Exhibit 10.1
K-TRON INTERNATIONAL, INC.
2006 EQUITY COMPENSATION PLAN

 

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K-TRON INTERNATIONAL, INC.
2006 EQUITY COMPENSATION PLAN
     The purpose of the K-Tron International, Inc. 2006 Equity Compensation Plan
(the “Plan”) is to provide (i) employees of K-Tron International, Inc. (the
“Company”) and its subsidiaries and (ii) non-employee members of the Board of
Directors of the Company with the opportunity to receive grants of incentive
stock options, nonqualified stock options, stock appreciation rights, stock
awards, stock units and other stock-based awards. The Company believes that the
Plan will encourage the participants to contribute materially to the growth of
the Company, thereby benefitting the Company’s shareholders, and will align the
economic interests of the participants with those of the shareholders.
     Section 1. Definitions
     The following terms shall have the meanings set forth below for purposes of
the Plan:
          (a) “Board” shall mean the Board of Directors of the Company.
          (b) “Cause” shall mean, except to the extent specified otherwise by
the Committee, a finding by the Committee that the Grantee (i) has breached his
or her employment or service contract with the Employer, (ii) has engaged in
disloyalty to the Employer, including, without limitation, fraud, embezzlement,
theft, commission of a felony or proven dishonesty, (iii) has disclosed trade
secrets or confidential information of the Employer to persons not entitled to
receive such information, (iv) has breached any written non-competition,
non-solicitation or confidentiality agreement between the Grantee and the
Employer or (v) has engaged in such other behavior detrimental to the interests
of the Employer as the Committee determines.
          (c) “Change of Control” shall be deemed to have occurred upon:
               (i) A liquidation or dissolution of the Company or a sale
(excluding transfers to subsidiaries) of all or substantially all of the
Company’s assets;
               (ii) As a result of a tender offer, stock purchase, other stock
acquisition, merger, consolidation, recapitalization, reverse split or sale or
transfer of assets, any person or group (as such terms are used in and under
Section 13(d) of the Exchange Act) becomes the beneficial owner (as defined in
Rule 13-d under the Exchange Act), directly or indirectly, of securities of the
Company representing 15% or more of the outstanding common stock of the Company
or the combined voting power of the Company’s then outstanding securities; or
               (iii) During any period of two consecutive years, individuals
who, at the beginning of such period, constitute the Board cease for any reason
to constitute at least a majority thereof, unless the election, or the
nomination for election by the Company’s

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shareholders, of at least two-thirds of the directors who were not directors at
the beginning of such period was approved by a vote of at least two-thirds of
the directors then still in office who were either directors at the beginning of
the period or who, in connection with their election or nomination, received the
foregoing two-thirds approval.
          (d) “Code” shall mean the Internal Revenue Code of 1986, as amended.
          (e) “Committee” shall mean the committee, consisting of members of the
Board, designated by the Board to administer the Plan.
          (f) “Company” shall mean K-Tron International, Inc. and shall include
its successors.
          (g) “Company Stock” shall mean common stock of the Company.
          (h) “Disability” or “Disabled” shall mean a Grantee’s becoming
disabled within the meaning of section 22(e)(3) of the Code, within the meaning
of the Employer’s long-term disability plan applicable to the Grantee or as
otherwise determined by the Committee.
          (i) “Dividend Equivalent” shall mean an amount determined by
multiplying the number of shares of Company Stock subject to a Grant by the
per-share cash dividend paid by the Company on its outstanding Company Stock, or
the per-share fair market value (as determined by the Committee) of any dividend
paid on its outstanding Company Stock in consideration other than cash.
          (j) “Employee” shall mean an employee of the Company or a subsidiary
of the Company.
          (k) “Employed by, or providing service to, the Employer” shall mean
employment or service as an Employee or member of the Board (so that, for
purposes of exercising Options and SARs and satisfying conditions with respect
to Stock Awards and Performance Units, a Grantee who has served as both an
Employee and a director shall not be considered to have terminated employment or
service until the Grantee ceases to be both an Employee and member of the
Board).
          (l) “Employer” shall mean the Company and each of its subsidiaries.
          (m) “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.
          (n) “Exercise Price” shall mean the purchase price of Company Stock
subject to an Option.

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          (o) “Fair Market Value” shall mean:
               (i) If the Company Stock is publicly traded, then the Fair Market
Value per share shall be determined as follows: (x) if the principal trading
market for the Company Stock is a national securities exchange or Nasdaq, the
last reported sale price thereof on the relevant date or (if there were no
trades on that date) the latest preceding date upon which a sale was reported,
or (y) if the Company Stock is not principally traded on any such exchange or on
Nasdaq, the mean between the last reported “bid” and “asked” prices on a share
of Company Stock on the relevant date, as reported by the OTC Bulletin Board or,
if shares are not reported on the OTC Bulletin Board, on pinksheets.com.
               (ii) If the Company Stock is not publicly traded or, if publicly
traded, is not subject to reported transactions or “bid” or “asked” quotations
as set forth above, the Fair Market Value per share shall be as determined by
the Committee.
          (p) “Grant” shall mean a grant of Options, SARs, Stock Awards, Stock
Units or Other Stock-Based Awards under the Plan.
          (q) “Grant Instrument” shall mean the agreement that sets forth the
terms of a Grant, including any amendments.
          (r) “Grantee” shall mean an Employee or Non-Employee Director who
receives a Grant under the Plan.
          (s) “Incentive Stock Option” shall mean an option to purchase Company
Stock that is intended to meet the requirements of section 422 of the Code.
          (t) “Non-Employee Director” shall mean a member of the Board who is
not an Employee.
          (u) “Nonqualified Stock Option” shall mean an option to purchase
Company Stock that is not intended to meet the requirements of section 422 of
the Code.
          (v) “Option” shall mean an Incentive Stock Option or Nonqualified
Stock Option granted under the Plan.
          (w) “Other Stock-Based Award” shall mean any Grant based on, measured
by or payable in Company Stock, as described in Section 10.
          (x) “SAR” shall mean a stock appreciation right with respect to a
share of Company Stock.
          (y) “Stock Award” shall mean an award of Company Stock, with or
without restrictions.

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          (z) “Stock Unit” shall mean a unit that represents a hypothetical
share of Company Stock.
     Section 2. Administration
          (a) Committee. The Plan shall be administered and interpreted by the
Board or by a Committee appointed by the Board. The Committee, if applicable,
should consist of two or more persons who are “outside directors” as defined
under section 162(m) of the Code, and related Treasury regulations, and
“non-employee directors” as defined under Rule 16b-3 under the Exchange Act. The
Board shall approve and administer all grants made to Non-Employee Directors.
The Committee may delegate authority to one or more subcommittees, as it deems
appropriate. To the extent that the Board or a subcommittee administers the
Plan, references in the Plan to the “Committee” shall be deemed to refer to the
Board or such subcommittee. In the absence of a specific designation by the
Board to the contrary, the Plan shall be administered by the Compensation and
Human Resources Committee of the Board or any successor Board committee
performing substantially the same functions.
          (b) Committee Authority. The Committee shall have the sole authority
to (i) determine the individuals to whom grants shall be made under the Plan,
(ii) determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, (iv) amend
the terms of any previously issued grant, subject to the provisions of
Section 18 below, and (v) deal with any other matters arising under the Plan.
          (c) Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee’s interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.
     Section 3. Grants
     Awards under the Plan may consist of grants of Options as described in
Section 6, Stock Awards as described in Section 7, Stock Units as described in
Section 8, SARs as described in Section 9 and Other Stock-Based Awards as
described in Section 10. All Grants shall be subject to the terms and conditions
set forth herein and to such other terms and conditions consistent with this
Plan as the Committee deems appropriate and as are specified in writing by the
Committee to the individual in the Grant Instrument. All Grants shall be made
conditional upon the Grantee’s acknowledgement, in writing or by acceptance of
the Grant, that all decisions and

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determinations of the Committee shall be final and binding on the Grantee, his
or her beneficiaries and any other person having or claiming an interest under
such Grant. Grants under a particular Section of the Plan need not be uniform as
among the Grantees.
     Section 4. Shares Subject to the Plan
          (a) Shares Authorized. Subject to adjustment as described below, the
aggregate number of shares of Company Stock that may be issued or transferred
under the Plan is 200,000 shares. Shares issued or transferred under the Plan
may be authorized but unissued shares of Company Stock or reacquired shares of
Company Stock, including shares purchased by the Company on the open market for
purposes of the Plan. If and to the extent Options or SARs granted under the
Plan terminate, expire or are canceled, forfeited, exchanged or surrendered
without having been exercised or if any Stock Awards, Stock Units or Other
Stock-Based Awards are forfeited or terminated, the shares subject to such
Grants shall again be available for purposes of the Plan.
          (b) Individual Limits. All Grants under the Plan shall be expressed in
shares of Stock. The maximum aggregate number of shares of Company Stock that
shall be subject to Grants made under the Plan to any individual during any
calendar year shall be 50,000 shares, subject to adjustment as described below.
          (c) Adjustments. If there is any change in the number or kind of
shares of Company Stock outstanding by reason of (i) a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) a
merger, reorganization or consolidation, (iii) a reclassification or change in
par value, or (iv) any other extraordinary or unusual event affecting the
outstanding Company Stock as a class without the Company’s receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company’s payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Grants, the maximum number of shares of Company Stock that
any individual participating in the Plan may be granted in any year, the number
of shares covered by outstanding Grants, the kind of shares issued or
transferred under the Plan, and the price per share or the applicable market
value of such Grants may be appropriately adjusted by the Committee to reflect
any increase or decrease in the number of, or change in the kind or value of,
issued shares of Company Stock to preclude, to the extent practicable, the
enlargement or dilution of rights and benefits under such Grants; provided,
however, that any fractional shares resulting from such adjustment shall be
eliminated. Any adjustments determined by the Committee shall be final, binding
and conclusive.
     Section 5. Eligibility for Participation
          (a) Eligible Persons. All Employees (including, for all purposes of
the Plan, an Employee who is a member of the Board) and Non-Employee Directors
shall be eligible to participate in the Plan.

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          (b) Selection of Grantees. The Committee shall select the Employees
and Non-Employee Directors to receive Grants and shall determine the number of
shares of Company Stock subject to a particular Grant in such manner as the
Committee determines.
     Section 6. Options
     The Committee may grant Options to an Employee or Non-Employee Director
upon such terms as the Committee deems appropriate. The following provisions are
applicable to Options:
          (a) Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each Grant of Options to
Employees and Non-Employee Directors.
          (b) Type of Option and Price.
               (i) The Committee may grant Incentive Stock Options or
Nonqualified Stock Options or any combination of the two, all in accordance with
the terms and conditions set forth herein. Incentive Stock Options may be
granted only to employees of the Company or its parent or subsidiary
corporations, as defined in section 424 of the Code. Nonqualified Stock Options
may be granted to Employees and Non-Employee Directors.
               (ii) The Exercise Price of Company Stock subject to an Option
shall be determined by the Committee and may be equal to or greater than the
Fair Market Value of a share of Company Stock on the date the Option is granted;
provided, however, that an Incentive Stock Option may not be granted to an
Employee who, at the time of grant, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, or any
parent or subsidiary corporation of the Company, as defined in section 424 of
the Code, unless the Exercise Price per share is not less than 110% of the Fair
Market Value of a share of Company Stock on the date of grant.
          (c) Option Term. The Committee shall determine the term of each
Option. The term of any Option shall not exceed ten years from the date of
grant. However, an Incentive Stock Option that is granted to an Employee who, at
the time of grant, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company, or any parent or subsidiary
corporation of the Company, as defined in section 424 of the Code, may not have
a term that exceeds five years from the date of grant.
          (d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument. The Committee
may accelerate the exercisability of any or all outstanding Options at any time
for any reason.

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          (e) Termination of Employment, Disability or Death.
               (i) Except as provided below, an Option may only be exercised
while the Grantee is employed by, or providing service to, the Employer as an
Employee or member of the Board.
               (ii) In the event that a Grantee ceases to be employed by, or
provide service to, the Employer for any reason other than Disability, death or
termination for Cause, any Option which is otherwise exercisable by the Grantee
shall terminate unless exercised within 90 days after the date on which the
Grantee ceases to be employed by, or provide service to, the Employer (or within
such other period of time as may be specified by the Committee), but in any
event no later than the date of expiration of the Option term. Except as
otherwise provided by the Committee, any of the Grantee’s Options that are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by, or provide service to, the Employer shall terminate as of such date.
               (iii) In the event the Grantee ceases to be employed by, or
provide service to, the Company on account of a termination for Cause by the
Employer, any Option held by the Grantee shall terminate as of the date the
Grantee ceases to be employed by, or provide service to, the Employer. In
addition, notwithstanding any other provisions of this Section 6, if the
Committee determines that the Grantee has engaged in conduct that constitutes
Cause at any time while the Grantee is employed by, or providing service to, the
Employer or after the Grantee’s termination of employment or service, any Option
held by the Grantee shall immediately terminate and the Grantee shall
automatically forfeit all shares underlying any exercised portion of an Option
for which the Company has not yet delivered the share certificates, upon refund
by the Company of the Exercise Price paid by the Grantee for such shares. Upon
any exercise of an Option, the Company may withhold delivery of share
certificates pending resolution of an inquiry that could lead to a finding
resulting in a forfeiture.
               (iv) In the event the Grantee ceases to be employed by, or
provide service to, the Employer because the Grantee is Disabled, any Option
which is otherwise exercisable by the Grantee shall terminate unless exercised
within one year after the date on which the Grantee ceases to be employed by, or
provide service to, the Employer (or within such other period of time as may be
specified by the Committee), but in any event no later than the date of
expiration of the Option term. Except as otherwise provided by the Committee,
any of the Grantee’s Options which are not otherwise exercisable as of the date
on which the Grantee ceases to be employed by, or provide service to, the
Employer shall terminate as of such date.
               (v) If the Grantee dies while employed by, or providing service
to, the Employer or within 90 days after the date on which the Grantee ceases to
be employed or provide service on account of a termination specified in
Section 6(e)(ii) above (or within such other period of time as may be specified
by the Committee), any Option that is otherwise exercisable by the Grantee shall
terminate unless exercised within one year after the date on which the Grantee
ceases to be employed by, or provide service to, the Employer (or within such

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other period of time as may be specified by the Committee), but in any event no
later than the date of expiration of the Option term. Except as otherwise
provided by the Committee, any of the Grantee’s Options that are not otherwise
exercisable as of the date on which the Grantee ceases to be employed by, or
provide service to, the Employer shall terminate as of such date.
          (f) Exercise of Options. A Grantee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company. The Grantee shall pay the Exercise Price for an Option as specified
by the Committee (w) in cash, (x) unless the Committee determines otherwise, by
delivering shares of Company Stock owned by the Grantee and having a Fair Market
Value on the date of exercise at least equal to the Exercise Price or by
attestation (on a form prescribed by the Committee) to ownership of shares of
Company Stock having a Fair Market Value on the date of exercise at least equal
to the Exercise Price, (y) by payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board, or (z) by
such other method as the Committee may approve. Shares of Company Stock used to
exercise an Option shall have been held by the Grantee for the requisite period
of time necessary to avoid adverse accounting consequences to the Company with
respect to the Option. Payment for the shares to be issued or transferred
pursuant to the Option, and any required withholding taxes, must be received by
the Company by the time specified by the Committee depending on the type of
payment being made, but in all cases prior to the issuance or transfer of such
shares.
          (g) Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that, if the aggregate Fair Market Value of the Company Stock on
the date of the grant with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year, under the
Plan or any other stock option plan of the Company or a parent or subsidiary,
exceeds $100,000, then the Option, as to the excess, shall be treated as a
Nonqualified Stock Option. An Incentive Stock Option shall not be granted to any
person who is not an Employee of the Company or a parent or subsidiary
corporation (within the meaning of section 424(f) of the Code) of the Company.
     Section 7. Stock Awards
     The Committee may issue or transfer shares of Company Stock to an Employee
or Non-Employee Director under a Stock Award, upon such terms as the Committee
deems appropriate. The following provisions are applicable to Stock Awards:
          (a) General Requirements. Shares of Company Stock issued or
transferred pursuant to Stock Awards may be issued or transferred for
consideration or for no consideration, and subject to restrictions or no
restrictions, as determined by the Committee. The Committee may, but shall not
be required to, establish conditions under which restrictions on Stock Awards
shall lapse over a period of time or according to such other criteria as the
Committee deems appropriate, including, without limitation, restrictions based
upon the achievement of specific performance goals. The period of time during
which the Stock Awards will remain subject to restrictions will be designated in
the Grant Instrument as the “Restriction Period.”

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          (b) Number of Shares. The Committee shall determine the number of
shares of Company Stock to be issued or transferred pursuant to a Stock Award
and the restrictions applicable to such shares.
          (c) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Employer during a period designated in
the Grant Instrument as the Restriction Period, or if other specified conditions
are not met, the Stock Award shall terminate as to all shares covered by the
Grant as to which the restrictions have not lapsed, and those shares of Company
Stock must be immediately returned to the Company. The Committee may, however,
provide for complete or partial exceptions to this requirement as it deems
appropriate.
          (d) Restrictions on Transfer and Legend on Stock Certificate. During
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of a Stock Award except under Section 15(a)
below. Unless otherwise determined by the Committee, the Company will retain
possession of certificates for shares of Stock Awards until all restrictions on
such shares have lapsed. Each certificate for a Stock Award, unless held by the
Company, shall contain a legend giving appropriate notice of the restrictions in
the Grant. The Grantee shall be entitled to have the legend removed from the
stock certificate covering the shares subject to restrictions when all
restrictions on such shares have lapsed. The Committee may determine that the
Company will not issue certificates for Stock Awards until all restrictions on
such shares have lapsed.
          (e) Right to Vote and to Receive Dividends. Unless the Committee
determines otherwise, during the Restriction Period, the Grantee shall have the
right to vote shares of Stock Awards and to receive any dividends or other
distributions paid on such shares, subject to any restrictions deemed
appropriate by the Committee, including, without limitation, the achievement of
specific performance goals.
          (f) Lapse of Restrictions. All restrictions imposed on Stock Awards
shall lapse upon the expiration of the applicable Restriction Period and the
satisfaction of all conditions, if any, imposed by the Committee. The Committee
may determine, as to any or all Stock Awards, that the restrictions shall lapse
without regard to any Restriction Period.
     Section 8. Stock Units
     The Committee may grant Stock Units, each of which shall represent one
hypothetical share of Company Stock, to an Employee or Non-Employee Director,
upon such terms and conditions as the Committee deems appropriate. The following
provisions are applicable to Stock Units:
          (a) Crediting of Units. Each Stock Unit shall represent the right of
the Grantee to receive a share of Company Stock or an amount of cash based on
the value of a share of Company Stock, if and when specified conditions are met.
All Stock Units shall be credited to bookkeeping accounts established on the
Company’s records for purposes of the Plan.

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          (b) Terms of Stock Units. The Committee may grant Stock Units that are
payable if specified performance goals or other conditions are met, or under
other circumstances. Stock Units may be paid at the end of a specified
performance period or other period, or payment may be deferred to a date
authorized by the Committee. The Committee shall determine the number of Stock
Units to be granted and the requirements applicable to such Stock Units.
          (c) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Employer prior to the vesting of Stock
Units, or if other conditions established by the Committee are not met, the
Grantee’s Stock Units shall be forfeited. The Committee may, however, provide
for complete or partial exceptions to this requirement as it deems appropriate.
          (d) Payment With Respect to Stock Units. Payments with respect to
Stock Units shall be made in cash, Company Stock or any combination of the
foregoing, as the Committee shall determine.
     Section 9. Stock Appreciation Rights
     The Committee may grant SARs to an Employee or Non-Employee Director
separately or in tandem with any Option. The following provisions are applicable
to SARs:
          (a) General Requirements. The Committee may grant SARs to an Employee
or Non-Employee Director separately or in tandem with any Option (for all or a
portion of the applicable Option). Tandem SARs may be granted either at the time
the Option is granted or at any time thereafter while the Option remains
outstanding; provided, however, that, in the case of an Incentive Stock Option,
SARs may be granted only at the time of the Grant of the Incentive Stock Option.
The Committee shall establish the base amount of the SAR at the time the SAR is
granted. The base amount of each SAR shall be equal to the per share Exercise
Price of the related Option or, if there is no related Option, an amount equal
to or greater than the Fair Market Value of a share of Company Stock as of the
date of Grant of the SAR.
          (b) Tandem SARs. In the case of tandem SARs, the number of SARs
granted to a Grantee that shall be exercisable during a specified period shall
not exceed the number of shares of Company Stock that the Grantee may purchase
upon the exercise of the related Option during such period. Upon the exercise of
an Option, the SARs relating to the Company Stock covered by such Option shall
terminate. Upon the exercise of SARs, the related Option shall terminate to the
extent of an equal number of shares of Company Stock.
          (c) Exercisability. An SAR shall be exercisable during the period
specified by the Committee in the Grant Instrument and shall be subject to such
vesting and other restrictions as may be specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding SARs at
any time for any reason. SARs may only be exercised while the Grantee is
employed by, or providing service to, the Employer or during the applicable
period after termination of employment or service as described in Section 6(e)
above.

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A tandem SAR shall be exercisable only during the period when the Option to
which it is related is also exercisable.
          (d) Value of SARs. When a Grantee exercises SARs, the Grantee shall
receive in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised. The stock appreciation for an SAR
is the amount by which the Fair Market Value of the underlying Company Stock on
the date of exercise of the SAR exceeds the base amount of the SAR as described
in subsection (a).
          (e) Form of Payment. The appreciation in an SAR shall be paid in
shares of Company Stock, cash or any combination of the foregoing, as the
Committee shall determine. For purposes of calculating the number of shares of
Company Stock to be received, shares of Company Stock shall be valued at their
Fair Market Value on the date of exercise of the SAR.
     Section 10. Other Stock-Based Awards
     The Committee may grant Other Stock-Based Awards, which are awards (other
than those described in Sections 6, 7, 8 and 9 of the Plan) that are based on or
measured by Company Stock, to any Employee or Non-Employee Director, on such
terms and conditions as the Committee shall determine. Other Stock-Based Awards
may be awarded subject to the achievement of performance goals or other
conditions and may be payable in cash, Company Stock or any combination of the
foregoing, as the Committee shall determine.
     Section 11. Dividend Equivalents
     The Committee may grant Dividend Equivalents in connection Stock Units or
Other Stock-Based Awards. Dividend Equivalents may be paid currently or accrued
as contingent cash obligations and may be payable in cash or shares of Company
Stock, and upon such terms as the Committee may establish, including, without
limitation, the achievement of specific performance goals.
     Section 12. Qualified Performance-Based Compensation
     The Committee may determine that Stock Awards, Stock Units, Other
Stock-Based Awards and Dividend Equivalents granted to an Employee shall be
considered “qualified performance-based compensation” under section 162(m) of
the Code. The following provisions shall apply to Grants of Stock Awards, Stock
Units, Other Stock-Based Awards and Dividend Equivalents that are to be
considered “qualified performance-based compensation” under section 162(m) of
the Code:
          (a) Performance Goals.
               (i) When Stock Awards, Stock Units, Other Stock-Based Awards or
Dividend Equivalents that are to be considered “qualified performance-based
compensation” are granted, the Committee shall establish in writing (A) the
objective

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performance goals that must be met, (B) the performance period during which the
performance will be measured, (C) the threshold, target and maximum amounts that
may be paid if the performance goals are met, and (D) any other conditions that
the Committee deems appropriate and consistent with the Plan and Section 162(m)
of the Code.
               (ii) The business criteria may relate to the Grantee’s business
unit or the performance of the Company and its parents and subsidiaries as a
whole, or any combination of the foregoing. The Committee shall use objectively
determinable performance goals based on one or more of the following criteria:
stock price, earnings per share, net earnings, operating earnings, earnings
before income taxes, EBITDA (earnings before income tax expense, interest
expense, and depreciation and amortization expense), return on assets,
shareholder return, return on equity, growth in assets, unit volume, sales or
market share, or strategic business criteria consisting of one or more
objectives based on meeting specified revenue goals, market penetration goals,
geographic business expansion goals, cost targets or goals relating to
acquisitions or divestitures.
          (b) Establishment of Goals. The Committee shall establish the
performance goals in writing either before the beginning of the performance
period or during a period ending no later than the earlier of (i) 90 days after
the beginning of the performance period or (ii) the date on which 25% of the
performance period has been completed, or such other date as may be required or
permitted under applicable regulations under section 162(m) of the Code. The
performance goals shall satisfy the requirements for “qualified
performance-based compensation,” including the requirement that the achievement
of the goals be substantially uncertain at the time they are established and
that the goals be established in such a way that a third party with knowledge of
the relevant facts could determine whether and to what extent the performance
goals have been met. The Committee shall not have discretion to increase the
amount of compensation that is payable upon achievement of the designated
performance goals.
          (c) Announcement of Grants. The Committee shall certify and announce
the results for each performance period to all Grantees after the announcement
of the Company’s financial results for the performance period. If and to the
extent that the Committee does not certify that the performance goals have been
met, the grants of Stock Awards, Stock Units, Other Stock-Based Awards and
Dividend Equivalents for the performance period shall be forfeited or shall not
be made, as applicable. If Dividend Equivalents are granted as “qualified
performance-based compensation” under section 162(m) of the Code, a Grantee may
not accrue more than $50,000 of such Dividend Equivalents during any calendar
year.
          (d) Death, Disability or Other Circumstances. The Committee may
provide that Stock Awards, Stock Units, Other Stock-Based Awards and Dividend
Equivalents shall be payable or restrictions on such Grants shall lapse, in
whole or in part, in the event of the Grantee’s death or Disability during the
performance period, or under other circumstances consistent with the Treasury
regulations and rulings under section 162(m) of the Code.

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     Section 13. Deferrals
     The Committee may permit or require a Grantee to defer receipt of the
payment of cash or the delivery of shares that would otherwise be due to such
Grantee in connection with any Stock Units or Other Stock-Based Awards. If any
such deferral election is permitted or required, the Committee shall establish
rules and procedures for such deferrals and may provide for interest or other
earnings to be paid on such deferrals. The rules and procedures for any such
deferrals shall be consistent with applicable requirements of section 409A of
the Code.
     Section 14. Withholding of Taxes
          (a) Required Withholding. All Grants under the Plan shall be subject
to applicable federal (including FICA), state and local tax withholding
requirements. The Employer may require that the Grantee or other person
receiving or exercising Grants pay to the Employer the amount of any federal,
state or local taxes that the Employer is required to withhold with respect to
such Grants, or the Employer may deduct from other wages paid by the Employer
the amount of any withholding taxes due with respect to such Grants.
          (b) Election to Withhold Shares. If the Committee so permits, a
Grantee may elect to satisfy the Employer’s tax withholding obligation with
respect to Grants paid in Company Stock by having shares withheld up to an
amount that does not exceed the Grantee’s minimum applicable withholding tax
rate for federal (including FICA), state and local tax liabilities. The election
must be in a form and manner prescribed by the Committee and may be subject to
the prior approval of the Committee.
     Section 15. Transferability of Grants
          (a) Nontransferability of Grants. Except as provided below, only the
Grantee may exercise rights under a Grant during the Grantee’s lifetime. A
Grantee may not transfer those rights except (i) by will or by the laws of
descent and distribution or (ii) with respect to Grants other than Incentive
Stock Options, pursuant to a domestic relations order. When a Grantee dies, the
personal representative or other person entitled to succeed to the rights of the
Grantee may exercise such rights. Any such successor must furnish proof
satisfactory to the Company of his or her right to receive the Grant under the
Grantee’s will or under the applicable laws of descent and distribution.
          (b) Transfer of Nonqualified Stock Options. Notwithstanding the
foregoing, the Committee may provide, in a Grant Instrument, that a Grantee may
transfer Nonqualified Stock Options to family members, or one or more trusts or
other entities for the benefit of or owned by family members, consistent with
the applicable securities laws, according to such terms as the Committee may
determine; provided that the Grantee receives no consideration for the transfer
of an Option and the transferred Option shall continue to be subject to the same
terms and conditions as were applicable to the Option immediately before the
transfer.

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     Section 16. Consequences of a Change of Control
          (a) Notice and Acceleration. If the Company becomes aware that a
Change of Control has occurred or will occur, the Company shall provide to each
Grantee who holds outstanding Grants written notice of such Change of Control.
Effective upon the date of the Change of Control, (i) all outstanding Options
and SARs shall automatically accelerate and become fully exercisable, (ii) the
restrictions and conditions on all outstanding Stock Awards shall immediately
lapse, and (iii) all Stock Units, Other Stock-Based Awards and Dividend
Equivalents shall become fully vested and shall be paid at their target values,
or in such greater amounts as the Committee may determine.
          (b) Other Alternatives. Notwithstanding the foregoing, in the event of
a Change of Control, the Committee may take one or more of the following actions
with respect to any or all outstanding Grants: the Committee may (i) require
that Grantees surrender their outstanding Options and SARs in exchange for one
or more payments by the Company, in cash or Company Stock as determined by the
Committee, in an amount equal to the amount by which the then Fair Market Value
of the shares of Company Stock subject to the Grantee’s unexercised Options and
SARs exceeds the Exercise Price of the Options or the base amount of the SARs,
as applicable, (ii) after giving Grantees an opportunity to exercise their
outstanding Options and SARs, terminate any or all unexercised Options and SARs
at such time as the Committee deems appropriate, or (iii) determine that
outstanding Options and SARs that are not exercised shall be assumed by, or
replaced with comparable options or rights by, the surviving corporation (or a
parent or subsidiary of the surviving corporation). Such surrender or
termination shall take place as of the date of the Change of Control or such
other date as the Committee may specify.
     Section 17. Requirements for Issuance or Transfer of Shares
     No Company Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Grant on the Grantee’s undertaking in writing to comply with such
restrictions on his or her subsequent disposition of the shares of Company Stock
as the Committee shall deem necessary or advisable, and certificates
representing such shares may be legended to reflect any such restrictions.
Certificates representing shares of Company Stock issued or transferred under
the Plan may be subject to such stop-transfer orders and other restrictions as
the Committee deems appropriate to comply with applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
     Section 18. Amendment and Termination of the Plan
          (a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that the Board shall not amend the Plan without shareholder
approval if such approval is required in order to comply with the Code or other
applicable law, or to comply with applicable stock exchange requirements.

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          (b) No Repricing Without Shareholder Approval. Notwithstanding
anything in the Plan to the contrary, the Committee may not reprice Options, nor
may the Board amend the Plan to permit repricing of Options, unless the
shareholders of the Company provide prior approval for such repricing. An
adjustment to an Option pursuant to Section 4(c) above shall not constitute a
repricing of the Option.
          (c) Shareholder Re-Approval Requirement. If Stock Awards, Stock Units,
Other Stock-Based Awards or Dividend Equivalents are granted as “qualified
performance-based compensation” under Section 12 above, the Plan must be
reapproved by the shareholders no later than the first shareholders meeting that
occurs in the fifth year following the year in which the shareholders previously
approved the provisions of Section 12, if required by section 162(m) of the Code
or the regulations thereunder.
          (d) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or is extended by the Board with the
approval of the shareholders.
          (e) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 19(f) below. The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 19(f) below or may be amended by agreement
of the Company and the Grantee consistent with the Plan.
          (f) Effective Date of the Plan. The Plan shall be effective as of the
date on which the shareholders approve the Plan.
     Section 19. Miscellaneous
          (a) Grants in Connection with Corporate Transactions and Otherwise.
Nothing contained in the Plan shall be construed to (i) limit the right of the
Committee to make Grants under the Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees, or (ii) limit the right of the Company to grant stock
options or make other awards outside of the Plan. The Committee may make a Grant
to an employee of another corporation who becomes an Employee by reason of a
corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company, in substitution for a stock
option or stock awards grant made by such corporation. Notwithstanding anything
in the Plan to the contrary, the Committee may establish such terms and
conditions of the new Grants as it deems appropriate, including setting the
Exercise Price of Options or the base price of SARs at a price necessary to
retain for the Grantee the same economic value as the prior options or rights.

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          (b) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
          (c) Funding of the Plan. The Plan shall be unfunded. The Company shall
not be required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any Grants under the Plan.
          (d) Rights of Grantees. Nothing in the Plan shall entitle any
Employee, Non-Employee Director or other person to any claim or right to be
granted a Grant under the Plan. Neither the Plan nor any action taken hereunder
shall be construed as giving any individual any rights to be retained by or in
the employ of the Employer or any other employment rights.
          (e) No Fractional Shares. No fractional shares of Company Stock shall
be issued or delivered pursuant to the Plan or any Grant. Except as otherwise
provided under the Plan, the Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
          (f) Compliance with Law. The Plan, the exercise of Options and SARs
and the obligations of the Company to issue or transfer shares of Company Stock
under Grants shall be subject to all applicable laws and regulations, and to
approvals by any governmental or regulatory agency as may be required. With
respect to persons subject to section 16 of the Exchange Act, it is the intent
of the Company that the Plan and all transactions under the Plan comply with all
applicable provisions of Rule 16b-3 or its successors under the Exchange Act. In
addition, it is the intent of the Company that Incentive Stock Options comply
with the applicable provisions of section 422 of the Code, that Grants of
“qualified performance-based compensation” comply with the applicable provisions
of section 162(m) of the Code and that, to the extent applicable, Grants comply
with the requirements of section 409A of the Code. To the extent that any legal
requirement of section 16 of the Exchange Act or section 422, 162(m) or 409A of
the Code as set forth in the Plan ceases to be required under section 16 of the
Exchange Act or section 422, 162(m) or 409A of the Code, that Plan provision
shall cease to apply. The Committee may revoke any Grant if it is contrary to
law or modify a Grant to bring it into compliance with any valid and mandatory
government regulation.
          (g) Employees Subject to Taxation Outside the United States. With
respect to Grantees who are believed by the Committee to be subject to taxation
in countries other than the United States, the Committee may make Grants on such
terms and conditions, consistent with the Plan, as the Committee deems
appropriate to comply with the laws of the applicable countries, and the
Committee may create such procedures, addenda and subplans and make such
modifications as may be necessary or advisable to comply with such laws.

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          (h) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall be governed
and construed by and determined in accordance with the laws of New Jersey,
without giving effect to the conflict of laws provisions thereof.

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