1989 LONG-TERM INCENTIVE COMPENSATION PLAN

Executive Compensation Plan Agreement

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SMITH INTERNATIONAL INC

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Title: 1989 LONG-TERM INCENTIVE COMPENSATION PLAN
Governing Law: Texas Date: 5/2/2005
Industry: OILSRV Sector: ENERGY

Search Executive Compensation Plan Agreement by:

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Exhibit 10.1

SMITH INTERNATIONAL, INC.

1989 LONG-TERM INCENTIVE

COMPENSATION PLAN

(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2005)

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TABLE OF CONTENTS

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SECTION 1 GENERAL PROVISIONS RELATING TO PLAN GOVERNANCE,

COVERAGE AND BENEFITS.......................................... 1

1.1 Background and Purpose......................................... 1

1.2 Definitions.................................................... 1

(a) Authorized Officer....................................... 2

(b) Board.................................................... 2

(d) CEO...................................................... 2

(e) Change in Control........................................ 2

(f) Code..................................................... 2

(g) Committee................................................ 2

(h) Common Stock............................................. 3

(i) Company.................................................. 3

(j) Covered Employee......................................... 3

(k) Disability............................................... 3

(l) Employee................................................. 3

(m) Employment............................................... 3

(n) Exchange Act............................................. 3

(o) Fair Market Value........................................ 3

(p) Grantee.................................................. 4

(q) Immediate Family......................................... 4

(r) Incentive Award or Award................................. 4

(s) Incentive Agreement...................................... 4

(t) Independent SAR or SAR................................... 4

(u) Insider.................................................. 4

(v) Nonstatutory Stock Option................................ 4

(w) Option Price............................................. 5

(x) Other Stock-Based Award.................................. 5

(y) Outside Director......................................... 5

(z) Parent................................................... 5

(aa) Performance-Based Exception.............................. 5

(bb) Performance-Based Restricted Stock....................... 5

(cc) Performance Criteria..................................... 5

(dd) Performance Period....................................... 5

(ee) Plan..................................................... 5

(ff) Publicly Held Corporation................................ 5

(gg) Restricted Stock......................................... 5

(hh) Restricted Stock Award................................... 5

(ii) Restriction Period....................................... 6

(jj) Retirement............................................... 6

(kk) Share.................................................... 6

(ll) Share Pool............................................... 6

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(mm) Spread................................................... 6

(nn) Stock Appreciation Right or SAR.......................... 6

(oo) Stock Option or Option................................... 6

(pp) Subsidiary............................................... 6

(qq) Supplemental Payment..................................... 6

1.3 Plan Administration............................................ 6

(a) Authority of the Committee............................... 6

(b) Meetings................................................. 7

(d) Modification of Outstanding Incentive Awards............. 7

(e) Delegation of Authority.................................. 7

(f) Expenses of Committee.................................... 7

(g) Surrender of Previous Incentive Awards................... 8

(h) Indemnification.......................................... 8

1.4 Shares of Common Stock Available for Incentive Awards.......... 8

1.5 Share Pool Adjustments for Awards and Payouts.................. 9

1.6 Common Stock Available......................................... 10

1.7 Eligibility.................................................... 10

1.8 Types of Incentive Awards...................................... 10

SECTION 2 STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.................... 10

2.1 Grant of Stock Options......................................... 10

2.2 Stock Option Terms............................................. 11

(a) Written Agreement........................................ 11

(b) Number of Shares......................................... 11

(d) Term..................................................... 11

(e) Exercise................................................. 11

2.3 Stock Option Exercises......................................... 11

(a) Method of Exercise and Payment........................... 11

(b) Restrictions on Share Transferability.................... 12

2.4 Stock Appreciation Rights...................................... 13

(a) Grant.................................................... 13

(b) General Provisions....................................... 13

(d) Settlement............................................... 13

2.5 Supplemental Payment on Exercise of Nonstatutory Stock

Options or Stock Appreciation Rights........................... 14

SECTION 3 RESTRICTED STOCK............................................... 14

3.1 Award of Restricted Stock...................................... 14

(a) Grant.................................................... 14

(b) Immediate Transfer Without Immediate Delivery of

Restricted Stock......................................... 14

3.2 Restrictions................................................... 15

(a) Forfeiture of Restricted Stock........................... 15

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(b) Issuance of Certificates................................. 16

3.3 Delivery of Shares of Common Stock............................. 16

3.4 Supplemental Payment on Vesting of Restricted Stock............ 16

SECTION 4 OTHER STOCK-BASED AWARDS....................................... 17

4.1 Grant of Other Stock-Based Awards.............................. 17

4.2 Other Stock-Based Award Terms.................................. 17

(a) Written Agreement........................................ 17

(b) Purchase Price........................................... 17

(d) Payment.................................................. 17

SECTION 5 PERFORMANCE CRITERIA........................................... 18

SECTION 6 PROVISIONS RELATING TO PLAN PARTICIPATION...................... 19

6.1 Incentive Agreement............................................ 19

6.2 No Right to Employment......................................... 20

6.3 Securities Requirements........................................ 20

6.4 Transferability................................................ 21

6.5 Rights as a Stockholder........................................ 21

(a) No Stockholder Rights.................................... 21

(b) Representation of Ownership.............................. 22

6.6 Change in Stock and Adjustments................................ 22

(a) Changes in Law or Circumstances.......................... 22

(b) Exercise of Corporate Powers............................. 22

(d) Issue of Common Stock by the Company..................... 23

(e) Assumption under the Plan of Outstanding Stock Options... 23

(f) Assumption of Incentive Awards by a Successor............ 23

6.7 Termination of Employment, Death, Disability and Retirement.... 25

(a) Termination of Employment................................ 25

(b) Termination of Employment for Cause...................... 25

(d) Retirement............................................... 25

(e) Disability or Death...................................... 26

(f) Continuation............................................. 26

6.8 Change in Control.............................................. 26

6.9 Exchange of Incentive Awards................................... 29

6.10 Financing...................................................... 29

SECTION 7 GENERAL........................................................ 29

7.1 Effective Date and Grant Period................................ 29

7.2 Funding and Liability of Company............................... 29

7.3 Withholding Taxes.............................................. 30

(a) Tax Withholding.......................................... 30

(b) Share Withholding........................................ 30

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7.4 No Guarantee of Tax Consequences............................... 30

7.5 Designation of Beneficiary by Participant...................... 30

7.6 Deferrals...................................................... 31

7.7 Amendment and Termination...................................... 31

7.8 Requirements of Law............................................ 31

(a) Governmental Entities and Securities Exchanges........... 31

(b) Securities Act Rule 701.................................. 32

7.9 Rule 16b-3 Securities Law Compliance for Insiders.............. 32

7.10 Compliance with Code Section 162(m) for Publicly Held

Corporation.................................................... 32

7.11 Notices........................................................ 33

7.12 Pre-Clearance Agreement with Brokers........................... 33

7.13 Successors to Company.......................................... 33

7.14 Miscellaneous Provisions....................................... 33

7.15 Severability................................................... 34

7.16 Gender, Tense and Headings..................................... 34

7.17 Governing Law.................................................. 34

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SMITH INTERNATIONAL, INC.

1989 LONG-TERM INCENTIVE COMPENSATION PLAN

SECTION 1

GENERAL PROVISIONS RELATING TO

PLAN GOVERNANCE, COVERAGE AND BENEFITS

1.1 BACKGROUND AND PURPOSE

Smith International, Inc., (the "COMPANY"), previously established and

adopted the Smith International, Inc. 1989 Long-Term Incentive Compensation Plan

(the "PLAN"). The Plan has been amended from time to time but not previously

amended and restated.

The Company hereby amends and restates the Plan under the form of this plan

document, effective as of January 1, 2005 (the "EFFECTIVE DATE"), to incorporate

various amendments for the benefit of the Company and the participants in the

Plan.

Effective as of the Effective Date, outstanding stock options and any other

Incentive Awards granted under the Plan, prior to this amendment and

restatement, are assumed and continued hereunder. All outstanding Incentive

Awards that are assumed and continued under the Plan, as amended and restated,

shall remain subject to their individual Incentive Agreements for each such

outstanding Incentive Award.

The purpose of the Plan is to foster and promote the long-term financial

success of the Company and to increase stockholder value by: (a) encouraging the

commitment of selected key Employees, (b) motivating superior performance of key

Employees by means of long-term performance related incentives, (c) encouraging

and providing key Employees with a program for obtaining ownership interests in

the Company which link and align their personal interests to those of the

Company's stockholders, (d) attracting and retaining key Employees by providing

competitive compensation opportunities, and (e) enabling key Employees to share

in the long-term growth and success of the Company.

The Plan provides for payment of various forms of compensation. It is not

intended to be a plan that is subject to the Employee Retirement Income Security

Act of 1974, as amended (ERISA). The Plan will be interpreted, construed and

administered consistent with its status as a plan that is not subject to ERISA.

The Plan will remain in effect, subject to the right of the Board to amend

or terminate the Plan at any time pursuant to Section 7.7, until all Shares

subject to the Plan have been purchased or acquired according to its provisions.

1.2 DEFINITIONS

The following terms shall have the meanings set forth below:

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(a) AUTHORIZED OFFICER. The Chairman of the Board, the CEO or any

other senior officer of the Company to whom either of them delegate the

authority to execute any Incentive Agreement for and on behalf of the

Company. No officer or director shall be an Authorized Officer with respect

to any Incentive Agreement for himself.

(b) BOARD. The Board of Directors of the Company.

Employment, shall mean the termination of the Grantee's Employment by the

Company or any Subsidiary by reason of (i) the conviction of the Grantee by

a court of competent jurisdiction as to which no further appeal can be

taken of a crime involving moral turpitude or a felony; (ii) the proven

commission by the Grantee of a material act of fraud upon the Company or

any Subsidiary, or any customer or supplier thereof; (iii) the

misappropriation of any funds or property of the Company or any Subsidiary,

or any customer or supplier thereof; (iv) the willful and continued failure

by the Grantee to perform the material duties assigned to him that is not

cured to the reasonable satisfaction of the Company within 30 days after

written notice of such failure is provided to Grantee by the Board or CEO

(or by another officer of the Company or a Subsidiary who has been

designated by the Board or CEO for such purpose); (v) the knowing

engagement by the Grantee in any direct and material conflict of interest

with the Company or any Subsidiary without compliance with the Company's or

Subsidiary's conflict of interest policy, if any, then in effect; or (vi)

the knowing engagement by the Grantee, without the written approval of the

Board or CEO, in any material activity which competes with the business of

the Company or any Subsidiary or which would result in a material injury to

the business, reputation or goodwill of the Company or any Subsidiary.

(d) CEO. The Chief Executive Officer of the Company.

(e) CHANGE IN CONTROL. Any of the events described in and subject to

Section 6.8.

(f) CODE. The Internal Revenue Code of 1986, as amended, and the

regulations and other authority promulgated thereunder by the appropriate

governmental authority. References herein to any provision of the Code

shall refer to any successor provision thereto.

(g) COMMITTEE. A committee appointed by the Board to administer the

Plan. While the Company is a Publicly Held Corporation, the Plan shall be

administered by a Committee appointed by the Board consisting of not less

than two directors who fulfill the "nonemployee director" requirements of

Rule 16b-3 under the Exchange Act and the "outside director" requirements

of Code Section 162(m). In either case, the Committee may be the

Compensation and Benefits Committee of the Board, or any subcommittee of

the Compensation and Benefits Committee, provided that the members of the

Committee satisfy the requirements of the previous provisions of this

paragraph.

The Board shall have the power to fill vacancies on the Committee

arising by resignation, death, removal or otherwise. The Board, in its sole

discretion, may bifurcate

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the powers and duties of the Committee among one or more separate

committees, or retain all powers and duties of the Committee in a single

Committee. The members of the Committee shall serve at the discretion of

the Board.

(h) COMMON STOCK. The common stock of the Company, $1.00 par value per

share, and any class of common stock into which such common shares may

hereafter be converted, reclassified or recapitalized.

(i) COMPANY. Smith International, Inc. and any successor in interest

thereto.

(j) COVERED EMPLOYEE. A named executive officer who is one of the

group of covered employees, as defined in Code Section 162(m) and Treasury

Regulation Section 1.162-27(c) (or its successor), during any period that

the Company is a Publicly Held Corporation.

(k) DISABILITY. As determined by the Committee in its discretion

exercised in good faith, a physical or mental condition of the Grantee that

would entitle him to payment of disability income payments under the

Company's long term disability insurance policy or plan for employees, as

then effective, if any; or in the event that the Grantee is not covered,

for whatever reason, under the Company's long-term disability insurance

policy or plan, "Disability" means a permanent and total disability as

defined in Code Section 22(e)(3). A determination of Disability may be made

by a physician selected or approved by the Committee and, in this respect,

the Grantee shall submit to any reasonable examination(s) required by such

physician upon request.

(l) EMPLOYEE. Any full-time, salaried employee of the Company (or any

Parent or Subsidiary) within the meaning of Code Section 3401(c) who, in

the opinion of the Committee, is in a position to contribute to the growth,

development or financial success of the Company (or any Parent or

Subsidiary), including, without limitation, officers who are members of the

Board.

(m) EMPLOYMENT. Employment means that the individual is employed as an

Employee by the Company or any Parent or Subsidiary. In this regard,

neither the transfer of a Grantee from Employment by the Company to

Employment by any Parent or Subsidiary, nor the transfer of a Grantee from

Employment by any Parent or Subsidiary to Employment by the Company, shall

be deemed to be a termination of Employment of the Grantee. Moreover, the

Employment of a Grantee shall not be deemed to have been terminated because

of an approved leave of absence from active Employment on account of

temporary illness, authorized vacation or granted for reasons of

professional advancement, education, or health, or during any period

required to be treated as a leave of absence by virtue of any applicable

statute, Company personnel policy or written agreement. All determinations

regarding Employment, and the termination of Employment hereunder, shall be

made by the Committee.

(n) EXCHANGE ACT. The Securities Exchange Act of 1934, as amended.

(o) FAIR MARKET VALUE. While the Company is a Publicly Held

Corporation, the Fair Market Value of one Share of Common Stock on the date

in question is deemed

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to be (i) the average of the high and low prices of a Share on the date as

of which Fair Market Value is to be determined, or if no such sales were

made on such date, the closing sales price on the immediately preceding

business day of a Share as reported on the New York Stock Exchange or other

principal securities exchange on which Shares are then listed or admitted

to trading, or (ii) the closing sales price for a Share on the date of

grant as quoted on the National Association of Securities Dealers Automated

Quotation System ("NASDAQ"), or (iii) if not quoted on NASDAQ, the average

of the closing bid and asked prices for a Share as quoted by the National

Quotation Bureau's "Pink Sheets" or the National Association of Securities

Dealers' OTC Bulletin Board System. If there was no public trade of Common

Stock on the date in question, Fair Market Value shall be determined by

reference to the last preceding date on which such a trade was so reported.

If the Company is not a Publicly Held Corporation at the time a

determination of the Fair Market Value of the Common Stock is required to

be made hereunder, the determination of Fair Market Value for purposes of

the Plan shall be made by the Committee in its sole and absolute

discretion. In this respect, the Committee may rely on such financial data,

appraisals, valuations, experts, and other sources as, in its sole and

absolute discretion, it deems advisable under the circumstances.

(p) GRANTEE. Any Employee who is granted an Incentive Award under the

Plan.

(q) IMMEDIATE FAMILY. With respect to a Grantee, the Grantee's child,

stepchild, grandchild, parent, stepparent, grandparent, spouse, former

spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,

brother-in-law, or sister-in-law, including adoptive relationships.

(r) INCENTIVE AWARD OR AWARD. A grant of an award under the Plan to a

Grantee, including any Nonstatutory Stock Option, Stock Appreciation Right

(SAR), Restricted Stock Award, Performance-Based Restricted Stock Award, or

Other Stock-Based Award, as well as any Supplemental Payment with respect

thereto.

(s) INCENTIVE AGREEMENT. The written agreement entered into between

the Company and the Grantee setting forth the terms and conditions pursuant

to which an Incentive Award is granted under the Plan, as such agreement is

further defined in Section 6.1(a).

(t) INDEPENDENT SAR OR SAR. A Stock Appreciation Right described in

Section 2.4.

(u) INSIDER. If the Company is a Publicly Held Corporation, an

individual who is, on the relevant date, an officer, director or ten

percent (10%) beneficial owner of any class of the Company's equity

securities that is registered pursuant to Section 12 of the Exchange Act,

all as defined under Section 16 of the Exchange Act.

(v) NONSTATUTORY STOCK OPTION. A Stock Option granted by the Committee

to a Grantee under Section 2.

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(w) OPTION PRICE. The exercise price at which a Share may be purchased

by the Grantee of a Stock Option.

(x) OTHER STOCK-BASED AWARD. An award granted by the Committee to a

Grantee under Section 4.1 that is valued in whole or in part by reference

to, or is otherwise based upon, Common Stock.

(y) OUTSIDE DIRECTOR. A member of the Board who is not at the time of

grant of an Incentive Award, an employee of the Company or any Parent or

Subsidiary.

(z) PARENT. Any corporation (whether now or hereafter existing) which

constitutes a "parent" of the Company, as defined in Code Section 424(e).

(aa) PERFORMANCE-BASED EXCEPTION. The performance-based exception from

the tax deductibility limitations of Code Section 162(m), as prescribed in

Code Section 162(m)(4)(C) and Treasury Regulation Section 1.162-27(e) (or

its successor), which is applicable during such period that the Company is

a Publicly Held Corporation.

(bb) PERFORMANCE-BASED RESTRICTED STOCK. Shares of Restricted Stock

awarded to a Grantee pursuant to Section 3, the grant of which is

contingent upon the attainment of specified Performance Criteria, and/or

the vesting of which are subject to a risk of forfeiture if the specified

Performance Criteria are not met within the Performance Period.

(cc) PERFORMANCE CRITERIA. The business criteria that are specified by

the Committee pursuant to Section 5 for an Incentive Award that is intended

to qualify for the Performance-Based Exception; the satisfaction of such

business criteria during the Performance Period being required for the

grant or vesting of the particular Incentive Award to occur, as specified

in the Incentive Agreement.

(dd) PERFORMANCE PERIOD. A period of time determined by the Committee

over which performance is measured for the purpose of determining a

Grantee's right to and the payment value of any Performance-Based

Restricted Stock Award or Other Stock-Based Award that is intended to

qualify for the Performance-Based Exception.

(ee) PLAN. Smith International, Inc. 1989 Long-Term Incentive

Compensation Plan, as set forth herein and as it may be amended from time

to time.

(ff) PUBLICLY HELD CORPORATION. A corporation issuing any class of

common equity securities required to be registered under Section 12 of the

Exchange Act.

(gg) RESTRICTED STOCK. Shares of Common Stock issued or transferred to

a Grantee pursuant to Section 3.

(hh) RESTRICTED STOCK AWARD. An authorization by the Committee to

issue or transfer Restricted Stock to a Grantee pursuant to Section 3.

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(ii) RESTRICTION PERIOD. The period of time determined by the

Committee and set forth in the Incentive Agreement during which the

transfer of Restricted Stock by the Grantee is restricted.

(jj) RETIREMENT. The voluntary termination of Employment from the

Company and any Parent or Subsidiary constituting retirement for age (i) on

any date after the Employee attains the normal retirement age of 65 years,

(ii) an earlier retirement date for age as expressly agreed to by the

Committee prior to termination of Employment, or (iii) or such other age as

may be designated by the Committee in the Employee's individual Incentive

Agreement.

(kk) SHARE. A share of the Common Stock of the Company.

(ll) SHARE POOL. The number of shares authorized for issuance under

Section 1.4, as adjusted for awards and payouts under Section 1.5 and as

adjusted for changes in corporate capitalization under Section 6.6.

(mm) SPREAD. The difference between the exercise price per Share

specified in a SAR grant and the Fair Market Value of a Share on the date

of exercise of the SAR.

(nn) STOCK APPRECIATION RIGHT OR SAR. A Stock Appreciation Right as

described in Section 2.4.

(oo) STOCK OPTION OR OPTION. Pursuant to Section 2, a Nonstatutory

Stock Option which provides the Grantee with the right to purchase Shares

of Common Stock upon specified terms. The Plan does not provide for grants

of "incentive stock options" as described in Code Section 422.

(pp) SUBSIDIARY. Any corporation (whether now or hereafter existing)

which constitutes a "subsidiary" of the Company, as defined in Code Section

424(f) of the Code, and any limited liability company, partnership, or

other entity in which the Company controls fifty percent (50%) or more of

the voting power or equity interests.

(qq) SUPPLEMENTAL PAYMENT. Any amount, as described in Sections 2.5,

3.4 and/or 4.2(c), that is dedicated to payment of income taxes which are

payable by the Grantee resulting from an Incentive Award.

1.3 PLAN ADMINISTRATION

(a) AUTHORITY OF THE COMMITTEE. Except as may be limited by law and

subject to the provisions herein, the Committee shall have full power to

(i) select Grantees who shall participate in the Plan; (ii) determine the

sizes, duration and types of Incentive Awards; (iii) determine the terms

and conditions of Incentive Awards and Incentive Agreements; (iv) determine

whether any Shares subject to Incentive Awards will be subject to any

restrictions on transfer; (v) construe and interpret the Plan and any

Incentive Agreement or other agreement entered into under the Plan; and

(vi) establish, amend, or waive rules for the Plan's administration.

Further, the Committee shall make

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all other determinations which may be necessary or advisable for the

administration of the Plan.

(b) MEETINGS. The Committee shall designate a chairman from among its

members who shall preside at its meetings, and shall designate a secretary,

without regard to whether that person is a member of the Committee, who

shall keep the minutes of the proceedings and all records, documents, and

data pertaining to its administration of the Plan. Meetings shall be held

at such times and places as shall be determined by the Committee and the

Committee may hold telephonic meetings. The Committee may take any action

otherwise proper under the Plan by the affirmative vote, taken with or

without a meeting, of a majority of its members. The Committee may

authorize any one or more of its members or any officer of the Company to

execute and deliver documents on behalf of the Committee.

Committee shall be made in its discretion pursuant to the terms and

provisions of the Plan, and shall be final, conclusive and binding on all

persons including the Company, its shareholders, Employees, Grantees, and

their estates and beneficiaries. The Committee's decisions with respect to

any Incentive Award need not be uniform and may be made selectively among

Incentive Awards and Grantees, whether or not such Incentive Awards are

similar or such Grantees are similarly situated.

(d) MODIFICATION OF OUTSTANDING INCENTIVE AWARDS. Subject to the

stockholder approval requirements of Section 7.7 if applicable, the

Committee may, in its discretion, provide for the extension of the

exercisability of an Incentive Award, accelerate the vesting or

exercisability of an Incentive Award (except for an Incentive Award in the

form of a SAR which is subject to Code Section 409A), eliminate or make

less restrictive any restrictions contained in an Incentive Award, waive

any restriction or other provisions of an Incentive Award, or otherwise

amend or modify an Incentive Award in any manner that is either (i) not

adverse to the Grantee to whom such Incentive Award was granted or (ii)

consented to by such Grantee. Notwithstanding the above provisions of this

subsection, no amendment or modification of an Incentive Award shall be

made to the extent such modification results in any Stock Option with an

exercise price less than 100% of the Fair Market Value per Share on the

date of grant.

(e) DELEGATION OF AUTHORITY. The Committee may delegate to designated

officers or other employees of the Company any of its duties and authority

under the Plan pursuant to such conditions or limitations as the Committee

may establish from time to time; provided, however, the Committee may not

delegate to any person the authority (i) to grant Incentive Awards or (ii)

if the Company is a Publicly Held Corporation, to take any action which

would contravene the requirements of Rule 16b-3 under the Exchange Act, the

Performance-Based Exception under Code Section 162(m), or the

Sarbanes-Oxley Act of 2002.

(f) EXPENSES OF COMMITTEE. The Committee may employ legal counsel,

including, without limitation, independent legal counsel and counsel

regularly employed by the Company, and other agents as the Committee may

deem appropriate for the

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administration of the Plan. The Committee may rely upon any opinion or

computation received from any such counsel or agent. All expenses incurred

by the Committee in interpreting and administering the Plan, including,

without limitation, meeting expenses and professional fees, shall be paid

by the Company.

(g) SURRENDER OF PREVIOUS INCENTIVE AWARDS. The Committee may, in its

absolute discretion, grant Incentive Awards to Grantees on the condition

that such Grantees surrender to the Committee for cancellation such other

Incentive Awards (including, without limitation, Incentive Awards with

higher exercise prices) as the Committee directs. Incentive Awards granted

on the condition precedent of surrender of outstanding Incentive Awards

shall not count against the limits set forth in Section 1.4 until such time

as such previous Incentive Awards are surrendered and cancelled.

(h) INDEMNIFICATION. Each person who is or was a member of the

Committee shall be indemnified by the Company against and from any damage,

loss, liability, cost and expense that may be imposed upon or reasonably

incurred by him in connection with or resulting from any claim, action,

suit, or proceeding to which he may be a party or in which he may be

involved by reason of any action taken or failure to act under the Plan,

except for any such act or omission constituting willful misconduct or

gross negligence. Each such person shall be indemnified by the Company for

all amounts paid by him in settlement thereof, with the Company's approval,

or paid by him in satisfaction of any judgment in any such action, suit, or

proceeding against him, provided he shall give the Company an opportunity,

at its own expense, to handle and defend the same before he undertakes to

handle and defend it on his own behalf. The foregoing right of

indemnification shall not be exclusive of any other rights of

indemnification to which such persons may be entitled under the Company's

Articles or Certificate of Incorporation or Bylaws, as a matter of law, or

otherwise, or any power that the Company may have to indemnify them or hold

them harmless.

1.4 SHARES OF COMMON STOCK AVAILABLE FOR INCENTIVE AWARDS

Subject to adjustment under Section 6.6, there shall be available for

Incentive Awards that are granted wholly or partly in Common Stock (including

rights or Stock Options that may be exercised for or settled in Common Stock)

Fourteen Million Four Hundred Thousand (14,400,000) Shares of Common Stock. The

number of Shares of Common Stock that are the subject of Incentive Awards under

this Plan, which are forfeited or terminated, expire unexercised, are settled in

cash in lieu of Common Stock or in a manner such that all or some of the Shares

covered by an Incentive Award are not issued to a Grantee or are exchanged for

Incentive Awards that do not involve Common Stock, shall again immediately

become available for Incentive Awards hereunder. The Committee may from time to

time adopt and observe such procedures concerning the counting of Shares against

the Plan maximum as it may deem appropriate.

During any period that the Company is a Publicly Held Corporation, then

unless and until the Committee determines that a particular Incentive Award

granted to a Covered Employee is not intended to comply with the

Performance-Based Exception, the following rules shall apply to grants of

Incentive Awards to Covered Employees:

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(a) Subject to adjustment as provided in Section 6.6, the maximum

aggregate number of Shares of Common Stock (including Stock Options, SARs,

Restricted Stock, Performance-Based Restricted Stock, and Other Stock-Based

Awards that are paid out in Shares) that may be granted (in the case of

Stock Options and SARs) or that may vest (in the case of Restricted Stock,

Performance-Based Restricted Stock or other Stock-Based Awards), as

applicable, in any calendar year pursuant to any Incentive Award held by

any individual Covered Employee shall be One Million (1,000,000) Shares.

(b) The maximum aggregate cash payout (including SARs or Other

Stock-Based Awards that are paid out in cash) with respect to Incentive

Awards granted in any calendar year which may be made to any Covered

Employee shall be Ten Million dollars ($10,000,000).

Employee that is canceled or repriced, the number of Shares subject to such

Stock Option or SAR shall continue to count against the maximum number of

Shares that may be the subject of Stock Options or SARs granted to such

Covered Employee hereunder and, in this regard, such maximum number shall

be determined in accordance with Code Section 162(m).

(d) The limitations of subsections (a), (b) and (c) above shall be

construed and administered so as to comply with the Performance-Based

Exception.

1.5 SHARE POOL ADJUSTMENTS FOR AWARDS AND PAYOUTS.

The following Incentive Awards and payouts shall reduce, on a one Share for

one Share basis, the number of Shares authorized for issuance under the Share

Pool:

(a) Stock Option;

(b) SAR;

(d) Performance-Based Restricted Stock; and

(e) A payout of an Other Stock-Based Award in Shares.

The following transactions shall restore, on a one Share for one Share

basis, the number of Shares authorized for issuance under the Share Pool:

(a) A Payout of a SAR, Restricted Stock Award, Performance-Based

Restricted Stock Award, or Other Stock-Based Award in the form of cash (but

not the "cashless" exercise of a Stock Option as provided in Section

2.3(a));

(b) A cancellation, termination, expiration, forfeiture, or lapse for

any reason of any Shares subject to an Incentive Award; and

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would be acquired on exercise (i.e., the Share Pool shall be increased by

the number of Shares withheld in payment of the Option Price).

1.6 COMMON STOCK AVAILABLE.

The Common Stock available for issuance or transfer under the Plan shall be

made available from Shares now or hereafter (a) held in the treasury of the

Company, (b) authorized but unissued shares, or (c) shares to be purchased or

acquired by the Company. No fractional shares shall be issued under the Plan;

payment for fractional shares shall be made in cash.

1.7 ELIGIBILITY.

Full-time salaried Employees who have been determined by the Committee to

be key Employees shall be eligible to receive Incentive Awards under the Plan.

The Committee shall from time to time designate those Employees to be granted

Incentive Awards under the Plan, the type of Incentive Awards granted, the

number of Shares, Stock Options, rights or units, as the case may be, which

shall be granted to each such person, and any other terms or conditions relating

to the Incentive Awards as it may deem appropriate to the extent consistent with

the provisions of the Plan. A Grantee who has been granted an Incentive Award

may, if otherwise eligible, be granted additional Incentive Awards at any time.

No Insider shall be eligible to be granted an Incentive Award that is

subject to Rule 16a-3 under the Exchange Act unless and until such Insider has

granted a limited power of attorney to those officers of the Company who have

been designated by the Committee for purposes of future required filings under

the Exchange Act.

1.8 TYPES OF INCENTIVE AWARDS

The types of Incentive Awards under the Plan are Stock Options, Stock

Appreciation Rights and Supplemental Payments as described in Section 2,

Restricted Stock, Performance-Based Restricted Stock and Supplemental Payments

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