Document:

Exhibit
10.10

 

[Form of Transition Services Agreement by and
between Walter Industries, Inc. and Mueller Water Products, Inc.]

 

TRANSITION
SERVICES AGREEMENT

 

 

                This
Transition Services Agreement (this “Services Agreement”) is made as of
the _____ day of _________, 2006, by and among (i) Walter Industries, Inc., a
Delaware corporation (“Walter”) on behalf of itself and each of the
other Walter Entities, and (ii) Mueller Water Products, Inc., a Delaware
corporation (“Mueller”), on behalf of itself and each of the other
Mueller Entities.  The Mueller Entities
currently receive certain services from and provide certain services to the
Walter Entities.  Each of the Walter
Entities and the Mueller Entities desire that these services continue to be
provided after the initial public offering of shares of Mueller and the
subsequent spin-off of Mueller’s common stock to Walter’s shareholders, upon
the terms and conditions set forth in this Services Agreement.

 

                In
consideration of the mutual covenants and agreements contained in this Services
Agreement, the parties hereto hereby agree as follows:

 

ARTICLE
1.

 

DEFINITIONS

 

1.1           Unless the context otherwise requires, the following terms
and their singular or plural, used in this Services Agreement shall have the
meanings set forth below:

 

a)              “Force
Majeure” shall have the meaning set forth in Section 7.1 of this Services
Agreement.

 

b)             “Mueller”
shall have the meaning set forth in the preamble to this Services Agreement.

 

c)              “Mueller
Entities” means, collectively, Mueller and any of its Affiliates that are
listed as Recipients on Schedule A or as Providers on Schedule B.

 

d)             “Mueller
Provided Services” shall have the meaning set forth in Section 2.2 of this
Services Agreement.

 

e)              “Person”
means an individual, partnership, corporation, trust, unincorporated
association, or other entity or association.

 

f)                “Provider”
shall mean the particular Walter Entity or Mueller Entity, in any Services
Agreement.

 

 

 

g)             “Recipient”
shall mean the particular Walter Entity or Mueller Entity, in any given
location, that is receiving services or leasing or subleasing property (as
tenant) pursuant to this Services Agreement.

 

h)             “Term”
shall have the meaning set forth in Section 5.1 of this Services Agreement.

 

i)                 “Walter”
shall have the meaning set forth in the preamble to this Services Agreement.

 

j)                 “Walter
Entities” means, collectively, Walter and any of its Affiliates that are
listed as Providers on Schedule A or as Recipients on Schedule B.

 

k)              “Walter
Provided Services” shall have the meaning set forth in Section 2.1 of this
Services Agreement.

 

Other
terms are used as defined elsewhere herein.

 

ARTICLE
2.

 

SERVICES

 

2.1           Walter Provided Services.  Pursuant to the terms of this Services
Agreement, the Walter Entities agree to provide, or cause to be provided, to
the respective Mueller Entities the services described in Schedule A to this
Services Agreement (the “Walter Provided Services”).

 

2.2           Mueller Provided Services.  Pursuant to the terms of this Services
Agreement, the Mueller Entities agree to provide, or cause to be provided, the
services described in Schedule B to this Services Agreement (the “Mueller
Provided Services”).

 

2.3           Other Services. 
If, after the execution of this Services Agreement, the parties
determine that a service provided by the Walter Entities to the Mueller
Entities or by the Mueller Entities to the Walter Entities prior to the date
hereof was omitted from the Schedules to this Services Agreement, then the
parties shall negotiate in good faith to agree to the terms and conditions upon
which such services would be added to this Services Agreement, it being agreed
that the charges for such services should be determined on a basis consistent
with the methodology for determining the initial prices provided for in Section
3.3.

 

 

ARTICLE
3.

 

COMPENSATION

 

 

 

2

3.1           Compensation
for Walter Provided Services. 
Subject to Section 3.4, the compensation for the Walter Provided
Services for the duration of the Term shall be as described for each individual
service provided as set forth on Schedule A plus applicable sales or
value-added taxes, if any.

 

3.2           Compensation
for Mueller Provided Services. 
Subject to Section 3.4, the compensation for the Mueller Provided
Services for the duration of the term shall be as described for each individual
service as set forth on Schedule B plus applicable sales or value-added taxes,
if any.

 

3.3           Methodology
for Determining Prices.  The parties
agree that the prices charged by a Provider for any Service provided hereunder
shall be sufficient to cover such Provider’s reasonable estimate of its actual
costs and, if applicable, consistent with the prices such provider would charge
to an Affiliate, in each case without taking into account any profit margin or
projected savings from increased efficiency.

 

3.4           Price
Adjustments.  It is the intent of the
parties that the prices set forth on the Schedules hereto are consistent with
the methodology for determining prices as described in Section 3.3.  If the parties determine in good faith that
the initial prices set forth on the Schedules hereto are not consistent with
such methodology, then the parties shall negotiate in good faith to adjust such
prices in a manner that is consistent with such methodology.

 

3.5           Allocation
of Certain Expenses.

 

(a)            (i)  In
respect of software applications which are resident in the Mueller Entities
while they are affiliates of the Walter Entities, Mueller shall bear the costs
and expenses of obtaining any and all licenses for such software applications
for Mueller.

 

(ii)  Walter and Mueller
cooperate in good faith to minimize the costs and expenses to be incurred
pursuant to this Section 3.5(a).

 

                (b)           Walter and Mueller shall each bear
the costs and expenses of obtaining any and all consents from third parties
which may be necessary in connection with the other party’s provision of
services to the Recipient hereunder.

 

3.6           Terms
of Payment; Dispute Resolution.

 

                (a)           Except as otherwise expressly
provided herein, Providers shall invoice Recipients monthly (or, if mutually
agreeable to Provider and Recipient, quarterly or semi-annually) in arrears for
the services provided by them under this Services Agreement.  Payment in U.S. dollars shall be made by
Recipients within 30 days after receipt of any invoice.  No Recipient shall withhold any payments to
its Provider under this Services Agreement, and no Provider shall withhold the
provision of any services to its Recipient, notwithstanding any dispute that
may be pending between them, whether 

 

 

 

3

under this Services Agreement or otherwise
(any required adjustment being made on subsequent invoices), unless such
withholding is provided for in an arbitral award in accordance with Section 9.6
of this Services Agreement.

 

(b)           If there is a dispute between any Recipient and any
Provider regarding the amounts shown as billed to such Recipient on any
invoice, such Provider shall furnish to such Recipient reasonable documentation
to substantiate the amounts billed including, but not limited to listings of
the dates, times and amounts of the services in question where applicable and
practicable.  Upon delivery of such
documentation, such Recipient and such Provider shall cooperate and use their best
efforts to resolve such dispute among themselves.  If such disputing parties are unable to
resolve their dispute within thirty (30) calendar days of the initiation of
such procedure, and such Recipient believes in good faith and with a reasonable
basis that the amounts shown as billed to such Recipient are inaccurate or are
otherwise not in accordance with the terms of this Services Agreement, then
such Recipient shall have the right, as its own expense, to commence
arbitration in accordance with Section 9.1 of this Services Agreement.

 

 

ARTICLE
4.

 

OCCUPANCY
RIGHTS

 

4.1           Any
Employee of a Walter Entity or Mueller Entity who is located at a facility of
the other party may remain at such location for a period not to exceed 180 days
after the date of the spin-off; provided, however, that such
employee shall be required to adhere to all applicable security restrictions
and guidelines at such facility. 
Thereafter, the owner of such facility may require such employee(s) to
vacate the premises unless, prior to such time, the parties have executed a
formal lease or other occupancy arrangements upon commercially reasonable terms
that are mutually acceptable to the parties.

 

ARTICLE
5.

 

TERM

 

5.1           Term.  Except as expressly provided otherwise in
this Services Agreement, or with respect to specific services as indicated on
the Schedules hereto, the term of this Services Agreement shall commence
immediately and shall expire automatically at the time the term of every
service described on the Schedules hereto has terminated (the “Term”).  The obligation of any Recipient to make a
payment for services previously rendered shall not be affected by the
expiration of the term and shall continue until full payment is made.

 

5.2           Termination
of Individual Services.  (a)  Each of the individual services described on
the schedules hereto has a separate term which, in respect of some services,
includes a right of extension.  Unless
earlier terminated pursuant to the following sentence, the obligation of a
Provider to provide a service will terminate upon the expiration of the 

 

 

 

4

term of such service.  Effective between the respective Provider and
Recipient, a Recipient may terminate at any time during the Term any individual
service provided under this Services Agreement on a service-by-service basis
(and/or location-by-location basis where an individual service is provided to
multiple locations of a Recipient) upon written notice to the Provider
identifying the particular service (or location) to be terminated and the
effective date of termination, which date shall not be less than 30 days after
receipt of such notice unless the Provider otherwise agrees.  Effective upon the termination of any service,
an appropriate reduction will be made in the fees charged to such Recipient.

 

 

ARTICLE
6.

 

CERTAIN
COVENANTS

 

6.1           Points
of Contact.  Each Provider and Recipient
shall name a point of contact which shall be added to the Schedules
hereto.  Such points of contact shall be
responsible for the implementation of this Services Agreement between the
respective Provider and its Recipient, including resolutions of any issues that
may arise during the performance hereunder on a day-to-day basis.

 

6.2           Cooperation;
Reasonable Care.

 

                (a)           The parties will cooperate (using
reasonable commercial efforts) to effect a smooth and orderly transition of the
services provided hereunder from the Providers to the respective Recipients
including, without limitation, the separation of the Mueller Entities from the
Walter Entities; provided, however, that this Section 6.2 shall
not require any party hereto to incur any out-of-pocket expenses unless and
except as expressly provided otherwise herein.

 

(c)           Each Provider shall perform the
services that it is required to provide to its respective Recipient(s) under
this Services Agreement with reasonable skill and care and shall use at least
that degree of skill and care that it would exercise in similar circumstances
in carrying out its own business.  Each
Provider shall take necessary measures to protect the respective Recipient’s
data that is processed by such Provider from destruction, deletion or
unauthorized change and allow its recovery in events of Force Majeure; provided,
however, that a Provider shall be deemed to have satisfied this
obligation if the measures taken to protect and recover recipient’s data are
equivalent to what it uses in carrying out its own business.

 

6.3           Migration
Projects.  Each Provider will provide
the respective Recipient with reasonable support necessary to transition the
services, which may include consulting and training and providing reasonable
access to data and other information and to Providers employees; provided,
however, that such activities shall not unduly burden or interfere with
Provider’s business and operations. 
Where required for transitioning the services, 

 

 

 

5

the Recipient’s employees will be granted
reasonable access to the respective Provider’s facilities during normal business
hours.

 

6.4           Further
Assurances.  From time to time after
the date hereof, without further consideration, each party shall execute and
deliver such formal lease or license agreements as another party may reasonably
request to evidence any lease or license provided for herein or contemplated
hereby.

 

6.5           Certain
disbursements/receipts.  The parties
hereto contemplate that, from time to time, Walter-related entities and/or
Mueller-related entities (any such party, the “Paying  Party”), as
a convenience to another Mueller-related entity or Walter-related entity, as
the case may be (the “Responsible Party”), in connection with the
transactions contemplated by this Services Agreement, may make certain payments
that are properly the responsibility of the Responsible Party (any such payment
made, a “Disbursement”). 
Similarly, from time to time, Walter Entities and/or Mueller Entities
(any such party, the “Receiving Party”) may receive from third parties
certain payments to which another Mueller-related entity or Walter-related
entity, as the case may be, is entitled (any such party, the “Other Party”, and
any such payment received, a “Receipt”).

 

                (a)           Disbursements.

 

(i)            For Disbursements made by check, the
Responsible Party will reimburse the Paying Party within seven (7) business
days after written notice of such Disbursement has been given to the
Responsible Party.

 

(ii)           In case of a Disbursement by wire, if
written notice has been given by 2:00 p.m. on the business day prior to the
payment of such Disbursement, the Responsible Party shall reimburse the Paying
Party for the amount of such payment on the date the Disbursement is made by
the Paying Party.  If notice as provided
above has not been given prior to the payment of such Disbursement, the
Responsible Party shall reimburse the Paying party for the amount of such
payment within one business day after receipt of the Responsible Party of such
notice form the Paying Party.

 

(iii)          A Paying Party shall provide such
supporting documentation regarding Disbursements for which it is seeking
reimbursement as the Responsible Party may reasonably request.

 

(b)           Receipts.  A Receiving Party shall remit Receipts to the
Other Party within one business day of receipt thereof.  Concerning the cash collection of outstanding
receivables, the Receiving Party shall remit such cash on a weekly basis with
interest at the prime rate stated in 6.5(e).

 

(c)           Certain Exceptions.  Notwithstanding anything to the contrary set
forth above, if with respect to any particular transaction(s), it is impossible
or impracticable under the circumstances to comply with the procedures set
forth in subsections (a) and (b) of this Section 6.5 (including the time
periods specified therein), the parties will 

 

 

 

6

cooperate to find a mutually agreeable
alternative that will achieve substantially similar economic results from the
point of view of the Paying Party or the Other Party, as the case may be (i.e.,
an alternative pursuant to which the Paying Party will not incur any material
interest expense or the Other Party will not be deprived of any material
interest income); provided, however, that if a Receiving party
cannot comply with the procedures set forth in subsection (b) of this Section
because it does not become aware of a Receipt on behalf of the Other Party
shall remit such Receipt (without interest thereon) to the Other Party within
one business day after the Receiving Party becomes aware of such Receipt.

 

                (d)           Funding of Payroll.  Notwithstanding anything which may be to the
contrary set forth in Section 6(a) or 6(c) above, payroll checks disbursed by
or at the direction of a Walter Entity as part of the Walter Provided Services
shall be funded in immediately available funds to an account as directed by
such Walter Entity on the day the checks are issued to Mueller employees,
provided such Walter Entity notifies the respective Mueller Entity by 3:00 p.m.
on the business day prior to check issuance of the funding requirement amount
(which amount shall be grossed up to include any social charges and other
accessories on salaries).  Direct deposit
of payroll will have the same notice requirement and be funded on payday
(alternately referred to as the settlement date).

 

                (e)           Interest Rate.  The rate for any interest or expense that is
paid or payable pursuant to Section 6.5(b) shall be the prime rate as published
by the Wall Street Journal.

 

 

ARTICLE
7.

 

FORCE
MAJEURE

 

7.1           Force Majeure.  No Provider shall bear any responsibility or
liability for any losses, damages, liabilities, claims, costs or expenses,
including attorneys’, accountants’ or experts’ fees (“Damages”) arising out of
any delay, inability to perform or interruption of its performance of
obligations under this Services Agreement due to any acts or omissions of
Recipient or for events beyond its reasonable control (herinafter referred to
as “Force Majeure”) including, without limitation, acts of God, act of
governmental authority, act of the public enemy or due to war, riot, flood,
civil commotion, insurrection, labor difficulty, severe or adverse weather
conditions, lack of or shortage of electrical power, malfunctions of equipment
or software programs or any other cause beyond the reasonable control of the
Provider whose performance is affected by the Force Majeure event.

 

 

ARTICLE
8.

 

INDEMNITY

 

 

 

7

                8.1           Indemnity.

 

                                (a)  The Walter Entities and Mueller Entities, in
both instances jointly and severally, will each indemnify and hold harmless the
other, their agents, employees and invitees, against all liabilities, claims,
losses, damages, death or personal injury of whatever nature or kind, arising
out of their respective performance of this Services Agreement or the entry of
their respective agents, employees or invitees in the premises of the other, to
the extent occasioned by their own willful misconduct or negligent actions or
omissions or the willful misconduct or negligent actions or omissions of their
respective agents, employees or invitees.

 

                                (b)           Notwithstanding the foregoing, no
party shall be entitled to any damages with respect to lost profits or other
consequential damages or punitive damages with respect to the performance by
any other party under this Services Agreement.

 

 

ARTICLE
9.

 

MISCELLANEOUS

 

9.1           Resolution of Disputes;
Continuation of Services Pending Outcome of Dispute.  In the event of any dispute between the
parties or between Providers and Recipients, the parties agree to be bound by
the arbitration procedures set forth in Section 9.6 of this Services
Agreement.  Notwithstanding the existence
of any dispute between the parties, no Provider shall discontinue the supply of
any service provided for herein, unless so provided in an arbitral
determination that the respective Recipient is in default of an obligation
under this Services Agreement.

 

9.2           Notices.  All notices, consents, waiver, claims and
other communications hereunder (each a “Notice”) shall be in writing and
shall be (a) personally delivered, (b) deposited, prepaid in a nationally
established overnight delivery firm such as Federal Express, (c) mailed by
certified mail, return receipt requested, or (d) transmitted by facsimile as
follows:

 

As to Walter or any other Walter Entity:

                Walter
Industries, Inc.

                4211
W. Boy Scout Blvd.

                Tampa,
FL  33607

                Attention:              Victor
P. Patrick

                                                Senior
Vice President and General Counsel

                Fax
No.: (813) 871-4420

 

As to Mueller or any other Mueller Entity:

                Mueller
Water Products, Inc.

                [Address]

 

 

 

8

or to any other address which such party may
have subsequently communicated to the other party by a Notice given in
accordance with the provisions of this Section. 
Each Notice shall be deemed given and effective upon receipt (or refusal
or receipt).

 

                9.3           Entire Agreement.  This Services Agreement and the Schedules
attached hereto contain every obligation and understanding between the parties
relating to the subject matter hereof and merge all prior discussion,
negotiations and agreement, if any, between them, and none of the parties shall
be bound by any representations, warranties, covenants or other understandings,
other than as expressly provided herein or therein.

 

                9.4           Waiver and Amendment.  Any representation, warranty, covenant, term
or condition of this Services Agreement which may legally be waived, may be
waived, or the time of performance thereof extended, at any time by the party
hereto entitled to the benefit thereof, and any term, condition or covenant
hereto may be amended by the parties hereto at any time.  Any such waiver, extension or amendment shall
be evidenced by an instrument in writing executed on behalf of the appropriate
party by a Person who has been authorized by such party to execute waivers,
extensions or amendments on its behalf. 
No waiver by any party hereto, whether express or implied, of its rights
under any provisions at any other time or a waiver of such party’s rights under
any other provision of this Services Agreement. 
No failure by any party hereto to take any action against any breach of
this Services Agreement or default by another party shall constitute a waiver
of the former party’s right to enforce any provision of this Services Agreement
or to take action against such breach or default or any subsequent breach or
default by such other party.

 

                9.5           Severability.  In the event that any one or more of the
provisions contained in this Services Agreement shall be declared invalid, void
or unenforceable, the remainder of the provisions of this Services Agreement
shall remain in full force and effect, and such invalid, void or unenforceable
provision shall be interpreted as closely as possible to the manner in which it
was written.

 

                9.6           Governing Law; Jurisdiction.  This Services Agreement shall be interpreted
and construed in accordance with the laws of New York without giving effect to
the principles of conflicts of laws thereof. 
Neither party shall commence any proceeding against the other party
under this Services Agreement unless and until the parties shall have attempted
in good faith to settle the underlying dispute through negotiation or mediation
for a period of not less than 30 days.  If the parties have not resolved the
dispute within 30 days, then either party may initiate arbitration by notifying
the other party in writing that arbitration is demanded.  The arbitration
shall be conducted in accordance with the CPR Institute for Dispute Resolution
Rules for Non-Administered Arbitration (the “Rules”) by
one arbitrator.  Unless the parties agree on an individual arbitrator
by name, each party shall appoint one arbitrator, obtain its appointee’s
acceptance of such appointment, and deliver written notification of such
appointment and acceptance to the other party within 10 days after delivery of
the written notice demanding arbitration.  The two party appointed
arbitrators shall then jointly appoint a third arbitrator, obtain the
appointee’s acceptance of such appointment and notify the 

 

 

 

9

parties in writing of such appointment and acceptance within 10 days
after their appointment and acceptance.  The arbitrator appointed by the
two party-appointed arbitrators shall serve as the sole arbitrator.  If
the party appointed arbitrators fail to appoint an arbitrator within the time
limits specified herein, the CPR Institute for Dispute Resolution shall appoint
the arbitrator in accordance with Article 6 of the Rules.  Judgment upon
the award rendered by the arbitrator may be entered by any court having jurisdiction
thereof.  Unless otherwise agreed, the place of the arbitration shall be
Jacksonville, Florida.

 

                9.7           Counterpart Execution.  This Services Agreement may be executed in
counterparts with the same effect as if all of the parties had signed the same
document.  Such counterparts shall be
construed together and shall constitute one and the same instrument,
notwithstanding that all of the parties are not signatories to the original or
the same instrument, or that signature pages from different counterparts are
combined.  The signature of any party to
one counterpart shall be deemed to be a signature to and may be appended to any
other counterpart.

 

                9.8           Assignment.  This Services Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, provided that this Agreement may not be assigned by either party
to any Person without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed.  Notwithstanding the foregoing, either party
may assign any of its rights and obligations under this Services Agreement, in
whole or in part, to one or more wholly owned subsidiaries of such party.  Any party so assigning this Services
Agreement shall remain fully liable to the other party for the performance by
any assignee of any obligation of such party so assigned.  Any purported assignment in violation of this
Section 9.8 shall be void.

 

                9.9           No Third Party Beneficiary.  Nothing expressed or implied in this Services
Agreement is intended, or shall be construed, to confer upon or give any Person
other than the parties hereto, their respective successors and permitted
assigns and the indemnities, any rights or remedies under or by reason of this
Services Agreement.

 

                9.10         Headings and Interpretation.  Titles and headings to articles and sections
herein and titles to the Schedules are inserted for convenience of reference
only and are not intended to be a part of or to affect the meaning or
interpretation of this Services Agreement. 
The Schedules referred to herein shall be construed with and as an
integral part of this Services Agreement to the same extent as if they were set
forth verbatim herein.

 

                9.11         Survival.  Notwithstanding anything to the contrary
herein, the rights and obligations of the parties under this Services Agreement
which by their nature would continue beyond the termination of this Services
Agreement, including but not limited to rights and obligations those set forth
in Sections 3.6, 6.5, 8.1, 9.1 and 9.6, shall survive termination of this
Services Agreement.

 

 

 

10

                IN
WITNESS WHEREOF, the duly authorized officers or representatives of the parties
hereto have duly executed this Services Agreement as of the date first written
above.

 

 

	
  MUELLER ENTITIES:

  	
   

  	
  WALTER ENTITIES:

  
	
   

  	
   

  	
   

  
	
  MUELLER WATER PRODUCTS,
  INC.

  	
   

  	
  WALTER INDUSTRIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Name:

  
	
  Title:

  	
   

  	
  Title:

  

 

 

 

11EXHIBIT
NO. 10.11

[Form of Mueller Water
Products, Inc. 2006 Stock Incentive Plan]

MUELLER WATER PRODUCTS, INC.

2006 STOCK INCENTIVE PLAN

Approved
by the Board of Directors on              , 2006

Approved
by Stockholders on                              , 2006

Effective
Date:          , 2006

Termination
Date:                    , 2016

I.  PURPOSE.

1.1.                  The purpose of
this Plan is to aid the Company and its Affiliates in recruiting and retaining
key Employees (including officers), Directors, and Consultants of outstanding
ability and to motivate such persons to exert their best efforts on behalf of
the Company and its Affiliates by providing incentives through the granting of
Stock Awards.  The Company expects that
it will benefit from the added interest which such key Employees, Directors and
Consultants will have in the welfare of the Company as a result of their
proprietary interest in the Company’s success.

II.  DEFINITIONS.

2.1.                  “Affiliate”
means, with respect to the Company, any entity directly or indirectly
controlling, controlled by, or under common control with, the Company or any
other entity designated by the Board in which the Company or any Affiliate has
an interest.

2.2.                  “Applicable
Law” means the legal requirements relating to the administration of an equity
compensation plan under applicable U.S. federal and state corporate and
securities laws, the Code, any stock exchange rules or regulations, and the
applicable laws of any other country or jurisdiction, as such laws, rules,
regulations and requirements shall be in place from time to time.

2.3.                  “Beneficial
Owner” means the definition given in Rule 13d-3 promulgated under the Exchange
Act.

2.4.                  “Board” means
the board of directors of the Company.

2.5.                  “Cause” means
any of the following: (1) the Participant’s theft, dishonesty, or
falsification of any documents or records related to the Company or any of its
Affiliates; (2) the Participant’s improper use or disclosure of the
Company’s or any of its Affiliate’s confidential or proprietary information;
(3) any action by the Participant which has a material detrimental effect
on the reputation or business of the Company or any of its Affiliates;
(4) the Participant’s failure or inability to perform any reasonable
assigned duties, if such failure or inability is reasonably capable of cure,
after being provided with a

 

 reasonable opportunity to cure, such failure
or inability; (5) any material breach by the Participant of any employment
or service agreement between the Participant and the Company or any of its
Affiliates or applicable policy of the Company or any of its Affiliates, which
breach is not cured pursuant to the terms of such agreement; or (6) the
Participant’s indictment or plea of guilty or nolo contendere with respect to any criminal act which impairs the
Participant’s ability to perform his or her duties with the Company or any of
its Affiliates.  Notwithstanding
the foregoing, the definition of “Cause” in an individual written agreement
between the Company or any of its Affiliates and the Participant shall
supersede the foregoing definition with respect to Stock Awards subject to such
individual agreement to the extent expressly provided for in such individual
written agreement (it being understood, however, that if no definition of the
term “Cause” is set forth in such an individual written agreement, the
foregoing definition shall apply).

2.6.                  “Change of
Control” means the occurrence of any of the following events:

(i)            The
sale, exchange, lease or other disposition, in one or a series of related
transactions, of all or substantially all of the assets of the Company to a
person or group of related persons, as such terms are defined or described in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act;

(ii)           A
merger or consolidation or similar transaction involving the Company if the
stockholders of the Common Stock of the Company immediately prior to such
transaction do not own a majority of the outstanding common stock of the
surviving company or its parent immediately after the transaction in
substantially the same proportions relative to each other as immediately prior
to such transaction;

(iii)          Any person or group is or becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the total voting
power of the voting stock of the Company, including by way of merger,
consolidation or otherwise (for the purposes of this clause (iii), a
member of a group will not be considered to be the Beneficial Owner of the
securities owned by other members of the group other than in response to a
contested proxy or other control battle); or

(iv)          During
any period of two (2) consecutive years, individuals who at the beginning of
such period constituted the Board (together with any new Directors whose
election by such Board or whose nomination for election by the stockholders of
the Company was approved by a vote of a majority of the Directors of the
Company then still in office, who were either Directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board then in
office.

2.7.                  “Code” means
the Internal Revenue Code of 1986, as amended from time to time.

2.8.                  “Committee”
means the Board, or a committee of one or more members of the Board (or other
individuals who are not members of the Board to the extent allowed by law) duly
appointed by the Board in accordance with the Plan and Applicable Law.  At any

2

time that no such committee has been
appointed, the Board shall constitute the “Committee” hereunder.

2.9.                  “Common Stock”
means the Series A common stock of the Company, par value $0.01 per Share.

2.10.                “Company” means Mueller Water Products, Inc., a
Delaware corporation.

2.11.                “Consultant” means any person (i) engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the board of
directors of an Affiliate.  For purposes
of determining eligibility to participate in the Plan, the term Consultant
shall be clarified pursuant to the provisions of Section 5.4.

2.12.                “Continuous Service” means that the Participant’s
service with the Company or an Affiliate, whether as an Employee, Director, or
Consultant, as applicable, is not interrupted or terminated.  Unless otherwise expressly provided in the
Stock Award, the Participant’s Continuous Service shall be deemed to have
terminated in the event of a termination of all positions a Participant holds
with the Company and its Affiliates, except in the case of a transition from
status as a Consultant to status as an Employee if and only if there is no
interruption or termination of the Participant’s service in connection with
such transition.  For example, unless
otherwise expressly provided in the Stock Award, a termination in a Participant’s
status as an Employee and the immediate commencement of service as a Consultant
of the Company will constitute a termination of Continuous Service.  Notwithstanding anything herein to the
contrary, the Committee, in its sole discretion, may determine whether
Continuous Service shall be considered interrupted in the case of any leave of
absence approved by the Company or an Affiliate, including sick leave, military
leave or any other personal leave.

2.13.                “Covered Employee” means a “covered employee” as
determined for purposes of Section 162(m) of the Code.

2.14.                “Director” means a member of the Board of Directors
of the Company.

2.15.                “Disability” (a) means with respect to all Incentive
Stock Options, the permanent and total disability of a person within the
meaning of Section 22(e)(3) of the Code, (b) for all other purposes, has the
meaning under Section 409A(a)(2)(C)(i) of the Code, that is, the Participant
(a) is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months or (b) is, by reason of any medically determinable physical or
mental impairment which can be expected to result in death, or can be expected
to last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three (3) months under an
accident and health plan covering employees of the Participant’s employer.

2.16.                “Employee” means any person employed by the Company
or an Affiliate.  Compensation by the
Company or an Affiliate solely for services as a Director or as a

3

Consultant shall not be sufficient to
constitute “employment” by the Company or an Affiliate.

2.17.                “Exchange Act” means the Securities Exchange Act of
1934, as amended from time to time.

2.18.                “Fair Market Value” means, as of any date, the value
of the Common Stock determined as follows:

(i)            If
the Common Stock is listed on any established stock exchange or traded on the
Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of
a share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no such sales were reported) as quoted on such exchange or market
(or the exchange or market with the greatest volume of trading in the Common
Stock) on the date of determination, as reported in The Wall Street Journal or such other source as the Board
deems reliable;

(ii)           If
the Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, the Fair Market Value of a share of Common
Stock shall be the mean between the high bid and low asked prices for the
Common Stock on the day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable; or

(iii)          In
the absence of such markets for the Common Stock, the Fair Market Value shall
be determined in good faith by the Board.

(iv)          Notwithstanding
the foregoing, to the extent required to comply with Section 409A of the Code
in order to avoid the imposition of penalties or interest in respect thereof,
the value of the Common Stock shall be determined in a manner consistent with
Section 409A (and the regulations and guidance promulgated thereunder).

2.19.                “Full-Value Stock Award” shall mean any of a
Restricted Stock Bonus, Restricted Stock Units, Phantom Stock Units,
Performance Share Bonus, or Performance Share Units.

2.20.                “Incentive Stock Option” means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.

2.21.                “Nonstatutory Stock Option” means an Option not
intended to qualify as an Incentive Stock Option.

2.22.                “Option” means an Incentive Stock Option or a
Nonstatutory Stock Option granted pursuant to the Plan.

2.23.                “Optionholder” means a person to whom an Option is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

4

2.24.                “Participant” means an Employee, Director or
Consultant to whom a Stock Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Stock Award.

2.25.                “Performance Share Bonus” means a grant of shares of
the Company’s Common Stock not requiring a Participant to pay any amount of
monetary consideration (other than par value to the extent required by
Applicable Law), and subject to the provisions of Section 8.2 of the Plan.

2.26.                “Performance Share Unit” means the right to receive
the value of one (1) share of the Company’s Common Stock at the time the
Performance Share Unit vests, with the further right to elect to defer receipt
of that value otherwise deliverable upon the vesting of an award of Performance
Share Units to the extent permitted in the Participant’s agreement.  These Performance Share Units are subject to
the provisions of Section 8.2 of the Plan.

2.27.                “Phantom Stock Unit” means the right to receive the
value of one (1) share of the Company’s Common Stock, subject to the provisions
of Section 8.2 of the Plan.

2.28.                “Plan” means this Mueller Water Products, Inc. 2006
Stock Incentive Plan, as amended and in effect from time to time.

2.29.                “Retirement” means the voluntary termination of a
Participant’s Continuous Service in all capacities with the Company and all of
its Affiliates at such time that the Participant’s age and years of service
equal or exceed 70.

2.30.                “Restricted Stock Bonus” means a grant of shares of
the Company’s Common Stock not requiring a Participant to pay any amount of
monetary consideration (other than par value to the extent required by
Applicable Law), and subject to the provisions of Section 8.2 of the Plan.

2.31.                “Restricted Stock Purchase Right” means the right to
acquire shares of the Company’s Common Stock upon the payment of the
agreed-upon monetary consideration, subject to the provisions of Section 8.2 of
the Plan.

2.32.                “Restricted Stock Unit” means the right to receive
the value of one (1) share of the Company’s Common Stock at the time the
Restricted Stock Unit vests, with the further right to elect to defer receipt
of that value otherwise deliverable upon the vesting of an award of restricted
stock to the extent permitted in the Participant’s agreement.  These Restricted Stock Units are subject to
the provisions of Section 8.2 of the Plan.

2.33.                “Rule 16b-3” means Rule 16b-3 promulgated under the
Exchange Act or any successor to Rule l6b-3, as in effect from time to time.

2.34.                “Securities Act” means the Securities Act of 1933, as
amended from time to time.

5

2.35.                “Stock Appreciation Right” means the right to receive
an amount equal to the Fair Market Value of one (1) share of the Company’s
Common Stock on the day the Stock Appreciation Right is redeemed, reduced by
the deemed exercise price or base price of such right, subject to the
provisions of Section 8.1 of the Plan.

2.36.                “Stock Award” means any award of an Option,
Restricted Stock Bonus, Restricted Stock Purchase Right, Stock Appreciation
Right, Phantom Stock Unit, Restricted Stock Unit, Performance Share Bonus,
Performance Share Unit, or other stock-based award.

2.37.                “Stock Award Agreement” means a written agreement
between the Company and a holder of a Stock Award setting forth the terms and
conditions of an individual Stock Award grant. 
Each Stock Award Agreement shall be subject to the terms and conditions
of the Plan.

2.38.                “Subsidiary” means a subsidiary corporation, as
defined in Section 424(f) of the Code.

2.39.                “Ten Percent Shareholder” means a person who owns (or
is deemed to own pursuant to Section 424(d) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of its parent or subsidiary corporation.

III. 
ADMINISTRATION.

3.1.                  Administration.  The Committee shall administer the Plan and
shall have the power, subject to, and within the limitations of, the express
provisions of the Plan:

(i)            To
determine from time to time which of the persons eligible under the Plan shall
be granted Stock Awards; when and how each Stock Award shall be granted; what
type or combination of types of Stock Awards shall be granted; the terms and
conditions of each Stock Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive cash and/or
Common Stock pursuant to a Stock Award; the number of shares of Common Stock
with respect to which a Stock Award shall be granted to each such person; and
whether a Stock Award will be adjusted to account for dividends paid with
respect to the Company’s Common Stock.

(ii)           To
construe and interpret the Plan and Stock Awards granted under it, and to
establish, amend and revoke rules and regulations for the administration of the
Plan.  The Committee, in the exercise of
this power, may correct any defect, omission or inconsistency in the Plan or in
any Stock Award Agreement, in a manner and to the extent it shall deem
necessary or expedient to make the Plan and the terms of the Stock Award fully
effective.

(iii)          To
amend the Plan or a Stock Award as provided in the Plan.

(iv)          Generally,
to exercise such powers and to perform such acts as the Committee deems
necessary, desirable, convenient or expedient to promote the best interests of
the Company consistent with the provisions of the Plan.

6

(v)           To
adopt sub-plans and/or special provisions applicable to Stock Awards regulated
by the laws of a jurisdiction other than and outside of the United States.
Except with respect to Section 4 of the Plan and such other sections as
required by Applicable Law, the sub-plans and/or special provisions may take
precedence over other provisions of the Plan to the extent expressly set forth
in the terms of such sub-plans and/or special provisions.

(vi)          To
authorize any person to execute on behalf of the Company any instrument
required to effectuate the grant of a Stock Award previously granted by the
Committee.

(vii)         To
impose such restrictions, conditions or limitations as it determines
appropriate as to the timing and manner of any resales by a Participant or
other subsequent transfers by the Participant of any shares of Common Stock
issued as a result of or under a Stock Award, including, without limitation,
(A) restrictions under an insider trading policy and (B) restrictions as to the
use of a specified brokerage firm for such resales or other transfers.

(viii)        To provide, either at the time a Stock
Award is granted or by subsequent action, that a Stock Award shall contain as a
term thereof, a right, either in tandem with the other rights under the Stock
Award or as an alternative thereto, of the Participant to receive, without
payment to the Company, a number of shares of Common Stock, cash or a
combination thereof, the amount of which is determined by reference to the
value of the Stock Award.

3.2.                  Delegation
by the Committee.  In no way limiting
any other provision of the Plan, the Committee may delegate its duties and
powers hereunder in whole or in part to any subcommittee thereof consisting
solely of at least two individuals who are intended to qualify as “Non-Employee
Directors” within the meaning of Rule 16b-3 under the Exchange Act and “outside
directors” within the meaning of Section 162(m) of the Code.

3.3.                  Effect
of the Committee’s Decision.  All
determinations, interpretations and constructions made by the Committee or its
duly authorized sub-committee(s) in good faith shall not be subject to review
by any person and shall be final, binding and conclusive on all persons.

IV.  SHARES SUBJECT
TO THE PLAN.

4.1.                  Share
Reserve.  Subject to the provisions
of Section 11 of the Plan relating to adjustments upon changes in Common Stock,
the maximum aggregate number of shares of Common Stock that may be issued
pursuant to Stock Awards shall not exceed                       shares of Common Stock (“Share
Reserve”), provided that each share of Common Stock issued pursuant to an
Option or Restricted Stock Purchase Right shall reduce the Share Reserve by one
(1) share and each share of Common Stock subject to the redeemed portion of a
Stock Appreciation Right (whether the distribution upon redemption is made in
cash, stock or a combination of the two) shall reduce the Share Reserve by one
(1) share.  Each share of Common Stock
issued pursuant to a Full-Value Stock Award shall reduce the Share

7

Reserve by one (1) shares.  To the extent that a distribution pursuant to
a Stock Award is made in cash, the Share Reserve shall be reduced by the number
of shares of Common Stock subject to the redeemed or exercised portion of the
Stock Award.  Notwithstanding any other
provision of the Plan to the contrary, the maximum aggregate number of shares
of Common Stock that may be issued under the Plan pursuant to Incentive Stock
Options is                  shares of
Common Stock (“ISO Limit”), subject to the adjustments provided for in Section
11 of the Plan.

4.2.                  Reversion
of Shares to the Share Reserve.  If
any Stock Award granted under this Plan shall for any reason (i) expire, be
cancelled or otherwise terminate, in whole or in part, without having been
exercised or redeemed in full, (ii) be reacquired by the Company prior to
vesting, or (iii) be repurchased at cost by the Company prior to vesting, the
shares of Common Stock not acquired under such Stock Award shall revert or be
added to the Share Reserve and become available for issuance under the Plan;
provided, however, that such shares of Common Stock shall not be available for
issuance pursuant to the exercise of Incentive Stock Options.

4.3.                  Source of
Shares.  The shares of Common Stock
subject to the Plan may be unissued shares or reacquired shares (whether
purchased on the market or otherwise reacquired).

V.  ELIGIBILITY.

5.1.                  Eligibility
for Specific Stock Awards.  Incentive
Stock Options may be granted only to Employees. 
Stock Awards other than Incentive Stock Options may be granted to
Employees, Directors, and Consultants.

5.2.                  Ten
Percent Shareholders.  A Ten Percent
Shareholder shall not be granted an Incentive Stock Option unless the exercise
price of such Option is at least one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant and the Option is not
exercisable after the expiration of five (5) years from the date of grant.

5.3.                  Annual
Section 162(m) Limitation.  Subject
to the provisions of Section 11 of the Plan relating to adjustments upon
changes in the shares of Common Stock, and to the extent required for
compliance with Section 162(m) of the Code, no Employee shall be eligible to be
granted Options and other Stock Awards covering more than                      shares of Common Stock (with respect to Stock
Awards payable in shares) or with a value in excess of $5,000,000 (with respect
to Stock Awards payable in cash) during any fiscal year; provided that in
connection with his or her initial service, an Employee may be granted Options
and other Stock Awards covering not more than an additional                                        shares of Common Stock (with respect to Stock
Awards payable in shares) or with a value in excess of $5,000,000 (with respect
to Stock Awards payable in cash), which shall not count against the limit set
forth in the preceding sentence.

5.4.                  Consultants.  A Consultant shall not be eligible for the
grant of a Stock Award if, at the time of grant, a Form S-8 Registration
Statement under the Securities Act (“Form S-8”) is not available to register
either the offer or the sale of the Company’s

8

securities to such Consultant because
of the nature of the services that the Consultant is providing to the Company,
or because the Consultant is not a natural person, or as otherwise provided by
the rules governing the use of Form S-8, unless the Company determines both
(1) that such grant (A) shall be registered in another manner under the
Securities Act (e.g., on a Form S-3 Registration Statement) or (B) does not
require registration under the Securities Act in order to comply with the
requirements of the Securities Act, if applicable, and (2) that such grant
complies with the securities laws of all other relevant jurisdictions.

VI.  OPTION
PROVISIONS.

6.1                   Form of Options.  Each Option shall be in such form and shall
contain such terms and conditions as the Committee shall deem appropriate.  All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of grant,
and, if certificates are issued, a separate certificate or certificates will be
issued for shares of Common Stock purchased upon exercise of each type of
Option.  The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

6.2                   Term.  In the absence of a provision to the contrary
in the individual Optionholder’s Stock Award Agreement, and subject to the
provisions of Section 5.2 of the Plan regarding grants of Incentive Stock
Options to Ten Percent Shareholders, the term of the Option shall be ten (10)
years from the date it was granted.

6.3                   Incentive Stock Option
$100,000 Limitation.  To the extent
that the aggregate Fair Market Value (determined at the time of grant) of
Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by any Optionholder during any calendar year (under all plans of
the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000),
or such other limit as may be set by Applicable Law, the Options or portions
thereof which exceed such limit (according to the order in which they were
granted) shall be treated as Nonstatutory Stock Options.

6.4                   Exercise Price of an
Incentive Stock Option.  The exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on
the date the Option is granted (or less than one hundred and ten percent (110%)
in the case of a Ten Percent Shareholder).

6.5                   Exercise
Price of a Nonstatutory Stock Option. 
The exercise price of each Nonstatutory Stock Option shall be not less
than one hundred percent (100%) of
the Fair Market Value of the Common Stock subject to the Option on the date the
Option is granted.

6.6                   Consideration.

(i)            The
purchase price of Common Stock acquired pursuant to an Option shall be paid, to
the extent permitted by applicable statutes and regulations, either (a) in
cash or by check at the time the Option is exercised or (b) at the
discretion of the Committee (in the case of Incentive Stock Options, at the
time of the grant of the Option): (1) by

9

delivery
to the Company of other shares of Common Stock (subject to such requirements as
may be imposed by the Committee), (2) if there is a public market for the
Common Stock at such time, and to the extent permitted by Applicable Law,
pursuant to a “same day sale” program that results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to
pay the aggregate exercise price to the Company from the sales proceeds, (3)
reduction of the Company’s liability to the Optionholder, (4) by any other form
of consideration permitted by law, but in no event shall a promissory note or
other form of deferred payment constitute a permissible form of consideration
for an Option granted under the Plan, or (5) by some combination of the
foregoing.

(ii)           Unless otherwise specifically provided in the Stock
Award Agreement, the purchase price of Common Stock acquired pursuant to a
Stock Award that is paid by delivery to the Company of other Common Stock,
which Common Stock was acquired, directly or indirectly from the Company, shall
be paid only by shares of the Common Stock that have been held for more than
six (6) months (or such longer or shorter period of time required to avoid a
supplemental charge to earnings for financial accounting purposes).

(iii)          Whenever a Participant is permitted to
pay the exercise price of a Stock Award and/or taxes relating to the exercise
of a Stock Award by delivering Common Stock, the Participant may, subject to
procedures satisfactory to the Committee, satisfy such delivery requirements by
presenting proof of beneficial ownership of such Common Stock, in which case
the Company shall treat the Stock Award as exercised or redeemed without
further payment and shall withhold such number of shares of Common Stock from
the Common Stock acquired under the Stock Award.  When necessary to avoid a supplemental charge
to earnings for financial accounting purposes, any such withholding for tax
purposes shall be made at the statutory minimum rate of withholding.

6.7                   Transferability
of an Incentive Stock Option.  An
Incentive Stock Option shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder.

6.8                   Transferability
of a Nonstatutory Stock Option. 
Except as otherwise provided in the Stock Award Agreement, a
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime
of the Optionholder only by the Optionholder.

6.9                   Vesting
Generally.  Options granted under the
Plan shall be exercisable at such times and upon such terms and conditions as
may be determined by the Committee. The vesting provisions of individual
Options may vary.  The provisions of this
Section 6.9 are subject to any Option provisions governing the minimum number
of shares of Common Stock as to which an Option may be exercised.

6.10                 Termination of Unvested Options.  Any Option or portion thereof that is not
vested at the time of termination of Continuous Service shall lapse and
terminate, and shall not be exercisable by the Optionee or any other person,
unless otherwise provided for in the Stock Award Agreement.

10

6.11                 Termination of Continuous Service.  In the event an Optionholder’s Continuous
Service terminates (other than upon the Optionholder’s death, Disability or
Retirement or termination for Cause), the Option shall remain exercisable for
three (3) months following the date of termination (to the extent that the
Option was exercisable at that time), or such other period specified in the
Stock Award Agreement.  In no event may
the Option be exercised after the expiration of the term of the Option as set
forth in the Stock Award Agreement.  If
the Optionholder does not exercise his or her Option within the specified time,
the Option shall terminate.

6.12                 Extension of Termination Date.  An Optionholder’s Stock Award Agreement may
also provide that if the exercise of the Option following the termination of
the Optionholder’s Continuous Service (other than upon the Optionholder’s death
or termination for Cause) would be prohibited at any time solely because the
issuance of shares of Common Stock would violate the registration requirements
under the Securities Act or other applicable securities law, then the Option
shall terminate on the earlier of (i) the expiration of the term of the
Option set forth in the Stock Award Agreement or (ii) the expiration of a
period of three (3) months after the termination of the Optionholder’s
Continuous Service during which the exercise of the Option would not be in
violation of such registration requirements or other applicable securities
law.  The provisions of this
Section 6.12 notwithstanding, in the event that a sale of the shares of
Common Stock received upon exercise of his or her Option would subject the
Optionholder to liability under Section 16(b) of the Exchange Act, then the
Option will terminate on the earlier of (1) the fifteenth (15th) day
after the last date upon which such sale would result in liability, or (2) two
hundred ten (210) days following the date of termination of the Optionholder’s
employment or other service to the Company (and in no event later than the
expiration of the term of the Option).

6.13                 Disability or Retirement of Optionholder.  In the event an Optionholder’s Continuous Service
terminates upon the Optionholder’s Disability or Retirement, the Option shall
remain exercisable for two (2) years following the date of termination (to the
extent that the Option was exercisable at that time), or such other period
specified in the Stock Award Agreement. 
In no event may the Option be exercised after than the expiration of the
term of the Option as set forth in the Stock Award Agreement.  If the Optionholder does not exercise his or
her Option within the specified time, the Option shall terminate.

6.14                 Death of Optionholder.  In the event (i) an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s death or
(ii) the Optionholder dies after the termination of his or her Continuous
Service but within the post-termination exercise period applicable to the
Option, then, except as otherwise provided in the Stock Award Agreement, the
Option shall remain exercisable for two (2) years following the date of death
(to the extent that the Option was exercisable at that time).  In no event may the Option be exercised after
the expiration of the term of the Option as set forth in the Stock Award
Agreement.  If the Option is not
exercised by the person entitled to do so within the specified time, the Option
shall terminate.

6.15                 Termination for Cause.  Unless otherwise provided in the applicable
Stock Award Agreement, the Option shall cease to be exercisable as to all
unexercised shares of

11

Common Stock (including any vested
shares) immediately upon the termination of the Optionholder’s Continuous
Service for Cause.

6.16                 Early Exercise Generally Not Permitted.  The Company may grant Options which permit
the Optionholder to exercise the Option as to any part or all of the shares of
Common Stock subject to the Option prior to the vesting of the Option.  If a Stock Award Agreement does permit such
early exercise, any unvested shares of Common Stock so purchased may be subject
to a repurchase option in favor of the Company or to any other restriction the
Committee determines to be appropriate.

VII. 
NON-DISCRETIONARY STOCK AWARDS FOR ELIGIBLE DIRECTORS.

7.1                   Stock
Awards for Eligible Directors.  In
addition to any other Stock Awards that Directors may be granted on a
discretionary basis under the Plan, each Director of the Company who is not an
Employee of the Company or any Affiliate (each, an “Eligible Director”) shall
be automatically granted, without the necessity of action by the Committee, the
following Stock Awards:

(i)            Initial
Grant.  On the first day following
the date that a Director commences service on the Board and satisfies the
definition of an Eligible Director, an initial grant of a Stock Award (the “Initial
Grant”) shall automatically be made to that Eligible Director.  The type of award, the number of shares
subject to this Initial Grant and other terms governing this Initial Grant
shall be as determined by the Committee in its sole discretion.  If the Committee does not establish the terms
and conditions of the Initial Grant for a given newly-elected Eligible Director
prior to the date of grant, then the Stock Award shall be of the same type, and
for the same number of shares, as the Initial Grant made to the immediately
preceding newly-elected Eligible Director. 
If at the time a Director first commences service on the Board, the
Director does not satisfy the definition of an Eligible Director, such Director
shall not be entitled to an Initial Grant at any time, even if such Director
subsequently becomes an Eligible Director.

(ii)           Annual
Grant.  An annual Stock Award grant
(the “Annual Award”) shall automatically be made to each Director who (1) is
re-elected to the Board, (2) is an Eligible Director on the relevant grant
date, and (3) has served as a Director for a period of at least six (6) months
on the relevant grant date.  The type of
award, the number of shares subject to the Annual Grant and other terms
governing the Annual Grant shall be as determined by the Committee in its sole
discretion.   If the Committee does not
establish the terms and conditions of the Annual Grant prior to the date of
grant, then the Annual Grant shall be of the same type, and for the same number
of shares of Common Stock, as the Annual Grants made for the immediately
preceding year.  The date of grant of an
Annual Grant is the date on which the Director is re-elected to serve on the
Board.

(iii)          Vesting
on Retirement.  All Initial Grants
and Annual Grants held by an Eligible Director shall become fully vested and
exercisable upon the termination of the Eligible Director’s Continuous Service
by reason of Retirement, unless otherwise expressly set forth in the applicable
Stock Award Agreement(s).

12

VIII.  PROVISIONS OF
STOCK AWARDS OTHER THAN OPTIONS.

8.1.  Stock
Appreciation Rights.  Each award of
Stock Appreciation Rights (“SARs”) granted under the Plan shall be subject to
such terms and conditions as the Committee shall deem appropriate.  The terms and conditions of SAR agreements
need not be identical, but each SAR agreement shall include the substance of
each of the applicable provisions of this Section 8.1.  The two types of SAR awards that are
authorized for issuance under this Plan are:

(i)            Stand-Alone
SARs.  The following terms and
conditions shall govern the grant and redeemability of stand-alone SARs:

(A)          The stand-alone SAR shall cover a
specified number of underlying shares of Common Stock and shall be redeemable
upon such terms and conditions as the Committee may establish.  Upon redemption of the stand-alone SAR, the
holder shall be entitled to receive a distribution from the Company in an
amount equal to the excess of (i) the aggregate Fair Market Value (on the
redemption date) of the shares of Common Stock underlying the redeemed right
over (ii) the aggregate base price in effect for those shares.

(B)           The number of shares of Common Stock
underlying each stand-alone SAR and the base price in effect for those shares
shall be determined by the Committee in its sole discretion at the time the
stand-alone SAR is granted.  In no event,
however, may the base price per share be less than one hundred percent (100%)
of the Fair Market Value per underlying share of Common Stock on the grant
date.

(C)           The distribution with respect to any
redeemed stand-alone SAR may be made in shares of Common Stock valued at Fair
Market Value on the redemption date, in cash, or partly in shares and partly in
cash, as the Committee shall in its sole discretion deem appropriate.

(ii)           Stapled
SARs.  The following terms and
conditions shall govern the grant and redemption of stapled SARs:

(A)          Stapled SARs may only be granted
concurrently with an Option to acquire the same number of shares of Common
Stock as the number of such shares underlying the stapled SARs.

(B)           Stapled SARs shall be redeemable upon
such terms and conditions as the Committee may establish and shall grant a
holder the right to elect among (i) the exercise of the concurrently granted
Option for shares of Common Stock, whereupon the number of shares of Common
Stock subject to the stapled SARs shall be reduced by an equivalent number,
(ii) the redemption of such stapled SARs in exchange for a distribution from
the Company in an amount equal to the excess of the Fair Market Value (on the
redemption date) of the number of vested shares which the holder redeems over
the aggregate base price for such vested

13

shares, whereupon the number
of shares of Common Stock subject to the concurrently granted Option shall be
reduced by any equivalent number, or (iii) a combination of (i) and (ii).

(C)           The distribution to which the holder
of stapled SARs shall become entitled upon the redemption of stapled SARs may
be made in shares of Common Stock valued at Fair Market Value on the redemption
date, in cash, or partly in shares and partly in cash, as the Committee shall
in its sole discretion deem appropriate.

(iii)          Limitations.  The total number of shares
of Common Stock subject to a SAR award may, but need not, vest in period
installments that may, but need not, be equal. 
The Committee shall determine the criteria under which shares of Common
Stock under the SAR may vest.  If the Stock
Award Agreement does not provide for transferability, then the shares subject
to the SAR shall not be transferable except by will or by the laws of descent
and distribution.

 

8.2.  Other
Stock-Based Awards.  The Committee,
in its sole discretion, may grant or sell an award of a Restricted Stock Bonus,
Restricted Stock Purchase Right, Phantom Stock Unit, Restricted Stock Unit,
Performance Share Bonus, Performance Share Unit, or other stock-based award
that is valued in whole or in part by reference to, or is otherwise based on,
the Fair Market Value of the Company’s Common Stock (each, an “Other
Stock-Based Award”).  Each Other
Stock-Based Award shall be subject to a Stock Award Agreement which shall
contain such terms and conditions as the Committee shall deem appropriate,
including any provisions for the deferral of the receipt of any shares of
Common Stock, cash or property otherwise distributable to the Participant in
respect of the Stock Award.  The terms
and conditions of Other Stock-Based Awards may change from time to time, and
the terms and conditions of separate Other Stock-Based Awards need not be
identical, but each Other Stock-Based Award shall be subject to the following
provisions (either through incorporation of provisions hereof by reference in
the applicable Stock Award Agreement or otherwise):

(i)            Purchase
Price.  Other Stock-Based Awards may
be granted in consideration for past services actually rendered to the Company
or an Affiliate.  The purchase price (if
any) under each Other Stock-Based Award shall be such amount as the Committee
shall determine and designate in the applicable Stock Award Agreement.  To the extent required by Applicable Law, the
purchase price shall not be less than one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Other Stock-Based Award on the
date such award is made or at the time the purchase is consummated, as
applicable.

(ii)           Consideration.

(A)          The
purchase price (if any) of Common Stock acquired pursuant to Other Stock-Based
Awards shall be paid either: (1) in cash or by check, or (2) as determined
by the Committee (and to the extent required by Applicable Law, at the time of
the grant): (v) by delivery to the Company of other shares of Common

14

Stock
(subject to such requirements as may be imposed by the Committee), (w) if there
is a public market for the Common Stock at such time, and to the extent
permitted by Applicable Law, pursuant to a “same day sale” program that results
in either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company
from the sales proceeds, (x) reduction of the Company’s liability to the
Participant, (y) by any other form of consideration permitted by law, but in no
event shall a promissory note or other form of deferred payment constitute a
permissible form of consideration, or (z) by some combination of the foregoing.

(B)           Unless otherwise specifically provided in the Stock Award
Agreement, the purchase price of Common Stock acquired pursuant to any Other
Stock-Based Award that is paid by delivery to the Company of other Common
Stock, which Common Stock was acquired, directly or indirectly from the
Company, shall be paid only by shares of the Common Stock that have been held
for more than six (6) months (or such longer or shorter period of time required
to avoid a supplemental charge to earnings for financial accounting purposes).
To the extent required by Applicable Law, the Participant shall pay the Common
Stock’s “par value” solely in cash or by check.

(C)           Whenever a Participant is permitted to pay the exercise
price of any Other Stock-Based Award and/or taxes relating to the exercise
thereof by delivering Common Stock, the Participant may, subject to procedures
satisfactory to the Committee, satisfy such delivery requirements by presenting
proof of beneficial ownership of such Common Stock, in which case the Company
shall treat the Other Stock-Based Award as exercised or redeemed without further
payment and shall withhold such number of shares of Common Stock from the
Common Stock acquired under the Other Stock-Based Award.  When necessary to avoid a supplemental charge
to earnings for financial accounting purposes, any such withholding for tax
purposes shall be made at the statutory minimum rate of withholding.

(iii)          Vesting.  The total number of shares of Common Stock
subject to each Other Stock-Based Award may, but need not, vest and/or become
redeemable in periodic installments that may, but need not, be equal.  The Committee shall determine the criteria
under which shares of Common Stock under the each Other Stock-Based Award may
vest.  The criteria may or may not include
performance criteria or Continuous Service. 
Shares of Common Stock acquired under each Other Stock-Based Award may,
but need not, be subject to a share repurchase right or similar forfeiture
feature in favor of the Company in accordance with a vesting schedule to be
determined by the Committee.

(iv)          Distributions.  The distribution with respect to any Other
Stock-Based Award may be made in shares of Common Stock valued at Fair Market
Value on the redemption or exercise date, in cash, or partly in shares and
partly in cash, as the Committee shall in its sole discretion deem appropriate.

15

(v)           Termination
of Participant’s Continuous Service. 
In the event a Participant’s Continuous Service terminates, the Company
may repurchase or reacquire, and/or the Participant shall forfeit (as
applicable), any or all of the shares of Common Stock held by the Participant
that have not vested as of the date of termination on such terms and conditions
as set forth in the Stock Award Agreement.

(vi)          Transferability.  Rights to acquire shares of Common Stock
under Other Stock-Based Award shall be transferable by the Participant only
upon such terms and conditions as are set forth in the applicable Stock Award
Agreement, as the Committee shall determine in its discretion.  If the Stock Award Agreement does not provide
for transferability, then the shares subject to Other Stock-Based Award shall
not be transferable except by will or by the laws of descent and distribution.

IX.  ISSUANCE OF SHARES.

9.1.                  Availability
of Shares.  During the terms of the
outstanding Stock Awards, the Company shall keep available at all times the
number of shares of Common Stock required to satisfy such Stock Awards.

9.2.                  Securities
Law Compliance.  The grant of Stock Awards and the issuance of
Common Stock pursuant to Stock Awards shall be subject to compliance with all
applicable requirements of federal, state and foreign law with respect to
securities. The Company shall use commercially reasonable efforts to obtain
from each regulatory commission or agency having jurisdiction over the Plan
such authority as may be required to grant Stock Awards and to issue and sell
shares of Common Stock upon exercise, redemption or satisfaction of the Stock
Awards; provided, however, that this undertaking shall not require the Company
to register under the Securities Act or under any foreign law of similar effect
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to
any such Stock Award.  If, after
commercially reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of Common Stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell Common Stock related to such Stock Awards unless and until such authority
is obtained.

9.3.                  Proceeds.  Proceeds from the sale of Common Stock
pursuant to Stock Awards shall constitute general funds of the Company.

X.  MISCELLANEOUS.

10.1.                Vesting
Generally.  Unless otherwise provided
in the Stock Award Agreement or the terms of the Plan, if the vesting of a
Stock Award is based solely on the Participant’s Continuous Service, the Stock
Award will not fully vest in less than three (3) years and if the vesting of a
Stock Award is based on the Participant’s achievement of performance criteria,
the Stock Award will not fully vest in less than one (1) year.

10.2.                Acceleration of Exercisability and Vesting.  The Committee shall have the power to
accelerate exercisability and/or vesting when it deems fit, such as upon a
Change of

16

Control.  The Committee shall have the power to
accelerate the time at which a Stock Award may first be exercised or the time
during which a Stock Award or any part thereof will vest in accordance with the
Plan, notwithstanding the provisions in the Stock Award stating the time at
which it may first be exercised or the time during which it will vest.

10.3.                Clawback. 
The Company may provide in any Stock Award Agreement that, upon the
Committee’s discovery of facts that would be grounds for a termination for
Cause of a Participant’s Continuous Service, and regardless of whether such
discovery is made prior to or following a termination of Continuous Service for
any reason, the Committee may (in its sole discretion, but acting in good faith)
direct that the Company recover all or a portion of the Stock Award, including
any shares of Common Stock then held by the Participant as well as any gain
recognized by the Participant upon any sale of the shares of Common Stock
issued pursuant to the Stock Award.  In
no event shall the amount to be recovered by the Company be less than any
amount required to be repaid or recovered as a matter of law.  The Committee shall determine whether the
Company shall effect any such recovery or repayment (i) by seeking recovery or
repayment from the Participant, (ii) by reducing (subject to Applicable Law and
the terms and conditions of the applicable plan, program or arrangement) the
amount that would otherwise be payable to the Participant under any
compensatory plan, program, agreement or arrangement maintained by the Company
or any of its Affiliates, (iii) by withholding payment of future compensation
(including the payment of any discretionary bonus amount) or grants of
compensatory awards that would otherwise have been made in accordance with the
otherwise applicable compensation practices of the Company or any Affiliate, or
(iv) by any combination of the foregoing.

10.4.                Compliance
of Performance Awards. 
Notwithstanding anything to the contrary herein, any Stock Award granted
under this Plan may, but need not, be granted in a manner which may be
deductible by the Company under Section 162(m) of the Code and, as applicable,
compliant with the requirements of Section 409A of the Code (such awards, “Performance-Based
Awards”).  A Participant’s
Performance-Based Award shall be determined based on the attainment of written
performance goals approved by the Committee for a performance period
established by the Committee, which goals are approved (i) while the
outcome for that performance period is substantially uncertain and
(ii) during such period of time as permitted by Applicable Law.  The performance goals, which must be
objective, shall be based upon one or more of the following criteria: (i)
consolidated earnings before or after taxes (including earnings before one or
more of the following: interest, taxes, depreciation and amortization); (ii)
net income; (iii) operating income; (iv) earnings per share; (v) book value per
share; (vi) return on stockholders’ equity; (vii) expense management; (viii)
return on investment; (ix) improvements in capital structure; (x) profitability
of an identifiable business unit or product; (xi) maintenance or improvement of
profit margins; (xii) stock price; (xiii) market share; (xiv) revenues or
sales; (xv) costs and/or cost reductions or savings; (xvi) cash flow; (xvii)
working capital; (xviii) return on invested capital or assets; (xix)
consummations of acquisitions or sales of certain Company assets, subsidiaries
or other businesses; (xx) funds from operations and (xxi) pre-tax income .  The foregoing criteria may relate to the
Company, one or more of its Affiliates or one or more of its divisions or
units, or any combination of the foregoing, and may be applied on an absolute
basis and/or be relative to one or more peer group companies or indices, or any
combination

17

thereof, all as the Committee shall
determine.  In addition, to the degree
consistent with Section 162(m) of the Code (or any successor section
thereto) and/or Section 409A of the Code, the performance goals may be
calculated without regard to extraordinary items.  The Committee shall determine whether, with
respect to a performance period, the applicable performance goals have been met
with respect to a given Participant and, if they have, to so certify and
ascertain the amount of the applicable Performance-Based Award.  No Performance-Based Awards will be paid for
such performance period until such certification is made by the Committee.  The amount of the Performance-Based Award
actually paid to a given Participant may be less than the amount determined by
the applicable performance goal formula, at the discretion of the
Committee.  The amount of the
Performance-Based Award determined by the Committee for a performance period
shall be paid to the Participant at such time as determined by the Committee in
its sole discretion after the end of such performance period; provided,
however, that a Participant may, if and to the extent permitted by the
Committee and consistent with the provisions of Section 162(m) and/or
Section 409A of the Code, elect to defer payment of a Performance-Based Award.

10.5.                Stockholder Rights.  No Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
of Common Stock subject to a Stock Award except to the extent that the Company
has issued the shares of Common Stock relating to such Stock Award or except as
expressly provided in a Stock Award Agreement.

10.6.                No Employment or Other Service Rights.  Nothing in the Plan or any instrument
executed or Stock Award granted pursuant thereto shall confer upon any
Participant any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Stock Award was granted or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the
service of a Consultant pursuant to the terms of such Consultant’s agreement
with the Company or an Affiliate or (iii) the service of a Director
pursuant to the Bylaws of the Company, and any applicable provisions of the
corporate law of the state or other jurisdiction in which the Company is
domiciled, as the case may be.

10.7.                Investment Assurances.  The Company may require a Participant, as a
condition of exercising or redeeming a Stock Award or acquiring Common Stock
under any Stock Award, (i) to give written assurances satisfactory to the
Company as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of acquiring
the Common Stock; (ii) to give written assurances satisfactory to the
Company stating that the Participant is acquiring Common Stock subject to the
Stock Award for the Participant’s own account and not with any present
intention of selling or otherwise distributing the Common Stock; and (iii) to
give such other written assurances as the Company may determine are reasonable
in order to comply with Applicable Law. 
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (1) the issuance of the shares of Common
Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (2) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement

18

need not be met in the circumstances
under the then applicable securities laws, and in either case otherwise
complies with Applicable Law.  The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with Applicable Laws, including, but not limited
to, legends restricting the transfer of the Common Stock.

10.8.                Designation of a Beneficiary.  The Committee may establish rules pertaining
to the designation by the Participant of a beneficiary who is to receive any
shares of Common Stock and/or any cash, or have the right to exercise or redeem
that Participant’s Stock Award, in the event of such Participant’s death.

10.9.                Withholding Obligations.  To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state, local,
or foreign tax withholding obligation relating to the grant, exercise,
acquisition or redemption of a Stock Award or the acquisition, vesting,
distribution or transfer of Common Stock under a Stock Award by any of the
following means (in addition to the Company’s right to withhold from any
compensation paid to the Participant by the Company) or by a combination of
such means: (i) tendering a cash payment; (ii) authorizing the
Company to withhold shares of Common Stock from the shares of Common Stock
otherwise issuable to the Participant, provided, however, that no shares of
Common Stock are withheld with a value exceeding the minimum amount of tax
required to be withheld by law (where withholding in excess of the minimum
amount will result in a supplemental charge to earnings for financial
accounting purposes); or (iii) delivering to the Company owned and
unencumbered shares of Common Stock; provided, however, that in the case of the
tender of shares, that any such shares have been held by the Participant for
not less than six (6) months (or such other period as established from time to
time by the Committee in order to avoid a supplemental charge to earnings for
financial accounting purposes).

10.10.              Section 409A. 
Notwithstanding anything in the Plan to the contrary, it is the intent
of the Company that the administration of the Plan, and the granting of all
Stock Awards under this Plan, shall be done in accordance with Section 409A of
the Code and the Department of Treasury regulations and other interpretive
guidance issued thereunder, including any guidance or regulations that may be
issued after the effective date of this Plan, and shall not cause the
acceleration of, or the imposition of the additional, taxes provided for in
Section 409A of the Code.  Any Stock
Award shall be granted, deferred, paid out or modified under this Plan in a
manner that shall be intended to avoid resulting in the acceleration of
taxation, or the imposition of penalty taxation, under Section 409A upon a
Participant.  In the event that it is
reasonably determined by the Committee that any amounts payable in respect of
any Stock Award under the Plan will be taxable to a Participant under Section
409A of the Code prior to the payment and/or delivery to such Participant of
such amounts or will be subject to the acceleration of taxation or the
imposition of penalty taxation under Section 409A of the Code, the Company may
either (i) adopt such amendments to the Plan and related Stock Award, and
appropriate policies and procedures, including amendments and policies with
retroactive effect, that the Committee determines necessary or appropriate to
preserve the intended tax treatment of the benefits provided by the Plan and
Stock Awards hereunder, and/or (ii) take such other actions as the Committee

19

determines necessary or appropriate to
comply with the requirements of Section 409A of the Code.

10.11.              Market Standoff Provision.  If required by the Company (or a
representative of the underwriter(s)) in connection with the first underwritten
registration of the offering of any equity securities of the Company under the
Securities Act, for a specified period of time, the Participant shall not sell,
dispose of, transfer, make any short sale of, grant any option for the purchase
of, or enter into any hedging or similar transaction with the same economic
effect as a sale, any shares of the Common Stock acquired by the Participant
pursuant to a Stock Award, and shall execute and deliver such other agreements
as may be reasonably requested by the Company and/or the underwriter(s) that
are consistent with the foregoing or that are necessary to give further effect
thereto.  In order to enforce the
foregoing covenant, the Company may impose stop transfer instructions with
respect to such shares until the end of such period.

XI.  ADJUSTMENTS
UPON CHANGES IN STOCK.

11.1.                Capitalization Adjustments.  In the event of any change in the Common
Stock subject to the Plan or subject to or underlying any Stock Award, by
reason of any stock dividend, stock split, reverse stock split, reorganization,
recapitalization, merger, consolidation, spin-off, combination, exchange of
shares of Common Stock or other corporate exchange, or any distribution or
dividend to stockholders of Common Stock (whether paid in cash or otherwise) or
any transaction similar to the foregoing, the Committee in its sole discretion
and without liability to any person may make such substitution or adjustment,
if any, as it deems to be equitable to (i) the type, class(es) and maximum
number of securities or other property subject to the Plan pursuant to the
Share Reserve, the ISO Limit, and Section 5.3, (ii) the type, class(es) and
number of securities subject to option grants to Eligible Directors under
Section 7 of the Plan, (iii) the type, class(es) and number of securities or
other property subject to, as well as the exercise price, base price,
redemption price or purchase price applicable to, outstanding Stock Awards or
(iv) any other affected terms of any outstanding Stock Awards.  Any determination, substitution or adjustment
made by the Committee under this Section 11.1, shall be final, binding and
conclusive on all persons.  The
conversion of any convertible securities of the Company shall not be treated as
a transaction that shall cause the Committee to make any determination,
substitution or adjustment under this Section 11.1.

11.2.                Adjustments Upon a Change of Control.  In the event of a Change of Control, then the
Committee or the board of directors of any surviving entity or acquiring entity
may provide or require that the surviving or acquiring entity shall: (1) assume
or continue all or any part of the Stock Awards outstanding under the Plan or
(2) substitute substantially equivalent stock awards (including an award to
acquire substantially the same consideration paid to the stockholders in the
transaction by which the Change of Control occurs) for those Stock Awards
outstanding under the Plan.  In the event
any surviving entity or acquiring entity refuses to assume or continue
outstanding Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, then with respect to Stock Awards held by
Participants whose Continuous Service has not terminated, the Committee in its
sole discretion and without liability to any person may: (1) provide for the
payment of a cash

20

amount in exchange for the cancellation
of a Stock Award equal to the product of (x) the excess, if any, of the Fair
Market Value per share of Common Stock at such time over the exercise or
redemption price, if any, and (y) the total number of shares then subject to
such Stock Award; (2) continue the Stock Awards upon such terms as the
Committee determines in its sole discretion; (3) provide for the issuance of
substitute awards that will substantially preserve the otherwise applicable
terms of any affected Stock Awards (including any unrealized value immediately
prior to the Change of Control) previously granted hereunder, as determined by
the Committee in its sole discretion; or (4) notify Participants holding Stock
Awards that they must exercise or redeem any portion of such Stock Award
(including, at the discretion of the Committee, any unvested portion of such
Stock Award) at or prior to the closing of the transaction by which the Change
of Control occurs and that the Stock Awards shall terminate if not so exercised
or redeemed at or prior to the closing of the transaction by which the Change
of Control occurs.  With respect to any
other Stock Awards outstanding under the Plan, such Stock Awards shall
terminate if not exercised or redeemed with respect to the vested portion of
the Stock Award (and, at the discretion of the Committee, any unvested portion
of such Stock Award) at or prior to the closing of the transaction by which the
Change of Control occurs.  In the
event of the dissolution or liquidation of the Company, unless the Board
determined otherwise, all outstanding awards will terminate immediately prior
to the dissolution or liquidation of the Company.  In all cases, the Committee
shall not be obligated to treat all Stock Awards, even those that are of the
same type, in the same manner.

XII.  AMENDMENT OR
TERMINATION OF THE PLAN OR STOCK AWARDS.

12.1.                Term and Termination of the Plan.  The Committee may suspend or terminate the
Plan at any time.  Unless sooner
terminated, the Plan shall terminate on the day before the tenth (10th)
anniversary of the earlier of the date that the Plan is approved by the
stockholders of the Company or the date the Plan is adopted by the Board.  No Stock Awards may be granted under the Plan
while the Plan is suspended or after it is terminated.

12.2.                Amendment of the Plan and Stock Awards.  The Committee at any time, and from time to
time, may amend the Plan, subject to the approval of the Company’s stockholders
to the extent such approval is necessary under Applicable Law.  The Committee at any time, and from time to
time, may amend the terms of one or more Stock Awards.  It is expressly contemplated that the
Committee may amend the Plan and Stock Awards in any respect the Committee
deems necessary or advisable (i) to provide eligible Participants with the
maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to Incentive Stock Options
and deferred compensation and/or (ii) to bring the Plan and/or Stock Awards
granted under the Plan into compliance with Applicable Law.

12.3.                No Material Impairment of Rights.  Notwithstanding anything to the contrary in
the Plan, the amendment, suspension or termination of the Plan and the
amendment of outstanding Stock Awards, shall not materially impair rights and
obligations under any Stock Award granted while the Plan is in effect except
with the written consent of the Participant unless such amendment is necessary
pursuant to Section 10.10 hereof, in

21

which case the Participant will be
deemed to have consented to the amendment by virtue of accepting the grant of
the Stock Award.

XIII.  EFFECTIVE
DATE OF PLAN.

14.1         Effective Date. 
The Plan shall become effective as of the date the Board approves the
Plan, or such later date as is designated by the Board (such date, as set forth
on the first page of this Plan, the “Effective Date”), subject to the approval
of the Plan by the stockholders of the Company within twelve (12) months before
or after the date the Plan is adopted by the Board.

XIV.  CHOICE OF LAW.

15.1         Choice of Law. 
The law of the State of Delaware shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state’s conflict of laws rules.

22

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}]]