Document:

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                                                                    EXHIBIT 10.2

                                                                  EXECUTION COPY

                    SEPARATION AGREEMENT AND GENERAL RELEASE

            This Separation Agreement and General Release ("Agreement") is
hereby made and entered into by and between Lawrence J. Pilon ("Employee"),
whose address is 720 E. Gull Lake Drive, Augusta, Michigan 49012, and Kellogg
Company, a Delaware corporation ("Kellogg").

            1.    Employee's Departure Date and Duties and Responsibilities.

                  (a).  Employee's last day of active employment will be June
16, 2004, with a "Departure Date" of June 17, 2004. Except as otherwise
expressly provided herein, Employee acknowledges that as of the Departure Date,
the Employee's participation will cease in all of the benefit plans of Kellogg
and any of its subsidiaries, divisions or affiliates (collectively, the
"Company"). Employee will be entitled to receive benefits, including any right
to exercise any conversion privileges, that are vested and accrued prior to the
Departure Date pursuant to benefit plans and programs of the Company.

                  (b).  Employee agrees that from the execution of this
Agreement until the Departure Date, Employee shall (i) continue to perform his
regular duties, including those duties described in Employee's 2004 Performance
Management Program accountabilities, and (ii) transition his work to his
successor as requested by Kellogg.

            2.    Consideration. In consideration for Employee entering into
this Agreement and fully abiding by its terms, and assuming Employee has not
revoked this Agreement as described in Paragraphs 20 and 21 below, Kellogg
agrees to provide Employee with the following consideration:

                  Severance Compensation and Benefits.

                  (a).  Kellogg agrees to provide Employee severance
compensation and benefits pursuant to the terms and conditions of the Kellogg
Company Severance Benefit Plan, effective April 1, 2002, as amended (the
"Plan"), a copy of which is attached to this Agreement as Exhibit A, and the
terms of which are incorporated herein. Employee represents and warrants that
Employee has read the Plan and understands its meaning and application. Employee
shall receive severance pay under the Plan equal to two years of base salary and
two years of target bonus. Such amount shall be paid to Employee in equal
installments over a two-year Severance Leave of Absence (as defined by the Plan)
in accordance with Kellogg's then-current payroll practices.

                  (b).  The Company shall also reimburse Employee for those
relocation expenses (and only those relocation expenses) described in Exhibit B
with respect to one (1) relocation. Such reimbursement shall be consistent with
the terms of the Company's current relocation policy and eligibility
requirements, subject to the following conditions:

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                           (i)      The relocation occurs on or before September
30, 2005;

                           (ii)     If Employee secures alternate employment
which provides a relocation benefit, Employee shall use his best efforts to
obtain the fullest amount of such benefit, and this relocation benefit shall be
reduced by the amount available under the alternate relocation benefit.

                           (iii)    The Company shall also reimburse Employee
for any Loss from the sale of Employee's home located at 720 E. Gull Lake Drive,
Augusta, Michigan 49012 (the "Residence"), not to exceed One Hundred Fifty
Thousand Dollars ($150,000.00). For the purposes of this Agreement, a "Loss"
shall be determined by using the following formula: (a) the amount Employee paid
for his Residence, plus, (b) the cost of any capital improvements to the
Residence after the date Employee purchased the Residence but prior to the date
of this Agreement, minus (c) the selling price of the Residence.

                  (d).  Employee acknowledges and agrees that: (i) usual and
customary withholding for tax purposes will be withheld from any payments made
to Employee pursuant to this Agreement, to the extent required by law, and (ii)
all tax liability, with respect to any and all payments or services received by
Employee under this Agreement (other than employer withholding and employer
payroll taxes) will be Employee's responsibility.

                  (e).  Employee acknowledges and agrees that if Employee
becomes Disabled (as defined under the disability program for Kellogg salaried
employees under the Kellogg Company Welfare Benefit Plan) prior to the Departure
Date, Employee shall be entitled to and must elect either (i) the benefits
provided under this Agreement, or (ii) the benefits provided under the
disability program for Kellogg salaried employees under the Kellogg Company
Welfare Benefit Plan. Employee, or Employee's representative, must provide such
election in writing to Kellogg prior to the Departure Date. If Employee, or
Employee's representative, does not provide such election to Kellogg by the
Departure Date, Employee shall receive the benefits provided under the
disability program for Kellogg salaried employees under the Kellogg Company
Welfare Benefit Plan and shall be deemed to have waived the rights to any
benefits under this Agreement. In addition, if Employee dies prior to the
Departure Date, Employee acknowledges and agrees that (i) Employee or Employee's
estate shall be entitled to receive benefits provided for under the Executive
Survivor Income Plan and other benefits under Kellogg's general policy for such
events, and (ii) Employee shall not be entitled to any benefits under this
Agreement.

            3.    No Other Compensation or Benefits Owing. Employee acknowledges
and agrees that, except as otherwise expressly provided for in this Agreement,
Employee is not and will not be due any other compensation or benefits
whatsoever from the Company and the Company shall have no further obligations of
any kind or nature to Employee.

            4.    No Other Representations. Employee represents and warrants
that no promise or inducement has been offered or made except as herein set
forth and that Employee is entering into and executing this Agreement without
reliance on any statement or representation not set forth within this Agreement
by the Company, or any person(s) acting on its behalf.

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            5.    Non-Assignment of Rights. Employee represents and warrants
that Employee has not sold, assigned, transferred, conveyed or otherwise
disposed of to any third party, by operation of law or otherwise, any action,
cause of action, debt, obligation, contract, agreement, covenant, guarantee,
judgment, damage, claim, counterclaim, liability or demand of any nature
whatsoever relating to any matter covered in this Agreement.

            6.    Non-Compete. In further consideration of the foregoing,
Employee agrees that, for a period beginning with the date of this Agreement and
ending on the second anniversary of the Departure Date (the "Restricted
Period"), Employee shall not, without the prior written consent of the Chief
Executive Officer of Kellogg:

      (i)   directly or indirectly, accept any employment, consult for or with,
            or otherwise provide or perform any services of any nature to, for
            or on behalf of any person, firm, partnership, corporation or other
            business or entity that manufactures, produces, distributes, sells
            or markets any of the Products (as hereinafter defined) in the
            Geographic Area (as hereinafter defined).

      (ii)  directly or indirectly, permit any business, entity or organization
            which Employee, individually or jointly with others, owns, manages,
            operates, or controls, to engage in the manufacture, production,
            distribution, sale or marketing of any of the Products in the
            Geographic Area.

            For purposes of this Paragraph, the term "Products" shall mean
ready-to-eat cereal products, toaster pastries, cereal bars, granola bars,
frozen waffles, crispy marshmallow squares, cookies, crackers, ice cream cones,
any other grain-based convenience food, or meat substitutes; the term
"Geographic Area" shall mean any country in the world where the Company
manufactures, produces, distributes, sells or markets any of the Products at any
time during the applicable Restricted Period.

            7.    Non-Solicitation.In further consideration of the foregoing,
Employee agrees that, during Employee's employment and for a two year period
beginning with the Departure Date, Employee shall not, without the prior written
consent of the General Counsel of Kellogg, directly or indirectly employ, or
solicit the employment of (whether as an employee, officer, director, agent,
consultant or independent contractor) any person who is or was at any time
during the previous year an officer, director, representative, agent or employee
of the Company.

            8.    Non-Disparagement of the Company. Employee agrees not to
engage in any form of conduct or make any statements or representations that
disparage, portray in a negative light, or otherwise impair the reputation,
goodwill or commercial interests of the Company, or its past, present and future
subsidiaries, divisions, affiliates, successors, officers, directors, attorneys,
agents and employees.

            9.    Employment Status. Employee understands and agrees that (i)
Employee's active employment with the Company ends effective June 16, 2004; and
(ii) the Company has no obligation to reinstate, rehire, reemploy, recall, or
hire Employee in the future.

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            10.   Disclosure of Any Material Information. As of the date
Employee signs this Agreement, Employee represents and warrants that Employee
has disclosed to Kellogg any information in Employee's possession concerning any
conduct involving the Company or any of its officers, directors,
representatives, agents or employees that Employee has any reason to believe may
be unlawful, or violates Company Policy or would otherwise reflect poorly on the
Company in any respect.

            11.   Return of Property. Employee agrees to return to the Company,
no later than the Departure Date, all property of the Company, regardless of the
type or medium (i.e., computer disk, CD-ROM) upon which it is maintained,
including, but not limited to, all files, documents, correspondence, memoranda,
customer and client lists, prospect lists, subscription lists, contracts,
pricing policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans, employee records,
technical processes, designs and design projects, inventions, research project
presentations, proposals, quotations, data, notes, records, photographic slides,
photographs, posters, manuals, brochures, internal publications, books, films,
drawings, videos, sketches, plans, outlines, computer disks, computer files,
work plans, specifications, credit cards, keys (including elevator, pass,
building and door keys), identification cards, and any other documents, writings
and materials that Employee came to possess or otherwise acquired as a result of
and/or in connection with Employee's employment with the Company. Should
Employee later find any Company property in Employee's possession, Employee
agrees to immediately return it. Employee further agrees not to maintain any
copies of said property or make any copies of said property available to any
third-party.

            12.   Non-Admission of Liability. Employee understands and agrees
that this Agreement does not and shall not be deemed or construed as an
admission of liability or responsibility by the Company for any purpose.
Employee further agrees that nothing contained in this Agreement can be used by
Employee or any other past, present or future employee of the Company in any way
as precedent for future dealings with the Company or any of its successors,
officers, directors, attorneys, representatives, agents or employees.

            13.   Releases, Representations and Covenants. In consideration of
the compensation and benefits provided pursuant to this Agreement, the
sufficiency of which is hereby acknowledged, Employee, for Employee and for any
person who may claim by or through Employee, irrevocably (except with respect to
Paragraph 20 below) and unconditionally releases, waives and forever discharges
the Company and its past, present and future subsidiaries, divisions,
affiliates, successors, and their respective officers, directors, attorneys,
agents and employees, from any and all claims or causes of action that Employee
had, has or may have, known or unknown, relating to Employee's employment with
and/or termination from the Company up until the date of this Agreement,
including but not limited to, any claims arising under Title VII of the Civil
Rights Act of 1964, as amended, Section 1981 of the Civil Rights Act of 1866, as
amended, the Civil Rights Act of 1991, as amended, the Family and Medical Leave
Act, the Age Discrimination in Employment Act, as amended by the Older Workers
Benefit Protection Act of 1990, the Americans with Disabilities Act, the
Employee Retirement Income Security Act; claims under any other federal, state
or local statute, regulation or ordinance; claims for discrimination or
harassment of any kind, breach of contract or public

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policy, wrongful or retaliatory discharge, defamation or other personal or
business injury of any kind; and any and all other claims to any form of legal
or equitable relief, damages, compensation or benefits (except as set forth in
subparagraph (d), below), or for attorneys fees or costs. Employee additionally
waives and releases any right Employee may have to recover in any lawsuit or
proceeding against the Company brought by Employee, an administrative agency, or
any other person on Employee's behalf or which includes Employee in any class.

                  (a).  No Pending Claims/Withdrawal of Claims. Employee
represents and warrants that, as of the date Employee signs this Agreement,
Employee has no charges, claims or lawsuits of any kind pending against the
Company or any of its past, present and future subsidiaries, divisions,
affiliates, successors, or their respective officers, directors, attorneys,
agents and employees that would fall within the scope of the Release set forth
in this Paragraph 13. To the extent that Employee has such pending charges,
claims or lawsuits as of the date Employee signs this Agreement, Employee agrees
to seek and obtain immediate dismissal with prejudice and provide written
confirmation immediately (i.e., court order, and/or agency determination) as a
condition precedent to the Kellogg's obligations under this Agreement on and
after the date Employee signs this Agreement (including, but not limited to,
providing any compensation or benefits under this Agreement).

                  (b).  Covenant Not to Sue. To the maximum extent permitted by
law, Employee agrees not to sue or to institute or cause to be instituted any
action in any federal, state, or local agency or court against the Company,
including, but not limited to, the claims released in this Paragraph 13.

                  (c).  Remedies for Breach. If Employee breaches any portion of
this Agreement, or disavows any portion of the Release, Employee acknowledges
and agrees that, in addition to any damages, Employee will be obligated, to the
maximum extent permitted by law, to reimburse Kellogg for all amounts paid to
Employee pursuant to this Agreement and under the Plan, and Employee shall be
liable for all expenses, including costs and reasonable attorney's fees,
incurred by any entity released in defending the lawsuit or claim, regardless of
the outcome. Employee also hereby agrees and acknowledges that if he or she
breaches this Agreement, because it would be impractical and excessively
difficult to determine the actual damages to the Company as a result of such
breach, any remedies at law (such as a right to monetary damages) would be
inadequate. Employee, therefore agrees that, if he or she breaches this
Agreement, the Company shall have the right (in addition to, and not in lieu of,
any other right or remedy available to it) to a temporary and permanent
injunctive relief from a court of competent jurisdiction, without posting any
bond or other security and without proof of actual damage.

                  (d).  Exclusion for Certain Claims. Notwithstanding the
foregoing, Kellogg and Employee agree that the Release shall not apply to any
claims arising after the date Employee signs this Agreement, nor shall anything
herein prevent Employee or the Company from instituting any action to enforce
the terms of this Agreement. In addition, Employee and Kellogg agree that
nothing herein shall be construed to prevent Employee from enforcing any rights
Employee may have under the Employee Retirement Income Security Act of 1974 to
recover any vested benefits.

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            14.   Preservation of Company Confidential Information. Employee
acknowledges and agrees that previously executed Company confidentiality or
non-disclosure agreements, if any, will continue to remain in effect after the
Departure Date. In addition, Employee agrees that he or she shall not (without
first obtaining the prior written consent in each instance from Kellogg) during
the term of this Agreement or thereafter, disclose, make commercial or other use
of, give or sell to any person, firm or corporation, any information received
directly or indirectly from the Company or acquired or developed in the course
of Employee's employment, including, by way of example only, ideas, inventions,
methods, designs, formulas, systems, improvements, prices, discounts, business
affairs, products, product specifications, manufacturing processes, data and
know-how and technical information of any kind whatsoever unless such
information has been publicly disclosed by authorized officials of the Company.

            15.   Confidentiality of Agreement. Employee agrees that the
existence and terms of this Agreement are confidential and shall be kept
strictly confidential. Employee agrees that these matters will not be disclosed
to any third party except for Employee's spouse, tax or legal advisor(s),
provided such parties agree to keep such information confidential and, in the
case of disclosure to any such advisor, only to the extent necessary to perform
services. Employee shall be primarily liable to the Company for any disclosure
of the existence or terms of this Agreement by such third parties.

            16.   Cooperation. Employee agrees to cooperate truthfully and fully
with the Company in connection with any and all existing or future
investigations or litigation of any nature brought against the Company involving
events that occurred during Employee's employment with the Company. Employee
agrees to notify the Company immediately if subpoenaed or asked to appear as a
witness in any matter related to the Company. The Company will reimburse
Employee for reasonable out-of-pocket expenses and, if approved in advance by
the General Counsel of Kellogg, reasonable attorney's fees incurred as a result
of such cooperation.

            17.   General.

                  (a).  Severability. If any provision of this Agreement is
found by a court of competent jurisdiction to be unenforceable, in whole or in
part, then that provision will be eliminated, modified or restricted in whatever
manner is necessary to make the remaining provisions enforceable to the maximum
extent allowable by law.

                  (b).  Successors. This Agreement shall be binding upon,
enforceable by, and inure to the benefit of Employee and Kellogg, and Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees, and to any successor or assignee of
Kellogg, but neither this Agreement, nor any rights, payments, or obligations
arising hereunder may be assigned, pledged, transferred, or hypothecated by
Employee.

                  (c).  Controlling Law and Venue. Employee agrees that the laws
of the State of Michigan shall govern this Agreement. Employee also agrees that
any controversy, claim or dispute between the parties, directly or indirectly,
concerning this Agreement or the

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breach of thereof shall only be resolved in the Circuit Court of Calhoun County,
or the United States District Court for the Western District of Michigan,
whichever court has jurisdiction over the subject matter thereof, and the
parties hereby submit to the jurisdiction of said courts.

                  (d).  Waiver. No claim or right arising out of a breach or
default under this Agreement can be discharged by a waiver of that claim or
right unless the waiver is in writing signed by the party hereto to be bound by
such waiver. A waiver by either party hereto of a breach or default by the other
party of any provision of this Agreement shall not be deemed a waiver of future
compliance therewith and such provision shall remain in full force and effect.

                  (e).  Notices. All notices, requests, demands and other
communications regarding this Agreement shall be in writing and delivered in
person or sent by registered or certified mail, postage prepaid, return receipt
requested, and properly addressed as follows:

                   To Kellogg:   Kellogg Company

                                 One Kellogg Square
                                 P.O. Box 3599
                                 Battle Creek, MI 49016

                                 ATTENTION: GENERAL COUNSEL

                                 With a copy to:

                                 Kellogg Company
                                 One Kellogg Square
                                 P.O. Box 3599
                                 Battle Creek, MI 49016

                                 ATTENTION: CHIEF COUNSEL, EMPLOYMENT AND LABOR

                    To Employee: At the address set forth in the preamble of
                    this Agreement.

            18.   Entire Agreement/Amendment. Employee agrees that this
Agreement, including any Exhibits attached hereto, constitutes the entire
agreement between Employee and Kellogg, and that this Agreement supersedes any
and all prior and/or contemporaneous written and/or oral agreements relating to
Employee's employment with the Company and termination there from; provided,
however, that the Company acknowledges and agrees that Employee's stock option
agreements and Employee's restricted stock agreement remain in full force and
effect and govern such stock option grants and restricted stock grant,
respectively. Employee acknowledges that this Agreement may not be modified
except by written document, signed by Employee and the General Counsel or Deputy
General Counsel of Kellogg.

            19.   Knowing and Voluntary Action. Employee acknowledges that
Employee has been advised to consult an attorney before signing this Agreement.
Employee further acknowledges that Employee has read this Agreement and any
Exhibits attached hereto; has been given a period of at least twenty-one (21)
days to consider this Agreement; understands its

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meaning and application; and is signing of Employee's own free will with the
intent of being bound by it. If Employee elects to sign this Agreement prior to
the expiration of twenty-one (21) days, Employee has done so voluntarily and
knowingly, without any improper inducement or coercion by the Company.

            20.   Revocation of Agreement. Employee further acknowledges that
Employee may revoke this Agreement at any time within a period of seven (7) days
following the date Employee signs this Agreement. Notice of revocation shall be
made in writing addressed to Kellogg in accordance with Paragraph 17(e) above.
Such revocation must be received by Kellogg by the close of business of the
first day following the end of the seven (7) day revocation period. This
Agreement shall not become effective until after the time period for revocation
has expired.

            21.   Release of Claims. As a condition to receiving the
compensation described in Paragraph 2(a) of this Agreement, Employee shall be
required to execute and deliver to the Company (and not revoke) the form of
General Release attached hereto as Exhibit C, within twenty-one (21) days of the
Departure Date.

            IN WITNESS WHEREOF, the parties have executed and agreed to this
Agreement.

EMPLOYEE                                      KELLOGG COMPANY

______________________________                By: ___________________________
Lawrence J. Pilon

Date: ________________________                Date: _________________________

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                                                                       EXHIBIT B

                               RELOCATION BENEFITS

-     House Closing

      -     Broker's commission up to 6% or normal for area

      -     Reimbursement for normal and customary closing costs, including
            reasonable attorneys' fees, inspections, and surveys.

-     Loss on sale

      -     According to the Agreement

-     Personal Goods

      -     Packing, loading and unloading

      -     Insurance - up to $250,000

      -     Storage - 60 days

      -     Transport of personal goods to new location

Tax assistance, if any, will be provided in accordance with the Kellogg Company
relocation policy.

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                                                                       EXHIBIT C

                                 GENERAL RELEASE

      This General Release (the "Release") is hereby made and entered into by
and between Lawrence J. Pilon ("Employee"), whose address is 720 E. Gull Lake
Drive, Augusta, Michigan, 49012 and Kellogg Company, a Delaware corporation
("Kellogg").

                                    RECITALS

      WHEREAS The parties have entered into a Separation Agreement and General
Release dated April 15, 2004 (the "Agreement")(1); and

      WHEREAS Paragraph 21 of the Agreement states that Employee must sign and
deliver this Release within 21 days of on Employee's Departure Date as a
condition for receiving benefits under the Agreement;

      NOW, THEREFORE, for and in consideration of the mutual promises and
covenants and good and valuable consideration contained in the Agreement, the
sufficiency of which is hereby acknowledged:

            1.    Releases, Representations and Covenants. Employee, for
Employee and for any person who may claim by or through Employee, irrevocably
(except with respect to Paragraph 4 below) and unconditionally releases, waives
and forever discharges the Company and its past, present and future
subsidiaries, divisions, affiliates, successors, and their respective officers,
directors, attorneys, agents and employees, from any and all claims or causes of
action that Employee had, has or may have, known or unknown, relating to
Employee's employment with and/or termination from the Company up until the date
of this Agreement, including but not limited to, any claims arising under Title
VII of the Civil Rights Act of 1964, as amended, Section 1981 of the Civil
Rights Act of 1866, as amended, the Civil Rights Act of 1991, as amended, the
Family and Medical Leave Act, the Age Discrimination in Employment Act, as
amended by the Older Workers Benefit Protection Act of 1990, the Americans with
Disabilities Act, the Employee Retirement Income Security Act; claims under any
other federal, state or local statute, regulation or ordinance; claims for
discrimination or harassment of any kind, breach of contract or public policy,
wrongful or retaliatory discharge, defamation or other personal or business
injury of any kind; and any and all other claims to any form of legal or
equitable relief, damages, compensation or benefits (except as set forth in
subparagraph (d), below), or for attorneys fees or costs. Employee additionally
waives and releases any right Employee may have to recover in any lawsuit or
proceeding against the Company brought by Employee, an administrative agency, or
any other person on Employee's behalf or which includes Employee in any class.

-----------------
(1)   All capitalized terms not defined herein, have the same meaning as defined
      in the Agreement.

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                  (a).  No Pending Claims/Withdrawal of Claims. Employee
represents and warrants that, as of the date Employee signs this Agreement,
Employee has no charges, claims or lawsuits of any kind pending against the
Company or any of its past, present and future subsidiaries, divisions,
affiliates, successors, or their respective officers, directors, attorneys,
agents and employees that would fall within the scope of the Release set forth
in this Paragraph 1. To the extent that Employee has such pending charges,
claims or lawsuits as of the date Employee signs this Agreement, Employee agrees
to seek and obtain immediate dismissal with prejudice and provide written
confirmation immediately (i.e., court order, and/or agency determination) as a
condition precedent to the Kellogg's obligations under this Agreement on and
after the date Employee signs this Agreement (including, but not limited to,
providing any compensation or benefits under this Agreement).

                  (b).  Covenant Not to Sue. To the maximum extent permitted by
law, Employee agrees not to sue or to institute or cause to be instituted any
action in any federal, state, or local agency or court against the Company,
including, but not limited to, the claims released in this Paragraph 1.

                  (c).  Remedies for Breach. If Employee breaches any portion of
this Agreement, or disavows any portion of the Release, Employee acknowledges
and agrees that, in addition to any damages, Employee will be obligated, to the
maximum extent permitted by law, to reimburse Kellogg for all amounts paid to
Employee pursuant to this Agreement and under the Plan, and Employee shall be
liable for all expenses, including costs and reasonable attorney's fees,
incurred by any entity released in defending the lawsuit or claim, regardless of
the outcome. Employee also hereby agrees and acknowledges that if he or she
breaches this Agreement, because it would be impractical and excessively
difficult to determine the actual damages to the Company as a result of such
breach, any remedies at law (such as a right to monetary damages) would be
inadequate. Employee, therefore agrees that, if he or she breaches this
Agreement, the Company shall have the right (in addition to, and not in lieu of,
any other right or remedy available to it) to a temporary and permanent
injunctive relief from a court of competent jurisdiction, without posting any
bond or other security and without proof of actual damage.

                  (d).  Exclusion for Certain Claims. Notwithstanding the
foregoing, Kellogg and Employee agree that the Release shall not apply to any
claims arising after the date Employee signs this Agreement, nor shall anything
herein prevent Employee or the Company from instituting any action to enforce
the terms of this Agreement. In addition, Employee and Kellogg agree that
nothing herein shall be construed to prevent Employee from enforcing any rights
Employee may have under the Employee Retirement Income Security Act of 1974 to
recover any vested benefits.

            2.    Incorporation of Agreement. Employee further agrees that all
other provisions of the Agreement are hereby incorporated by reference to the
extent applicable and that both documents constitute the entire agreement
concerning Employee's employment with and termination from the Company.

            3.    Knowing and Voluntary Action. Employee acknowledges that
Employee has been advised to consult an attorney before signing this Release.
Employee further acknowledges that Employee has read this Release; has been
given a period of at least twenty-

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one (21) days to consider this Release; understands its meaning and application;
and is signing of Employee's own free will with the intent of being bound by it.
If Employee elects to sign this Release prior to the expiration of twenty-one
(21) days, Employee has done so voluntarily and knowingly, without any improper
inducement or coercion by the Company.

            4.    Revocation of Agreement. Employee further acknowledges that
Employee may revoke this Release at any time within a period of seven (7) days
following the date Employee signs this Release. Notice of revocation shall be
made in writing addressed to Kellogg in accordance with Paragraph 17(e) of the
Agreement. Such revocation must be received by Kellogg by the close of business
of the first day following the end of the seven (7) day revocation period. This
Release shall not become effective until after the time period for revocation
has expired.

            IN WITNESS WHEREOF, the parties have executed and agreed to this
Release as of the later date provided below.

EMPLOYEE                                 KELLOGG COMPANY

__________________________               By: ________________________________

Date: ____________________               Date: ______________________________

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Appendix B

INCENTIVE AWARD PLAN

OF

UNITED DEFENSE INDUSTRIES, INC.

     
United Defense Industries, Inc., a Delaware
corporation, adopted the United Defense Stock Option Plan (the
“Option Plan”) effective July 25, 1998. The
following constitutes an amendment, restatement and continuation
of the Option Plan, effective March 2, 2004, in the form of
this Incentive Award Plan for the benefit of eligible employees,
consultants and directors.

     
The purposes of the Plan are as follows:

     
(1)     To further the
growth, development, and financial success of the Company and
its Affiliates (as defined herein) by providing additional
incentives to (i) employees and directors of the Company
and employees of its Affiliates who have been or will be given
responsibility for the management or administration of the
Company’s (and/or one of more Affiliates’) business
affairs, and (ii) non-employee advisors and consultants who
provide valuable services to the Company and/or its Affiliates,
in each case by either assisting such persons to become owners
of Common Stock or providing incentive compensation based on the
performance of the Company’s Common Stock, thereby
benefiting directly from the growth, development and financial
success of the Company.

     
(2)     To enable the
Company and its Affiliates to obtain and retain the services of
the type of professional, technical, and managerial employees,
directors, and non-employee advisors and consultants considered
essential to the long-range success of the Company by providing
and offering them either an opportunity to become owners of
Common Stock or providing incentive compensation based on the
performance of the Company’s Common Stock.

ARTICLE I.

DEFINITIONS

     
Wherever the following terms are used in the Plan
they shall have the meanings specified below, unless the context
clearly indicates otherwise. The singular pronoun shall include
the plural where the context so indicates.

     
1.1.     “Administrator”
shall mean the entity that conducts the general administration
of the Plan as provided in Section 10.1.

     
1.2.     “Affiliate”
shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under
common control with, such Person where “control” shall
have the meaning given such term under Rule 405 of the
Securities Act.

     
1.3.     “Award”
shall mean an Option, a Restricted Stock award, a Performance
Award, a Dividend Equivalents award, a Deferred Stock award, a
Stock Payment award, a Stock Appreciation Right, or a Restricted
Stock Unit award which may be awarded or granted under the Plan
(collectively, “Awards”).

     
1.4.     “Award
Agreement” shall mean a written agreement executed by
an authorized officer of the Company and the Holder which shall
contain such terms and conditions with respect to an Award as
the Administrator shall determine, consistent with the Plan.

     
1.5.     “Award
Limit” shall mean 500,000 shares of Common Stock per
fiscal year of the Company, as adjusted pursuant to
Section 11.3; provided, however, that solely with respect
to cash payments of Performance Awards granted pursuant to
Section 8.2(b) and Dividend Equivalents granted pursuant to
Section 8.3, Award Limit shall mean $2,000,000 per fiscal
year of the Company.

     
1.6.     “Board”
shall mean the Board of Directors of the Company.

     
1.7.     “Code”
shall mean the Internal Revenue Code of 1986, as amended.

B-1

 

     
1.8.     “Committee”
shall mean the Compensation Committee of the Board, or another
committee or subcommittee of the Board, appointed as provided in
Section 10.1.

     
1.9.     “Common
Stock” shall mean the common stock of the Company, par
value $0.01 per share.

     
1.10.     “Company”
shall mean United Defense Industries, Inc., a Delaware
corporation.

     
1.11.     “Consultant”
shall mean any consultant or adviser if (i) the consultant
or adviser renders bona fide services to the Company;
(ii) the services rendered by the consultant or adviser are
not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly
promote or maintain a market for the Company’s securities;
and (iii) the consultant or adviser is a natural person who
has contracted directly with the Company to render such services.

     
1.12.     “Deferred
Stock” shall mean Common Stock awarded under
Article VIII of the Plan.

     
1.13.     “Director”
shall mean a member of the Board.

     
1.14.     “Disability”
shall have the meaning set forth in Section 22(e)(3) of the
Code.

     
1.15.     “Dividend
Equivalent” shall mean a right to receive the
equivalent value (in cash or Common Stock) of dividends paid on
Common Stock, awarded under Article VIII of the Plan.

     
1.16.     “DRO”
shall mean a domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder.

     
1.17.     “Employee”
shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the
Company, or of any Subsidiary.

     
1.18.     “Exchange
Act” shall mean the Securities Exchange Act of 1934, as
amended.

     
1.19.     “Fair
Market Value” of a share of Common Stock as of a given
date shall be (a) the closing price of a share of Common
Stock on the principal exchange on which shares of Common Stock
are then trading, if any, on the trading day previous to such
date, or if shares were not traded on the trading day previous
to such date, then on the next preceding date on which a trade
occurred, or (b) if Common Stock is not traded on an
exchange but is quoted on Nasdaq or a successor quotation
system, (i) the last sales prices (if the Common Stock is
listed as a National Market Issue) or (ii) the mean between
the closing representative bid and asked prices for the Common
Stock on the trading day previous to such date as reported by
Nasdaq or such successor quotation system, or (c) if Common
Stock is not publicly traded on an exchange and not quoted on
Nasdaq or a successor quotation system, the Fair Market Value of
a share of Common Stock as established by the Administrator
acting in good faith.

     
1.20.     “Holder”
shall mean a person who has been granted or awarded an Award.

     
1.21.     “Incentive
Stock Option” shall mean an option which conforms to
the applicable provisions of Section 422 of the Code and
which is designated as an Incentive Stock Option by the
Administrator.

     
1.22.     “Independent
Director” shall mean a member of the Board who is not
an Employee of the Company.

     
1.23.     “Non-Qualified
Stock Option” shall mean an Option which is not
designated as an Incentive Stock Option by the Administrator.

     
1.24.     “Option”
shall mean a stock option granted under Article IV of the
Plan. An Option granted under the Plan shall, as determined by
the Administrator, be either a Non-Qualified Stock Option or an
Incentive Stock Option; provided, however, that Options granted
to Independent Directors and Consultants shall be Non-Qualified
Stock Options.

     
1.25.     “Performance
Award” shall mean a cash bonus, stock bonus or other
performance or incentive award that is paid in cash, Common
Stock or a combination of both, awarded under Article VIII
of the Plan.

     
1.26.     “Performance
Criteria” shall mean the following business criteria
with respect to the Company, any Subsidiary or any division or
operating unit thereof: (a) net income, (b) pre-tax
income, (c) operating

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income, (d) cash flow, (e) earnings per
share, (f) return on equity, (g) return on invested
capital or assets, (h) cost reductions or savings,
(i) funds from operations, (j) appreciation in the
Fair Market Value of a share of Common Stock, (k) operating
profit, (l) working capital and (m) earnings before
any one or more of the following items: interest, taxes,
depreciation or amortization; provided that each of the business
criteria described in subsections (a) through
(m) shall be determined in accordance with generally
accepted accounting principles (“GAAP”). For each
fiscal year of the Company, the Committee may provide for
objectively determinable adjustments, as determined in
accordance with GAAP, to any of the business criteria described
in subsections (a) through (m) for one or more of the
items of gain, loss, profit or expense: (i) determined to
be extraordinary or unusual in nature or infrequent in
occurrence, (ii) related to the disposal of a segment of a
business, (iii) related to a change in accounting
principles under GAAP, (iv) related to discontinued operations
that do not qualify as a segment of a business under GAAP, and
(v) attributable to the business operations of any entity
acquired by the Company during the fiscal year.

     
1.27.     “Person”
shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental
authority or other entity of whatever nature.

     
1.28.     “Plan”
shall mean the Incentive Award Plan of United Defense
Industries, Inc., as the continuation of the United Defense
Stock Option Plan.

     
1.29.     “Restricted
Stock” shall mean Common Stock awarded under
Article VII of the Plan.

     
1.30.     “Restricted
Stock Unit” shall mean an Award granted pursuant to
Section 8.6 of the Plan.

     
1.31.     “Rule 16b-3”
shall mean Rule 16b-3 promulgated under the Exchange Act,
as such Rule may be amended from time to time.

     
1.32.     “Section 162(m)
Participant” shall mean any key Employee designated by
the Administrator as a key Employee whose compensation for the
fiscal year in which the key Employee is so designated or a
future fiscal year may be subject to the limit on deductible
compensation imposed by Section 162(m) of the Code.

     
1.33.     “Securities
Act” shall mean the Securities Act of 1933, as amended.

     
1.34.     “Stock
Appreciation Right” shall mean a stock appreciation
right granted under Article IX of the Plan.

     
1.35.     “Stock
Payment” shall mean (a) a payment in the form of
shares of Common Stock, or (b) an option or other right to
purchase shares of Common Stock, as part of a deferred
compensation arrangement, made in lieu of all or any portion of
the compensation, including without limitation, salary, bonuses
and commissions, that would otherwise become payable to a key
Employee or Consultant in cash, awarded under Article VIII
of the Plan.

     
1.36.     “Subsidiary”
shall mean (i) with respect to Incentive Stock Options, any
corporation in an unbroken chain of corporations beginning with
the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing
fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such
chain and (ii) with respect to all other Awards, any entity
in which the Company owns an equity interest, either directly or
indirectly through one or more entities, which constitutes fifty
percent (50%) or more of either the voting securities or the
value of such entity.

     
1.37.     “Substitute
Award” shall mean an Option granted under this Plan
upon the assumption of, or in substitution for, outstanding
equity awards previously granted by a company or other entity in
connection with a corporate transaction, such as a merger,
combination, consolidation or acquisition of property or stock;
provided, however, that in no event shall the term
“Substitute Award” be construed to refer to an award
made in connection with the cancellation and repricing of an
Option.

     
1.38.     “Termination
of Consultancy” shall mean the time when the engagement
of a Holder as a Consultant to the Company or a Subsidiary is
terminated for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death or
retirement, but excluding terminations where

B-3

 

there is a simultaneous commencement of
employment with the Company or any Subsidiary. The
Administrator, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of
Consultancy, including, but not by way of limitation, the
question of whether a Termination of Consultancy resulted from a
discharge for good cause, and all questions of whether a
particular leave of absence constitutes a Termination of
Consultancy. Notwithstanding any other provision of the Plan,
the Company or any Subsidiary has an absolute and unrestricted
right to terminate a Consultant’s service at any time for
any reason whatsoever, with or without cause, except to the
extent expressly provided otherwise in writing.

     
1.39.     “Termination
of Directorship” shall mean the time when a Holder who
is an Independent Director ceases to be a Director for any
reason, including, but not by way of limitation, a termination
by resignation, failure to be elected, death or retirement. The
Board, in its sole and absolute discretion, shall determine the
effect of all matters and questions relating to Termination of
Directorship with respect to Independent Directors.

     
1.40.     “Termination
of Employment” shall mean the time when the
employee-employer relationship between a Holder and the Company
or any Subsidiary is terminated for any reason, with or without
cause, including, but not by way of limitation, a termination by
resignation, discharge, death, disability or retirement; but
excluding (a) terminations where there is a simultaneous
reemployment or continuing employment of a Holder by the Company
or any Subsidiary, (b) at the discretion of the
Administrator, terminations which result in a temporary
severance of the employee-employer relationship, and (c) at
the discretion of the Administrator, terminations which are
followed by the simultaneous establishment of a consulting
relationship by the Company or a Subsidiary with the former
employee. The Administrator, in its absolute discretion, shall
determine the effect of all matters and questions relating to
Termination of Employment, including, but not by way of
limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of
whether a particular leave of absence constitutes a Termination
of Employment; provided, however, that, with respect to
Incentive Stock Options, unless otherwise determined by the
Administrator in its discretion, a leave of absence, change in
status from an employee to an independent contractor or other
change in the employee-employer relationship shall constitute a
Termination of Employment if, and to the extent that, such leave
of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the
Code and the then applicable regulations and revenue rulings
under said Section.

ARTICLE II.

SHARES SUBJECT TO PLAN

     
2.1.     Shares
Subject to Plan.

		
	 	     
    (a)     The shares of
    stock subject to Awards shall be Common Stock. Subject to
    adjustment as provided in Section 11.3, the aggregate
    number of such shares which may be issued with respect to Awards
    granted under the Plan shall not exceed 9,375,000. The payment
    of Dividend Equivalents in conjunction with any outstanding
    Awards shall not be counted against the shares available for
    issuance under the Plan.
    
	 
	 	     
    (b)     The shares of
    Common Stock issuable with respect to such Awards may be either
    previously authorized but unissued shares or treasury shares. In
    the event that Substitute Awards are granted under the Plan, the
    aggregate number of shares of Common Stock available under the
    Plan for Substitute Awards other than substitute Incentive Stock
    Options shall be increased by the number of shares of Common
    Stock which may be granted or issued with respect to such
    Substitute Awards. In no event shall the maximum number of
    shares of Common Stock which may be issued under this Plan with
    respect to Incentive Stock Options be increased pursuant to the
    preceding sentence.
    
	 
	 	     
    (c)     The maximum
    number of shares which may be subject to Awards granted under
    the Plan to any individual in any calendar year shall not exceed
    the Award Limit. To the extent required by Section 162(m)
    of the Code, shares subject to Options which are canceled
    continue to be counted against the Award Limit.
    

B-4

 

     
2.2.     Add-back of
Options and Other Rights.     If
any Award under the Plan expires, terminates or lapses for any
reason other than exercise or settlement of such Award for
shares of Common Stock, the number of shares subject to such
Award shall again be available for grant of an Award pursuant to
the Plan, subject to the limitations of Section 2.1.
Furthermore, any shares subject to Awards which are adjusted
pursuant to Section 11.3 and become exercisable with
respect to shares of stock of another corporation shall be
considered cancelled and may again be optioned, granted or
awarded hereunder, subject to the limitations of
Section 2.1.

ARTICLE III.

GRANTING OF AWARDS

     
3.1.     Award
Agreement. Each Award shall be evidenced by an Award
Agreement. Award Agreements evidencing Awards intended to
qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall contain such terms
and conditions as may be necessary to meet the applicable
provisions of Section 162(m) of the Code. Award Agreements
evidencing Incentive Stock Options shall contain such terms and
conditions as may be necessary to meet the applicable provisions
of Section 422 of the Code.

     
3.2.     Provisions
Applicable to Section 162(m) Participants.

		
	 	     
    (a)     The Committee,
    in its discretion, may determine whether an Award is to qualify
    as performance-based compensation as described in
    Section 162(m)(4)(C) of the Code.
    
	 
	 	     
    (b)     Notwithstanding
    anything in the Plan to the contrary, the Committee may grant
    any Award to a Section 162(m) Participant, including
    Restricted Stock the restrictions with respect to which lapse
    upon the attainment of performance goals which are related to
    one or more of the Performance Criteria and any performance or
    incentive award described in Article VIII that vests or
    becomes exercisable or payable upon the attainment of
    performance goals which are related to one or more of the
    Performance Criteria.
    
	 
	 	     
    (c)     To the extent
    necessary to comply with the performance-based compensation
    requirements of Section 162(m)(4)(C) of the Code, with
    respect to any Award granted under Articles VII and VIII which
    may be granted to one or more Section 162(m) Participants,
    no later than ninety (90) days following the commencement
    of any fiscal year in question or any other designated fiscal
    period or period of service (or such other time as may be
    required or permitted by Section 162(m) of the Code), the
    Committee shall, in writing, (i) designate one or more
    Section 162(m) Participants, (ii) select the
    Performance Criteria applicable to the fiscal year or other
    designated fiscal period or period of service, (iii) establish
    the various performance targets, in terms of an objective
    formula or standard, and amounts of such Awards, as applicable,
    which may be earned for such fiscal year or other designated
    fiscal period or period of service, and (iv) specify the
    relationship between Performance Criteria and the performance
    targets and the amounts of such Awards, as applicable, to be
    earned by each Section 162(m) Participant for such fiscal
    year or other designated fiscal period or period of service.
    Following the completion of each fiscal year or other designated
    fiscal period or period of service, the Committee shall certify
    in writing whether the applicable performance targets have been
    achieved for such fiscal year or other designated fiscal period
    or period of service. In determining the amount earned by a
    Section 162(m) Participant, the Committee shall have the
    right to reduce (but not to increase) the amount payable at a
    given level of performance to take into account additional
    factors that the Committee may deem relevant to the assessment
    of individual or corporate performance for the fiscal year or
    other designated fiscal period or period of service.
    
	 
	 	     
    (d)     Furthermore,
    notwithstanding any other provision of the Plan or any Award
    which is granted to a Section 162(m) Participant and is
    intended to qualify as performance-based compensation as
    described in Section 162(m)(4)(C) of the Code shall be
    subject to any additional limitations set forth in
    Section 162(m) of the Code (including any amendment to
    Section 162(m) of the Code) or any regulations or rulings
    issued thereunder that are requirements for qualification as
    performance-based
    

B-5

 

		
	 	
    compensation as described in
    Section 162(m)(4)(C) of the Code, and the Plan shall be
    deemed amended to the extent necessary to conform to such
    requirements.
    

     
3.3.     Limitations
Applicable to Section 16
Persons.     Notwithstanding any
other provision of the Plan, the Plan, and any Award granted or
awarded to any individual who is then subject to Section 16
of the Exchange Act, shall be subject to any additional
limitations set forth in any applicable exemptive rule under
Section 16 of the Exchange Act (including any amendment to
Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by
applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

     
3.4.     Consideration.     In
consideration of the granting of an Award under the Plan, the
Holder shall agree, in the Award Agreement, to remain in the
employ of (or to consult for or to serve as a Director of, as
applicable) the Company or any Subsidiary for a period of at
least one year (or such shorter period as may be fixed in the
Award Agreement or by action of the Administrator following
grant of the Award) after the Award is granted (or, in the case
of an Independent Director, until the next annual meeting of
stockholders of the Company).

     
3.5.     At-Will
Employment.     Nothing in the Plan
or in any Award Agreement hereunder shall confer upon any Holder
any right to continue in the employ of, or as a Consultant for,
the Company or any Subsidiary, or as a director of the Company,
or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Holder at any time for any reason whatsoever,
with or without cause, except to the extent expressly provided
otherwise in a written employment agreement between the Holder
and the Company and any Subsidiary.

ARTICLE IV.

GRANTING OF OPTIONS TO EMPLOYEES,

CONSULTANTS AND INDEPENDENT
DIRECTORS

     
4.1.     Eligibility.     Any
Employee, Consultant or Independent Director selected by the
Administrator pursuant to Section 4.4(a)(i) shall be
eligible to be granted Options at the times and in the manner
set forth in this Article IV.

     
4.2.     Disqualification
for Stock Ownership.     No person
may be granted an Incentive Stock Option under the Plan if such
person, at the time the Incentive Stock Option is granted, owns
stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any then
existing Subsidiary or parent corporation (within the meaning of
Section 424(e) of the Code) unless such Incentive Stock
Option conforms to the applicable provisions of Section 422
of the Code.

     
4.3.     Qualification
of Incentive Stock Options.     No
Incentive Stock Option shall be granted to any person who is not
an Employee.

     
4.4.     Granting of
Options.

		
	 	     
    (a)     The
    Administrator shall from time to time, in its absolute
    discretion, and subject to applicable limitations of the Plan:
    

		
	 	     
    (i)     Determine which
    Employees, Consultants and Independent Directors (including
    individuals who have previously received Awards under the Plan)
    as in its opinion should be granted Options;
    
	 
	 	     
    (ii)     Subject to the
    Award Limit, determine the number of shares to be subject to
    such Options;
    
	 
	 	     
    (iii)     Subject to
    Section 4.3, determine whether such Options are to be
    Incentive Stock Options or Non-Qualified Stock Options and
    whether such Options are to qualify as performance-based
    compensation as described in Section 162(m)(4)(C) of the
    Code; and
    

B-6

 

		
	 	     
    (iv)     Determine the
    terms and conditions of such Options, consistent with the Plan;
    provided, however, that the terms and conditions of Options
    intended to qualify as performance-based compensation as
    described in Section 162(m)(4)(C) of the Code shall
    include, but not be limited to, such terms and conditions as may
    be necessary to meet the applicable provisions of
    Section 162(m) of the Code.
    

		
	 	     
    (b)     Upon the
    selection of an Employee, Consultant or Independent Director to
    be granted an Option, the Administrator shall instruct the
    Secretary of the Company to issue the Option and may impose such
    conditions on the grant of the Option as it deems appropriate.
    
	 
	 	     
    (c)     Any Incentive
    Stock Option granted under the Plan may be modified by the
    Administrator, with the consent of the Holder, to disqualify
    such Option from treatment as an “incentive stock
    option” under Section 422 of the Code.
    

     
4.5.     Options in
Lieu of Cash
Compensation.     Options may be
granted under the Plan to Employees and Consultants in lieu of
cash bonuses which would otherwise be payable to such Employees
and Consultants and to Independent Directors in lieu of
directors’ fees which would otherwise be payable to such
Independent Directors, pursuant to such policies which may be
adopted by the Administrator from time to time.

ARTICLE V.

TERMS OF OPTIONS

     
5.1.     Option
Price.     The price per share of
the shares subject to each Option granted shall be no less than
100% of the Fair Market Value of a share of Common Stock on the
date the Option is granted; provided, however,
that in the case of Incentive Stock Options granted to an
individual then owning (within the meaning of
Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or
any Subsidiary or parent corporation thereof (within the meaning
of Section 424(e) of the Code), such price shall not be
less than 110% of the Fair Market Value of a share of Common
Stock on the date the Option is granted (or the date the Option
is modified, extended or renewed for purposes of
Section 424(h) of the Code).

     
5.2.     Option
Term.     No Option may be
exercised to any extent by the Holder after the first to occur
of the following events:

		
	 	     
    (a)     The expiration
    of ten years from the date the Option was granted; or
    
	 
	 	     
    (b)     With respect to
    an Incentive Stock Option in the case of an Holder owning
    (within the meaning of Section 424(d) of the Code), at the
    time the Incentive Stock Option was granted, more than 10% of
    the total combined voting power of all classes of stock of the
    Company or any Subsidiary, the expiration of five years from the
    date the Incentive Stock Option was granted.
    

     
5.3.     Option
Vesting.

		
	 	     
    (a)     The period
    during which the right to exercise, in whole or in part, an
    Option vests in the Holder shall be set by the Administrator and
    the Administrator may determine that an Option may not be
    exercised in whole or in part for a specified period after it is
    granted. At any time after grant of an Option, the Administrator
    may, in its sole and absolute discretion and subject to whatever
    terms and conditions it selects, accelerate the period during
    which an Option granted vests.
    
	 
	 	     
    (b)     No portion of an
    Option which is unexercisable at Termination of Employment,
    Termination of Consultancy or Termination of Directorship, as
    applicable, shall thereafter become exercisable, except as may
    be otherwise provided by the Administrator either in the Award
    Agreement or by action of the Administrator following the grant
    of the Option.
    
	 
	 	     
    (c)     To the extent
    that the aggregate Fair Market Value of stock with respect to
    which “incentive stock options” (within the meaning of
    Section 422 of the Code, but without regard to
    Section 422(d) of the Code) are exercisable for the first
    time by a Holder during any calendar year (under the Plan and
    all other incentive stock option plans of the Company or
    Subsidiary) of the Company, exceeds $100,000,
    

B-7

 

		
	 	
    such Options shall be treated as Non-Qualified
    Stock Options to the extent required by Section 422 of the
    Code. The rule set forth in the preceding sentence shall be
    applied by taking Options into account in the order in which
    they were granted. For purposes of this Section 5.3(c), the
    Fair Market Value of stock shall be determined as of the time
    the Option with respect to such stock is granted.
    

     
5.4.     Substitute
Awards.     Notwithstanding the
foregoing provisions of this Article V to the contrary, in
the case of an Option that is a Substitute Award, the price per
share of the shares subject to such Option may be less than the
Fair Market Value per share on the date of grant,
provided, that the excess of:

		
	 	     
    (a)     The aggregate
    Fair Market Value (as of the date such Substitute Award is
    granted) of the shares subject to the Substitute Award; over
    
	 
	 	     
    (b)     The aggregate
    exercise price thereof does not exceed the excess of:
    
	 
	 	     
    (c)     The aggregate
    fair market value (as of the time immediately preceding the
    transaction giving rise to the Substitute Award, such fair
    market value to be determined by the Committee) of the shares of
    the predecessor entity that were subject to the grant assumed or
    substituted for by the Company; over
    
	 
	 	     
    (d)     The aggregate
    exercise price of such shares.
    

ARTICLE VI.

EXERCISE OF OPTIONS

     
6.1.     Partial
Exercise.     An exercisable Option
may be exercised in whole or in part. However, an Option shall
not be exercisable with respect to fractional shares and the
Administrator may require that, by the terms of the Option, a
partial exercise be with respect to a minimum number of shares.

     
6.2.     Manner of
Exercise.     All or a portion of
an exercisable Option shall be deemed exercised upon delivery of
all of the following to the Secretary of the Company or his
designee:

		
	 	     
    (a)     A written notice
    complying with the applicable rules established by the
    Administrator stating that the Option, or a portion thereof, is
    exercised. The notice shall be signed by the Holder or other
    person then entitled to exercise the Option or such portion of
    the Option;
    
	 
	 	     
    (b)     Such
    representations and documents as the Administrator, in its
    absolute discretion, deems necessary or advisable to effect
    compliance with all applicable provisions of the Securities Act
    and any other federal or state securities laws or regulations.
    The Administrator may, in its absolute discretion, also take
    whatever additional actions it deems appropriate to effect such
    compliance including, without limitation, placing legends on
    share certificates and issuing stop-transfer notices to agents
    and registrars;
    
	 
	 	     
    (c)     In the event
    that the Option shall be exercised pursuant to Section 11.1
    by any person or persons other than the Holder, appropriate
    proof of the right of such person or persons to exercise the
    Option; and
    
	 
	 	     
    (d)     Full cash
    payment to the Secretary of the Company for the shares with
    respect to which the Option, or portion thereof, is exercised.
    However, the Administrator may, in its discretion,
    (i) allow payment, in whole or in part, through the
    delivery of shares of Common Stock which have been owned by the
    Holder for at least six months, duly endorsed for transfer to
    the Company with a Fair Market Value on the date of delivery
    equal to the aggregate exercise price of the Option or exercised
    portion thereof; (ii) allow payment, in whole or in part,
    through the surrender of shares of Common Stock then issuable
    upon exercise of the Option having a Fair Market Value on the
    date of Option exercise equal to the aggregate exercise price of
    the Option or exercised portion thereof; (iii) allow
    payment, in whole or in part, through the delivery of property
    of any kind which constitutes good and valuable consideration;
    (iv) allow payment, in whole or in part, through the
    delivery of a full recourse promissory note bearing interest (at
    no less than such rate as shall then preclude the imputation of
    interest under the Code) and payable upon such terms as may be
    prescribed by the Administrator; (v) allow payment through
    a broker assisted cash-less exercise procedure; or
    (vi) allow payment through any combination of the
    consideration provided in the foregoing subparagraphs (i),
    (ii), (iii), (iv) and (v). In the case of a promissory
    

B-8

 

		
	 	
    note, the Administrator may also prescribe the
    form of such note and the security to be given for such note.
    The Option may not be exercised, however, by delivery of a
    promissory note or by a loan from the Company when or where such
    loan or other extension of credit is prohibited by law, and
    payment in the manner prescribed by the preceding sentences
    shall not be permitted to the extent that the Administrator
    determines that payment in such manner may result in an
    extension or maintenance of credit, an arrangement for the
    extension of credit, or a renewal of an extension of credit in
    the form of a personal loan to or for any Director or executive
    officer of the Company that is prohibited by Section 13(k)
    of the Exchange Act or other applicable law.
    

     
6.3.     Conditions
to Issuance of Stock
Certificates.     The Company shall
not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of
any Option or portion thereof prior to fulfillment of all of the
following conditions:

		
	 	     
    (a)     The admission of
    such shares to listing on all stock exchanges on which such
    class of stock is then listed;
    
	 
	 	     
    (b)     The completion
    of any registration or other qualification of such shares under
    any state or federal law, or under the rulings or regulations of
    the Securities and Exchange Commission or any other governmental
    regulatory body which the Administrator shall, in its absolute
    discretion, deem necessary or advisable;
    
	 
	 	     
    (c)     The obtaining of
    any approval or other clearance from any state or federal
    governmental agency which the Administrator shall, in its
    absolute discretion, determine to be necessary or advisable;
    
	 
	 	     
    (d)     The lapse of
    such reasonable period of time following the exercise of the
    Option as the Administrator may establish from time to time for
    reasons of administrative convenience; and
    
	 
	 	     
    (e)     The receipt by
    the Company of full payment for such shares, including payment
    of any applicable withholding tax, which in the discretion of
    the Administrator may be in the form of consideration used by
    the Holder to pay for such shares under Section 6.2(d).
    

     
6.4.     Rights as
Stockholders.     Holders shall not
be, nor have any of the rights or privileges of, stockholders of
the Company in respect of any shares purchasable upon the
exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such
Holders.

     
6.5.     Exercise,
Ownership and Transfer
Restrictions.     The
Administrator, in its absolute discretion, may impose such
restrictions on the exercise of an Option and the ownership and
transferability of the shares purchasable upon the exercise of
an Option as it deems appropriate. Any such restriction shall be
set forth in the respective Award Agreement and may be referred
to on the certificates evidencing such shares. The Holder shall
give the Company prompt notice of any disposition of shares of
Common Stock acquired by exercise of an Incentive Stock Option
within (a) two years from the date of granting (including
the date the Option is modified, extended or renewed for
purposes of Section 424(h) of the Code) such Option to such
Holder, or (b) one year after the transfer of such shares
to such Holder.

     
6.6.     Additional
Limitations on Exercise of
Options.     Holders may be
required to comply with any timing or other restrictions with
respect to the settlement or exercise of an Option, including a
window-period limitation, as may be imposed in the discretion of
the Administrator.

ARTICLE VII.

AWARD OF RESTRICTED STOCK

     
7.1.     Eligibility.

     
Subject to the Award Limit, Restricted Stock may
be awarded to any Employee, Consultant or Independent Director
who the Administrator determines should receive such an Award.

B-9

 

     
7.2.     Award of
Restricted Stock.

		
	 	     
    (a)     The
    Administrator may from time to time, in its absolute discretion:
    

		
	 	     
    (i)     Determine which
    Employees, Consultants or Independent Directors (including
    individuals who have previously received Awards under the Plan)
    as in its opinion should be awarded Restricted Stock; and
    
	 
	 	     
    (ii)     Determine the
    purchase price, if any, and other terms and conditions
    applicable to such Restricted Stock, consistent with the Plan.
    

		
	 	     
    (b)     The
    Administrator shall establish the purchase price, if any, and
    form of payment for Restricted Stock; provided,
    however, that such purchase price shall be no less than
    the par value of the Common Stock to be purchased, unless
    otherwise permitted by applicable state law. In all cases, legal
    consideration shall be required for each issuance of Restricted
    Stock.
    
	 
	 	     
    (c)     Upon the
    selection of an Employee, Consultant or Independent Director to
    be awarded Restricted Stock, the Administrator shall instruct
    the Secretary of the Company to issue such Restricted Stock and
    may impose such conditions on the issuance of such Restricted
    Stock as it deems appropriate.
    

     
7.3.     Rights as
Stockholders.     Subject to
Section 7.4, upon delivery of the shares of Restricted
Stock to the escrow holder pursuant to Section 7.6, the
Holder shall have, unless otherwise provided by the
Administrator, all the rights of a stockholder with respect to
said shares, subject to the restrictions in his or her Award
Agreement, including the right to receive all dividends and
other distributions paid or made with respect to the shares;
provided, however, that in the discretion of the
Administrator, any extraordinary distributions with respect to
the Common Stock shall be subject to the restrictions set forth
in Section 7.4.

     
7.4.     Restriction.     All
shares of Restricted Stock issued under the Plan (including any
shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or
any other form of recapitalization) shall, in the terms of each
individual Award Agreement, be subject to such restrictions as
the Administrator shall provide, which restrictions may include,
without limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of employment
with the Company, Company performance and individual
performance; provided, however, that, unless the
Administrator otherwise provides in the terms of the Award
Agreement or otherwise, no share of Restricted Stock granted to
a person subject to Section 16 of the Exchange Act shall be
sold, assigned or otherwise transferred until at least six
months and one day have elapsed from the date on which the
Restricted Stock was issued, and provided,
further, that, except with respect to shares of
Restricted Stock granted to Section 162(m) Participants, by
action taken after the Restricted Stock is issued, the
Administrator may, on such terms and conditions as it may
determine to be appropriate, remove any or all of the
restrictions imposed by the terms of the Award Agreement.
Restricted Stock may not be sold or encumbered until all
restrictions are terminated or expire. If no consideration was
paid by the Holder upon issuance, a Holder’s rights in
unvested Restricted Stock shall lapse, and such Restricted Stock
shall be surrendered to the Company without consideration, upon
Termination of Employment, Termination of Consultancy or
Termination of Directorship, as applicable.

     
7.5.     Repurchase
of Restricted Stock.     If
consideration was paid by the Holder upon issuance, then the
Company shall have the right to repurchase from the Holder the
Restricted Stock then subject to restrictions under the Award
Agreement immediately upon a Termination of Employment,
Termination of Consultancy or Termination of Directorship, at a
cash price per share equal to the price paid by the Holder for
such Restricted Stock.

     
7.6.     Escrow.     The
Secretary of the Company or such other escrow holder as the
Administrator may appoint shall retain physical custody of each
certificate representing Restricted Stock until all of the
restrictions imposed under the Award Agreement with respect to
the shares evidenced by such certificate expire or shall have
been removed.

     
7.7.     Legend.     In
order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Administrator shall cause a
legend or legends to be placed on certificates representing all
shares of

B-10

 

Restricted Stock that are still subject to
restrictions under Award Agreements, which legend or legends
shall make appropriate reference to the conditions imposed
thereby.

     
7.8.     Section 83(b)
Election.     If a Holder makes an
election under Section 83(b) of the Code, or any successor
section thereto, to be taxed with respect to the Restricted
Stock as of the date of transfer of the Restricted Stock rather
than as of the date or dates upon which the Holder would
otherwise be taxable under Section 83(a) of the Code, the
Holder shall deliver a copy of such election to the Company
immediately after filing such election with the Internal Revenue
Service.

ARTICLE VIII.

PERFORMANCE AWARDS, DIVIDEND
EQUIVALENTS,

DEFERRED STOCK, STOCK PAYMENTS

     
8.1.     Eligibility.     Subject
to the Award Limit, one or more Performance Awards, Dividend
Equivalents, awards of Deferred Stock and/or Stock Payments may
be granted to any Employee, Consultant or Independent Director
whom the Administrator determines should receive such an Award.

     
8.2.     Performance
Awards.

		
	 	     
    (a)     Any Employee,
    Consultant or Independent Director selected by the Administrator
    may be granted one or more Performance Awards. The value of such
    Performance Awards may be linked to any one or more of the
    Performance Criteria or other specific performance criteria
    determined appropriate by the Administrator, in each case on a
    specified date or dates or over any period or periods determined
    by the Administrator. In making such determinations, the
    Administrator shall consider (among such other factors as it
    deems relevant in light of the specific type of award) the
    contributions, responsibilities and other compensation of the
    particular Employee, Consultant or Independent Director.
    
	 
	 	     
    (b)     Without limiting
    Section 8.2(a), the Committee may grant Performance Awards
    to any 162(m) Participant in the form of a cash bonus payable
    upon the attainment of objective performance goals which are
    established by the Committee and relate to one or more of the
    Performance Criteria, in each case on a specified date or dates
    or over any period or periods determined by the Committee. Any
    such bonuses paid to 162(m) Participants shall be based upon
    objectively determinable bonus formulas established in
    accordance with the provisions of Section 3.2. The maximum
    amount of any Performance Award payable to a 162(m) Participant
    under this Section 8.2(b) shall not exceed the Award
    Limit.1 Unless otherwise specified by the Committee
    at the time of grant, the Performance Criteria with respect to a
    Performance Award payable to a 162(m) Participant shall be
    determined on the basis of generally accepted accounting
    principles.
    

     
8.3.     Dividend
Equivalents.

		
	 	     
    (a)     Any Employee,
    Consultant or Independent Director selected by the Administrator
    may be granted Dividend Equivalents based on the dividends
    declared on Common Stock, to be credited as of dividend payment
    dates, during the period between the date a Stock Appreciation
    Right, Deferred Stock or Performance Award is granted, and the
    date such Stock Appreciation Right, Deferred Stock or
    Performance Award is exercised, vests or expires, as determined
    by the Administrator. Such Dividend Equivalents shall be
    converted to cash or additional shares of Common Stock by such
    formula and at such time and subject to such limitations as may
    be determined by the Administrator.
    
	 
	 	     
    (b)     Any Holder of an
    Option as selected by the Committee may be granted Dividend
    Equivalents based on the dividends declared on Common Stock, to
    be credited as of dividend payment dates, during the period
    between the date an Option is granted, and the date such Option
    is exercised, vests or expires, as determined by the Committee.
    Such Dividend Equivalents shall be converted to cash or
    additional shares of Common Stock by such formula and at such
    time and subject to such limitations as may be determined by the
    Administrator.
    

1 The
Company, in its sole discretion, may chose the period by which
the Award Limit is measured. 
B-11

 

		
	 	     
    (c)     The maximum
    amount of Dividend Equivalents intended to be qualified
    performed based compensation for purposes of Section 162(m)
    of the Code shall not exceed the Award Limit.
    

     
8.4.     Stock
Payments.     Any Employee,
Consultant or Independent Director selected by the Administrator
may receive Stock Payments in the manner determined from time to
time by the Administrator. The number of shares shall be
determined by the Administrator and may be based upon the
Performance Criteria or other specific performance criteria
determined appropriate by the Administrator, determined on the
date such Stock Payment is made or on any date thereafter.

     
8.5.     Deferred
Stock.     Any Employee, Consultant
or Independent Director selected by the Administrator may be
granted an award of Deferred Stock in the manner determined from
time to time by the Administrator. The number of shares of
Deferred Stock shall be determined by the Administrator and may
be linked to the Performance Criteria or other specific
performance criteria determined to be appropriate by the
Administrator, in each case on a specified date or dates or over
any period or periods determined by the Administrator. Common
Stock underlying a Deferred Stock award will not be issued until
the Deferred Stock award has vested, pursuant to a vesting
schedule or performance criteria set by the Administrator.
Unless otherwise provided by the Administrator, a Holder of
Deferred Stock shall have no rights as a Company stockholder
with respect to such Deferred Stock until such time as the Award
has vested and the Common Stock underlying the Award has been
issued.

     
8.6.     Restricted
Stock Units.     Any Employee,
Consultant or Independent Director selected by the Administrator
may be granted Awards of Restricted Stock Units in such amounts
and subject to such terms and conditions as determined by the
Administrator. At the time of grant, the Administrator shall
specify the date or dates on which the Restricted Stock Units
shall become fully vested and nonforfeitable, and may specify
such conditions to vesting as it deems appropriate. At the time
of grant, the Administrator shall specify the maturity date
applicable to each grant of Restricted Stock Units which shall
be no earlier than the vesting date or dates of the Award and
may be determined at the election of the grantee. On the
maturity date, the Company shall transfer to the Participant one
unrestricted, fully transferable share of Common Stock for each
Restricted Stock Unit scheduled to be paid out on such date and
not previously forfeited. The Administrator shall specify the
purchase price, if any, to be paid by the grantee to the Company
for such shares of Common Stock.

     
8.7.     Term.     The
term of a Performance Award, Dividend Equivalent, award of
Deferred Stock, Restricted Stock Unit and/or Stock Payment shall
be set by the Administrator in its discretion.

     
8.8.     Exercise or
Purchase Price.     The
Administrator may establish the exercise or purchase price of a
Performance Award, shares of Deferred Stock, Restricted Stock
Units or shares received as a Stock Payment; provided,
however, that such price shall not be less than the par
value of a share of Common Stock, unless otherwise permitted by
applicable state law.

     
8.9.     Exercise
Upon Termination of Employment, Termination of Consultancy or
Termination of Directorship.     A
Performance Award, Dividend Equivalent, award of Deferred Stock,
Restricted Stock Unit and/or Stock Payment is exercisable or
payable only while the Holder is an Employee, Consultant or
Independent Director, as applicable; provided,
however, that the Administrator in its sole and absolute
discretion may provide that the Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment may be
exercised or paid subsequent to a Termination of Employment
following a Corporate Transaction.

     
8.10.     Form of
Payment.     Payment of the amount
determined under Section 8.2, 8.3, or 8.6 above shall be in
cash, in Common Stock or a combination of both, as determined by
the Administrator. To the extent any payment under this
Article VIII is effected in Common Stock, it shall be made
subject to satisfaction of all provisions of Section 6.3.

B-12

 

ARTICLE IX.

STOCK APPRECIATION RIGHTS

     
9.1.     Grant of
Stock Appreciation Rights.     A
Stock Appreciation Right may be granted to any Employee,
Consultant or Independent Director selected by the
Administrator. A Stock Appreciation Right may be granted
(a) in connection and simultaneously with the grant of an
Option, (b) with respect to a previously granted Option, or
(c) independent of an Option. A Stock Appreciation Right
shall be subject to such terms and conditions not inconsistent
with the Plan as the Administrator shall impose and shall be
evidenced by an Award Agreement.

     
9.2.     Coupled
Stock Appreciation Rights.

		
	 	     
    (a)     A Coupled Stock
    Appreciation Right (“CSAR”) shall be related to a
    particular Option and shall be exercisable only when and to the
    extent the related Option is exercisable.
    
	 
	 	     
    (b)     A CSAR may be
    granted to the Holder for no more than the number of shares
    subject to the simultaneously or previously granted Option to
    which it is coupled.
    
	 
	 	     
    (c)     A CSAR shall
    entitle the Holder (or other person entitled to exercise the
    Option pursuant to the Plan) to surrender to the Company
    unexercised a portion of the Option to which the CSAR relates
    (to the extent then exercisable pursuant to its terms) and to
    receive from the Company in exchange therefor an amount
    determined by multiplying the difference obtained by subtracting
    the Option exercise price from the Fair Market Value of a share
    of Common Stock on the date of exercise of the CSAR by the
    number of shares of Common Stock with respect to which the CSAR
    shall have been exercised, subject to any limitations the
    Committee may impose.
    

     
9.3.     Independent
Stock Appreciation Rights.

		
	 	     
    (a)     An Independent
    Stock Appreciation Right (“ISAR”) shall be unrelated
    to any Option and shall have a term set by the Administrator. An
    ISAR shall be exercisable in such installments as the
    Administrator may determine. An ISAR shall cover such number of
    shares of Common Stock as the Administrator may determine;
    provided, however, that unless the Administrator
    otherwise provides in the terms of the ISAR or otherwise, no
    ISAR granted to a person subject to Section 16 of the
    Exchange Act shall be exercisable until at least six months have
    elapsed from (but excluding) the date on which the Option was
    granted. The exercise price per share of Common Stock subject to
    each ISAR shall be set by the Administrator. An ISAR is
    exercisable only while the Holder is an Employee, Director or
    Consultant; provided, that the Committee may determine
    that the ISAR may be exercised subsequent to Termination of
    Employment, Termination of Consultancy or Termination of
    Directorship without cause, or following a change in control of
    the Company, or because of the Holder’s retirement, death
    or disability, or otherwise.
    
	 
	 	     
    (b)     An ISAR shall
    entitle the Holder (or other person entitled to exercise the
    ISAR pursuant to the Plan) to exercise all or a specified
    portion of the ISAR (to the extent then exercisable pursuant to
    its terms) and to receive from the Company an amount determined
    by multiplying the difference obtained by subtracting the
    exercise price per share of the ISAR from the Fair Market Value
    of a share of Common Stock on the date of exercise of the ISAR
    by the number of shares of Common Stock with respect to which
    the ISAR shall have been exercised, subject to any limitations
    the Administrator may impose.
    

     
9.4.     Payment and
Limitations on Exercise.

		
	 	     
    (a)     Payment of the
    amounts determined under Section 9.2(c) and 9.3(b) above
    shall be in cash, in Common Stock (based on its Fair Market
    Value as of the date the Stock Appreciation Right is exercised)
    or a combination of both, as determined by the Committee. To the
    extent such payment is effected in Common Stock it shall be made
    subject to satisfaction of all provisions of Section 6.3
    above pertaining to Options.
    

B-13

 

		
	 	     
    (b)     Holders of Stock
    Appreciation Rights may be required to comply with any timing or
    other restrictions with respect to the settlement or exercise of
    a Stock Appreciation Right, including a window-period
    limitation, as may be imposed in the discretion of the
    Administrator.
    

ARTICLE X.

ADMINISTRATION

     
10.1.     Administrator.     The
Administrator of the Plan shall be the Committee (or another
committee or a subcommittee of the Board assuming the functions
of the Committee under the Plan) and shall consist solely of two
or more Independent Directors appointed by and holding office at
the pleasure of the Board, each of whom is both a
“non-employee director” as defined by Rule 16b-3
and an “outside director” for purposes of
Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment.
Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by
the Board. In its absolute discretion, the Board may at any time
and from time to time exercise any and all rights and duties of
the Committee under the Plan except with respect to matters
which under Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the
sole discretion of the Committee. Notwithstanding the foregoing,
the full Board, acting by a majority of its members in office,
shall conduct the general administration of the Plan with
respect to Awards granted to Independent Directors and with
respect to any individual subject to Section 16 of the
Exchange Act.

     
10.2.     Duties and
Powers of Administrator.     It
shall be the duty of the Administrator to conduct the general
administration of the Plan in accordance with its provisions.
The Administrator shall have the power to interpret the Plan and
the Award Agreements, and to adopt such rules for the
administration, interpretation and application of the Plan as
are consistent therewith, to interpret, amend or revoke any such
rules. Interpretations and rules with respect to Incentive Stock
Options shall be consistent with the provisions of
Section 422 of the Code. The Administrator shall also have
the power to amend any Award Agreement provided that the rights
or obligations of the Holder of the Award that is the subject of
any such Award Agreement are not affected adversely;
provided, however, that without the approval of
the stockholders of the Company, neither the Committee nor the
Board shall authorize the amendment of any outstanding Option or
SAR to reduce its exercise price. Notwithstanding anything
contained herein, no Option or Stock Appreciation Right shall be
canceled and replaced with the grant of an Option or Stock
Appreciation Right having a lower exercise price without the
approval of the stockholders of the Company. Grants or awards
under the Plan need not be the same with respect to each Holder.

     
10.3.     Majority
Rule; Unanimous Written
Consent.     The Administrator
shall act by a majority of its members in attendance at a
meeting at which a quorum is present or by a memorandum or other
written instrument signed by all members of the Administrator.

     
10.4.     Compensation;
Professional Assistance; Good Faith
Actions.     Members of the
Committee shall receive such compensation, if any, for their
services as members as may be determined by the Board. All
expenses and liabilities which members of the Administrator
incur in connection with the administration of the Plan shall be
borne by the Company. The Administrator may, with the approval
of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Administrator, the
Company and the Company’s officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any
such persons. All actions taken and all interpretations and
determinations made by the Administrator or the Board in good
faith shall be final and binding upon all Holders, the Company
and all other interested persons. No members of the Committee or
Board shall be personally liable for any action, determination
or interpretation made in good faith with respect to the Plan or
Awards, and all members of the Committee and the Board shall be
fully protected by the Company in respect of any such action,
determination or interpretation.

     
10.5.     Delegation
of Authority to Grant
Awards.     The Administrator may,
but need not, delegate from time to time some or all of its
authority to grant Awards under the Plan to a committee
consisting of one or more members of the Committee or of one or
more officers of the Company; provided, however,
that the

B-14

 

Administrator may not delegate its authority to
grant Awards to individuals (a) who are subject on the date
of the grant to the reporting rules under Section 16(a) of
the Exchange Act, (b) who are Section 162(m)
Participants, or (c) who are officers of the Company who
are delegated authority by the Administrator hereunder. Any
delegation hereunder shall be subject to the restrictions and
limits that the Administrator specifies at the time of such
delegation of authority and may be rescinded at any time by the
Administrator. At all times, any committee appointed under this
Section 10.5 shall serve in such capacity at the pleasure
of the Administrator.

ARTICLE XI.

MISCELLANEOUS PROVISIONS

     
11.1.     Transferability
of Awards.

		
	 	     
    (a)     Except as
    otherwise provided in Section 11.1(b):
    

		
	 	     
    (i)     No Award under
    the Plan may be sold, pledged, assigned or transferred in any
    manner other than by will or the laws of descent and
    distribution or, subject to the consent of the Administrator,
    pursuant to a DRO, unless and until such Award has been
    exercised, or the shares underlying such Award have been issued,
    and all restrictions applicable to such shares have lapsed;
    
	 
	 	     
    (ii)     No Option,
    Restricted Stock award, Restricted Stock Unit, Deferred Stock
    award, Performance Award, Stock Appreciation Right, Dividend
    Equivalent or Stock Payment or interest or right therein shall
    be liable for the debts, contracts or engagements of the Holder
    or his successors in interest or shall be subject to disposition
    by transfer, alienation, anticipation, pledge, encumbrance,
    assignment or any other means whether such disposition be
    voluntary or involuntary or by operation of law by judgment,
    levy, attachment, garnishment or any other legal or equitable
    proceedings (including bankruptcy), and any attempted
    disposition thereof shall be null and void and of no effect,
    except to the extent that such disposition is permitted by the
    preceding clause (i); and
    
	 
	 	     
    (iii)     During the
    lifetime of any Holder, only he may exercise Award (or any
    portion thereof) granted to him under the Plan, unless it has
    been disposed of pursuant to a DRO; after the death of the
    Holder, any exercisable portion of an Option or other Award may,
    prior to the time when such portion becomes unexercisable under
    the Plan or the applicable Award Agreement, be exercised by his
    personal representative or by any person empowered to do so
    under the deceased Holder’s will or under the then
    applicable laws of descent and distribution.
    

		
	 	     
    (b)     Notwithstanding
    Section 11.1(a), the Administrator, in its sole discretion,
    may determine to permit a Holder to transfer a Non-Qualified
    Stock Option to any one or more Permitted Transferees (as
    defined below), subject to the following terms and conditions:
    (i) a Non-Qualified Stock Option transferred to a Permitted
    Transferee shall not be assignable or transferable by the
    Permitted Transferee other than by will or the laws of descent
    and distribution; (ii) any Non-Qualified Stock Option which
    is transferred to a Permitted Transferee shall continue to be
    subject to all the terms and conditions of the Non-Qualified
    Stock Option as applicable to the original Holder (other than
    the ability to further transfer the Non-Qualified Stock Option);
    and (iii) the Holder and the Permitted Transferee shall
    execute any and all documents requested by the Administrator,
    including, without limitation documents to (A) confirm the
    status of the transferee as a Permitted Transferee,
    (B) satisfy any requirements for an exemption for the
    transfer under applicable federal and state securities laws and
    (C) evidence the transfer. For purposes of this
    Section 11.1(b), “Permitted Transferee” shall
    mean, with respect to a Holder, any child, stepchild,
    grandchild, parent, stepparent, grandparent, spouse, former
    spouse, sibling, niece, nephew, mother-in-law, father-in-law,
    son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
    including adoptive relationships, any person sharing the
    Holder’s household (other than a tenant or employee), a
    trust in which these persons (or the Holder) control the
    management of assets, and any other entity in which these
    persons (or the Holder) own more than fifty percent of the
    voting interests, or
    

B-15

 

		
	 	
    any other transferee specifically approved by the
    Administrator after taking into account any state or federal tax
    or securities laws applicable to transferable Non-Qualified
    Stock Options.
    

     
11.2.     Amendment,
Suspension or Termination of the
Plan.     The Board, at any time
and from time to time, may terminate, amend or modify the Plan;
provided, however, that (i) to the extent necessary
and desirable to comply with any applicable law, regulation, or
stock exchange rule, the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a
degree as required, and (ii) stockholder approval is
required for any amendment to the Plan that (A) increases
the number of shares available under the Plan (other than any
adjustment as provided by Article 11), (B) permits the
Administrator to grant Options with an exercise price that is
below Fair Market Value on the date of grant, or
(C) permits the Administrator to extend the term of the
Plan or any Option granted hereunder, or (D) increase the
Award Limit. Notwithstanding any provision in this Plan to the
contrary, absent approval of the stockholders of the Company, no
Option may be amended to reduce the per share exercise price of
the shares subject to such Option below the per share exercise
price as of the date the Option is granted and, except as
permitted by Article 11, no Option may be granted in
exchange for, or in connection with, the cancellation or
surrender of an Option having a higher per share exercise price.
No amendment, suspension or termination of the Plan shall,
without the consent of the Holder, alter or impair any rights or
obligations under any Award theretofore granted or awarded,
unless the Award itself otherwise expressly so provides.

     
11.3.     Changes in
Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.

		
	 	     
    (a)     Subject to
    Section 11.3(e), in the event that the Administrator
    determines that any dividend or other distribution (whether in
    the form of cash, Common Stock, other securities or other
    property), recapitalization, reclassification, stock split,
    reverse stock split, reorganization, merger, consolidation,
    split-up, spin-off, combination, repurchase, liquidation,
    dissolution, or sale, transfer, exchange or other disposition of
    all or substantially all of the assets of the Company, or
    exchange of Common Stock or other securities of the Company,
    issuance of warrants or other rights to purchase Common Stock or
    other securities of the Company, or other similar corporate
    transaction or event, in the Administrator’s sole
    discretion, affects the Common Stock such that an adjustment is
    determined by the Administrator to be appropriate in order to
    prevent dilution or enlargement of the benefits or potential
    benefits intended to be made available under the Plan or with
    respect to an Award, then the Administrator shall, in such
    manner as it may deem equitable, adjust any or all of:
    

		
	 	     
    (i)     The number and
    kind of shares of Common Stock (or other securities or property)
    with respect to which Awards may be granted or awarded
    (including, but not limited to, adjustments of the limitations
    in Section 2.1 on the maximum number and kind of shares
    which may be issued and adjustments of the Award Limit);
    
	 
	 	     
    (ii)     The number and
    kind of shares of Common Stock (or other securities or property)
    subject to outstanding Awards; and
    
	 
	 	     
    (iii)     The grant or
    exercise price with respect to any Award.
    

		
	 	     
    (b)     Subject to
    Sections 11.3(c) and 11.3(e), in the event of any
    transaction or event described in Section 11.3(a) or any
    unusual or nonrecurring transactions or events affecting the
    Company, any affiliate of the Company, or the financial
    statements of the Company or any affiliate, or of changes in
    applicable laws, regulations or accounting principles, the
    Administrator, in its sole and absolute discretion, and on such
    terms and conditions as it deems appropriate, either by the
    terms of the Award or by action taken prior to the occurrence of
    such transaction or event and either automatically or upon the
    Holder’s request, is hereby authorized to take any one or
    more of the following actions whenever the Administrator
    determines that such action is appropriate in order to prevent
    dilution or enlargement of the benefits or potential benefits
    intended to be made available under the Plan or with respect to
    any
    

B-16

 

		
	 	
    Award under the Plan, to facilitate such
    transactions or events or to give effect to such changes in
    laws, regulations or principles:
    

		
	 	     
    (i)     To provide for
    either the purchase of any such Award for an amount of cash
    equal to the amount that could have been attained upon the
    exercise of such Award or realization of the Holder’s
    rights had such Award been currently exercisable or payable or
    fully vested or the replacement of such Award with other rights
    or property selected by the Administrator in its sole discretion;
    
	 
	 	     
    (ii)     To provide that
    the Award cannot vest, be exercised or become payable after such
    event;
    
	 
	 	     
    (iii)     To provide
    that such Award shall be exercisable as to all shares covered
    thereby, notwithstanding anything to the contrary in
    Section 5.3 or 5.4 or the provisions of such Award;
    
	 
	 	     
    (iv)     To provide that
    such Award be assumed by the successor or survivor corporation,
    or a parent or subsidiary thereof, or shall be substituted for
    by similar options, rights or awards covering the stock of the
    successor or survivor corporation, or a parent or subsidiary
    thereof, with appropriate adjustments as to the number and kind
    of shares and prices;
    
	 
	 	     
    (v)     To make
    adjustments in the number and type of shares of Common Stock (or
    other securities or property) subject to outstanding Awards, and
    in the number and kind of outstanding Restricted Stock or
    Deferred Stock and/or in the terms and conditions of (including
    the grant or exercise price), and the criteria included in,
    outstanding options, rights and awards and options, rights and
    awards which may be granted in the future; and
    
	 
	 	     
    (vi)     To provide
    that, for a specified period of time prior to such event, the
    restrictions imposed under an Award Agreement upon some or all
    shares of Restricted Stock or Deferred Stock may be terminated,
    and, in the case of Restricted Stock, some or all shares of such
    Restricted Stock may cease to be subject to repurchase under
    Section 7.5 or forfeiture under Section 7.4 after such
    event.
    

		
	 	     
    (c)     Subject to
    Sections 3.2, 3.3 and 11.3(e), the Administrator may, in
    its discretion, include such further provisions and limitations
    in any Award, agreement or certificate, as it may deem equitable
    and in the best interests of the Company.
    
	 
	 	     
    (d)     With respect to
    Awards which are granted to Section 162(m) Participants and
    are intended to qualify as performance-based compensation under
    Section 162(m)(4)(C), no adjustment or action described in
    this Section 11.3 or in any other provision of the Plan
    shall be authorized to the extent that such adjustment or action
    would cause such Award to fail to so qualify under
    Section 162(m)(4)(C), or any successor provisions thereto.
    No adjustment or action described in this Section 11.3 or
    in any other provision of the Plan shall be authorized to the
    extent that such adjustment or action would cause the Plan to
    violate Section 422(b)(1) of the Code. Furthermore, no such
    adjustment or action shall be authorized to the extent such
    adjustment or action would result in short-swing profits
    liability under Section 16 or violate the exemptive
    conditions of Rule 16b-3 unless the Administrator
    determines that the Award is not to comply with such exemptive
    conditions. The number of shares of Common Stock subject to any
    Award shall always be rounded to the next whole number.
    
	 
	 	     
    (e)     The existence of
    the Plan, the Award Agreement and the Awards granted hereunder
    shall not affect or restrict in any way the right or power of
    the Company or the shareholders of the Company to make or
    authorize any adjustment, recapitalization, reorganization or
    other change in the Company’s capital structure or its
    business, any merger or consolidation of the Company, any issue
    of stock or of options, warrants or rights to purchase stock or
    of bonds, debentures, preferred or prior preference stocks whose
    rights are superior to or affect the Common Stock or the rights
    thereof or which are convertible into or exchangeable for Common
    Stock, or the dissolution or liquidation of the company, or any
    sale or transfer of all or any part of its assets or business,
    or any other corporate act or proceeding, whether of a similar
    character or otherwise.
    

     
11.4.     Approval of
Plan by Stockholders.     The Plan
will be submitted for the approval of the Company’s
stockholders after the date of the Board’s initial adoption
of the Plan, and any amendment to the Plan

B-17

 

increasing the aggregate number of shares of
Common Stock issuable under the Plan will be submitted for the
approval of the Company’s stockholders after the date of
the Board’s adoption of such amendment. Awards may be
granted or awarded prior to such stockholder approval, provided
that such Awards shall not be exercisable nor shall such Awards
vest prior to the time when the Plan is approved by the
stockholders, and provided further that if such approval is not
obtained, all Awards previously granted or awarded under the
Plan shall thereupon be canceled and become null and void. In
addition, if the Board determines that Awards other than Options
or Stock Appreciation Rights which may be granted to
Section 162(m) Participants should continue to be eligible
to qualify as performance-based compensation under
Section 162(m)(4)(C) of the Code, the Performance Criteria
must be disclosed to and approved by the Company’s
stockholders no later than the first stockholder meeting that
occurs in the fifth year following the year in which the
Company’s stockholders previously approved the Performance
Criteria.

     
11.5.     Tax
Withholding.     The Company shall
be entitled to require payment in cash or deduction from other
compensation payable to each Holder of any sums required by
federal, state or local tax law to be withheld with respect to
the issuance, vesting, exercise or payment of any Award. The
Administrator may in its discretion and in satisfaction of the
foregoing requirement allow such Holder to elect to have the
Company withhold shares of Common Stock otherwise issuable under
such Award (or allow the return of shares of Common Stock)
having a Fair Market Value equal to the sums required to be
withheld. Notwithstanding any other provision of the Plan, the
number of shares of Common Stock which may be withheld with
respect to the issuance, vesting, exercise or payment of any
Award (or which may be repurchased from the Holder of such Award
within six months after such shares of Common Stock were
acquired by the Holder from the Company) in order to satisfy the
Holder’s federal and state income and payroll tax
liabilities with respect to the issuance, vesting, exercise or
payment of the Award shall be limited to the number of shares
which have a Fair Market Value on the date of withholding or
repurchase equal to the aggregate amount of such liabilities
based on the minimum statutory withholding rates for federal and
state tax income and payroll tax purposes that are applicable to
such supplemental taxable income.

     
11.6.     Loans.     The
Administrator may, in its discretion, extend one or more loans
to key Employees in connection with the exercise or receipt of
an Award granted or awarded under the Plan, or the issuance of
Restricted Stock or Deferred Stock awarded under the Plan. The
terms and conditions of any such loan shall be set by the
Administrator. Notwithstanding the foregoing, no loan shall be
made to an Employee under this Section to the extent such loan
shall result in an extension or maintenance of credit, an
arrangement for the extension of credit, or a renewal of an
extension of credit in the form of a personal loan to or for any
Director or executive officer of the Company that is prohibited
by Section 13(k) of the Exchange Act or other applicable
law. In the event that the Administrator determines in its
discretion that any loan under this Section may be or will
become prohibited by Section 13(k) of the Exchange Act or
other applicable law, the Administrator may provide that such
loan shall be immediately due and payable in full and may take
any other action in connection with such loan as the
Administrator determines in its discretion to be necessary or
appropriate for the repayment, cancellation or extinguishment of
such loan.

     
11.7.     Forfeiture
Provisions.     Pursuant to its
general authority to determine the terms and conditions
applicable to Awards under the Plan, the Administrator shall, to
the extent permitted by applicable law, have the right to
provide, in the terms of Awards made under the Plan, or to
require a Holder to agree by separate written instrument, that
(a)(i) any proceeds, gains or other economic benefit actually or
constructively received by the Holder upon any receipt or
exercise of the Award, or upon the receipt or resale of any
Common Stock underlying the Award, must be paid to the Company,
and (ii) the Award shall terminate and any unexercised
portion of the Award (whether or not vested) shall be forfeited,
if (b)(i) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs prior to a
specified date, or within a specified time period following
receipt or exercise of the Award, or (ii) the Holder at any
time, or during a specified time period, engages in any activity
in competition with the Company, or which is inimical, contrary
or harmful to the interests of the Company, as further defined
by the Administrator or (iii) the Holder incurs a
Termination of Employment, Termination of Consultancy or
Termination of Directorship for cause.

B-18

 

     
11.8.     Effect of
Plan Upon Compensation
Plans.     The adoption of the Plan
shall not affect any other compensation or incentive plans in
effect for the Company or any Subsidiary. Nothing in the Plan
shall be construed to limit the right of the Company (a) to
establish any other forms of incentives or compensation for
Employees, Directors or Consultants of the Company or any
Subsidiary, or (b) to grant or assume options or other
rights or awards otherwise than under the Plan in connection
with any proper corporate purpose including but not by way of
limitation, the grant or assumption of options in connection
with the acquisition by purchase, lease, merger, consolidation
or otherwise, of the business, stock or assets of any
corporation, partnership, limited liability company, firm or
association.

     
11.9.     Compliance
with Laws.     The Plan, the
granting and vesting of Awards under the Plan and the issuance
and delivery of shares of Common Stock and the payment of money
under the Plan or under Awards granted or awarded hereunder are
subject to compliance with all applicable federal and state
laws, rules and regulations (including but not limited to state
and federal securities law and federal margin requirements) and
to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities
delivered under the Plan shall be subject to such restrictions,
and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the
Company as the Company may deem necessary or desirable to assure
compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.

     
11.10.     Titles.     Titles
are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of the Plan.

     
11.11.     Governing
Law.     The Plan and any
agreements hereunder shall be administered, interpreted and
enforced under the internal laws of the State of Delaware
without regard to conflicts of laws thereof.

*     *     *

     
I hereby certify that the foregoing Plan was duly
adopted by the Board of Directors of United Defense Industries,
Inc.
on                     ,
200          .

		
	 	
    

	 	
    Name:
    
	 	
    Title:
    

*     *     *

     
I hereby certify that the foregoing Plan was
approved by the stockholders of United Defense Industries, Inc.
on                     ,
200     .

     
Executed on
this      day
of                ,
200     .

		
	 	
    

	 	
    Name:
    
	 	
    Title:
    

B-19

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