by the Committee under
this Plan are not intended to qualify as incentive stock options (as such term
is defined in Section 422 of the Code). Stock Options granted under this Plan
shall be subject to the following terms and conditions:

          7.1. Price.
The exercise price per share shall be determined by the Committee, subject to
adjustment under Section 11.6. Notwithstanding the foregoing sentence, the
exercise price per share shall not be less than the Fair Market Value of the
Common Stock on the Grant Date. 

          7.2. Number.
The number of shares of Common Stock subject to a Stock Option shall be
determined by the Committee, subject to adjustment as provided in Section 11.6.
If an SAR is granted in conjunction with or related to a Stock Option, the
number of shares of Common Stock subject to the Stock Option shall be reduced
in the same proportion that the holder thereof exercises the SAR. 

          7.3. Duration
and Time for Exercise. Subject to earlier termination as provided in
Section 11.4, the term of each Stock Option shall be determined by the
Committee but shall not exceed ten years from the Grant Date. Each Stock Option
shall become exercisable at such time or times during its term as shall be
determined by the Committee at the time of grant. The Committee may accelerate
the exercisability of any Stock Option. 

          7.4. Manner
of Exercise. A Stock Option may be exercised, in whole or in part, by
giving written notice to the Company, specifying the number of shares of Common
Stock to be purchased and accompanied by the exercise price for such shares.
Subject to the policies of the Company or Committee in effect from time to time
and any requirements of the Company’s transfer agent, the exercise price shall
be payable (a) in cash (United States dollars) upon exercise of the Stock
Option, payable by certified check or bank draft, or otherwise as determined by
the Committee; (b) to the extent permitted in the option agreement, by delivery
of shares of Common Stock (or deemed surrender through attestation) in payment
of all or any part of the exercise price, which shares shall be valued for this
purpose at the Fair Market Value on the date such Stock Option is exercised; or
(c) unless otherwise provided in the option agreement, by instructing the
Company to withhold from the shares of Common Stock issuable upon exercise of
the Stock Option shares of Common Stock in payment of all or any part of the
exercise price and/or any related withholding tax obligations consistent with
Section 11.8, which shares shall be valued for this purpose at the Fair Market
Value or in such other manner as may be authorized from time to time by the
Committee. Prior to the issuance of shares of Common Stock upon the exercise of
a Stock Option, a Participant shall have no rights as a stockholder.

8. Stock Appreciation Rights (SARs). An SAR may be granted (a)
with respect to any Stock Option granted under this Plan, either concurrently
with the grant of such Stock Option 

6

or at such later time as determined by the Committee (as to all or any
portion of the shares of Common Stock subject to the Stock Option), or (b)
alone, without reference to any related Stock Option. Each SAR granted by the
Committee under this Plan shall be subject to the following terms and
conditions:

          8.1. Price.
The exercise price per share of any SAR granted without reference to a Stock
Option shall be determined by the Committee, subject to adjustment under
Section 11.6. Notwithstanding the foregoing sentence, the exercise price per
share shall not be less than the Fair Market Value of the Common Stock on the
Grant Date.

          8.2. Number.
Each SAR granted to any Participant shall relate to such number of shares of
Common Stock as shall be determined by the Committee, subject to adjustment as
provided in Section 11.6. In the case of an SAR granted with respect to a Stock
Option, the number of shares of Common Stock to which the SAR relates shall be
reduced in the same proportion that the holder exercises the related Stock
Option. Notwithstanding the foregoing, the limitation on grants under Section
6.4 shall apply to grants of SARs under the Plan.

          8.3. Duration.
Subject to earlier termination as provided in Section 11.4, the term of each
SAR shall be determined by the Committee but shall not exceed ten years from
the Grant Date. Unless otherwise provided by the Committee, each SAR shall
become exercisable at such time or times, to such extent and upon such
conditions as the Stock Option, if any, to which it relates is exercisable. The
Committee may in its discretion accelerate the exercisability of any SAR.

          8.4. Exercise.
An SAR may be exercised, in whole or in part, by giving written notice to the
Company, specifying the number of SARs which the holder wishes to exercise.
Prior to the issuance of shares of Common Stock upon the exercise of an SAR, a
Participant shall have no rights as a stockholder.

          8.5. Issuance
of Shares Upon Exercise. The number of shares of Common Stock which shall
be issuable upon the exercise of an SAR shall be determined by dividing:

	
  

 	
  

 
	
  

 	
           (a) the
 number of shares of Common Stock as to which the SAR is exercised multiplied
 by the amount of the appreciation in such shares (for this purpose, the
 “appreciation” shall be the amount by which the Fair Market Value of the
 shares of Common Stock subject to the SAR on the exercise date exceeds (1) in
 the case of an SAR related to a Stock Option, the exercise price of the Stock
 Option or (2) in the case of an SAR granted alone, without reference to a
 related Stock Option, the exercise price as determined under Section 8.1; by

 
	
  

 	
  

 
	
  

 	
           (b) the
 Fair Market Value of a share of Common Stock on the exercise date.

 

          No
fractional shares of Common Stock shall be issued upon the exercise of an SAR;
instead, the holder of the SAR shall be entitled to receive a cash adjustment
equal to the same fraction of the Fair Market Value of a share of Common Stock
on the exercise date or to purchase the portion necessary to make a whole share
at its Fair Market Value on the date of exercise.

9. Stock Awards, Restricted Stock, and Restricted Stock Units.
The transfer of Common Stock pursuant to Stock Awards and the transfer and sale
of Restricted Stock or Restricted Stock Units shall be subject to the following
terms and conditions:

7

          9.1. Number
of Shares. The number of shares to be transferred or sold by the Company to
a Participant pursuant to a Stock Award or as Restricted Stock or Restricted
Stock Units shall be determined by the Committee.

          9.2. Sale
Price. The Committee shall determine the price, if any, at which shares of
Restricted Stock shall be sold to a Participant, which may vary from time to
time and among Participants.

          9.3. Restrictions.
All shares of Restricted Stock transferred or sold by the Company hereunder
shall be subject to such restrictions as the Committee may determine,
including, without limitation any or all of the following:

	
  

 	
  

 
	
  

 	
           (a) a prohibition against the sale, transfer, pledge or other
 encumbrance of the shares of Restricted Stock by the Participant, such
 prohibition to lapse at such time or times as the Committee shall determine
 (whether in annual or more frequent installments, at the time of the death,
 disability or retirement of the holder of such shares, or otherwise);

 
	
  

 	
  

 
	
  

 	
           (b) a requirement that the holder of shares of Restricted Stock
 forfeit, or (in the case of shares sold to a Participant) resell back to the
 Company at his or her cost, all or a part of such shares in the event of
 termination of his or her employment or consulting engagement during any
 period in which such shares are subject to restrictions;

 
	
  

 	
  

 
	
  

 	
           (c) such other conditions or restrictions as the Committee may deem
 advisable.

 

          9.4. Enforcement
of Restrictions. In order to enforce the restrictions imposed by the
Committee pursuant to Section 9.3, the Participant receiving Restricted Stock
shall enter into an agreement with the Company setting forth the conditions of
the grant. Shares of Restricted Stock shall be registered in the name of the
Participant and deposited, together with a stock power endorsed in blank, with
the Company. As determined by the Company or the Committee, each such
certificate shall bear a legend that refers to the Plan and the restrictions
imposed under the applicable agreement or be retained by the Company until such
time as the restrictions have lapsed. The Committee may provide that no
certificates representing Restricted Stock be issued until the restriction
period is completed.

          9.5. End
of Restrictions. Subject to Section 11.5, at the end of any time period
during which the shares of Restricted Stock are subject to forfeiture and
restrictions on transfer, such shares will be delivered free of all
restrictions to the Participant or to the Participant’s legal representative,
beneficiary or heir, subject to applicable withholding for taxes.

          9.6. Rights
of Holders of Restricted Stock. Subject to the terms and conditions of the
Plan, each Participant receiving Restricted Stock shall have all the rights of
a stockholder with respect to shares of stock during any period in which such
shares are subject to forfeiture and restrictions on transfer, including
without limitation, the right to vote such shares. Dividends paid in cash or
property other than Common Stock with respect to shares of Restricted Stock
shall be paid to the Participant currently.

          9.7. Section
83(b) Election. The Committee may provide in an Award agreement that the
Award of Restricted Stock is conditioned upon the Participant making or
refraining from making an election with respect to the Award under Section
83(b) of the Code. If a Participant makes an election pursuant to Section 83(b)
of the Code concerning a Restricted Stock Award, the Participant shall be
required to file promptly a copy of such election with the Company.

8

          9.8. Rights
of Holders of Restricted Stock Units; Dividend Equivalents. Participants
who receive Restricted Stock Units shall have no rights as stockholders with
respect to such Restricted Stock Units until such time as share certificates
for Common Stock are issued to the Participants; and such Participants shall
never have rights as stockholders if the Restricted Stock Units are payable
only in cash; provided, however, that, the Award agreement may provide for
Dividend Equivalents. Dividend Equivalents, if any, shall be payable quarterly
during the applicable restricted period for all Restricted Stock Units awarded
hereunder, or at the end of the restricted period, or otherwise as provided in
the Award agreement; provided, that Dividend Equivalents shall be payable at a
time that satisfies the requirements of (or an exemption from) Section 409A of
the Code, including the rules and regulations thereunder (together, “Section
409A”). Dividend Equivalents shall otherwise be considered a part of the award
of Restricted Stock Units.

10. Performance Awards. A Performance Award is based on the
extent to which the applicable Performance Goals are achieved. A Performance
Award shall be of no value to a Participant unless and until earned in
accordance with this Section 10. 

          10.1. Establishment
of Performance Goals. Performance Goals applicable to a Performance Award shall
be established by the Committee in its absolute discretion and not more than 90
days after the beginning of the relevant Performance Period. Such Performance
Goals for Performance Awards that are intended to qualify as
“performance-based” compensation within the meaning of Section 162(m) of the
Code shall be based on one or more of the following business criteria: earnings
per share, operating income or profit, net income, gross or net sales,
expenses, expenses as a percentage of net sales, inventory turns, cash flow
(including, but not limited to, operating cash flow, free cash flow, cash flow
return on equity, and cash flow return on investment), gross profit, margins,
working capital, earnings before interest and tax (EBIT), earnings before
interest, tax, depreciation and amortization (EBITDA), return measures
(including, but not limited to, return on assets, capital, invested capital,
equity, sales, or revenue), revenue growth, share price (including, but not
limited to, growth measures and total shareholder return), operating
efficiency, productivity ratios, market share, economic value added and safety.
For Performance Awards that are intended to so qualify under
Section 162(m), the targets shall be established within the required time
period. Any of the above criteria may be
used to measure the performance of the Company, a Subsidiary, and/or affiliate
of the Company as a whole or any business unit of the Company, Subsidiary,
and/or such an affiliate or any combination thereof, as the Committee may deem
appropriate, or any of the above criteria as compared to the performance of a
group of comparator companies, or published or special index that the
Committee, in its sole discretion, deems appropriate, or the Committee may
select criteria based on the Company’s share price as compared to various stock
market indices. The Committee, in its sole discretion, may modify the
Performance Goals if it determines that circumstances have changed and
modification is required to reflect the original intent of the Performance
Goals; provided, however, that no such change or modification may be made to
the extent it increases the amount of compensation payable to any Participant
who is a “covered employee” within the meaning of Code Section 162(m).

          10.2. Levels
of Performance Required to Earn Performance Awards. At or about the same
time that Performance Goals are established for a specific period, the
Committee shall in its absolute discretion establish the percentage of the
Performance Awards granted for such Performance Period which shall be earned by
the Participant for various levels of performance measured in relation to
achievement of Performance Goals for such Performance Period. 

          10.3. Other
Terms. The Committee shall determine the terms and conditions applicable to
any Performance Award, which may include vesting provisions, restrictions on
the 

9

delivery of Common Stock payable in connection with the Performance
Award, the requirement that such Common Stock be delivered in the form of Restricted
Stock, or other restrictions that could result in the future forfeiture of all
or part of any Common Stock earned. The Committee may provide that shares of
Common Stock issued in connection with a Performance Award be held in escrow
and/or legended. 

          10.4. Notification
to Participants. Promptly after the Committee has established or modified
the Performance Goals with respect to a Performance Award, the Participant
shall be provided with written notice of the Performance Goals so established
or modified. 

          10.5. Measurement
of Performance Against Performance Goals. The Committee shall, as soon as
practicable after the close of a Performance Period, determine: 

	
  

 	
  

 
	
  

 	
           (a) the
 extent to which the Performance Goals for such Performance Period have been
 achieved; and 

 
	
  

 	
  

 
	
  

 	
           (b) the
 percentage of the Performance Awards earned as a result. 

 

          These
determinations shall be absolute and final as to the facts and conclusions
therein made and be binding on all parties. Promptly after the Committee has
made the foregoing determination, each Participant who has earned Performance
Awards shall be notified, in writing thereof. For all purposes of this Plan,
notice shall be deemed to have been given the date action is taken by the
Committee making the determination. Participants may not sell, transfer,
pledge, exchange, hypothecate or otherwise dispose of all or any portion of
their Performance Awards during the Performance Period, except that Performance
Awards may be transferable by assignment by a Participant to the extent
provided in the applicable Performance Award agreement. 

          10.6. Treatment
of Performance Awards Earned. Upon the Committee’s determination that a
percentage of any Performance Awards have been earned for a Performance Period,
Participants to whom such earned Performance Awards have been granted and who
have been (or were) in the employ of the Company or a Subsidiary thereof
continuously from the Grant Date, subject to the exceptions set forth in this
section and in Section 10.9 hereof, shall be entitled, subject to the other
conditions of this Plan, to payment in accordance with the terms and conditions
of their Performance Awards. Such terms and conditions may permit or require
that any applicable tax withholding be deducted from the amount payable.
Performance Awards shall under no circumstances become earned or have any value
whatsoever for any Participant who is not in the employ of the Company or a
Subsidiary continuously during the entire Performance Period for which such
Performance Award was granted, except as provided by the Committee in
circumstances it deems advisable or as provided in Section 10.9 hereof. 

          10.7. Distribution.
Distributions payable pursuant to Section 10.6 above shall be made as soon as
practicable after the Committee determines the Performance Awards have been
earned unless the provisions of Section 10.8 hereof are applicable to a
Participant. 

          10.8. Deferral
of Receipt of Performance Award Distributions; Compliance with Section 409A.
With the consent of the Committee, a Participant who has been granted a
Performance Award may elect to defer receipt of all or any part of any
distribution associated with that Performance Award pursuant to the terms of a
deferred compensation plan of the Company. In any such event, the agreement
evidencing such Performance Award shall comply in all respects with the
applicable requirements of Section 409A of the Code and the regulations
promulgated thereunder.

10

          10.9. Non-Disqualifying
Termination of Employment. Exceptions to the requirement of continuous
employment during a Performance Period for Performance Award distribution
include Retirement as defined in Section 11.4(a), or termination of a
Participant’s employment by reason of death (in which event the Performance
Award may be transferable by will or the laws of descent and distribution only
to such Participant’s beneficiary designated to receive the Performance Award
or to the Participant’s applicable legal representatives, heirs or legatees) or
total and permanent disability, with the consent of the Committee, occurring
during the Performance Period applicable to the subject Performance Award. In
the instance of Retirement, death or total and permanent disability as
described above, a distribution of the Performance Award shall be made as soon
as practicable, with the distributed amount equal to the amount that could have
been earned during the Performance Period if the Participant were continuously
employed by the Company or a Subsidiary until the last day of the Performance
Period; provided, that the amount earned will be established by the Committee
(i) based upon the actual achievement level of the Performance Goals for any
fiscal year during the Performance Period that was completed prior to
termination and for the fiscal year in which the termination occurred, and (ii)
based upon the assumed achievement of target levels of the Performance Goals
for any subsequent fiscal year during the Performance Period.

11. General 

          11.1. Effective Date. The Plan will become effective upon
its approval by the Board, subject to approval by the Company’s stockholders. 

          11.2. Duration.
The Plan shall remain in effect until all Incentives granted under the Plan
have either been satisfied by the issuance of shares of Common Stock or the
payment of cash or been terminated under the terms of the Plan and all
restrictions imposed on shares of Common Stock in connection with their
issuance under the Plan have lapsed. No Incentives may be granted under the
Plan after the tenth anniversary of the date the Plan is approved by the
Company’s stockholders.

          11.3. Limits
on Transfer of Awards. No Award and no right under any such Award shall be
transferable by a Participant for any consideration. Except as otherwise
provided by the terms of this Plan, no Award and no right under any such Award
shall be transferable by a Participant other than by will or by the laws of
descent and distribution. The Committee may establish procedures as it deems
appropriate for a Participant to designate a Person or Persons, as beneficiary
or beneficiaries, to exercise the rights of the Participant and receive any
property distributable with respect to any Award in the event of the Participant’s
death. The Committee, in its discretion and subject to such additional terms
and conditions as it determines, may permit a Participant to transfer a Stock
Option to any “family member” (as such term is defined in the General
Instructions to Form S-8 (or any successor to such Instructions or such Form)
under the Securities Act of 1933, as amended) at any time that such Participant
holds such Option, provided that such transfers may not be for value (i.e., the
transferor may not receive any consideration therefore) and the family member
may not make any subsequent transfers other than by will or by the laws of
descent and distribution. Each Award under the Plan or right under any such
Award shall be exercisable during the Participant’s lifetime only by the
Participant, except as provided herein or in an agreement evidencing an Award
or amendment thereto relating to a Stock Option) or, if permissible under
applicable law, by the Participant’s guardian or legal
representative. No Award or right under any such Award may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company. 

          11.4. Effect
of Retirement or Other Termination. 

	
  

 	
  

 
	
  

 	
           (a) In
 the event of a Participant’s Retirement (as defined below), if and to the
 extent provided in the agreement evidencing any Incentive described in this
 sentence, 

 

11

	
  

 	
  

 
	
  

 	
 (1) all outstanding Restricted Stock Awards, Stock Options, SARs and
 Restricted Stock Units previously granted to the Participant will become 100%
 vested, (2) the Participant shall be entitled to exercise any outstanding
 Stock Options and SARs for the remainder of the original term of the Stock
 Option or SAR, provided that if the Participant violates his/her Non-Compete
 Agreement (as defined below), all of his/her unexercised Stock Options and
 SARs shall terminate immediately and be forfeited to the Company and (3) the
 Participant will become entitled to a distribution of any Performance Award
 as described in Section 10.9. For purposes of this Plan, “Retirement” means
 the termination of employment with the Company or a Subsidiary for any reason
 other than death, Disability or Termination for Cause (as defined below) at any
 time after the Participant has attained the age of fifty-five years or a
 different age specified for a Participant for any Incentive) if the
 Participant has executed a Non-Compete Agreement (as defined below).
 “Non-Compete Agreement” means an agreement not to directly or indirectly
 render services (including consulting or research) for a period of three
 years to any person or business organization that is engaged in the
 development, manufacture and sale of any product, process or service
 (including any component thereof or research to develop information useful in
 connection with a product or service) that is being designed, developed,
 assembled, manufactured, marketed or sold by anyone other than the Company
 and which is of the same general type, performs similar functions, competes
 with or is used for the same purposes as a product of the Company or a
 Subsidiary. “Termination for Cause” means the termination of employment with
 the Company or a Subsidiary as a result of an illegal act, gross
 insubordination or willful violation of a policy of the Company or a
 Subsidiary by a Participant.

 
	
  

 	
  

 
	
  

 	
           (b) In
 the event that a Participant ceases to be an employee of or consultant to the
 Company or a Subsidiary or a director of the Company, as applicable, for any
 reason other than Retirement, including death or disability, any Incentives
 may be exercised or shall expire at such times as may be set forth in the
 agreement, if any, applicable to the Incentive, or otherwise as determined by
 the Committee.

 

          11.5. Restrictions
under Securities Laws. Notwithstanding anything in this Plan to the
contrary: (a) the Company may, if it shall determine it necessary or desirable
for any reason, at the time of Award of any Incentive or the issuance of any
shares of Common Stock pursuant to any Incentive, require the recipient of the
Incentive, as a condition to the receipt thereof or to the receipt of shares of
Common Stock issued pursuant thereto, to deliver to the Company a written
representation of present intention to acquire the Incentive or the shares of
Common Stock issued pursuant thereto for his or her own account for investment
and not for distribution; and (b) if at any time the Company further
determines, in its sole discretion, that the listing, registration or
qualification (or any updating of any such document) of any Incentive or the
shares of Common Stock issuable pursuant thereto is necessary on any securities
exchange or under any federal or state securities or blue sky law, or that the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with the Award of any Incentive,
the issuance of shares of Common Stock pursuant thereto, or the removal of any
restrictions imposed on such shares, such Incentive shall not be awarded or
such shares of Common Stock shall not be issued or such restrictions shall not
be removed, as the case may be, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.

          11.6. Adjustment.
In the event of any change in the outstanding Common Stock of the Company by
reason of a stock dividend, stock split, reverse stock split, combination of shares,
spin-off, dividend (other than regular, quarterly cash dividends),
recapitalization, merger or similar event, the Committee shall make appropriate
adjustments in the number of shares of 

12

Common Stock then subject to the Plan, the shares of Common Stock
issuable pursuant to any Incentive, the exercise price of any Stock Option or
SAR, the Performance Goals for any Incentive, and other provisions of this Plan
and outstanding Incentives, in order to reflect the change in the Common Stock
and to provide Participants with the same relative rights before and after such
adjustment.

          11.7. Incentive
Plans and Agreements. Except in the case of Stock Awards, the terms of each
Incentive shall be stated in a plan or agreement approved by the Committee. The
Committee shall communicate the key terms of each Award to the Participant
promptly after the Committee approves the grant of such Award.

	
  

 	
  

 
	
  

 	
 11.8. Withholding

 
	
  

 	
  

 
	
  

 	
           (a) The Company shall have the right to withhold
 from any payments made under the Plan or to collect as a condition of
 payment, any taxes required by law to be withheld. At any time when a
 Participant is required to pay to the Company an amount required to be
 withheld under applicable income tax laws in connection with a distribution
 of Common Stock or upon exercise of a Stock Option or SAR or upon vesting of
 Restricted Stock, the Participant may satisfy this obligation in whole or in
 part by electing (the “Election”) to have the Company withhold, from the
 distribution or from such shares of Restricted Stock, shares of Common Stock
 having a value up to the minimum amount of withholding taxes required to be
 collected on the transaction. The value of the shares to be withheld shall be
 based on the Fair Market Value of the Common Stock on the date that the
 amount of tax to be withheld shall be determined (“Tax Date”).

 
	
  

 	
  

 
	
  

 	
           (b) Each
 Election must be made prior to the Tax Date. The Committee may disapprove of
 any Election, may suspend or terminate the right to make Elections, or may
 provide with respect to any Incentive that the right to make Elections shall
 not apply to such Incentive. An Election is irrevocable.

 

          11.9. No
Continued Employment, Engagement or Right to Corporate Assets. No
Participant under the Plan shall have any right, because of his or her
participation, to continue in the employ of the Company for any period of time
or to any right to continue his or her present or any other rate of
compensation. Nothing contained in the Plan shall be construed as giving an
employee, a consultant, such persons’ beneficiaries or any other person any
equity or interests of any kind in the assets of the Company or creating a
trust of any kind or a fiduciary relationship of any kind between the Company
and any such person.

          11.10. Payments
Under Incentives. Payment of cash or distribution of any shares of Common
Stock to which a Participant is entitled under any Incentive shall be made as
provided in the Incentive. Except as permitted under Section 11.14, payments
and distributions may not be deferred under any Incentive unless the deferral
complies with the requirements of Code Section 409A.

          11.11. Amendment
of the Plan. The Board or Committee may amend or discontinue the Plan at
any time. However, no such amendment or discontinuance shall adversely change
or impair, without the consent of the recipient, an Incentive previously
granted. Further, no such amendment shall, without approval of the stockholders
of the Company, (a) increase the maximum number of shares of Common Stock which
may be issued to all Participants under the Plan, or (b) make any other change
for which stockholder approval is required by law or under the applicable rules
of the New York Stock Exchange.

          11.12. Amendment
of Agreements for Incentives; No Stock Option or SAR Repricing Without
Stockholder Approval. Except as otherwise provided in this Section 11.12,
the terms of an existing Incentive may be amended by agreement between the
Committee and the 

13

Participant. Notwithstanding the foregoing sentence, except as
permitted under Section 11.6, 11.13 or 11.14, (a) without the prior approval of
the Company’s stockholders, (i) no Stock Option or SAR will be repriced,
replaced, or regranted through cancellation, (ii) the exercise price of a previously
granted Stock Option or SAR will not be lowered and (iii) no Stock Option or
SAR whose Fair Market Value is lower than its exercise price will be exchanged
for cash or another Incentive, and (b) no such amendment shall (i) extend the
maximum period during which such Incentive may be exercised, either by
extending the term of the Incentive or by extending the exercise period
following termination of employment or any other applicable event, or (ii)
reduce the exercise price per share below the Fair Market Value of the Common
Stock on the date the Incentive was granted, unless, in either case, the
Incentive, as amended, complies with the requirements of Section 409A.

          11.13. Change
in Control. In the event of a Change in Control, the Committee or a
comparable committee of any corporation assuming the obligations of the Company
hereunder shall declare (a) that the restriction period of all Restricted Stock
and Restricted Stock Units has been eliminated; (b) that all Restricted Stock
Units shall be payable in connection with the Change in Control, pursuant to
the following paragraph, if applicable; (c) that subject to the third paragraph
of this Section 11.13, all outstanding Stock Options and SARs shall accelerate
and become exercisable in full but that all outstanding Stock Options and SARs,
whether or not exercisable prior to such acceleration, must be exercised within
the period of time set forth in a notice to Participant or they will terminate;
and (d) that all Performance Awards granted to Participants are deemed earned. 

          In
connection with any declaration pursuant to this Section 11.13 that applies to
Restricted Stock Units that are payable in cash, the Committee shall cause a
cash payment to be made to each Participant who holds any such Restricted Stock
Unit in an amount equal to the product obtained by multiplying (a) the amount
of the Transaction Proceeds Per Share (as defined in the following sentence)
times (b) the number of shares of Common Stock covered by such Restricted Stock
Unit. For purposes of this Section 11.13, “Transaction Proceeds Per Share”
shall mean the cash plus the Fair Market Value of the non-cash consideration to
be received per share by the shareholders of the Company upon the occurrence of
the transaction.

          In
connection with any declaration pursuant to this Section 11.13 that applies to
Stock Options or SARs, the Committee may, but shall not be obligated to, cause
a cash payment to be made to each Participant who holds a Stock Option or SAR
that is terminated in an amount equal to the product obtained by multiplying
(a) the amount (if any) by which the Transaction Proceeds Per Share exceeds the
exercise price per share covered by such Stock Option, times (b) the number of
shares of Common Stock covered by such Stock Option or SAR.

          The
Board may restrict the rights of Participants or the applicability of this
Section 11.13 to the extent necessary to comply with Section 16(b) of the
Exchange Act, the Code or any other applicable law or regulation. The grant of
an Incentive Award pursuant to the Plan shall not limit in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge, exchange or consolidate
or to dissolve, liquidate, sell or transfer all or any part of its business or
assets. 

	
  

 	
  

 
	
  

 	
 11.14. Deferred Compensation 

 
	
  

 	
  

 
	
  

 	
           (a) Except to the extent such
 acceleration or deferral is permitted or complies with the requirements of
 Code Section 409A and the regulations promulgated thereunder, neither the
 Committee nor a Participant may accelerate or defer the time or schedule of
 any payment of, or the amount scheduled to be paid under, an Incentive that
 constitutes Deferred Compensation; provided, however, that payment shall be
 permitted if it is in accordance with a fixed date or schedule or on

 

14

	
  

 	
  

 
	
  

 	
 account of “separation from service,” “disability,” death, “change in
 control” or “ unforeseeable emergency” as those terms are defined under Code
 Section 409A and the regulations promulgated thereunder.

 
	
  

 	
  

 
	
  

 	
           (b)
 Notwithstanding anything in the Plan, unless the agreement evidencing the
 Incentive specifically provides otherwise, the Company may not make payment
 to a Specified Employee of any Incentive that constitutes Deferred
 Compensation, earlier than 6 months following the Participant’s “separation
 from service” as defined for purposes of Code Section 409A (or if earlier,
 upon the Specified Employee’s death), except as permitted under Code Section
 409A and the regulations promulgated thereunder. Any payments that otherwise
 would be payable to the Specified Employee during the foregoing 6 month
 period will be accumulated and payment delayed until the first date after the
 6 month period. The Committee may specify in the Stock Incentive Agreement,
 that the amount of the Deferred Compensation delayed shall accumulate
 interest, earnings or Dividend Equivalents (as applicable) during the period
 of such delay.

 
	
  

 	
  

 
	
  

 	
           (c) The
 Committee may, however, reform any provision in an Incentive intended to
 comply with (or be exempt from) Code Section 409A to maintain to the maximum
 extent practicable the original intent of the applicable provision without
 violating the provisions of Code Section 409A and the regulations promulgated
 thereunder.

 

          11.15. Prior
Plans. Notwithstanding the adoption of this Plan by the Board and its
approval by the stockholders, the Company’s Prior Plans, as they have been
amended from time to time, shall remain in effect, and all grants and awards
made under the Prior Plans shall be governed by the terms of the Prior Plans.
No further grants shall be made under the Prior Plans.

Approved by the Board of
Directors on December 10, 2008.

Approved by the stockholders on February 25, 2009.

Amended on October 20, 2009 to add an additional 3,000,000 shares to the Plan
reserve; 

amendment approved by the stockholders on February 18, 2010.

Amended June 8, 2010.

15exhibit4_1.htm - Generated by SEC Publisher for SEC Filing

Exhibit 4.1                

AMENDMENT NO. 4 TO RIGHTS AGREEMENT

 

AMENDMENT NO. 4 (the “Amendment”), dated as of June 8, 2010, to the Rights Agreement, dated as of June 8, 2000 (the “Rights Agreement”), between Smith International, Inc., a Delaware corporation (the “Company”), and Computershare Trust Company, N.A., a federally chartered trust company (as successor rights agent to First Chicago Trust Company of New York), as rights agent (the “Rights Agent”).

RECITALS

WHEREAS, the Company and the Rights Agent have heretofore executed and entered into the Rights Agreement.

WHEREAS, the Company, Schlumberger Limited (“Schlumberger”) and Turnberry Merger Sub Inc. (“Merger Sub”) have entered into an Agreement and Plan of Merger (the “Merger Agreement”) dated as of February 21, 2010 pursuant to which Merger Sub will merge with and into the Company (the “Merger”).  The Board of Directors of the Company has approved the Merger Agreement. 

WHEREAS, pursuant to Section 27 of the Rights Agreement, prior to the time any person becomes an Acquiring Person (as defined in the Rights Agreement) the Company may from time to time supplement and amend the Rights Agreement.

WHEREAS, the preferred share purchase rights (the “Rights”) under the Rights Agreement are scheduled to expire at 5:00 p.m, New York City time, on June 8, 2010.

WHEREAS, pursuant to the Merger Agreement, Smith has agreed to extend the expiration date of the Rights Agreement at Schlumberger’s request.

WHEREAS, Schlumberger has requested that Smith extend the expiration date of the Rights Agreement.   

WHEREAS, all acts and things necessary to make this Amendment a valid agreement, enforceable according to its terms have been done and performed, and the execution and delivery of this Amendment by the Company and the Rights Agent have been in all respects duly authorized by the Company and the Rights Agent.

                        NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, and intending to be legally bound hereby, (capitalized terms used but not defined herein have the meanings ascribed to such terms in the Rights Agreement):

 

1.         Amendment of Section 7(a) of the Rights Agreement.  Subsection (a) of Section 7 of the Rights Agreement is hereby amended and replaced in its entirety with the following:

 

“The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein), in whole or in part, at any time after the 
 Distribution Date, upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the principal office of the Rights Agent, together with payment of the Purchase Price for each one one-hundredth of a Preferred Share as to which the Rights are exercised, at or prior to the earliest of (i) the Close of Business on May 31, 2011 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the “Redemption Date”, (iii) the time at which such Rights are exchanged as provided in Section 24 hereof or (iv) immediately prior to the Effective Time (as defined in the Plan) of the Merger.”

	

                                                                                                                                                                                                                                                                

 

 

2.         Amendment of Exhibit B to the Rights Agreement.  Exhibit B to the Rights Agreement is hereby amended by replacing the references to “2010” with “2011.” 

 

3.         Amendment of Exhibit C to the Rights Agreement.  Exhibit C to the Rights Agreement is hereby amended by replacing the sentence under the heading “Expiration” in its entirety with the following:

            

            “The Rights will expire on May 31, 2011.” 

 

4.         Effectiveness.  This Amendment shall be deemed effective as of the date first written above, as if executed on such date.  Except as amended hereby, the Rights Agreement shall remain in full force and effect and shall be otherwise unaffected hereby.

 

5.         Miscellaneous.  This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made and performed entirely within such state.  This Amendment may be executed in any number of counterparts, each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.  If any provision, covenant or restriction of this Amendment is held by a court of competent jurisdiction or other authority to be invalid, illegal or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment shall remain in full force and effect and shall in no way be effected, impaired or invalidated.  Except as otherwise expressly provided herein, or unless the context otherwise requires, all terms used herein have the meanings assigned to them in the Rights Agreement.  The Rights Agent and the Company hereby waive any notice requirement under the Rights Agreement pertaining to the matters covered by this Amendment.  

            

 

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                        IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and year first above written.

 

 

 

		  SMITH INTERNATIONAL, INC.
	Attest: 	
		
	
By:    _/s/ Jennifer Samford_________

Name: Jennifer Samford

	
By:    __/s/ Richard E. Chandler, Jr.____

Name: Richard E. Chandler, Jr.

Title: Senior Vice President, 

General Counsel and Secretary

 

 

 

 

 

 

		COMPUTERSHARE TRUST COMPANY, N.A. 
	Attest: 	
		
	
By:    __/s/ Suzanne S. O'Brien______

Name: Suzanne S. O'Brien

Title: Corporate Counsel

	
By:    ____/s/ Dennis V. Moccia_________

Name: Dennis V. Moccia

Title: Manager, Contract Administration

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