Document:

Exhibit 10.3  (00167248.DOC;1)

Exhibit 10.3

WAUSAU PAPER CORP.

1990 STOCK APPRECIATION RIGHTS PLAN

As amended May 4, 2007

WAUSAU PAPER CORP.

1990 STOCK APPRECIATION RIGHTS PLAN

1.

Purpose.

The purpose of the Wausau Paper Corp. 1990 Stock Appreciation Rights Plan (the “Plan”) is to attract and retain outstanding individuals as officers and key employees of Wausau Paper Corp. (the “Corporation”) and its subsidiaries, and to furnish incentives to such individuals through rewards based upon the performance of the common stock of the Corporation.  To this end, the Committee hereinafter designated may grant stock appreciation rights to officers and other key employees of the Corporation and its subsidiaries, on the terms and subject to the conditions set forth in this Plan.

2.

Participants.

Participants in the Plan shall consist of such officers and other key employees of the Corporation and its subsidiaries as the Committee in its sole discretion may select from time to time to receive stock appreciation rights.

3.

Administration of the Plan.

The Plan shall be administered by a Committee (the “Committee”) of at least three members appointed by the Board of Directors of the Corporation from among its members.  No person shall be appointed a member of the Committee if, during the one year prior to the date on which such person’s service as a member of the Committee is to commence, such person was granted or awarded equity securities of the Corporation (within the meaning of Securities and Exchange Commission Rule 16a-1(d)) under the Plan or any other plan of the Corporation or any subsidiary of the Corporation.  Subject to the provisions of the Plan, the Committee shall have authority (i) to determine which employees of the Corporation and its subsidiaries shall be eligible for participation in the Plan; (ii) to select employees to receive grants under the Plan; (iii) to determine the number of stock appreciation rights subject to the grant, the time and conditions of exercise or vesting, the fair market value of the common stock of the Corporation for purposes of the Plan, and all other terms and conditions of any grant; and (iv) to prescribe the form of agreement, certificate or other instrument evidencing the grant.  The Committee shall also have authority to interpret the Plan and to establish, amend and rescind rules and regulations for the administration of the Plan, and all such interpretations, rules and regulations shall be conclusive and binding on all persons, provided, however, that the Committee shall not exercise such authority in a manner adversely and significantly affecting rights previously granted unless the action taken is required to comply with any applicable law or regulation.

4.

Effective Date and Term of Plan.

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The Plan shall become effective on July 24, 1990, the date of its approval by the Board of Directors of the Corporation.  The Plan shall terminate ten years after it becomes effective, unless terminated sooner by action of the Board of Directors.  No further grants may be made under the Plan after its termination, but the termination of the Plan shall not affect the rights of any participant under, or the authority of the Committee with respect to, any grants made prior to termination.

5.

Shares Subject to the Plan.

Subject to adjustment as provided in paragraph 7 hereof, the aggregate number of shares of common stock of the Corporation with respect to which stock appreciation rights may be granted under the Plan shall not exceed 250,000.  Whenever a stock appreciation right granted under the Plan can no longer under any circumstances be exercised, the shares, if any, then remaining subject to such stock appreciation right shall thereupon be released from such stock appreciation right and shall thereafter be available for additional grants of stock appreciation rights under the Plan.

6.

Stock Appreciation Rights.

(a)

Grants.  Stock appreciation rights entitling the grantee to receive cash equal to the sum of (i) the appreciation in value of and (ii) the value of the reinvested cash dividends which would have been paid with respect to a stated number of shares of common stock of the Corporation between the date of grant and the date of exercise (the “hypothetical reinvested cash dividends”) may be granted from time to time to such officers and other key employees of the Corporation and its subsidiaries as may be selected by the Committee.

(b)

Terms of Grant.  Stock appreciation rights shall be exercisable in whole or in such installments and at such times as may be determined by the Committee, provided that no stock appreciation right shall be exercisable more than twenty years after the date of grant.  The Committee may at the time of grant or at any time thereafter impose such additional terms and conditions on the exercise of stock appreciation rights as it deems necessary or desirable for compliance with Section 16(a) or 16(b) of the Securities Exchange Act of 1934 and the rules and regulations thereunder.

(c)

Termination of Employment or Death.  If a grantee ceases to be employed by the Corporation and any of its subsidiaries for any reason other than death or attaining his Retirement Date, any stock appreciation right held by such grantee may be exercised for a period ending on the earlier of the 90th day following the date of such cessation of employment or the date of expiration of such stock appreciation right, but only with respect to that number of shares of common stock for which such right was exercisable immediately prior to the date of cessation of employment.

If a grantee ceases to be employed by the Corporation or any of its subsidiaries by reason of death prior to his Retirement Date, or dies within 90 days after termination of his employment by the Corporation or any of its subsidiaries prior to his having attained his Retirement Date, any stock appreciation right held by such grantee may be exercised, with respect to all or any part of the common stock of the Corporation with respect to which such stock appreciation right was 

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exercisable by the grantee immediately prior to his death, for a period ending on the first anniversary of the date of such grantee’s death.

If a grantee attains his Retirement Date, any stock appreciation right held by such grantee may be exercised for a period ending on the second anniversary of such Retirement Date, but only with respect to that number of shares of common stock for which such right was exercisable immediately prior to the date of cessation of employment.

Notwithstanding any other provision of this Section 6(c), no stock appreciation right shall be exercisable after the first to occur of (1) the date specified in Section 6(b) or (2) the date specified by the Committee in the grant evidencing such rights.

For purposes of this Plan, the term “Retirement Date” shall mean the date on which the grantee’s employment with the Corporation (and any parent or subsidiary of the Corporation) terminates (including termination because of death) if the Optionee had then attained age 55 and completed ten calendar years of service with the Corporation (or any parent or subsidiary of the Corporation). 

(d)

Payment on Exercise.  Upon exercise of a stock appreciation right the grantee shall be paid within five business days an amount in cash equal to the sum of (i) the amount by which the fair market value of one share of the Corporation’s common stock on the date of exercise exceeds the date of grant value thereof multiplied by the number of shares in respect of which the stock appreciation right is being exercised and (ii) the value of the hypothetical reinvested cash dividends associated therewith.  The value of the hypothetical reinvested cash dividends associated with a share in respect of which the stock appreciation right is being exercised (the “exercised share”) shall be equal to the fair market value on the date of exercise of the number of additional shares (or fraction thereof) of the Corporation’s common stock the grantee would have owned if it is assumed (1) that cash dividends which would have been paid with respect to the exercised share if the exercised share had been outstanding from the time of grant had been paid in cash to the grantee and then immediately reinvested by the grantee in the Corporation’s common stock at the fair market value thereof on the applicable dividend payment date, and (2) that, once assumed issued, hypothetical shares resulting from assumed dividend reinvestment themselves paid cash dividends (at the same time and in the same amount as shares of the Corporation’s outstanding common stock) which were reinvested in a similar manner.

For purposes of this Plan, the fair market value of a share of common stock of the Corporation means:

(A)

If the principal market for the common stock of the Corporation is a national securities exchange, “fair market value” means the closing price of the common stock of the Corporation on the New York Stock Exchange if the common stock is then listed for trading on such exchange, otherwise, the closing price of the common stock of the Corporation as reported on the principal exchange on which the common stock is then listed for trading.

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(B)

If the principal market for the common stock of the Corporation is an over-the-counter market, “fair market value” means the closing price of the common stock of the Corporation reported in the Nasdaq National Stock Market, or if the common stock of the Corporation is not then listed for trading in such market, the closing price reported on any other bona fide over-the-counter stock market selected in good faith by the Committee.

In the event that the date of the exercise of a stock appreciation right is a date on which there is no trading of the common stock of the Corporation on a national or regional securities exchange or is a date for which there is no published bid and asked prices if the stock is traded on the over-the-counter market, such fair market value shall be determined by referring to the next preceding business day on which trading occurs or on which published prices are available.

(e)

Additional Terms and Conditions.  The agreement or instrument evidencing the grant of stock appreciation rights may contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Committee in its sole discretion.

7.

Adjustments for Changes in Capitalization, Etc.

Stock appreciation rights shall be subject to adjustment by the Committee in its sole discretion as to the number, kind and date of grant value of shares or other consideration subject to such grants in the event of changes in the outstanding common stock by reason of stock dividends, stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in corporate structure or capitalization occurring after the date of the grant of any stock appreciation right, provided that if the Corporation shall change its common stock into a greater or lesser number of shares through a stock dividend, stock split-up, or combination of shares, outstanding rights shall be adjusted proportionately, consistent with existing law and regulation, to prevent inequitable results.

8.

Effect of Liquidation, Merger, Consolidation, or Other Events.

Nothing contained in the Plan or in any stock appreciation right granted under the Plan shall in any way prohibit the Corporation from merging with or consolidating into another corporation, or from selling or transferring all or substantially all of its assets, or from distributing all or substantially all of its assets to its stockholders in liquidation, or from dissolving and terminating its corporate existence; and in any such event, all outstanding stock appreciation rights granted under the Plan shall be deemed to have been exercised at the time of any such merger, consolidation, sale or transfer of assets, liquidation, or dissolution, except to the extent that any agreement or undertaking of any party to such merger, consolidation, or sale or transfer of assets, or any plan pursuant to which such liquidation or dissolution is effected, shall make specific provision to continue such stock appreciation rights and the rights of such person or persons entitled to exercise such stock appreciation rights.

9.

Amendment and Termination of Plan.

The Plan may be amended or terminated by the Board of Directors of the Corporation in any respect, provided, however, that the Board shall not exercise such authority in a manner 

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adversely and significantly affecting rights previously granted unless the action taken is required to comply with any applicable law or regulation.

10.

Miscellaneous.

(a)

No Right to a Grant.  Neither the adoption of the Plan nor any action of the Board of Directors or of the Committee shall be deemed to give any employee any right to be selected as a participant or to be granted a stock appreciation right.

(b)

Rights as Stockholder.  No person shall have any rights as a stockholder of the Corporation with respect to any shares covered by a stock appreciation right.

(c)

Employment.  Nothing contained in this Plan shall be deemed to confer upon any employee any right of continued employment with the Corporation or any of its subsidiaries or to limit or diminish in any way the right of the Corporation or any such subsidiary to terminate his or her employment at any time with or without cause.

(d)

Taxes.  The Corporation shall be entitled to deduct from any payment under the Plan the amount of any tax required by law to be withheld with respect to such payment or may require any participant to pay such amount to the Corporation prior to and as a condition of making such payment.

(e)

Nontransferability.  No stock appreciation right shall be transferable except by will or the laws of descent and distribution.  During the holder’s lifetime, stock appreciation rights shall be exercisable only by such holder.

11.

Change of Control.

(a)

Definition of “Change in Control.”  For purposes of the Plan, a “Change in Control” means the happening of any of the following events:

(i)

The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) of beneficial ownership (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 Corporation (the “Outstanding Corporation Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the “Outstanding Corporation Voting Securities”); excluding, however, the following: (1) any acquisition directly from the Corporation other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Corporation, (2) any acquisition by the Corporation, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any entity controlled by the Corporation, (4) any acquisition pursuant to a transaction which complies with clauses (A), (B), and (C) of paragraph (iii) of this Section 11(a), (5) except as provided in paragraphs (iv) and (v), any acquisition by any of the Woodson Entities or any of the Smith Entities, or (6) any increase in the proportionate number of shares of Outstanding Corporation Common 

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Stock or Outstanding Corporation Voting Securities beneficially owned by a Person to 20% or more of the shares of either of such classes of stock if such increase was solely the result of the acquisition of Outstanding Corporation Common Stock or Outstanding Corporation Voting Securities by the Corporation; provided, however, that this clause (6) shall not apply to any acquisition of Outstanding Corporation Common Stock or Outstanding Corporation Voting Securities not described in clauses (1), (2), (3), (4), or (5) of this paragraph (i) by the Person acquiring such shares which occurs after such Person had become the beneficial owner of 20% or more of either the Outstanding Corporation Common Stock or Outstanding Corporation Voting Securities by reason of share purchases by the Corporation; or

(ii)

A change in the composition of the Board such that the individuals who, as of the Effective Date, constitute the Board (such Board shall be hereinafter referred to as the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of the Plan, that any individual who becomes a member of the Board subsequent to the Effective Date whose election, or nomination for election by the Corporation’s shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be deemed to be and shall be considered as though such individual were a member of the Incumbent Board, but provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so deemed or considered as a member of the Incumbent Board; or

(iii)

Consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Corporation or the acquisition of the assets or securities of any other entity (a “Corporate Transaction”); excluding, however, such a Corporate Transaction pursuant to which (A) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries) (the “Resulting Corporation”) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (B) no Person (other than the Corporation, any employee benefit plan (or related trust) of the Corporation, any Woodson Entity, any Smith Entity, or such Resulting Corporation) will beneficially own, directly or indirectly, 20% or more of, respectively, the outstanding shares of common stock of the Resulting Corporation or the combined 

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voting power of the then outstanding voting securities of such Resulting Corporation entitled to vote generally in the election of directors except to the extent that such ownership existed with respect to the Corporation prior to the Corporate Transaction, and (C) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the Resulting Corporation; or

(iv)

The Woodson Entities acquire beneficial ownership of more than 35% of the Outstanding Corporation Common Stock or Outstanding Corporation Voting Securities or of the outstanding shares of common stock or the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the Resulting Corporation; or

(v)

The Smith Entities acquire beneficial ownership of more than 35% of the Outstanding Corporation Common Stock or Outstanding Corporation Voting Securities or of the outstanding shares of common stock or the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the Resulting Corporation; or

(vi)

The approval by the shareholders of the Corporation of a complete liquidation or dissolution of the Corporation.

For purposes of this Section 11(a), the term “Woodson Entities” shall mean Aytchmonde P. Woodson, Leigh Yawkey Woodson and Alice Richardson Yawkey, members of their respective families and their respective descendants (the “Woodson Family”), heirs or legatees of any of the Woodson Family members, transferees by will, laws of descent or distribution or by operation of law of any of the foregoing (including of any such transferees) (including any executor or administrator of any estate of any of the foregoing), any trust established by any of Aytchmonde P. Woodson, Leigh Yawkey Woodson, or Alice Richardson Yawkey, whether pursuant to last will or otherwise, any partnership, trust or other entity established primarily for the benefit of, or any other Person the beneficial owners of which consist primarily of, any of the foregoing or any Affiliates or Associates of any of the foregoing or any charitable trust or foundation to which any of the foregoing transfers or may transfer securities of the Corporation (including any beneficiary or trustee, partner, manager or director of any of the foregoing or any other Person serving any such entity in a similar capacity). 

For purposes of this Section 11(a), the term “Smith Entities” shall mean David B. Smith and Katherine S. Smith, members of their respective families and their respective descendants (the “Smith Family”), heirs or legatees of any of the Smith Family members, transferees by will, laws of descent or distribution or by operation of law of any of the foregoing (including of any such transferees) (including any executor or administrator of any estate of any of the foregoing), any trust established by either of David B. Smith or Katherine S. Smith, whether pursuant to last will or otherwise, any partnership, trust or other entity established primarily for the benefit of, or any other Person the beneficial owners of which consist primarily of, any of the foregoing or any Affiliates or Associates of any of the foregoing or any charitable trust or foundation to which any of the foregoing transfers or may transfer securities of the Corporation (including any beneficiary 

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or trustee, partner, manager or director of any of the foregoing or any other Person serving any such entity in a similar capacity).

For purposes of this Section 11(a), the terms “Affiliate” and “Associate” shall have the meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act as in effect on the date of this Plan. 

(b)

Effects of Change in Control.

(i)

In the event of a Change in Control,

(A)

all stock appreciation rights (“SARs”) outstanding on the date on which such Change in Control has occurred (the “Change in Control Date”) shall, to the extent not then exercisable or vested, immediately become exercisable in full, and

(B)

each grantee may elect, with respect to each SAR held by such grantee on the Change in Control Date (the grantee’s “Election Right”), to surrender such SAR for an immediate lump sum cash payment in an amount equal to the product of (1) the number of shares of common stock of the Corporation (“Shares”) then subject to the SAR as to which the election is being exercised, multiplied by (2) the excess, if any, of (a) the greater of (i) the Change in Control Price or (ii) the highest fair market value of a Share on any day in the 60-day period ending on the Change in Control Date, over (b) the date of grant value of such SAR.  Upon exercise of a grantee’s Election Right, the value of all hypothetical reinvested cash dividends associated with such SAR shall also be determined by the greater of (i) the Change in Control Price or (ii) the highest fair market value of a Share on any day in the 60-day period ending on the Change in Control Date.   For purposes of this Section 11(b), the “Change in Control Price” shall mean, if the Change in Control is the result of a tender or exchange offer or a Corporate Transaction (as defined in Section 11(a)(iii), the highest price per Share paid in such tender or exchange offer or Corporate Transaction.  To the extent that the consideration paid in any such transaction consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Committee. 

(ii)

The exercise of an Election Right must be in writing, specify the SAR or SARs and the number of Shares as to which the election is being exercised, and be delivered to the Secretary of the Corporation either in person or by depositing said notice and payment in the United States mail, postage pre-paid and addressed to such officer at the Corporation’s home office on or before the 60th day following the Change in Control Date. 

(iii)

All payments due an grantee pursuant to the provisions of this Section 11(b) shall be made by the Corporation on or before the first to occur of (A) the date provided in this Plan for payment upon exercise of an SAR and (B) the 5th business 

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day following the date on which the grantee’s election has been delivered to the Corporation pursuant to Section 11(b)(ii). 

(iv)

Notwithstanding any other provision of this Section 11(b), if the grant or the exercise of a grantee’s Election Right or payment of cash provided for in this Section 11(b) would make a Change in Control transaction ineligible for pooling-of-interests accounting treatment under APB No. 16, that, but for the nature of such grant or exercise of Election Rights, would otherwise be eligible for such pooling-of-interests accounting treatment, the Committee shall have the right and authority to modify, eliminate, or terminate the Election Right to the extent necessary to preserve such pooling-of-interests accounting treatment.

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Exhibit 10.5

WAUSAU PAPER CORP.

1991 EMPLOYEE STOCK OPTION PLAN

As amended May 4, 2007

WAUSAU PAPER CORP.

1991 EMPLOYEE STOCK OPTION PLAN

Wausau Paper Corp., a Wisconsin corporation (the “Company”), hereby adopts the Wausau Paper Corp. 1991 Employee Stock Option Plan (the “Plan”), as set forth herein.

Section 1.

Purpose.  The Plan has been adopted for the purpose of recognizing and rewarding the job performance of key employees of the Company and to enable the Company to attract and retain superior management-level employees by increasing the personal interest of all such employees in the growth and success of the Company.  It is the express intent of the Company that, subject to Section 6(g) hereof, all options granted hereunder designated “Incentive Stock Options” shall meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or any successor section or sections.  It is the further intent of the Company that options granted hereunder designated “Non-Qualified Stock Options” shall not meet the requirements of Section 422 of the Code.

Section 2.

Number of Shares Available for Options.  The aggregate number of shares of common stock, no par value, of the Company (the “Shares”) which may be issued under options granted pursuant to the Plan shall be 250,000.

Section 3.

Administration of the Plan.

Section 3.1

General.  The Plan shall be administered by a committee (the “Committee”) consisting of at least two members designated by the Board of Directors of the Company from among those of its members who are not officers or employees of the Company or a parent or subsidiary of the Company and who otherwise satisfy the definition of a “Non-Employee Director” in Rule 16b-3(b)(3) promulgated under Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”) and the definition of an “Outside Director” in the regulations under Section 162(m) of the Code.  In the absence of specific rules to the contrary, action by the Committee shall require the consent of a majority of the members of the Committee, expressed either orally at a meeting of the Committee or in writing in the absence of a meeting.

Section 3.2

Authority of Committee.  The Committee shall have full and complete authority to grant options to such eligible employees on such terms, which need not be the same as to all Optionees, as will, in its discretion and subject only to the specific limitations elsewhere contained in the Plan, carry out the purpose of the Plan.  The Committee shall also have full and complete authority to interpret the Plan and adopt rules governing the administration of the Plan.  The Committee’s decision on any matter with respect to the Plan shall be final.

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Section 3.3

Indemnification of Committee.  To the extent permitted by applicable law, the members of the Committee and each of them shall be indemnified and saved harmless by the Company from any liability or claim of liability which may arise from the administration of the Plan if the acts giving rise to such liability or claim of liability were taken in good faith and without negligence.

Section 4.

Eligible Employees.

Section 4.1

Definition of Eligible Employees.  Subject to the limitations of Section 4.2, key employees of the Company and its subsidiary corporations shall be eligible to participate in the Plan.  For purposes of the Plan, the term “key employee” shall include all employees of all participating employers employed in management, administrative or professional capacities.

Section 4.2

Limitations on Eligibility.  No person who is serving as a member of the Committee shall be eligible to receive an option; provided, however, that options outstanding prior to an Optionee’s becoming a member of the Committee shall remain in effect.

Section 5.

Granting of Options.  Subject to the limitations of Section 4.2, options to purchase Shares shall be granted to such key employees who are eligible to participate in the Plan as the Committee may, from time to time and at any time, select.  Membership in a class of eligible key employees shall not, without specific Committee action, entitle a key employee to receive an option to purchase Shares.  Eligible key employees selected by the Committee shall be referred to herein as “Optionees.”

Section 6.

Terms and Conditions of the Options.

Section 6.1

Written Instrument.  Each option to purchase Shares granted under the Plan shall be evidenced by a written option agreement signed on behalf of the Company and the Optionee which sets forth the name of the Optionee, the date granted, the price at which the Shares subject to the option may be purchased (the “option price”), whether the option is an Incentive Stock Option or a Non-Qualified Stock Option, the number of Shares subject to the option and such other terms and conditions consistent with the Plan as determined by the Committee.  The Committee may at the time of grant or at any time thereafter impose such additional terms and conditions on the exercise of such option as it deems necessary or desirable for compliance with Section 16 of the Exchange Act and the regulations promulgated thereunder.  Such option agreement shall incorporate by reference all terms, conditions and limitations set forth in the Plan.

Section 6.2

Terms and Conditions of the Options.  In addition to any other limitations, terms and conditions specified in the Plan, each option granted hereunder shall, as to each Optionee, satisfy the following requirements:

(a)

Date of Grant.  Options must be granted on or before June 18, 2001.

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(b)

Expiration.  No Incentive Stock Option shall be exercisable after the expiration of ten years from the date such option is granted.  No Non-Qualified Stock Option shall be exercisable after the expiration of twenty years from the date such option is granted.

(c)

Price.  The option price as to any Share subject to an Incentive Stock Option or Non-Qualified Stock Option will be not less than one hundred percent of the fair market value of the Share on the date the option is granted.  For purposes of the Plan, the fair market value of a Share means:

(i)

If the principal market for the Shares is a national securities exchange, “fair market value” means the closing price of the Shares on the New York Stock Exchange if the Shares are then listed for trading on such exchange, otherwise, the closing price of the Shares as reported on the principal exchange on which the Shares are then listed for trading.

(ii)

If the principal market for the Shares is an over-the-counter market, “fair market value” means the closing price of the Shares reported in the Nasdaq National Stock Market, or if the Shares are not then listed for trading in such market, the closing price reported on any other bona fide over-the-counter stock market selected in good faith by the Committee.

In the event that the date on which the fair market value of a Share is to be determined is a date on which there is no trading of the Shares on a national or regional securities exchange or on the over-the-counter market, such fair market value shall be determined by referring to the next preceding business day on which trading occurs.

(d)

Transferability.  

(i)

No Incentive Stock Option shall be transferable by the Optionee otherwise than by will or the laws of descent and distribution nor can it be exercised by anyone other than the Optionee during the Optionee’s lifetime.

(ii)

The Committee may, in its discretion, authorize all or a portion of any options to be granted to an Optionee or which were granted to any Optionee on or before December 16, 1996 to permit transfer by the Optionee to (A) the spouse, children or grandchildren of the Optionee (“Immediate Family”), (B) a trust for the exclusive benefit of the Optionee or the Optionee’s Immediate Family, (C) a partnership in which the Optionee or the Optionee’s Immediate Family are the only partners, or (D) to a former spouse of the Optionee pursuant to a domestic relations order within the meaning of Rule 16a-12 promulgated under Section 16 of the Exchange Act; provided, however, that (X) there may be not consideration for any such transfer, (Y) the written option agreement required by Section 6.1, or any amendment thereof approved by the Committee, must expressly provide for transferability of the option evidenced in such agreement in a manner consistent with this Section 6.2(d), and (Z) once transferred pursuant to the preceding provisions of this Section 6.2(d)(ii), no subsequent transfer of any options shall be permitted except a transfer by will or the laws of descent and distribution.  In 

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authorizing all or any portion of an option to be transferred, the Committee may impose any conditions on exercise, prescribe a holding period for the Shares acquired upon such exercise and/or impose any other conditions or limitations it deems desirable or necessary in order to carry out the purposes and requirements of the Plan.  Following transfer, the terms and conditions of the plan and the written option agreement relating to such option shall continue to be applicable in all respects to the Optionee making such transfer and each transferred option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer as if such option had not been transferred, including, but not limited to, the terms and conditions with respect to the lapse and termination of such option.  For purposes of Section 7, the transferee of an option shall be deemed an “Optionee”.  Neither the Company, the Committee or any Optionee shall have any obligation to inform any transferee of the termination or lapse of any option for any reason.  Notwithstanding any other provision of the plan, (YY) following the termination of employment of an Optionee, a transferred Non-Qualified Option shall be exercisable by the transferee only to the extent, and for the periods specified in Section 6(e) as if such option had not been transferred and (ZZ) no Non-Qualified Stock Option granted prior to November 1, 1996 may be transferred until such option has been held by the Optionee for a period of not less than six months after the date on which such option was granted.

(e)

Employment.

(i)

Except as otherwise provided in Section 6.2(e)(ii), no option shall be exercisable unless the Optionee shall have been employed by the Company (or any present or future parent or subsidiary of the Company) during the period beginning on the date the option is granted and ending on a date ninety days before the date of exercise; provided, however, that in the event an Optionee dies while in the employ of the Company (or any present or future parent or subsidiary of the Company) or within ninety days after such employment had terminated, the employment period requirement described above (the “90-day limit”) shall be deemed to have been satisfied, and, provided further, that the Committee may permit the exercise of a Non-Qualified Stock Option without regard to “90-day limit” if (A) the Optionee (or the Optionee’s personal representative or estate in the event of the Optionee’s death) is, in the sole discretion of the Committee, directly or indirectly prevented from exercising such option by reason of the application of federal securities laws within the 90-day limit or the Company or its shareholders would be adversely affected by reason of the application of federal securities laws to an exercise of such option within such 90-day limit, (B) the Optionee was not, at the time of his termination of employment, a person with respect to whom payment of compensation by the Company is then subject to (or would be, but for an exemption from) the provisions of Section 162(m) of the Code, and (C) such action by the Committee would not adversely affect the tax or accounting practices of the Company or otherwise adversely affect the business or operations of the Company.

(ii)

In the event an Optionee has attained his Retirement Date (as defined herein), (A) the provisions of Section 6(e)(i) shall not be applicable to such Optionee’s Non-Qualified Stock Options and (B) such Optionee’s Non-Qualified Stock Options shall not be exercisable after the second anniversary of such Optionee’s Retirement Date.  For 

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purposes of this Plan, the term “Retirement Date” shall mean the date on which the Optionee’s employment with the Company (and any parent or subsidiary of the Company) terminates (including termination because of death) if the Optionee had then attained age 55 and completed ten calendar years of service with the Company (or any parent or subsidiary of the Company).

(f)

Minimum Holding Period.  No option granted prior to November 1, 1996 may be exercised before the date which is six months after the date on which such option was granted.  Each option shall contain such additional or other restriction or restrictions with respect to the stated percentage of Shares covered by such option as to which such option may be exercised as the Committee may deem desirable or necessary in order to carry out the purposes and requirements of the Plan.

(g)

Additional Restrictions Relating to Incentive Stock Options.  To the extent that the aggregate fair market value (determined as of the time the option is granted) of the Shares for which Incentive Stock Options are exercisable for the first time by an individual during any calendar year (under this Plan or any other plan of the Company or any of its subsidiaries) exceeds $100,000 (or such other individual limit as may be in effect under the Code on the date of grant), such options shall not be Incentive Stock Options.  No Incentive Stock Option shall be granted to an employee who, at the time such option is granted, owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any parent or subsidiary of the Company within the meaning of Section 422(b)(6) of the Code unless: (i) at the time the option is granted, the option price is at least one hundred ten percent of the fair market value of the Shares subject to the option, and (ii) such option by its terms is not exercisable after the expiration of five years from the date such option is granted.

(h)

Limitation on Option Grants.  No Optionee may be granted options under Section 5 of the Plan in any fiscal year with respect to more than 50,000 Shares.

Section 7.

Exercise and Payment of Option Price.

Section 7.1

Exercise of Options.  Options shall be exercised as to all or a portion of the Shares by written notice to the Company setting forth the exact number of Shares as to which the option is being exercised and including with such notice payment of the option price (plus required tax withholding).  The date of exercise shall be the date such written notice and payment have been delivered to the Secretary of the Company either in person or by depositing said notice and payment in the United States mail, postage pre-paid and addressed to such officer at the Company’s home office.  Notwithstanding the fact that an option has been transferred pursuant to Section 6.2(d)(ii), the grantee of such option shall remain liable for any required tax withholding.

Section 7.2

Payment for Shares.  Payment of the option price (plus required tax withholding) may be made by (a) tendering cash (in the form of a check or otherwise) in such amount, or (b) tendering Shares with a fair market value on the date of exercise equal to such amount, or (c) delivering a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the sale or loan proceeds equal to 

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such amount.  Notwithstanding the fact that an option has been transferred pursuant to Section 6.2(d)(ii), the grantee of such option shall remain liable for any required tax withholding.

Section 8.

Adjustment Upon Changes in Capitalization.  If any option is exercised in whole or in part subsequent to any stock dividend, stock split, recapitalization, reorganization, merger or other change in the corporate structure of the Company as a result of which (a) shares of any class or classes of the Company shall be issued in respect of the Shares or (b) the Shares shall be changed into the same or a different number of shares of the same or another class or classes of the Company or another corporation, the Optionee so exercising the option shall receive, for the aggregate option price payable upon such exercise, the aggregate number and class or classes of shares equal to the number and class or classes of shares such Optionee would have had on the date of actual exercise if the Optionee had purchased on the date the option was granted the Shares as to which the option is so exercised and the Shares so purchased had not been disposed of as of the date of such actual exercise, taking into consideration such stock dividend, stock split, recapitalization, reorganization, merger or other change in the corporate structure of the Company.

Section 9.

Termination or Lapse of Options.  Each option shall terminate or lapse upon the first to occur of (a) the expiration date set forth in the applicable Stock Option Agreement, (b) the applicable date set forth in Section 6.2(b), or (c) the date which is the day next following the last day such option could be exercised by the Optionee under Section 6.2(e); provided, however, that in the event of an Optionee’s death while in the employ of the Company or a parent or subsidiary of the Company or, if the Optionee is no longer so employed, in the event of the Optionee’s death on or before the last day such option could be exercised by the Optionee under Section 6.2(e), an option may be exercised, to the extent exercisable by the Optionee immediately prior to his death, in whole or in part by the Optionee’s estate or his designee by will, or, if applicable, the transferee of such option pursuant to Section 6.2(d)(ii), but only if the date of exercise is on or before the first to occur of (i) the expiration date set forth in the applicable Stock Option Agreement, (ii) the applicable date set forth in Section 6.2(b), or (iii) (A) for options subject to Section 6.2(e)(i), the date which is twelve months after the date of the Optionee’s death, and (B) for options subject to Section 6.2(e)(ii), the second anniversary of the deceased Optionee’s Retirement Date.

Section 10.

Amendment and Termination of Plan.

Section 10.1

Amendment of Plan.  The Board of Directors of the Company may amend the Plan from time to time and at any time; provided, however, that no amendment shall adversely affect any option which has been granted prior to the amendment and no amendment with respect to the maximum number of Shares which may be issued pursuant to options or the class of eligible employees, or which constitutes a change in the material terms of the Plan (within the meaning of section 162(m) of the Code) shall be effective unless approved by a majority of the shares entitled to vote at a meeting of shareholders.

Section 10.2

Termination of Plan.  The Plan shall terminate on the first to occur of (a) June 18, 2001 or (b) the date specified by the Board of Directors of the Company as the effective 

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date of Plan termination; provided, however, that the termination of the Plan shall not limit or otherwise affect any options outstanding on the date of termination.

Section 11.

Effective Date.  The Effective Date of the Plan shall be June 19, 1991, the date of approval by the Board of Directors of the Company; provided, however, that neither the Plan nor grants made under the Plan shall be effective unless the adoption of the Plan is approved at the annual meeting of the Company’s shareholders next following such date by the majority of the shares entitled to vote at such meeting.

Section 12.

Investment Intent.  Shares acquired pursuant to the exercise of an option, if not registered by the Company under the Securities Act of 1933 (the “Act”), will be “restricted” stock which will not be freely transferable by the holder after exercise of the option.  Each participating employee and assignee in interest of the employee accordingly represents, as a condition of participation in the Plan, that Shares which are unregistered under the Act are being acquired for the Optionee’s (or his assignee’s) own account for investment only and not with a view to offer for sale or for sale in connection with the distribution or transfer thereof.

Section 13.

Availability of Information.  The Company shall furnish each Optionee with (a) a copy of the Plan and the Company’s most recent annual report to its shareholders at the time the option agreement provided for in Section 6.1 is executed by the Optionee and (b) a copy of each subsequent annual report, on or about the same date as such report shall be made available to shareholders of the Company.  The Company will furnish, upon written request addressed to the Secretary of the Company, but at no charge to the Optionee or any duly authorized representative of the Optionee, copies of all reports filed by the Company with the Securities and Exchange Commission or the commissioner of securities of any state, including, but not limited to, the Company’s annual reports on Form 10-K, its quarterly reports on Form 10-Q, and its proxy statements.

Section 14.

Conditions of Employment.  Participation in or eligibility for participation in the Plan shall not confer upon any employee the right to be continued as an employee of the Company or any present or future parent or subsidiary of the Company and the Company and its participating subsidiaries hereby expressly reserve the right to terminate the employment of any employee, with or without cause, as if the Plan and any options granted pursuant to it were not in effect.

Section 15.

Change in Control.

15.1

Definition of “Change in Control.”  For purposes of the Plan, a “Change in Control” means the happening of any of the following events:

(a)

The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding Shares (the “Outstanding Company Common Stock”) or (ii) 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”); excluding, however, 

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the following: (A) any acquisition directly from the Company other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, (D) any acquisition pursuant to a transaction which complies with clauses (i), (ii), and (iii) of paragraph (c) of this Section 15.1, (E) except as provided in paragraphs (d) and (e), any acquisition by any of the Woodson Entities or any of the Smith Entities, or (F) any increase in the proportionate number of shares of Outstanding Company Common Stock or Outstanding Company Voting Securities beneficially owned by a Person to 20% or more of the shares of either of such classes of stock if such increase was solely the result of the acquisition of Outstanding Company Common Stock or Outstanding Company Voting Securities by the Company; provided, however, that this clause (F) shall not apply to any acquisition of Outstanding Company Common Stock or Outstanding Company Voting Securities not described in clauses (A), (B), (C), (D), or (E) of this paragraph (a) by the Person acquiring such shares which occurs after such Person had become the beneficial owner of 20% or more of either the Outstanding Company Common Stock or Outstanding Company Voting Securities by reason of share purchases by the Company; or

(b)

A change in the composition of the Board such that the individuals who, as of March 4, 1999, constitute the Board (such Board shall be hereinafter referred to as the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of the Plan, that any individual who becomes a member of the Board subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be deemed to be and shall be considered as though such individual were a member of the Incumbent Board, but provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so deemed or considered as a member of the Incumbent Board; or

(c)

Consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or securities of any other entity (a “Corporate Transaction”); excluding, however, such a Corporate Transaction pursuant to which (i) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) (the “Resulting Corporation”) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case 

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may be, (ii) no Person (other than the Company, any employee benefit plan (or related trust) of the Company, any Woodson Entity, any Smith Entity, or such Resulting Corporation) will beneficially own, directly or indirectly, 20% or more of, respectively, the outstanding shares of common stock of the Resulting Corporation or the combined voting power of the then outstanding voting securities of such Resulting Corporation entitled to vote generally in the election of directors except to the extent that such ownership existed with respect to the Company prior to the Corporate Transaction, and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the Resulting Corporation; or

(d)

The Woodson Entities acquire beneficial ownership of more than 35% of the Outstanding Company Common Stock or Outstanding Company Voting Securities or of the outstanding shares of common stock or the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the Resulting Corporation; or

(e)

The Smith Entities acquire beneficial ownership of more than 35% of the Outstanding Company Common Stock or Outstanding Company Voting Securities or of the outstanding shares of common stock or the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the Resulting Corporation; or

(f)

The approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

For purposes of this Section 15.1, the term “Woodson Entities” shall mean Aytchmonde P. Woodson, Leigh Yawkey Woodson and Alice Richardson Yawkey, members of their respective families and their respective descendants (the “Woodson Family”), heirs or legatees of any of the Woodson Family members, transferees by will, laws of descent or distribution or by operation of law of any of the foregoing (including of any such transferees) (including any executor or administrator of any estate of any of the foregoing), any trust established by any of Aytchmonde P. Woodson, Leigh Yawkey Woodson, or Alice Richardson Yawkey, whether pursuant to last will or otherwise, any partnership, trust or other entity established primarily for the benefit of, or any other Person the beneficial owners of which consist primarily of, any of the foregoing or any Affiliates or Associates of any of the foregoing or any charitable trust or foundation to which any of the foregoing transfers or may transfer securities of the Company (including any beneficiary or trustee, partner, manager or director of any of the foregoing or any other Person serving any such entity in a similar capacity). 

For purposes of this Section 15.1, the term “Smith Entities” shall mean David B. Smith and Katherine S. Smith, members of their respective families and their respective descendants (the “Smith Family”), heirs or legatees of any of the Smith Family members, transferees by will, laws of descent or distribution or by operation of law of any of the foregoing (including of any such transferees) (including any executor or administrator of any estate of any of the foregoing), any trust established by either of David B. Smith or Katherine S. Smith, whether pursuant to last will or otherwise, any partnership, trust or other entity established primarily for the benefit of, or any 

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other Person the beneficial owners of which consist primarily of, any of the foregoing or any Affiliates or Associates of any of the foregoing or any charitable trust or foundation to which any of the foregoing transfers or may transfer securities of the Company (including any beneficiary or trustee, partner, manager or director of any of the foregoing or any other Person serving any such entity in a similar capacity).

For purposes of this Section 15.1, the terms “Affiliate” and “Associate” shall have the meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act as in effect on the date of this Plan. 

Section 15.2.

Effects of Change in Control.  

(a)

In the event of a Change in Control, all options outstanding on the date on which such Change in Control has occurred (the “Change in Control Date”) shall, to the extent not then exercisable or vested, immediately become exercisable in full.

(b)

Notwithstanding any other provision of the Plan, the Committee may elect, in anticipation of, or subsequent to, a Change in Control, to cancel any options outstanding on the Change in Control Date and to make, in respect of each canceled option, a lump sum cash payment in an amount equal to the product of (i) the number of Shares then subject to the cancelled option multiplied by (ii) the excess, if any, of (A) the greater of (1) the Change in Control Price, (2) the highest fair market value of a Share on any day in the 60-day period ending on the Change in Control Date, and (3) the highest fair market value of a Share on any day during the period which begins on the Change in Control Date and ends on the date of the Committee’s election, over (B) the option price of such option.  Any election by the Committee in anticipation of a Change in Control shall be effective only if a Change in Control occurs within 60 days of such election.  Any payment elected by the Committee to be made pursuant to this Section 15.2 shall be paid to the optionee not later than the 5th business day following the effective date of the Committee’s election.  For purposes of this Section 15.2, the “Change in Control Price” shall mean, if the Change in Control is the result of a tender or exchange offer or a Corporate Transaction (as defined in Section 15.1), the highest price per Share paid in such tender or exchange offer or Corporate Transaction, and, to the extent that the consideration paid in any such transaction consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Committee.

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