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Exhibit 4.2  

HUNTSMAN LLC  

AND 

THE GUARANTORS NAMED HEREIN,  

AND 

HSBC BANK USA, NATIONAL ASSOCIATION  

as Trustee 

 
 

SUPPLEMENTAL INDENTURE    
    

Dated
as of July 13, 2005 

to

Indenture

Dated
as of September 30, 2003 

115/8%
Senior Secured Notes due 2010 

   
SUPPLEMENTAL INDENTURE, dated as of July 13, 2005 (this "Supplemental Indenture"), between HUNTSMAN LLC, a Utah limited liability company (the
"Company"), the Guarantors named therein and HSBC BANK USA, NATIONAL ASSOCIATION, a national banking association duly organized under the laws of the
United States, as trustee (the "Trustee"). All capitalized terms used and not defined herein shall have the respective meanings assigned to them in the
Indenture. 

        WHEREAS,
the Company, the Guarantors and the Trustee are parties to an Indenture, dated as of September 30, 2003 (the "Indenture"),
pursuant to which the Company issued its 115/8% Senior Secured Notes Due 2010 (the "Notes"); 

        WHEREAS,
the managers of the Company have authorized and approved the amendments to the Indenture set forth herein and delivered to the Trustee resolutions of the Board of Directors to
that effect (the "Amendments"); 

        WHEREAS,
Section 9.02 of the Indenture provides that the Company, the Guarantors and the Trustee may amend the Indenture and the Notes with the consent of the Holders of a
majority in principal amount of the Notes then outstanding; 

        WHEREAS,
the Company have solicited consents pursuant to a Consent Solicitation Statement, dated June 17, 2005, [as supplemented or amended] (the
"Consent Solicitation Statement"), and accompanying Consent Letter, from the Holders of the Notes in connection with the Amendments; 

        WHEREAS,
the Holders of approximately 99.9% in principal amount of the Notes have consented to the Amendments in accordance with Section 9.02 of the Indenture; and 

        WHEREAS,
the execution and delivery of this Supplemental Indenture have been duly authorized and all conditions and requirements necessary to make this Supplemental Indenture a valid and
binding agreement have been duly performed and complied with; 

        NOW,
THEREFORE, for and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, it is mutually
covenanted and agreed, for the equal proportionate benefit of all Holders of the Notes, as follows: 

ARTICLE I

OPERATION OF AMENDMENTS  

        Section 1.1 Operation of Amendments.    Notwithstanding an earlier execution date, the Amendments
described in Article II of this Supplemental Indenture shall not become operative until such time as the Company has delivered an Officer's Certificate to the Trustee notifying the Trustee that
such Amendments have become operative and certifying that one of the following conditions has been satisfied: 

        (a)   on
or prior to September 30, 2005, the merger of the Company and Huntsman International LLC (the "Merger") has
occurred and the Company has deposited with the Global Bondholder Services Corporation or its successor (the "Information Agent") sufficient funds to
pay the Consent Payment to Consenting Holders (each as defined in the Consent Solicitation Statement) and has irrevocably instructed the Information Agent to make such payment; or 

        (b)   the
Merger has occurred after September 30, 2005 and the Company, on or prior to September 30, 2005, has deposited with the Information Agent sufficient
funds to pay the Consent Payment and has irrevocably instructed the Information Agent to make such payment.

 

ARTICLE II

AMENDMENTS TO INDENTURE  

        Section 2.1 Permitted Indebtedness    

        (a)   Clause (2) of
the definition of "Permitted Indebtedness" is hereby amended and restated to read in its
entirety as set forth below: 

        (2)   Indebtedness
incurred pursuant to the Credit Facilities in an aggregate principal amount not exceeding $3,200 million at any one time outstanding, less
(i) the amount of any payments made by the Company under the Credit Facilities with the Net Cash Proceeds of any Asset Sale (which are accompanied by a corresponding permanent commitment
reduction) pursuant to clauses (1)(A) or (2)(A) of the second sentence of Section 4.15 and (ii) then outstanding Indebtedness of any Securitization Entity after giving
effect to the substantially contemporaneous application of the net proceeds therefrom; provided that, upon and after completion of a merger or other
transaction as a result of which Huntsman Advanced Materials, L.L.C., or its successor ("Admat"), is merged with or into or becomes a Restricted
Subsidiary of the Company, an additional $300 million aggregate principal amount of Indebtedness at any one time outstanding may be incurred pursuant to the Credit Facilities provided that,
after giving effect to such merger or other transaction, the Consolidated Fixed Charge Coverage Ratio of the Company would either (i) not be less than the Consolidated Fixed Charge Coverage
Ratio of the Company determined immediately prior to such merger or other transaction or (ii) not be less than 3.0 to 1.0; 

        (b)   Clause (14)
of the definition of "Permitted Indebtedness" is hereby amended and restated to read in its entirety
as set forth below: 

        (14) Indebtedness
of the Company or any Restricted Subsidiary incurred in the ordinary course of business not to exceed $35 million at any time outstanding: 

        (A)  representing
Capitalized Lease Obligations; or 

        (B)  constituting
purchase money Indebtedness incurred to finance property or assets of the Company or any Restricted Subsidiary of the Company acquired in the ordinary
course of business; provided, however, that such purchase money Indebtedness shall not exceed the cost of such property or assets and shall not be
secured by any property or assets of the Company or any Restricted Subsidiary of the Company other than the property and assets so acquired; 

        (c)   Clause (16)
of the definition of "Permitted Indebtedness" is hereby amended and restated to read in its entirety
as set forth below: 

        (16) Indebtedness
of the Company and its Domestic Subsidiaries pursuant to overdraft lines or similar extensions of credit in an aggregate amount not to exceed
$20 million at any one time outstanding and Indebtedness of Foreign Subsidiaries pursuant to overdraft lines or similar extensions of credit in an aggregate principal amount not to exceed
$60 million at any one time outstanding; 

        Section 2.2 Permitted Investments.    Clause (5) of the definition of
"Permitted Investments" is hereby amended and restated to read in its entirety as set forth below: 

        (5)   Investments
in Unrestricted Subsidiaries or joint ventures not to exceed $25 million, plus: 

        (A)  the
aggregate net after-tax amount returned in cash on or with respect to any Investments made in Unrestricted Subsidiaries and joint ventures whether
through interest payments, principal payments, dividends or other distributions or payments;

 

        (B)  the
net after-tax cash proceeds received by the Company or any Restricted Subsidiary from the disposition of all or any portion of such Investments (other
than to a Restricted Subsidiary of the Company); 

        (C)  upon
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair market value of such subsidiary; provided that such Unrestricted Subsidiary was so
designated after the Issue Date; and 

        (D)  the
net cash proceeds received by the Company from the issuance of Specified Capital Stock. 

        Section 2.3 Tax Sharing Agreement; Unrestricted Subsidiary Designation.    The following
definitions are hereby amended and restated to read in their entirety as follows: 

        "HMP" means HMP Equity Holdings Corporation, a Delaware corporation, any successor thereto or any other entity of which the Company is a
consolidated Subsidiary. 

        "Tax Sharing Agreement" means that certain tax sharing agreement dated September 30, 2002 by and between the Company and HMP, as in
effect on the Issue Date, as such agreement may be modified or replaced in a manner not less favorable in any material respect to the Company than the agreement as in effect on the Issue Date. 

        "Unrestricted Subsidiary" of any Person means: 

        (1)   any
Subsidiary of such Person that at the time of determination will be or continue to be designated an Unrestricted Subsidiary; and 

        (2)   any
Subsidiary of an Unrestricted Subsidiary. 

        On
the Issue Date, (i) Huntsman International Holdings, LLC and each of its direct and indirect subsidiaries, (ii) Huntsman Distribution Corporation, (iii) Huntsman
Styrenics Investments Holdings LLC, (iv) Huntsman Verwaltungs GmbH, (v) Huntsman SA Investment Corporation and (vi) HF II Australia Holdings Company LLC on such date will be
designated as Unrestricted Subsidiaries of the Company. Upon completion of the Merger, the following entities will be deemed to be designated Unrestricted Subsidiaries without further action by the
Company and without compliance with Section 4.03: Huntsman China Investments B.V. 

        The
Board of Managers of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary if: 

        (i)    such
Subsidiary does not own any Capital Stock of, or does not own or hold any Lien on any property of, the Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; 

        (ii)   the
Company certifies to the Trustee that such designation complies with Section 4.03; and 

        (iii)  each
Subsidiary to be designated as an Unrestricted Subsidiary and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness under which the lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries.

 

        The
Board of Managers of the Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if: 

        (i)    immediately
after giving effect to such designation, the Company is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.12(a); and 

        (ii)   immediately
before and immediately after giving effect to such designation, no default or Event of Default will have occurred and be continuing. 

        Any
such designation by the Board of Managers of the Company will be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution approving the designation
and an Officers' Certificate certifying that the designation complied with this Indenture. 

        Section 2.4 Matters Related to Collateral.    

        (a)   The
following definitions are hereby amended and restated to read in their entirety as set forth below: 

        "Collateral" means, collectively, (i) substantially all assets and property of the Company or any Guarantor that from time to time
are subject to a Lien securing the Obligations of the Company and/or any Guarantor under the Credit Facilities and (ii) all other assets and property that are from time to time subject to or
required to be subject to the Lien of this Indenture and the Security Documents; provided that Collateral shall not include any shares of Capital Stock
of Subsidiaries of the Company or any Guarantor. 

        "First Priority Credit Facility Indebtedness" means Indebtedness permitted under clause (2) of the definition of "Permitted
Indebtedness." 

        "Permitted Collateral Liens" means (i) Liens securing the Notes and the Guarantees, (ii) Liens of the type described in
clauses (2), (3), (4), (5), (6), (7), (8), (11), (12), (13), (14) and (16) of the definition of "Permitted Liens"; provided that, in the case of clauses (2), (3), (5) and
(13) thereof, any proceeding instituted contesting such Lien shall conclusively operate to stay the sale or forfeiture of any portion of the Collateral on account of such Lien, and
(iii) Liens securing Indebtedness incurred pursuant to clause (2) or clause (18)(iii) of the definition of "Permitted Indebtedness." 

        "Second Priority Collateral Agent" shall be deemed to refer to the First Priority Collateral Agent. 

        "Second Priority Credit Facilities" shall be deemed to refer to the First Priority Credit Facilities. 

        "Second Priority Representative" shall be deemed to refer to the Bank Agent under the Credit Facilities or, if no obligations are
outstanding under the Credit Facilities, the Trustee. 

        "Second Priority Security Agreement" shall be deemed to refer to the First Priority Security Agreement. 

        "Second Priority Senior Secured Indebtedness" shall be deemed to refer to First Priority Senior Secured Indebtedness. 

        (b)   The
Indenture is hereby amended by deleting the last sentence of the second paragraph of Section 11.01 in its entirety. Prior to this amendment, the sentence read
as follows: "Any collateral held by a Collateral Agent (as defined in the applicable Security Documents) for the benefit of Second Priority Senior Secured Parties shall constitute Collateral for
purposes of this Indenture."

 

        Section 2.5 Intercreditor Agreement.    Upon completion of the Merger, the Trustee will be
authorized to enter into, on behalf of the Holders of the Notes, a new or amended Intercreditor Agreement in such form as the Trustee shall, in its reasonable discretion, approve providing that the
relative rights and obligations of (a) the lenders under the new secured credit facility for the company surviving the Merger (the "New Credit
Facility") and (b) the Trustee on behalf of the Holders of the Notes with respect to the Collateral and related matters will be substantially equivalent to the relative
rights and obligations with respect to the Collateral and related matters of (x) the lenders under the Term Credit Agreement (as defined in the existing Intercreditor Agreement) and
(y) the Trustee on behalf of the Holders of the Notes that are currently provided for under the existing Intercreditor Agreement. The Company will deliver an Officer's Certificate to the
Trustee certifying that such new or amended Intercreditor Agreement complies with the terms of this Section 1.2, and the Trustee will be entitled to rely exclusively on such Officer's
Certificate. 

        Section 2.6 Subsequent Amendments.    The Trustee may execute, on behalf of the Holders of the
Notes, further amendments to provisions of the Indenture relating to the Collateral (the "Subsequent Amendments") without securing additional approval
of the Holders if the Company determines such Subsequent Amendments are consistent with the proposed collateral arrangements with respect to the New Credit Facility as described in the Consent
Solicitation Statement. The Company will evidence such determination by delivery of an Officer's Certificate to the Trustee certifying that the Company has determined such Subsequent Amendments to be
so consistent. 

ARTICLE III

MISCELLANEOUS PROVISIONS  

        Section 3.1    Upon execution and delivery of this Supplemental Indenture, the terms and conditions of this Supplemental
Indenture shall be part of the terms and conditions of the Indenture for any and all purposes, and all the terms and conditions of both shall be read together as though they constitute one and the
same instrument, except that in case of conflict, the provisions of this Supplemental Indenture will control. 

        Section 3.2    Each of the Company, the Guarantors and the Trustee hereby confirms and reaffirms the Indenture, as
amended and supplemented by this Supplemental Indenture. 

        Section 3.3    The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an
original, but all of them together shall represent the same agreement. One signed copy is enough to prove this Supplemental Indenture. 

        Section 3.4    All provisions of this Supplemental Indenture shall be deemed to be incorporated in, and made a part of,
the Indenture; and the Indenture, as amended and supplemented by this Supplemental Indenture, shall be read, taken and construed as one and the same instrument. 

        Section 3.5    The recitals contained herein shall be taken as the statements of the Company or the Guarantors, as
applicable, and the Trustee assumes no responsibility for their correctness. The Trustee shall not be liable or responsible for the validity or sufficiency of this Supplemental Indenture or the due
authorization of this Supplemental Indenture by the Company or the Guarantors. In entering into this Supplemental Indenture, the Trustee shall be entitled to the benefit of every provision of the
Indenture relating to the conduct of, affecting the liability of or affording protection to the Trustee, whether or not elsewhere herein so provided. 

[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 

 

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

	

 	
 	

HUNTSMAN LLC
	

 	
 	

By:	
 	

/s/  SEAN DOUGLAS      
 Sean Douglas

Vice President and Treasurer

 

	

GUARANTORS
	

 	
 	

Huntsman Specialty Chemicals Corporation

Huntsman Specialty Chemicals Holdings Corporation

Huntsman Chemical Purchasing Corporation

Huntsman International Chemicals Corporation

Huntsman International Trading Corporation

Huntsman Petrochemical Purchasing Corporation

Polymer Materials Inc.

Airstar Corporation

Huntsman Procurement Corporation

JK Holdings Corporation

Huntsman Australia Inc.

Huntsman Chemical Finance Corporation

Huntsman Enterprises Inc.

Huntsman Family Corporation

Huntsman Group Holdings Finance Corporation

Huntsman Group Intellectual Property Holdings Corporation

Huntsman International Services Corporation

Huntsman MA Investment Corporation

Huntsman MA Services Corporation

Huntsman Petrochemical Finance Corporation

Huntsman Expandable Polymers Company, LC
	 	 	 	 	By:	 	Huntsman International Chemicals Corporation,

its Manager
	 	 	Huntsman Petrochemical Canada Holdings Corporation

Huntsman Polymers Holdings Corporation

Huntsman Chemical Company LLC

Huntsman Polymers Corporation

Huntsman Purchasing, Ltd.
	 	 	 	 	By:	 	Huntsman Procurement Corporation,

its General Partner
	 	 	Petrostar Industries LLC

Huntsman Headquarters Corporation
	

 	
 	

 	
 	

 	
 	

By:	
 	

/s/  SEAN DOUGLAS      

	 	 	 	 	 	 	Name:	 	Sean Douglas
	 	 	 	 	 	 	Title:	 	Vice President
	

 	
 	

Huntsman Fuels, L.P.
	 	 	 	 	By:	 	Petrostar Fuels LLC,

its General Partner

 

	 	 	Petrostar Fuels LLC
	

 	
 	

 	
 	

 	
 	

By:	
 	

/s/  SAMUEL D. SCRUGGS      

	 	 	 	 	 	 	Name:	 	Samuel D. Scruggs
	 	 	 	 	 	 	Title:	 	Vice President
	

 	
 	

HSBC BANK USA, NATIONAL ASSOCIATION

as Trustee
	 	 	By:	 	/s/  HERAWATTEE ALLI      

	 	 	Name:	 	Herawattee Alli
	 	 	Title:	 	Assistant Vice President

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Exhibit 10.8  

 
 

DISCOVERY HOLDING COMPANY
  2005 NON-EMPLOYEE DIRECTOR INCENTIVE PLAN
  (Effective May 3, 2005)    
    

ARTICLE I

Purpose of Plan  

        1.1   Purpose. The purpose of the Plan is to provide a method whereby eligible Nonemployee Directors of the Company may be
awarded additional remuneration for services rendered and encouraged to invest in capital stock of the Company, thereby increasing their proprietary interest in the Company's businesses and increasing
their personal interest in the continued success and progress of the Company. The Plan is also intended to aid in attracting Persons of exceptional ability to become Nonemployee Directors of the
Company. 

        1.2   Effective Date. The Plan is effective as of May 3, 2005. 

ARTICLE II

Definitions  

        2.1   Certain Defined Terms. Capitalized terms not defined elsewhere in the Plan shall have the following meanings (whether
used in the singular or plural): 

        "Affiliate"
of the Company means any corporation, partnership or other business association that, directly or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with the Company. 

        "Agreement"
means a stock option agreement, stock appreciation rights agreement, restricted shares agreement, stock units agreement or an agreement evidencing more than one type of
Award, specified in Section 11.4, as any such Agreement may be supplemented or amended from time to time. 

        "Approved
Transaction" means any transaction in which the Board (or, if approval of the Board is not required as a matter of law, the stockholders of the Company) shall approve
(i) any consolidation or merger of the Company, or binding share exchange, pursuant to which shares of Common Stock of the Company would be changed or converted into or exchanged for cash,
securities or other property, other than any such transaction in which the common stockholders of the Company immediately prior to such transaction have the same proportionate ownership of the Common
Stock of, and voting power with respect to, the surviving corporation immediately after such transaction, (ii) any merger, consolidation or binding share exchange to which the Company is a
party as a result of which the Persons who are common stockholders of the Company immediately prior thereto have less than a majority of the combined voting power of the outstanding capital stock of
the Company ordinarily (and apart from the rights accruing under special circumstances) having the right to vote in the election of directors immediately following such merger, consolidation or
binding share exchange, (iii) the adoption of any plan or proposal for the liquidation or dissolution of the Company, or (iv) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all, of the assets of the Company. 

        "Award"
means a grant of Options, SARs, Restricted Shares, Stock Units and/or cash under the Plan. 

        "Board"
means the Board of Directors of the Company. 

        "Board
Change" means, during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board cease for any reason to constitute a
majority

 
thereof unless the election, or the nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at
the beginning of the period. 

        "Code"
means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific Code section shall include
any successor section. 

        "Common
Stock" means each or any (as the context may require) series of the Company's common stock. 

        "Company"
means Discovery Holding Company, a Delaware corporation. 

        "Control
Purchase" means any transaction (or series of related transactions) in which (i) any person (as such term is defined in Sections 13(d)(3) and
14(d)(2) of the Exchange Act), corporation or other entity (other than the Company, any Subsidiary of the Company or any employee benefit plan sponsored by the Company or any Subsidiary of the
Company) shall purchase any Common Stock of the Company (or securities convertible into Common Stock of the Company) for cash, securities or any other consideration pursuant to a tender offer or
exchange offer, without the prior consent of the Board, or (ii) any person (as such term is so defined), corporation or other entity (other than the Company, any Subsidiary of the Company, any
employee benefit plan sponsored by the Company or any Subsidiary of the Company or any Exempt Person (as defined below)) shall become the "beneficial owner" (as such term is defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the then outstanding securities of
the Company ordinarily (and apart from the rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in
Rule 13d-3(d) under the Exchange Act in the case of rights to acquire the Company's securities), other than in a transaction (or series of related transactions) approved by
the Board. For purposes of this definition, "Exempt Person" means each of (a) the Chairman of the Board, the President and each of the directors
of Discovery Holding Company as of the Distribution Date, and (b) the respective family members, estates, and heirs of each of the persons referred to in clause (a) above and any
trust or other investment vehicle for the primary benefit of any of such persons or their respective family members or heirs. As used with respect to any person, the term "family member" means the
spouse, siblings and lineal descendants of such person. 

        "Director
Compensation" means the annual retainer and meeting fees, and any other regular cash compensation payable by the Company to a Nonemployee Director for service on the Board. 

        "Disability"
means the inability 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 which has lasted or can be expected to last for a continuous period of not less than 12 months. 

        "Distribution
Date" means the date on which the Company ceases to be a wholly-owned subsidiary of LMC. 

        "Dividend
Equivalents" means, with respect to Restricted Shares to be issued at the end of the Restriction Period, to the extent specified by the Board only, an amount equal to all
dividends and other distributions (or the economic equivalent thereof) which are payable to stockholders of record during the Restriction Period on a like number and kind of shares of Common Stock. 

        "Domestic
Relations Order" means a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder. 

        "Effective
Date" has the meaning ascribed thereto in Section 1.2.

 

        "Equity
Security" shall have the meaning ascribed to such term in Section 3(a)(11) of the Exchange Act, and an equity security of an issuer shall have the meaning ascribed thereto
in Rule 16a-1 promulgated under the Exchange Act, or any successor Rule. 

        "Exchange
Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific Exchange Act
section shall include any successor section. 

        "Fair
Market Value" of a share of any series of Common Stock on any day means the last sale price (or, if no last sale price is reported, the average of the high bid and low asked
prices) for a share of such series of Common Stock on such day (or, if such day is not a trading day, on the next preceding trading day) as reported on the consolidated transaction reporting system
for the principal national securities exchange on which shares of such series of Common Stock are listed on such day or if such shares are not then listed on a national securities exchange, then as
reported on Nasdaq. If for any day the Fair Market Value of a share of the applicable series of Common Stock is not determinable by any of the foregoing means, then the Fair Market Value for such day
shall be determined in good faith by the Board on the basis of such quotations and other considerations as the Board deems appropriate. 

        "Free
Standing SAR" has the meaning ascribed thereto in Section 7.1. 

        "Holder"
means a person who has received an Award under the Plan. 

        "LMC"
means Liberty Media Corporation, a Delaware corporation. 

        "Nasdaq"
means The NASDAQ Stock Market. 

        "Nonemployee
Director" means an individual who is a member of the Board and who is not an employee of the Company or any Subsidiary and who is not an employee of LMC that provides
services to the Company pursuant to the Services Agreement, dated as of [                        ], 2005, between LMC and the
Company. 

        "Nonqualified
Stock Option" means a stock option granted under Article VI. 

        "Option"
means a Nonqualified Stock Option. 

        "Person"
means an individual, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind. 

        "Plan"
means this Discovery Holding Company 2005 Non-Employee Director Incentive Plan." 

        "Restricted
Shares" means shares of any series of Common Stock or the right to receive shares of any specified series of Common Stock, as the case may be, awarded pursuant to
Article VIII. 

        "Restriction
Period" means a period of time beginning on the date of each Award of Restricted Shares and ending on the Vesting Date with respect to such Award. 

        "Retained
Distribution" has the meaning ascribed thereto in Section 8.3. 

        "SARs"
means stock appreciation rights, awarded pursuant to Article VII, with respect to shares of any specified series of Common Stock. 

        "Stock
Unit Awards" has the meaning ascribed thereto in Section 9.1. 

        "Subsidiary"
of a Person means any present or future subsidiary (as defined in Section 424(f) of the Code) of such Person or any business entity in which such Person owns,
directly or indirectly, 50% or more of the voting, capital or profits interests. An entity shall be

 
deemed a subsidiary of a Person for purposes of this definition only for such periods as the requisite ownership or control relationship is maintained. 

        "Tandem
SARs" has the meaning ascribed thereto in Section 7.1. 

        "Vesting
Date," with respect to any Restricted Shares awarded hereunder, means the date on which such Restricted Shares cease to be subject to a risk of forfeiture, as designated in or
determined in accordance with the Agreement with respect to such Award of Restricted Shares pursuant to Article VIII. If more than one Vesting Date is designated for an Award of Restricted
Shares, reference in the Plan to a Vesting Date in respect of such Award shall be deemed to refer to each part of such Award and the Vesting Date for such part. 

ARTICLE III

Administration  

        3.1   Administration. The Plan shall be administered by the Board, provided that it may delegate to employees of the Company
certain administrative or ministerial duties in carrying out the purposes of the Plan. 

        3.2   Powers. The Board shall have full power and authority to grant to eligible persons Options under Article VI of the
Plan, SARs under Article VII of the Plan, Restricted Shares under Article VIII of the Plan and/or Stock Units under Article IX of the Plan, to determine the terms and conditions
(which need not be identical) of all Awards so granted, to interpret the provisions of the Plan and any Agreements relating to Awards granted under the Plan and to supervise the administration of the
Plan. The Board in making an Award may provide for the granting or issuance of additional, replacement or alternative Awards upon the occurrence of specified events, including the exercise of the
original Award. The Board shall have sole authority in the selection of persons to whom Awards may be granted under the Plan and in the determination of the timing, pricing, and amount of any such
Award, subject only to the express provisions of the Plan. In making determinations hereunder, the Board may take into account such factors as the Board in its discretion deems relevant. 

        3.3   Interpretation. The Board is authorized, subject to the provisions of the Plan, to establish, amend and rescind such
rules and regulations as it deems necessary or advisable for the proper administration of the Plan and to take such other action in connection with or in relation to the Plan as it deems necessary or
advisable. Each action and determination made or taken pursuant to the Plan by the Board, including any interpretation or construction of the Plan, shall be final and conclusive for all purposes and
upon all persons. No member of the Board shall be liable for any action or determination made or taken by him or the Board in good faith with respect to the Plan. 

ARTICLE IV

Shares Subject to the Plan  

        4.1   Number of Shares. Subject to the provisions of this Article IV, the maximum number of shares of Common Stock with
respect to which Awards may be granted during the term of the Plan shall be 5 million shares. Shares of Common Stock will be made available from the authorized but unissued shares of the
Company or from shares reacquired by the Company, including shares purchased in the open market. The shares of Common Stock subject to (a) any Award granted under the Plan that shall expire,
terminate or be annulled for any reason without having been exercised (or considered to have been exercised as provided in Section 7.2), (b) any Award of any SARs granted under the Plan
that shall be exercised for cash, and (c) any Award of Restricted Shares or Stock Units that shall be forfeited prior to becoming vested (provided that the Holder received no benefits of
ownership of such Restricted Shares or Stock Units other than voting rights and the accumulation of Retained Distributions and unpaid Dividend Equivalents that are likewise forfeited) shall again be
available for purposes of the Plan.

 

        4.2   Adjustments. If the Company subdivides its outstanding shares of any series of Common Stock into a greater number of
shares of such series of Common Stock (by stock dividend, stock split, reclassification, or otherwise) or combines its outstanding shares of any series of Common Stock into a smaller number of shares
of such series of Common Stock (by reverse stock split, reclassification, or otherwise) or if the Board determines that any stock dividend, extraordinary cash dividend, reclassification,
recapitalization, reorganization, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase such series of Common Stock or other similar
corporate event (including mergers or consolidations other than those which constitute Approved Transactions, adjustments with respect to which shall be governed by Section 11.1(b)) affects any
series of Common Stock so that an adjustment is required to preserve the benefits or potential benefits intended to be made available under the Plan, then the Board, in its sole discretion and in such
manner as the Board may deem equitable and appropriate, may make such adjustments to any or all of (a) the number and kind of shares of stock which thereafter may be awarded, optioned, or
otherwise made subject to the benefits contemplated by the Plan, (b) the number and kind of shares of stock subject to outstanding Awards, and (c) the purchase or exercise price and the
relevant appreciation base with respect to any of the foregoing, provided, however, that the number of shares subject to any Award shall always be a
whole number. Notwithstanding the foregoing, if all shares of any series of Common Stock are redeemed, then each outstanding Award shall be adjusted to substitute for the shares of such series of
Common Stock subject thereto the kind and amount of cash, securities or other assets issued or paid in the redemption of the equivalent number of shares of such series of Common Stock and otherwise
the terms of such Award, including, in the case of Options or similar rights, the aggregate exercise price, and, in the case of Free Standing SARs, the aggregate base price, shall remain constant
before and after the substitution (unless otherwise determined by the Board and provided in the applicable Agreement). The Board may, if deemed appropriate, provide for a cash payment to any Holder of
an Award in connection with any adjustment made pursuant to this Section 4.2. 

ARTICLE V

Eligibility  

        5.1   General. The persons who shall be eligible to participate in the Plan and to receive Awards under the Plan shall, subject
to Section 5.2, be such persons who are Nonemployee Directors as the Board shall select. Awards may be made to Nonemployee Directors who hold or have held Awards under the Plan or any similar
or other awards under any other plan of the Company or any of its Affiliates. 

        5.2   Ineligibility. No person who is not a Nonemployee Director shall be eligible to receive an Award. 

ARTICLE VI

Stock Options  

        6.1   Grant of Options. Subject to the limitations of the Plan, the Board shall designate from time to time those eligible
persons to be granted Options, the time when each Option shall be granted to such eligible persons, the series and number of shares of Common Stock subject to such Option, and, subject to
Section 6.2, the purchase price of the shares of Common Stock subject to such Option. 

        6.2   Option Price. The price at which shares may be purchased upon exercise of an Option shall be fixed by the Board and may
be no less than the Fair Market Value of the shares of the applicable series of Common Stock subject to the Option as of the date the Option is granted. 

        6.3   Term of Options. Subject to the provisions of the Plan with respect to death, retirement and termination of service, the
term of each Option shall be for such period as the Board shall determine as set forth in the applicable Agreement.

 

        6.4   Exercise of Options. An Option granted under the Plan shall become (and remain) exercisable during the term of the Option
to the extent provided in the applicable Agreement and the Plan and, unless the Agreement otherwise provides, may be exercised to the extent exercisable, in whole or in part, at any time and from time
to time during such term; provided, however,that subsequent to the grant of an Option, the Board, at any time before complete termination of such
Option, may accelerate the time or times at which such Option may be exercised in whole or in part (without reducing the term of such Option). 

        6.5   Manner of Exercise. 

        (a)   Form of Payment. An Option shall be exercised by written notice to the Company upon such terms and conditions as
the Agreement may provide and in accordance with such other procedures for the exercise of Options as the Board may establish from time to time. The method or methods of payment of the purchase price
for the shares to be purchased upon exercise of an Option and of any amounts required by Section 11.8 shall be determined by the Board and may consist of (i) cash, (ii) check,
(iii) whole shares of any series of Common Stock, (iv) the withholding of shares of the applicable series of Common Stock issuable upon such exercise of the Option, (v) the
delivery, together with a properly executed exercise notice, of irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds required to pay the purchase price, or (vi) any combination of the foregoing methods of payment, or such other consideration and method of payment as may be
permitted for the issuance of shares under the Delaware General Corporation Law. The permitted method or methods of payment of the amounts payable upon exercise of an Option, if other than in cash,
shall be set forth in the applicable Agreement and may be subject to such conditions as the Board deems appropriate. 

        (b)   Value of Shares. Unless otherwise determined by the Board and provided in the applicable Agreement, shares of any series
of Common Stock delivered in payment of all or any part of the amounts payable in connection with the exercise of an Option, and shares of any series of Common Stock withheld for such payment, shall
be valued for such purpose at their Fair Market Value as of the exercise date. 

        (c)   Issuance of Shares. The Company shall effect the transfer of the shares of Common Stock purchased under the Option as
soon as practicable after the exercise thereof and payment in full of the purchase price therefor and of any amounts required by Section 11.8, and within a reasonable time thereafter, such
transfer shall be evidenced on the books of the Company. Unless otherwise determined by the Board and provided in the applicable Agreement, (i) no Holder or other person exercising an Option
shall have any of the rights of a stockholder of the Company with respect to shares of Common Stock subject to an Option granted under the Plan until due exercise and full payment has been made, and
(ii) no adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such due exercise and full payment. 

        6.6   Nontransferability. Unless otherwise determined by the Board and provided in the applicable Agreement, Options shall not
be transferable other than by will or the laws of descent and distribution or pursuant to a Domestic Relations Order, and, except as otherwise required pursuant to a Domestic Relations Order, Options
may be exercised during the lifetime of the Holder thereof only by such Holder (or his or her court-appointed legal representative). 

ARTICLE VII

SARs  

        7.1   Grant of SARs. Subject to the limitations of the Plan, SARs may be granted by the Board to such eligible persons in such
numbers, with respect to any specified series of Common Stock, and at such times during the term of the Plan as the Board shall determine. A SAR may be granted to a

 
Holder of an Option (hereinafter called a "related Option") with respect to all or a portion of the shares of Common Stock subject to the related Option (a "Tandem SAR") or may be granted separately
to an eligible Nonemployee Director (a "Free Standing SAR"). Subject to the limitations of the Plan, SARs shall be exercisable in whole or in part upon notice to the Company upon such terms and
conditions as are provided in the Agreement. 

        7.2   Tandem SARs. A Tandem SAR may be granted either concurrently with the grant of the related Option or at any time
thereafter prior to the complete exercise, termination, expiration or cancellation of such related Option. Tandem SARs shall be exercisable only at the time and to the extent that the related Option
is exercisable (and may be subject to such additional limitations on exercisability as the Agreement may provide) and in no event after the complete termination or full exercise of the related Option.
Upon the exercise or termination of the related Option, the Tandem SARs with respect thereto shall be canceled automatically to the extent of the number of shares of Common Stock with respect to which
the related Option was so exercised or terminated. Subject to the limitations of the Plan, upon the exercise of a Tandem SAR and unless otherwise determined by the Board and provided in the applicable
Agreement, (a) the Holder thereof shall be entitled to receive from the Company, for each share of the applicable series of Common Stock with respect to which the Tandem SAR is being exercised,
consideration (in the form determined as provided in Section 7.4) equal in value to the excess of the Fair Market Value of a share of the applicable series of Common Stock with respect to which
the Tandem SAR was granted on the date of exercise over the related Option purchase price per share, and (b) the related Option with respect thereto shall be canceled automatically to the
extent of the number of shares of Common Stock with respect to which the Tandem SAR was so exercised. 

        7.3   Free Standing SARs. Free Standing SARs shall be exercisable at the time, to the extent and upon the terms and conditions
set forth in the applicable Agreement. The base price of a Free Standing SAR may be no less than the Fair Market Value of the applicable series of Common Stock with respect to which the Free Standing
SAR was granted as of the date the Free Standing SAR is granted. Subject to the limitations of the Plan, upon the exercise of a Free Standing SAR and unless otherwise determined by the Board and
provided in the applicable Agreement, the Holder thereof shall be entitled to receive from the Company, for each share of the applicable series of Common Stock with respect to which the Free Standing
SAR is being exercised, consideration (in the form determined as provided in Section 7.4) equal in value to the excess of the Fair Market Value of a share of the applicable series of Common
Stock with respect to which the Free Standing SAR was granted on the date of exercise over the base price per share of such Free Standing SAR. 

        7.4   Consideration. The consideration to be received upon the exercise of a SAR by the Holder shall be paid in the applicable
series of Common Stock with respect to which the SAR was granted (valued at Fair Market Value on the date of exercise of such SAR). No fractional shares of Common Stock shall be issuable upon exercise
of a SAR, and unless otherwise provided in the applicable Agreement, the Holder will receive cash in lieu of fractional shares. Unless the Board shall otherwise determine, to the extent a Free
Standing SAR is exercisable, it will be exercised automatically on its expiration date. 

        7.5   Limitations. The applicable Agreement may provide for a limit on the amount payable to a Holder upon exercise of SARs at
any time or in the aggregate, for a limit on the time periods during which a Holder may exercise SARs, and for such other limits on the rights of the Holder and such other terms and conditions of the
SAR, including a condition that the SAR may be exercised only in accordance with rules and regulations adopted from time to time, as the Board may determine. Unless otherwise so provided in the
applicable Agreement, any such limit relating to a Tandem SAR shall not restrict the exercisability of the related Option. Such rules and regulations may govern the right to exercise SARs granted
prior to the adoption or amendment of such rules and regulations as well as SARs granted thereafter.

 

        7.6   Exercise. For purposes of this Article VII, the date of exercise of a SAR shall mean the date on which the Company
shall have received notice from the Holder of the SAR of the exercise of such SAR (unless otherwise determined by the Board and provided in the applicable Agreement). 

        7.7   Nontransferability. Unless otherwise determined by the Board and provided in the applicable Agreement, (a) SARs
shall not be transferable other than by will or the laws of descent and distribution or pursuant to a Domestic Relations Order, and (b) except as otherwise required pursuant to a Domestic
Relations Order, SARs may be exercised during the lifetime of the Holder thereof only by such Holder (or his or her court-appointed legal representative). 

ARTICLE VIII

Restricted Shares  

        8.1   Grant. Subject to the limitations of the Plan, the Board shall designate those eligible persons to be granted Awards of
Restricted Shares, shall determine the time when each such Award shall be granted, shall determine whether shares of Common Stock covered by Awards of Restricted Shares will be issued at the beginning
or the end of the Restriction Period and whether Dividend Equivalents will be paid during the Restriction Period in the event shares of the applicable series of Common Stock are to be issued at the
end of the Restriction Period, and shall designate (or set forth the basis for determining) the Vesting Date or Vesting Dates for each Award of Restricted Shares, and may prescribe other restrictions,
terms and conditions applicable to the vesting of such Restricted Shares in addition to those provided in the Plan. The Board shall determine the price, if any, to be paid by the Holder for the
Restricted Shares; provided, however, that the issuance of Restricted Shares shall be made for at least the minimum consideration necessary to permit
such Restricted Shares to be deemed fully paid and nonassessable. All determinations made by the Board pursuant to this Section 8.1 shall be specified in the Agreement. 

        8.2   Issuance of Restricted Shares at Beginning of the Restriction Period. If shares of the applicable series of Common Stock
are issued at the beginning of the Restriction Period, the stock certificate or certificates representing such Restricted Shares shall be registered in the name of the Holder to whom such Restricted
Shares shall have been awarded. During the Restriction Period, certificates representing the Restricted Shares and any securities constituting Retained Distributions shall bear a restrictive legend to
the effect that ownership of the Restricted Shares (and such Retained Distributions), and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms and conditions
provided in the Plan and the applicable Agreement. Such certificates shall remain in the custody of the Company or its designee, and the Holder shall deposit with the custodian stock powers or other
instruments of assignment, each endorsed in blank, so as to permit retransfer to the Company of all or any portion of the Restricted Shares and any securities constituting Retained Distributions that
shall be forfeited or otherwise not become vested in accordance with the Plan and the applicable Agreement. 

        8.3   Restrictions. Restricted Shares issued at the beginning of the Restriction Period shall constitute issued and outstanding
shares of the applicable series of Common Stock for all corporate purposes. The Holder will have the right to vote such Restricted Shares, to receive and retain such dividends and distributions, as
the Board may designate, paid or distributed on such Restricted Shares, and to exercise all other rights, powers and privileges of a Holder of shares of the applicable series of Common Stock with
respect to such Restricted Shares; except, that, unless otherwise determined by the Board and provided in the applicable Agreement, (a) the
Holder will not be entitled to delivery of the stock certificate or certificates representing such Restricted Shares until the Restriction Period shall have expired and unless all other vesting
requirements with respect thereto shall have been fulfilled or waived; (b) the Company or its designee will retain custody of the stock certificate or certificates representing the Restricted
Shares during the Restriction Period as provided in Section 8.2; (c) other than such dividends and distributions as the Board may designate, the Company or its designee will retain
custody of all distributions ("Retained Distributions") made or declared with respect to the

 
Restricted Shares (and such Retained Distributions will be subject to the same restrictions, terms and vesting, and other conditions as are applicable to the Restricted Shares) until such time, if
ever, as the Restricted Shares with respect to which such Retained Distributions shall have been made, paid or declared shall have become vested, and such Retained Distributions shall not bear
interest or be segregated in a separate account; (d) the Holder may not sell, assign, transfer, pledge, exchange, encumber or dispose of the Restricted Shares or any Retained Distributions or
his interest in any of them during the Restriction Period; and (e) a breach of any restrictions, terms or conditions provided in the Plan or established by the Board with respect to any
Restricted Shares or Retained Distributions will cause a forfeiture of such Restricted Shares and any Retained Distributions with respect thereto. 

        8.4   Issuance of Stock at End of the Restriction Period. Restricted Shares issued at the end of the Restriction Period shall
not constitute issued and outstanding shares of the applicable series of Common Stock, and the Holder shall not have any of the rights of a stockholder with respect to the shares of Common Stock
covered by such an Award of Restricted Shares, in each case until such shares shall have been transferred to the Holder at the end of the Restriction Period. If and to the extent that shares of Common
Stock are to be issued at the end of the Restriction Period, the Holder shall be entitled to receive Dividend Equivalents with respect to the shares of Common Stock covered thereby either
(a) during the Restriction Period or (b) in accordance with the rules applicable to Retained Distributions, as the Board may specify in the Agreement. 

        8.5   Cash Payments. In connection with any Award of Restricted Shares, an Agreement may provide for the payment of a cash
amount to the Holder of such Restricted Shares after such Restricted Shares shall have become vested. Such cash amounts shall be payable in accordance with such additional restrictions, terms and
conditions as shall be prescribed by the Board in the Agreement and shall be in addition to any other compensation payments which such Holder shall be otherwise entitled or eligible to receive from
the Company. 

        8.6   Completion of Restriction Period. On the Vesting Date with respect to each Award of Restricted Shares and the
satisfaction of any other applicable restrictions, terms and conditions, (a) all or the applicable portion of such Restricted Shares shall become vested, (b) any Retained Distributions
and any unpaid Dividend Equivalents with respect to such Restricted Shares shall become vested to the extent that the Restricted Shares related thereto shall have become vested, and (c) any
cash amount to be received by the Holder with respect to such Restricted Shares shall become payable, all in accordance with the terms of the applicable Agreement. Any such Restricted Shares, Retained
Distributions and any unpaid Dividend Equivalents that shall not become vested shall be forfeited to the Company, and the Holder shall not thereafter have any rights (including dividend and voting
rights) with respect to such Restricted Shares, Retained Distributions and any unpaid Dividend Equivalents that shall have been so forfeited. The Board may, in its discretion, provide that the
delivery of any Restricted Shares, Retained Distributions and unpaid Dividend Equivalents that shall have become vested, and payment of any cash amounts that shall have become payable, shall be
deferred until such date or dates as the recipient may elect. Any election of a recipient pursuant to the preceding sentence shall be filed in writing with the Board in accordance with such rules and
regulations, including any deadline for the making of such an election, as the Board may provide, and shall be made in compliance with Section 409A of the Code. 

ARTICLE IX

Stock Units  

        9.1   Grant. In addition to granting Awards of Options, SARs and Restricted Shares, the Board shall, subject to the limitations
of the Plan, have authority to grant to eligible persons Awards of Stock Units which may be in the form of shares of any specified series of Common Stock or units, the value of which is based, in
whole or in part, on the Fair Market Value of the shares of any specified series of Common Stock. Subject to the provisions of the Plan, including any rules established pursuant to

 
Section 9.2, Awards of Stock Units shall be subject to such terms, restrictions, conditions, vesting requirements and payment rules as the Board may determine in its discretion, which need not
be identical for each Award. The determinations made by the Board pursuant to this Section 9.1 shall be specified in the applicable Agreement. 

        9.2   Rules. The Board may, in its discretion, establish any or all of the following rules for application to an Award of Stock
Units: 

        (a)   Any
shares of Common Stock which are part of an Award of Stock Units may not be assigned, sold, transferred, pledged or otherwise encumbered prior to the date on which
the shares are issued or, if later, the date provided by the Board at the time of the Award. 

        (b)   Such
Awards may provide for the payment of cash consideration by the person to whom such Award is granted or provide that the Award, and any shares of Common Stock to be
issued in connection therewith, if applicable, shall be delivered without the payment of cash consideration; provided, however, that the issuance of any
shares of Common Stock in connection with an Award of Stock Units shall be for at least the minimum consideration necessary to permit such shares to be deemed fully paid and nonassessable. 

        (c)   Awards
of Stock Units may relate in whole or in part to performance or other criteria established by the Board at the time of grant. 

        (d)   Awards
of Stock Units may provide for deferred payment schedules, vesting over a specified period of service, the payment (on a current or deferred basis) of dividend
equivalent amounts with respect to the number of shares of Common Stock covered by the Award, and elections by the Holder to defer payment of the Award or the lifting of restrictions on the Award, if
any, provided that any such deferrals shall comply with the requirements of Section 409A of the Code. 

        (e)   In
such circumstances as the Board may deem advisable, the Board may waive or otherwise remove, in whole or in part, any restrictions or limitations to which a Stock
Unit Award was made subject at the time of grant. 

ARTICLE X

Stock awards in Lieu of Cash Director Fees  

        10.1 General. The Board may at any time adopt a resolution that provides that each Nonemployee Director shall have the option
to elect to receive shares of one or more series of Common Stock, as prescribed by the Board, in lieu of all or part of the Director Compensation otherwise payable by the Company during each calendar
quarter. Subject to Board approval of such option and any applicable Purchase Restriction as described in Section 10.3, to the extent a Nonemployee Director has elected in writing to receive
stock in lieu of Director Compensation, such Nonemployee Director will receive shares of Common Stock on the last day of the calendar quarter for which the Director Compensation was earned. The
Director Compensation shall be converted to a number of shares of Common Stock equal in value to such Director Compensation based on the Fair Market Value of such shares on the last day of the
calendar quarter for which the Director Compensation would otherwise be payable to the Nonemployee Director, with any fractional shares paid in cash. For this purpose, if the last day of the calendar
quarter is not a trading day, then Fair Market Value shall be determined as of the next succeeding trading day. Any shares issued in lieu of Director Compensation shall be issued free of all
restrictions except as required by law. For the avoidance of doubt, a Nonemployee Director shall not have the option described in this Section 10.1 unless and until the Board has adopted a
resolution approving such option, and, if the Board has adopted a resolution approving such option, then a Nonemployee Director shall have such option until such time as the Board adopts a resolution
that rescinds such option.

 

        10.2 Timing of Election. A Nonemployee Director's election pursuant to Section 10.1 must be made no later than the
30th calendar day (or such other day as the Board may prescribe) prior to the end of the calendar quarter to which the election applies in accordance with the procedures established by the Board. Once
an election is made with respect to a particular calendar quarter, it may not be withdrawn or substituted unless the Board determines, in its sole discretion, that the withdrawal or substitution is
occasioned by an extraordinary or unanticipated event. 

        10.3 Election Void During Restricted Period. If, on the date shares would be purchased pursuant to an election under
Section 10.1, there is in place any restriction under applicable law (including, without limitation, a blackout period under the Sarbanes-Oxley Act of 2002) or the rules of the principal
national securities exchange or national market system on which shares of the applicable series of Common Stock are traded (a "Purchase Restriction") which would prohibit the Nonemployee Director from
making such a purchase, then such shares shall be purchased on the first trading day following the lapse or removal of the Purchase Restriction based on the Fair Market Value of the shares on such
trading day. 

        10.4 Conditions. Nothing contained herein shall preclude the Board, in its sole discretion, from imposing conditions on any
election made under Section 10.1, including, without limitation, the conditions described in Section 10.3. 

ARTICLE XI

General Provisions  

        11.1 Acceleration of Awards.

        (a)   Death or Disability. If a Holder's service shall terminate by reason of death or Disability, notwithstanding any contrary
waiting period, installment period, vesting schedule or Restriction Period in any Agreement or in the Plan, unless the applicable Agreement provides otherwise: (i) in the case of an Option or
SAR, each outstanding Option or SAR granted under the Plan shall immediately become exercisable in full in respect of the aggregate number of shares covered thereby; (ii) in the case of
Restricted Shares, the Restriction Period applicable to each such Award of Restricted Shares shall be deemed to have expired and all such Restricted Shares, any related Retained Distributions and any
unpaid Dividend Equivalents shall become vested and any related cash amounts payable pursuant to the applicable Agreement shall be adjusted in such manner as may be provided in the Agreement; and
(iii) in the case of Stock Units, each such Award of Stock Units shall become vested in full. 

        (b)   Approved Transactions; Board Change; Control Purchase. In the event of any Approved Transaction, Board Change or Control
Purchase, notwithstanding any contrary waiting period, installment period, vesting schedule or Restriction Period in any Agreement or in the Plan, unless the applicable Agreement provides otherwise:
(i) in the case of an Option or SAR, each such outstanding Option or SAR granted under the Plan shall become exercisable in full in respect of the aggregate number of shares covered thereby;
(ii) in the case of Restricted Shares, the Restriction Period applicable to each such Award of Restricted Shares shall be deemed to have expired and all such Restricted Shares, any related
Retained Distributions and any unpaid Dividend Equivalents shall become vested and any related cash amounts payable pursuant to the applicable Agreement shall be adjusted in such manner as may be
provided in the Agreement; and (iii) in the case of Stock Units, each such Award of Stock Units shall become vested in full, in each case effective upon the Board Change or Control Purchase or
immediately prior to consummation of the Approved Transaction. Notwithstanding the foregoing, unless otherwise provided in the applicable Agreement, the Board may, in its discretion, determine that
any or all outstanding Awards of any or all types granted pursuant to the Plan will not vest or become exercisable on an accelerated basis in connection with an Approved Transaction if effective

 
provision has been made for the taking of such action which, in the opinion of the Board, is equitable and appropriate to substitute a new Award for such Award or to assume such Award and to make such
new or assumed Award, as nearly as may be practicable, equivalent to the old Award (before giving effect to any acceleration of the vesting or exercisability thereof), taking into account, to the
extent applicable, the kind and amount of securities, cash or other assets into or for which the applicable series of Common Stock may be changed, converted or exchanged in connection with the
Approved Transaction. 

        11.2 Termination of Service. 

        (a)   General. If a Holder's service shall terminate prior to an Option or SAR becoming exercisable or being exercised (or
deemed exercised, as provided in Section 7.2) in full, or during the Restriction Period with respect to any Restricted Shares or prior to the vesting or complete exercise of any Stock Units,
then such Option or SAR shall thereafter become or be exercisable, such Stock Units to the extent vested shall thereafter be exercisable, and the Holder's rights to any unvested Restricted Shares,
Retained Distributions, unpaid Dividend Equivalents and related cash amounts, and any such unvested Stock Units shall thereafter vest, in each case solely to the extent provided in the applicable
Agreement; provided, however, that, unless otherwise determined by the Board and provided in the applicable Agreement, (i) no Option or SAR may
be exercised after the scheduled expiration date thereof; (ii) if the Holder's service terminates by reason of death or Disability, the Option or SAR shall remain exercisable for a period of at
least one year following such termination (but not later than the scheduled expiration of such Option or SAR); and (iii) any termination of the
Holder's service for cause will be treated in accordance with the provisions of Section 11.2(b). 

        (b)   Termination for Cause. If a Holder's service on the Board shall be terminated by the Company for "cause" during the
Restriction Period with respect to any Restricted Shares, or prior to any Option or SAR becoming exercisable or being exercised in full or prior to the vesting or complete exercise of any Stock Unit
(for these purposes, "cause" shall include dishonesty, incompetence, moral turpitude, other misconduct of any kind and the refusal to perform his duties and responsibilities for any reason other than
illness or incapacity; provided, however, that if such termination occurs within 12 months after an Approved Transaction or Control Purchase or
Board Change, termination for "cause" shall mean only a felony conviction for fraud, misappropriation or embezzlement), then, unless otherwise determined by the Board and provided in the applicable
Agreement, (i) all Options and SARs and all unvested or unexercised Stock Units held by such Holder shall immediately terminate, and (ii) such Holder's rights to all Restricted Shares,
Retained Distributions, any unpaid Dividend Equivalents and any related cash amounts shall be forfeited immediately. 

        11.3 Nonalienation of Benefits. Except as set forth herein, no right or benefit under the Plan shall be subject to
anticipation, alienation, sale, assignment, hypothecation, pledge, exchange, transfer, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, hypothecate, pledge, exchange,
transfer, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to
such benefits. 

        11.4 Written Agreement. Each Award of Options shall be evidenced by a stock option agreement; each Award of SARs shall be
evidenced by a stock appreciation rights agreement; each Award of Restricted Shares shall be evidenced by a restricted shares agreement; and each Award of Stock Units shall be evidenced by a stock
units agreement, each in such form and containing such terms and provisions not inconsistent with the provisions of the Plan as the Board from time to time shall approve;  provided, however, that if more than one type of Award is made to the same Holder, such Awards may be
evidenced by a single Agreement with such Holder. Each grantee of an Option, SAR,

 
Restricted Shares or Stock Units shall be notified promptly of such grant, and a written Agreement shall be promptly executed and delivered by the Company. Any such Agreement may be supplemented or
amended from time to time as approved by the Board as contemplated by Section 11.6(b). 

        11.5 Designation of Beneficiaries. Each person who shall be granted an Award under the Plan may designate a beneficiary or
beneficiaries and may change such designation from time to time by filing a written designation of beneficiary or beneficiaries with the Board on a form to be prescribed by it, provided that no such
designation shall be effective unless so filed prior to the death of such person. 

        11.6 Termination and Amendment. 

        (a)   General. Unless the Plan shall theretofore have been terminated as hereinafter provided, no Awards may be made under the
Plan on or after the tenth anniversary of the Effective Date. The Plan may be terminated at any time prior to the tenth anniversary of the Effective Date and may, from time to time, be suspended or
discontinued or modified or amended if such action is deemed advisable by the Board. 

        (b)   Modification. No termination, modification or amendment of the Plan may, without the consent of the person to whom any
Award shall theretofore have been granted, adversely affect the rights of such person with respect to such Award, except as otherwise permitted by Section 11.17. No modification, extension,
renewal or other change in any Award granted under the Plan shall be made after the grant of such Award, unless the same is consistent with the provisions of the Plan. With the consent of the Holder,
or as otherwise permitted under Section 11.17, and subject to the terms and conditions of the Plan (including Section 11.6(a)), the Board may amend outstanding Agreements with any
Holder, including any amendment which would (i) accelerate the time or times at which the Award may be exercised and/or (ii) extend the scheduled expiration date of the Award. Without
limiting the generality of the foregoing, the Board may, but solely with the Holder's consent unless otherwise provided in the Agreement, agree to cancel any Award under the Plan and grant a new Award
in substitution therefor, provided that the Award so substituted shall satisfy all of the requirements of the Plan as of the date such new Award is made. Nothing contained in the foregoing provisions
of this Section 11.6(b) shall be construed to prevent the Board from providing in any Agreement that the rights of the Holder with respect to the Award evidenced thereby shall be subject
to such rules and regulations as the Board may, subject to the express provisions of the Plan, adopt from time to time or impair the enforceability of any such provision. 

        11.7 Government and Other Regulations. The obligation of the Company with respect to Awards shall be subject to all
applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including the effectiveness of any registration statement required under the Securities Act
of 1933, and the rules and regulations of any securities exchange or association on which the Common Stock may be listed or quoted. For so long as any series of Common Stock are registered under the
Exchange Act, the Company shall use its reasonable efforts to comply with any legal requirements (a) to maintain a registration statement in effect under the Securities Act of 1933 with respect
to all shares of the applicable series of Common Stock that may be issued to Holders under the Plan and (b) to file in a timely manner all reports required to be filed by it under the Exchange
Act. 

        11.8 Withholding. The Company's obligation to deliver shares of Common Stock or pay cash in respect of any Award under the
Plan shall be subject to applicable federal, state and local tax withholding requirements. Federal, state and local withholding tax due at the time of an Award, upon the exercise of any Option or SAR
or upon the vesting of, or expiration of restrictions with respect to, Restricted Shares or Stock Units, as appropriate, may, in the discretion of the Board, be paid in shares of the applicable series
of Common Stock already owned by the Holder or through the withholding of shares otherwise issuable to such Holder, upon such terms and conditions (including the conditions

 
referenced in Section 6.5) as the Board shall determine. If the Holder shall fail to pay, or make arrangements satisfactory to the Board for the payment to the Company of, all such federal,
state and local taxes required to be withheld by the Company, then the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to such Holder
an amount equal to any federal, state or local taxes of any kind required to be withheld by the Company with respect to such Award. 

        11.9 Nonexclusivity of the Plan. The adoption of the Plan by the Board shall not be construed as creating any limitations on
the power of the Board to adopt such other incentive arrangements as it may deem desirable, including the granting of stock options and the awarding of stock and cash otherwise than under the Plan,
and such arrangements may be either generally applicable or applicable only in specific cases. 

        11.10   Exclusion from Other Plans. By acceptance of an Award, unless otherwise provided in the applicable
Agreement, each Holder shall be deemed to have agreed that such Award is special incentive compensation that will not be taken into account, in any manner, as compensation or bonus in determining the
amount of any payment under any pension, retirement or other benefit plan, program or policy of the Company or any Subsidiary of the Company. In addition, each beneficiary of a deceased Holder shall
be deemed to have agreed that such Award will not affect the amount of any life insurance coverage, if any, provided by the Company on the life of the Holder which is payable to such beneficiary under
any life insurance plan of the Company or any Subsidiary of the Company. 

        11.11   Unfunded Plan. Neither the Company nor any Subsidiary of the Company shall be required to segregate any
cash or any shares of Common Stock which may at any time be represented by Awards, and the Plan shall constitute an "unfunded" plan of the Company. Except as provided in Article VIII with
respect to Awards of Restricted Shares and except as expressly set forth in an Agreement, no Holder shall have voting or other rights with respect to the shares of Common Stock covered by an Award
prior to the delivery of such shares. Neither the Company nor any Subsidiary of the Company shall, by any provisions of the Plan, be deemed to be a trustee of any shares of Common Stock or any other
property, and the liabilities of the Company to any Holder pursuant to the Plan shall be those of a debtor pursuant to such contract obligations as are created by or pursuant to the Plan, and the
rights of any Holder under the Plan shall be limited to those of a general creditor of the Company. In its sole discretion, the Board may authorize the creation of trusts or other arrangements to meet
the obligations of the Company under the Plan, provided, however, that the existence of such trusts or other arrangements is consistent with the
unfunded status of the Plan. 

        11.12   Governing Law. The Plan shall be governed by, and construed in accordance with, the laws of the State of
Delaware. 

        11.13   Accounts. The delivery of any shares of Common Stock and the payment of any amount in respect of an Award
shall be for the account of the Company or the applicable Subsidiary of the Company, as the case may be, and any such delivery or payment shall not be made until the recipient shall have paid or made
satisfactory arrangements for the payment of any applicable withholding taxes as provided in Section 11.8. 

        11.14   Legends. Each certificate evidencing shares of Common Stock subject to an Award shall bear such legends
as the Board deems necessary or appropriate to reflect or refer to any terms, conditions or restrictions of the Award applicable to such shares, including any to the effect that the shares represented
thereby may not be disposed of unless the Company has received an opinion of counsel, acceptable to the Company, that such disposition will not violate any federal or state securities laws. 

        11.15   Company's Rights. The grant of Awards pursuant to the Plan shall not affect in any way the right or power
of the Company to make reclassifications, reorganizations or other changes of or to its

 
capital or business structure or to merge, consolidate, liquidate, sell or otherwise dispose of all or any part of its business or assets. 

        11.16   Interpretation. The words "include," "includes," "included" and "including" to the extent used in the
Plan shall be deemed in each case to be followed by the words "without limitation." 

        11.17   Section 409A. Notwithstanding anything in this Plan to the contrary, if any Plan provision or
Award under the Plan would result in the imposition of an additional tax under Code Section 409A and related regulations and United States Department of the Treasury pronouncements
("Section 409A"), that Plan provision or Award will be reformed to avoid imposition of the applicable tax and no action taken to comply with Section 409A shall be deemed to adversely
affect the Holder's rights to an Award or require the consent of the Holder. 

QuickLinks

DISCOVERY HOLDING COMPANY 2005 NON-EMPLOYEE DIRECTOR INCENTIVE PLAN (Effective May 3, 2005)

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