Exhibit 10.2

 

1999 LONG-TERM INCENTIVE PLAN

 

Article I – GENERAL PROVISIONS

 

1.1 Purposes

 

The purposes of the 1999 Long-Term Incentive Plan (the “Plan”) are to advance
the long-term success of Armstrong World Industries, Inc. (the “Company”), and
to increase shareholder value by providing long-term incentive awards to
officers, directors and key employees. The Plan is designed to: (i) encourage
stock ownership by Participants to further align their interest in increasing
the value of the Company; and (ii) to assist in the attraction and retention of
key employees vital to the Company’s success.

 

1.2 Definitions

 

For the purpose of the Plan, the following terms shall have the meanings
indicated:

 

(a) “Board” means the Board of Directors of the Company.

 

(b) “Cash Incentive Awards” means a right to receive a cash payment pursuant to
any award made pursuant to Article VI hereof.

 

(c) “Change in Control” means a situation where: (i) any person acquires
beneficial ownership of 28 percent or more of the then outstanding voting stock
of the Company and within five years thereafter disinterested directors no
longer constitute at least a majority of the Board; or (ii) a business
combination with an interested shareholder occurs which has not been approved by
a majority of disinterested directors. The terms person, beneficial ownership,
voting stock, disinterested director, business combination, and interested
shareholder are defined in Article 7 of the Company’s Articles of Incorporation.

 

(d) “Code” means the Internal Revenue Code of 1986, as amended, including any
successor law thereto.

 

(e) “Committee” means the Management Development and Compensation Committee of
the Board or the full Board, as the case may be.

 

(f) “Common Stock” means the Common Stock of the Company, par value $1.00 per
share.

 

(g) “Company” means Armstrong World Industries, Inc., and solely for purposes of
determining (i) eligibility for participation in the Plan; (ii) employment; and
(iii) the establishment of performance goals, shall include any corporation,
partnership, or other organization of which Armstrong owns or controls, directly
or indirectly, not less than 50 percent of the total combined voting power of
all classes of stock or other equity interests. For purposes of this Plan, the
terms “Armstrong” and “Company” shall include any successor to Armstrong World
Industries, Inc.

 

(h) “Disability” means total and permanent disability within the meaning of
Section 22(e)(3) of the Code.

 

(i) “Dividend Equivalent” means an amount equal to the cash dividend paid on one
share of Common Stock for each Performance Restricted Share granted during the
Performance Period. All Dividend Equivalents will be reinvested in Performance
Restricted Shares at a purchase price equal to the Fair Market Value on the
dividend date.

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(j) “Employee or employment” means with respect to any nonemployee director (as
defined herein) service on the Board.

 

(k) “Fair Market Value” means the closing price of the Common Stock as reported
on the New York Stock Exchange Composite Transactions reporting system on the
applicable date or, if no sales were made on such date, on the next preceding
date on which sales of the Common Stock were made.

 

(l) “Incentive Stock Option” means a Stock Option which meets the definition
under Section 422 of the Code.

 

(m) “Nonstatutory Stock Option” means a Stock Option which does not meet the
definition of an Incentive Stock Option.

 

(n) “Participant” means any officer, director or key employee who has met the
eligibility requirements set forth in Section 1.6 hereof and to whom a grant has
been made and is outstanding under the Plan.

 

(o) “Performance Measures” shall mean the Performance Measures described in
Section 4.4 of the Plan.

 

(p) “Performance Period” means, in relation to Performance Restricted Shares or
Cash Incentive Awards, any period for which performance goals have been
established.

 

(q) “Performance Restricted Share” means a right granted to a Participant
pursuant to Article IV.

 

(r) “Restricted Stock Award” means an award of Common Stock granted to a
Participant pursuant to Article V which is subject to a Restriction Period.

 

(s) “Restriction Period” means (i) in relation to Performance Restricted Shares,
the period of time, beginning at the end of the Performance Period, during which
the Participant shall not be permitted to sell, assign, transfer, pledge, or
otherwise dispose of such shares; and (ii) in relation to Restricted Stock
Awards, the period of time during which such shares are subject to forfeiture
pursuant to the Plan and such shares are subject to the restrictions on
transferability described in (i) of this paragraph.

 

(t) “Retirement” means termination from employment with the Company after the
Participant has attained age 55 and has completed five years of service with the
Company or termination of employment under circumstances which the Committee
deems equivalent to retirement.

 

(u) “Stock Appreciation Right” means a right granted to a Participant pursuant
to Article III to surrender to the Company all or any portion of the related
Stock Option and to receive in shares of Common Stock an amount equal to the
excess of the Fair Market Value over the option price on the date of such
exercise.

 

(v) “Stock Award” means an award of Common Stock granted to a Participant
pursuant to Article V which is not subject to a Restriction Period or a Vesting
Period.

 

(w) “Stock Option” means a right granted to a Participant pursuant to Article
II, to purchase, before a specified date and at a specified price, a specified
number of shares of Common Stock.

 

(x) “Vesting Period” means the period of time, beginning at the end of the
Performance Period, during which Performance Restricted Shares are subject to
forfeiture pursuant to the Plan.

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1.3 Administration

 

The Plan shall be administered by the Committee; provided, however, that the
Board shall administer the Plan as it relates to the terms, conditions and grant
of awards to nonemployee directors. A majority of the Committee shall constitute
a quorum, and the acts of a majority of the members present at any meeting at
which a quorum is present, or acts approved in writing by a majority of the
Committee, shall be deemed the acts of the Committee. Subject to the provisions
of the Plan and to directions by the Board, the Committee is authorized to
interpret the Plan, to adopt administrative rules, regulations, and guidelines
for the Plan, and to impose such terms, conditions, and restrictions on grants
as it deems appropriate. The Committee, in its discretion, may allow certain
optionees holding unexercised Incentive Stock Options to convert such options to
Nonstatutory Stock Options. The Committee may, with respect to Participants who
are not subject to Section 16 (b) of the Exchange Act or “covered employees”
within the meaning of Section 162(m) of the Code (“Section 162(m)”), delegate
such of its powers and authority under the Plan as it deems appropriate to
designated officers or employees of the Company. All determinations by the
Committee shall be final and binding.

 

1.4 Types of Grants Under the Plan

 

Grants under the Plan may be in the form of any one or more of the following:

 

(a) Nonstatutory Stock Options;

 

(b) Incentive Stock Options;

 

(c) Stock Appreciation Rights;

 

(d) Performance Restricted Shares;

 

(e) Restricted Stock Awards;

 

(f) Stock Awards;

 

(g) Cash Incentive Awards.

 

1.5 Shares Subject to the Plan and Individual Award Limitation

 

(a) A maximum of 3,250,000 shares of Common Stock may be issued under the Plan
provided, however, that no more than 300,000 shares may be granted in the form
of Performance Restricted Shares, Restricted Stock Awards and Stock Awards. The
total number of shares authorized is subject to adjustment as provided in
Section 8.1 hereof. Shares of Common Stock issued under the Plan may be treasury
shares or authorized but unissued shares. No fractional shares shall be issued
under the Plan.

 

(b) If any Stock Option granted under the Plan expires or terminates, the
underlying shares of Common Stock may again be made available for the purposes
of the Plan. Any shares of Common Stock that have been granted as Restricted
Stock Awards, or that have been reserved for distribution in payment for
Performance Restricted Shares but are later forfeited or for any other reason
are not payable under the Plan, may again be made available for the purposes of
the Plan. Furthermore, shares of Common Stock that are tendered in payment of
the exercise price of any Stock Option or tendered or withheld in satisfaction
of tax withholding obligations arising from any award shall be available for
issuance under the Plan.

 

(c) In addition to the shares of Common Stock authorized under Sections 1.5(a)
and 1.5(b), shares of Common Stock that are (i) forfeited under the Company’s
1993 Long-Term Stock Incentive Plan (the “Prior Plan”) or for any other reason
not paid under the Prior Plan; or (ii) tendered in payment of the exercise price
of a stock option granted under the Prior Plan or tendered or withheld in
satisfaction of tax withholding obligations arising from awards under the Prior
Plan, shall be available for issuance under the Plan.

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(d) The aggregate maximum number of shares of Common Stock that may be granted
to any Participant in the form of Stock Options, Stock Appreciation Rights,
Performance Restricted Shares, Restricted Stock Awards and Stock Awards in any
one calendar year is 400,000.

 

1.6 Eligibility and Participation

 

Participation in the Plan shall be limited to officers, who may also be members
of the Board, other key employees of the Company and directors who are not
employees of the Company (“nonemployee directors”).

 

ARTICLE II – STOCK OPTIONS

 

2.1 Grant of Stock Options

 

The Committee may from time to time, subject to the provisions of the Plan,
grant Stock Options to such Participants. The Committee shall determine the
number of shares of Common Stock to be covered by each Stock Option and shall
have the authority to grant Incentive Stock Options, Nonstatutory Stock Options
or a combination thereof. Furthermore, the Committee may grant a Stock
Appreciation Right in connection with a Stock Option, as provided in Article
III.

 

2.2 Incentive Stock Option Exercise Limitations

 

The aggregate Fair Market Value (determined at the time an Incentive Stock
Option is granted) of the shares of Common Stock with respect to which an
Incentive Stock Option is exercisable for the first time by a Participant during
any calendar year (under all plans of the Company) shall not exceed $100,000 or
such other limit as may be established from time to time under the Code.

 

2.3 Option Documentation

 

Each Stock Option shall be evidenced by a written Stock Option agreement between
the Company and the Participant to whom such option is granted, specifying the
number of shares of Common Stock that may be acquired by its exercise and
containing such terms and conditions consistent with the Plan as the Committee
shall determine.

 

2.4 Exercise Price

 

The price at which each share covered by a Stock Option may be acquired shall be
determined by the Committee at the time the option is granted and shall not be
less than the Fair Market Value of the underlying shares of Common Stock on the
day the Stock Option is granted. The exercise price will be subject to
adjustment in accordance with the provisions of Section 8.1 of the Plan.

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2.5 Exercise of Stock Options

 

(a) Exercisability. Stock Options shall become exercisable at such times and
upon the satisfaction of such conditions and in such installments as the
Committee may provide at the time of grant.

 

(b) Option Period. For each Stock Option granted, the Committee shall specify
the period during which the Stock Option may be exercised, provided that no
Stock Option shall be exercisable after the expiration of ten years from the
date the option was granted.

 

(c) Exercise in the Event of Termination of Employment.

 

(i) Death: Unless otherwise provided by the Committee at the time of grant, in
the event of death of the Participant, the option must be exercised by the
Participant’s estate or beneficiaries prior to its expiration. Each option may
be exercised as to all or any portion thereof regardless of whether or not fully
exercisable under the terms of the grant.

 

(ii) Disability: Unless otherwise provided by the Committee at the time of
grant, in the event of the Disability of the Participant, the option must be
exercised prior to its expiration. An unexercised Incentive Stock Option will
cease to be treated as such and will become a Nonstatutory Stock Option twelve
months following the date of termination due to Disability. Each option may be
exercised as to all or any portion thereof regardless of whether or not fully
exercisable under the terms of the grant.

 

(iii) Retirement: Unless otherwise provided by the Committee at the time of
grant, in the event of the Retirement of the Participant, the option must be
exercised prior to its expiration. An unexercised Incentive Stock Option will
cease to be treated as such and will become a Nonstatutory Stock Option three
months following the date of Retirement.

 

(iv) Other Terminations: Unless otherwise provided by the Committee at the time
of grant, in the event a Participant ceases to be an employee of the Company for
any reason other than death, Disability, or Retirement, options which are
exercisable on the date of termination must be exercised within three months
after termination. All options which are not exercisable on the date of
termination shall be canceled.

 

(v) Extension of Exercise Period: Notwithstanding all other provisions under
Section 2.5(c) in the event a Participant’s employment is terminated, the
Committee may, in its sole discretion, extend the post termination period during
which the option may be exercised, provided however that such period may not
extend beyond the original option period.

 

(d) Exercise in the Event of Change in Control. In the event of any Change in
Control, all Stock Options shall immediately become exercisable without regard
to the exercise period set forth in 2.5(a).

 

2.6 Method of Exercise

 

The option may be exercised, in whole or in part, from time to time by written
request received by the Treasurer of the Company. The option price of each share
acquired pursuant to an option shall be paid in full at the time of each
exercise of the option either (i) in cash; (ii) by delivering to the Company a
notice of exercise with an irrevocable direction to a broker-dealer registered
under the Securities Exchange Act of 1934 to sell a sufficient portion of the
shares of Common Stock underlying such option having an aggregate Fair Market
Value equal to the option price of the shares being acquired; or (iii) by
delivering to the Company shares of Common Stock or any combination of shares
and cash having an aggregate Fair Market Value equal to the option price of the
shares being acquired. However, shares of Common Stock previously acquired by
the Participant under the Plan or any other incentive plan of the Company shall
not be utilized for purposes of payment upon the exercise of an option unless
those shares have been owned by the Participant for a six-month period or such
longer period as the Committee may determine.

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ARTICLE III – STOCK APPRECIATION RIGHTS

 

3.1 Grant of Stock Appreciation Rights

 

The Committee may, in its discretion, grant Stock Appreciation Rights in
connection with all or any part of an option granted under the Plan. Any Stock
Appreciation Right granted in connection with an option shall be governed by the
terms of the Stock Option agreement and the Plan.

 

3.2 Exercise of Stock Appreciation Rights

 

Stock Appreciation Rights shall become exercisable under the Stock Option terms
set forth in Section 2.5 but shall be exercisable only when the Fair Market
Value of the shares subject thereto exceeds the option price of the related
option.

 

3.3 Method of Exercise

 

(a) Stock Appreciation Rights shall permit the Participant, upon exercise of
such rights, to surrender the related option, or any portion thereof, and to
receive, without payment to the Company (except for applicable withholding
taxes), an amount equal to the excess of the Fair Market Value over the option
price. Such amount shall be paid in shares of Common Stock valued at Fair Market
Value on the date of exercise.

 

(b) Upon the exercise of a Stock Appreciation Right and surrender of the related
option, or any portion thereof, such option, to the extent surrendered, shall be
terminated, and the shares covered by the option so surrendered shall no longer
be available for purposes of the Plan.

 

ARTICLE IV – PERFORMANCE RESTRICTED SHARES

 

4.1 Grant of Performance Restricted Shares

 

The Committee may from time to time grant Performance Restricted Shares to
Participants under which payment may be made in shares of Common Stock if the
performance of the Company meets certain goals established by the Committee.
Such Performance Restricted Shares shall be subject to the provisions of the
Plan terms and conditions, and, if earned, a Vesting Period and a Restriction
Period as the Committee shall determine.

 

4.2 Performance Restricted Share Agreement

 

Each grant of Performance Restricted Shares shall be evidenced by a written
agreement between the Company and Participant to whom such shares are granted.
The agreement shall specify the number of Performance Restricted Shares granted,
the terms and conditions of the grant, the duration of the Performance Period,
the performance goals to be achieved, and the Vesting Period and the Restriction
Period applicable to shares of Common Stock earned.

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4.3 Common Stock Equivalent

 

Each Performance Restricted Share shall be credited to an account to be
maintained for each such Participant during the Performance Period and shall be
deemed to be the equivalent of one share of Common Stock. At the conclusion of
the Performance Period, Performance Restricted Shares earned, if any, shall be
converted to shares of Common Stock subject to a Vesting Period and a
Restriction Period.

 

4.4 Performance Measures

 

Performance Restricted Share awards shall be conditioned upon the Company’s
attainment of a specified goal with respect to one or more of the following
performance measures: (i) total shareholder return; (ii) EVA as defined below;
(iii) return on shareholders’ equity; (iv) return on capital; (v) earnings per
share; (vi) sales; (vii) earnings; (viii) cash flow; and (ix) operating income.
EVA equals the dollar amount arrived at by taking net operating profit after
taxes and subtracting a charge for the use of the capital needed to generate
that profit. The Committee shall determine a minimum performance level below
which no Performance Restricted Shares shall be payable and a performance
schedule under which the number of shares earned may be less than, equal to, or
greater than the number of Performance Restricted Shares granted based upon the
Company’s performance. The Committee may adjust the performance goals and
measurements to reflect significant unforeseen events; provided, however, that
the Committee may not make any such adjustment with respect to any award of
Performance Restricted Shares to an individual who is then a “covered employee”
as such term is defined in Regulation 1.162-27(c)(2) promulgated under
Section 162(m), if such adjustment would cause compensation pursuant to such
Performance Restricted Share award to cease to be performance-based compensation
under Section 162(m).

 

4.5 Performance Period

 

The Committee shall establish a Performance Period applicable to each grant of
Performance Restricted Shares. Each such Performance Period shall commence on
January 1 of the calendar year in which grants are made. There shall be no
limitation on the number of Performance Periods established by the Committee,
and more than one Performance Period may encompass the same calendar year. The
Committee may shorten any Performance Period if it determines that unusual or
unforeseen events so warrant.

 

4.6 Dividend Equivalents During Performance Period

 

Unless otherwise provided by the Committee, a Participant shall be entitled to
receive Dividend Equivalents during the Performance Period which shall be deemed
to have been reinvested in additional Performance Restricted Shares at the same
time as such underlying Common Stock cash dividend is paid. Performance
Restricted Shares granted through such reinvestment shall be credited to the
Participant’s account and shall be payable to the Participant in the same manner
and at the same time as the Performance Restricted Shares with respect to which
such Dividend Equivalents were issued.

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4.7 Right to Payment of Performance Restricted Shares

 

(a) At the conclusion of the Performance Period, the Committee shall determine
the number of Performance Restricted Shares, if any, which have been earned on
the basis of Company performance in relation to the established performance
goals. In no event shall such number exceed 300% of the shares contingently
granted.

 

(b) Performance Restricted Shares earned shall be converted to shares of Common
Stock and shall be represented by book entry or by a stock certificate
registered in the name of the Participant. Certificates evidencing such shares
shall be held in custody by the Company until the restrictions thereon are no
longer in effect. After the lapse or waiver of the restrictions imposed, the
Company shall deliver in the Participant’s name one or more stock certificates,
free of restrictions, evidencing the shares of Common Stock to which the
restrictions have lapsed or been waived.

 

4.8 Vesting Period

 

At the time a Performance Restricted Share grant is made, the Committee shall
establish a period of time (the “Vesting Period”) applicable to such shares
earned, if any, which shall begin at the end of the Performance Period. During
the Vesting Period, Performance Restricted Shares shall be subject to the risk
of forfeiture. The Committee may provide for the lapse of such restrictions in
installments and may accelerate or waive such restrictions, in whole or in part,
based on service and such other factors as the Committee may determine.

 

4.9 Restriction Period

 

At the time a Performance Restricted Share grant is made, the Committee shall
establish a period of time (the “Restriction Period”) applicable to such shares
earned, if any, which shall begin at the end of the Performance Period. During
the Restriction Period, the Participant shall not be permitted to sell, assign,
transfer, pledge or otherwise dispose of Performance Restricted Shares that have
been earned. The Committee may provide for the lapse of such restrictions in
installments, in whole or in part, based on service and such other factors as
the Committee may determine.

 

4.10 Other Terms and Conditions

 

Performance Restricted Shares earned and restricted shares received with respect
to such shares shall be subject to the following terms and conditions:

 

(a) Except as otherwise provided in the Plan or in the Performance Restricted
Share agreement, the Participant shall have all the rights of a shareholder of
the Company, including the right to vote the shares.

 

(b) Cash dividends paid with respect to Performance Restricted Shares shall be
reinvested to purchase additional shares of Common Stock that shall be subject
to the same terms, conditions, and restrictions that apply to the Performance
Restricted Shares with respect to which such dividends were issued.

 

(c) Except as otherwise provided in the Plan or in the Performance Restricted
Share agreement, upon termination of a Participant’s employment, all unvested
shares subject to restriction shall be forfeited by the Participant.

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4.11 Termination of Employment Provisions During a Performance Period

 

(a) In the event a Participant terminates employment during a Performance Period
by reason of death, Disability, or Retirement, the Participant shall be entitled
to the full number of shares earned, if any, as long as the Participant had
completed a minimum of one year of employment during the Performance Period. If
the termination of employment is by reason of death or Disability, all other
restrictions shall lapse and shares of Common Stock shall be issued to the
Participant or the Participant’s designated beneficiary following the
Performance Period. If the termination of employment is by reason of Retirement,
any applicable Restriction Period shall continue in effect, but in no event
beyond the end of the three-year period following the Participant’s Retirement.
Following the expiration of such Restriction Period, shares of Common Stock
shall be issued to the Participant. In the event the Participant had not
completed one year of employment during the Performance Period, the Participant
shall forfeit all rights to earn such Performance Restricted Shares.

 

(b) If a Participant terminates employment for any reason other than death,
Disability, or Retirement, the Participant shall forfeit all rights to earn such
Performance Restricted Shares.

 

(c) Notwithstanding Sections 4.11(a) and 4.11(b), in the event a Participant’s
employment is terminated under special circumstances, the Committee may, in its
sole discretion, continue a Participant’s rights to earn any or all Performance
Restricted Shares and waive, in whole or in part, any or all remaining
restrictions.

 

4.12 Termination of Employment Provisions Following a Performance Period

 

(a) In the event a Participant terminates employment following a Performance
Period by reason of death, Disability, or Retirement, all Performance Restricted
Shares earned shall immediately vest. If the termination of employment is by
reason of death or Disability, all other restrictions shall lapse and shares of
Common Stock shall be issued to the Participant or the Participant’s designated
beneficiary. If the termination of employment is by reason of Retirement, any
applicable Restriction Period shall continue in effect, but in no event beyond
the end of the three-year period following the Participant’s Retirement.
Following the expiration of such Restriction Period, shares of Common Stock
shall be issued to the Participant.

 

(b) If a Participant terminates employment for any reason other than death,
Disability, or Retirement, the Participant shall forfeit all Performance
Restricted Shares subject to the Vesting Period. Any applicable Restriction
Period shall continue in effect, but in no event beyond the end of the
three-year period following the Participant’s date of termination of employment.
Following the expiration of such Restriction Period, shares of Common Stock
shall be issued to the Participant.

 

(c) Notwithstanding Sections 4.12 (a) and 4.12 (b), in the event a Participant’s
employment is terminated under special circumstances, the Committee may, in its
sole discretion, waive in whole or in part any or all remaining restrictions.

 

4.13 Change in Control Provisions

 

In the event of any Change in Control, all Performance Restricted Shares earned
shall immediately vest and restrictions shall lapse on all shares subject to
restrictions as of the date of such Change in Control. Further, all Performance
Restricted Shares granted, including those granted pursuant to Dividend
Equivalents, shall be deemed to have been earned to the maximum extent permitted
pursuant to Section 4.4 for any Performance Period not yet completed as of the
effective date of such Change in Control.

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ARTICLE V – RESTRICTED STOCK AWARDS AND STOCK AWARDS

 

5.1 Award of Restricted Stock and Stock Awards

 

The Committee may grant Restricted Stock Awards to officers and key employees of
the Company subject to such terms and conditions as the Committee shall
determine, provided that each Restricted Stock Award shall be subject to a
Restriction Period. The Committee may also grant Stock Awards. Restricted Stock
Awards and Stock Awards shall be used for the purposes of recruitment,
recognition, and retention of key employees vital to the Company’s success and
may be issued independent of or in lieu of other compensation payable to a
Participant. The Committee may, in its sole discretion, require a Participant to
deliver consideration in form of services or cash as a condition to the grant of
a Restricted Stock Award or Stock Award.

 

5.2 Restricted Stock Award and Stock Award Agreements

 

Each Restricted Stock Award shall be evidenced by a written agreement between
the Company and the Participant to whom such award is granted and a Stock Award
will be evidenced by a written agreement in the event that the Committee
determines that an agreement is appropriate. The agreement shall specify the
number of shares awarded, the terms and conditions of the award and, in the case
of a Restricted Stock Award, the Restriction Period and the consequences of
forfeiture.

 

5.3 Awards and Certificates

 

Shares of Common Stock awarded pursuant to a Restricted Stock Award or a Stock
Award shall be registered in the name of the Participant. Certificates
evidencing Restricted Stock Awards shall be held in custody by the Company until
the restrictions thereon are no longer in effect. After the lapse or waiver of
the restrictions imposed upon the Restricted Stock Award, the Company shall
deliver in the Participant’s name one or more stock certificates, free of
restrictions, evidencing the shares of Common Stock subject to the Restricted
Stock Award to which the restrictions have lapsed or been waived.

 

5.4 Restriction Period

 

At the time a Restricted Stock Award is made, the Committee shall establish a
period of time (the “Restriction Period”) applicable to such award during which
the shares of restricted stock are subject to the risk of forfeiture and the
Participant shall not be permitted to sell, assign, transfer, pledge, or
otherwise dispose of such shares. The Committee may provide for the lapse of
such restrictions in installments and may accelerate or waive such restrictions,
in whole or in part, based on service and such other factors as the Committee
may determine.

 

5.5 Other Terms and Conditions of Restricted Stock Awards

 

Shares of Common Stock subject to Restricted Stock Awards shall be subject to
the following terms and conditions:

 

(a) Except as otherwise provided in the Plan or in the Restricted Stock Award
agreement, the Participant shall have all the rights of a shareholder of the
Company, including the right to vote the shares.

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(b) Cash dividends paid with respect to Common Stock subject to a Restricted
Stock Award shall be reinvested to purchase additional shares of Common Stock
that shall be subject to the same terms, conditions, and restrictions that apply
to the Restricted Stock Award with respect to which such dividends were issued.

 

(c) Except as otherwise provided in the Plan or in the Restricted Stock Award
agreement, upon termination of a Participant’s employment, all shares subject to
restriction shall be forfeited by the Participant.

 

5.6 Termination of Employment

 

(a) In the event a Participant terminates employment during the Restriction
Period by reason of death or Disability, restrictions shall lapse on all shares
subject to restriction at the time of such termination.

 

(b) In the event a Participant terminates employment during the Restriction
Period by reason of Retirement, restrictions shall lapse on a proportion of any
shares subject to restriction at the time of such Retirement. Any applicable
Restriction Period shall continue in effect, but in no event beyond the end of
the three-year period following the Participant’s Retirement. The number of
shares upon which the restrictions shall lapse shall be prorated for the number
of months of employment during the Restriction Period prior to the Participant’s
termination of employment.

 

(c) If a Participant terminates employment for any reason other than death,
Disability, or Retirement, the Participant shall forfeit all shares subject to
restriction.

 

(d) Notwithstanding Sections 5.6 (a), 5.6 (b) and 5.6 (c), in the event a
Participant’s employment is terminated under special circumstances, the
Committee may, in its sole discretion, waive in whole or in part any or all
remaining restrictions.

 

5.7 Change in Control Provisions

 

In the event of any Change in Control, all restrictions applicable to any
outstanding Restricted Stock Award shall lapse as of the date of such Change in
Control.

 

ARTICLE VI – CASH INCENTIVE AWARDS

 

6.1 Granting of Awards

 

The Committee, in its discretion, may grant Cash Incentive Awards to
Participants. Each Cash Incentive Award shall be conditioned upon the Company’s
attainment of a specified goal with respect to one or more Performance Measures
during the applicable Performance Period. The Committee shall determine a
minimum performance level below which the Cash Incentive Award shall not be
payable. The Committee may adjust the performance goals and measurements to
reflect significant unforeseen events; provided, however, that the Committee may
not make any such adjustment with respect to any Cash Incentive Award to an
individual who is then a “covered employee” as such term is defined under
Section 162(m), if such adjustment would cause compensation pursuant to such
Cash Incentive Award to cease to be performance-based compensation under
Section 162(m).

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6.2 Other Award Terms

 

The Committee may, in its sole discretion, establish certain additional
performance-based conditions that must be satisfied by the Company, a business
unit or the Participant as a condition precedent to the payment of all or a
portion of any Cash Incentive Awards. Such conditions precedent may include,
among other things, the receipt by a Participant of a specified annual
performance rating and the achievement of specified performance goals by the
Company, business unit or Participant.

 

6.3 Maximum Amount Available for Awards

 

The maximum amount payable to any one Participant pursuant to a Cash Incentive
Award with respect to any one year shall be $3,000,000.

 

ARTICLE VII – TAX WITHHOLDING AND DEFERRAL OF PAYMENT

 

7.1 Tax Withholding

 

(a) The Company may withhold from any payment of cash or Common Stock to a
Participant or other person pursuant to the Plan an amount sufficient to satisfy
any required withholding taxes, including the Participant’s Social Security and
Medicare taxes (“FICA”) and federal, state and local income tax with respect to
income arising from the payment of the award. The Company shall have the right
to require the payment of any such taxes before delivering payment or issuing
Common Stock pursuant to the award.

 

(b) At the discretion of the Committee, share tax withholding may be included as
a term of any grant of Stock Options, Stock Appreciation Rights, Performance
Restricted Shares, Restricted Stock Award and Stock Award.

 

(c) Share tax withholding shall entitle the Participant to elect to satisfy, in
whole or in part, any tax withholding obligations in connection with the
issuance of shares of Common Stock earned under the Plan by requesting that the
Company either:

 

(i) withhold shares of Common Stock otherwise issuable to the Participant; or

 

(ii) accept delivery of shares of Common Stock previously owned by the
Participant.

 

In either case, the Fair Market Value of such shares of Common Stock will
generally be determined on the date of exercise for Stock Options and Stock
Appreciation Rights, the date following the Restriction Period for Performance
Restricted Shares and Restricted Stock Awards and on the grant date for Stock
Awards.

 

(d) Notwithstanding any other provision hereof to the contrary, the Committee,
in its sole discretion may at any time suspend, terminate, or disallow any or
all entitlements to share tax withholding previously granted or extended to any
Participant.

 

7.2 Deferral of Payment

 

At the discretion of the Committee, a Participant may be offered the right to
defer the receipt of all or any portion of the Common Stock distributable to
such Participant with respect to Performance Restricted Shares, Restricted Stock
Awards or Stock Awards. Such right shall be exercised by execution of a written
agreement by the Participant: (i) with respect to Restricted Stock Awards, prior
to the expiration of the applicable Restriction Period; (ii) with respect to
Performance Restricted Shares, prior to the expiration of the applicable Vesting
Period; and (iii) with respect to Stock Awards, prior to the deadline
established by the Committee for such award. Upon any such deferral, the number
of shares of Common Stock subject to the deferral shall be converted to stock
units and a stock unit account shall be maintained by the Company on behalf of
the Participant. Such stock units shall represent only a contractual right and
shall not represent any interest in or title to Common Stock. Such units shall
be entitled to earn dividend equivalents. All other terms and conditions of
deferred payments shall be as contained in said written agreement.

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ARTICLE VIII – OTHER PROVISIONS

 

8.1 Adjustment in Number of Shares and Option Prices

 

Grants of Stock Options, Stock Appreciation Rights, Performance Restricted
Shares, Restricted Stock Awards and Stock Awards shall be subject to adjustment
by the Committee as to the number and price of shares of Common Stock or other
considerations subject to such grants in the event of changes in the outstanding
shares by reason of stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges, or other
relevant changes in capitalization occurring after the date of grant. In the
event of any such change in the outstanding shares, the aggregate number of
shares available under the Plan may be appropriately adjusted by the Committee.

 

8.2 No Right to Employment

 

Nothing contained in the Plan, nor in any grant pursuant to the Plan, shall
confer upon any Participant any right with respect to continuance of employment
by the Company or its subsidiaries, nor interfere in any way with the right of
the Company or its subsidiaries to terminate the employment or change the
compensation of any employee at any time.

 

8.3 Nontransferability

 

A Participant’s rights under the Plan, including the right to any shares or
amounts payable may not be assigned, pledged, or otherwise transferred except,
in the event of a Participant’s death, to the Participant’s designated
beneficiary or, in the absence of such a designation, by will or by the laws of
descent and distribution; provided, however, that the Committee may, in its
discretion, at the time of grant of a Nonstatutory Stock Option or by amendment
of an option agreement for an Incentive Stock Option or a Nonstatutory Stock
Option, provide that Stock Options granted to or held by a Participant may be
transferred, in whole or in part, to one or more transferees and exercised by
any such transferee, provided further that (i) any such transfer must be without
consideration; (ii) each transferee must be a member of such Participant’s
“immediate family” or a trust, family limited partnership or other estate
planning vehicle established for the exclusive benefit of one or more members of
the Participant’s immediate family; and (iii) such transfer is specifically
approved by the Committee following the receipt of a written request for
approval of the transfer; and provided further that any Incentive Stock Option
which is amended to permit transfers during the lifetime of the Participant
shall, upon the effectiveness of such amendment, be treated thereafter as a
Nonstatutory Stock Option. In the event a Stock Option is transferred as
contemplated in this Section, such transfer shall become effective when approved
by the Committee and such Stock Option may not be subsequently transferred by
the transferee other than by will or the laws of descent and distribution. Any
transferred Stock Option shall continue to be governed by and subject to the
terms and conditions of this Plan and the relevant option agreement, and the
transferee shall be entitled to the same rights as the Participant as if no
transfer had taken place. As used in this Section, “immediate family” shall
mean, with respect to any Participant, any spouse, child, stepchild or
grandchild, and shall include relationships arising from legal adoption.

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8.4 Compliance with Government Regulations

 

(a) The Company shall not be required to issue or deliver shares or make payment
upon any right granted under the Plan prior to complying with the requirements
of any governmental authority in connection with the authorization, issuance, or
sale of such shares.

 

(b) The Plan shall be construed and its provisions enforced and administered in
accordance with the laws of the Commonwealth of Pennsylvania applicable to
contracts entered into and performed entirely in such State.

 

8.5 Rights as a Shareholder

 

The recipient of any grant under the Plan shall have no rights as a shareholder
with respect thereto unless and until certificates for shares of Common Stock
are issued to such recipient or such shares are represented by book entry in the
name of such recipient.

 

8.6 Unfunded Plan

 

Unless otherwise determined by the Committee, the Plan shall be unfunded and
shall not create (or be construed to create) a trust or separate funds. With
respect to any payment not yet made to a Participant, nothing contained herein
shall give any Participant any rights that are greater than those of a general
creditor of the Company.

 

8.7 Foreign Jurisdiction

 

The Committee shall have the authority to adopt, amend, or terminate such
arrangements, not inconsistent with the intent of the Plan, as it may deem
necessary or desirable to make available tax or other benefits of the laws of
foreign countries in order to promote achievement of the purposes of the Plan.

 

8.8 Other Compensation Plans

 

Nothing contained in this Plan shall prevent the Company from adopting other or
additional compensation arrangements, subject to shareholder approval if such
approval is required.

 

8.9 Termination of Employment - Certain Forfeitures

 

Notwithstanding any other provision of the Plan (other than provisions regarding
Change in Control, including without limitation Sections 2.5(d), 4.13 and 5.7
which shall apply in all events) and except for Performance Restricted Shares,
Restricted Stock Awards or Stock Awards which would otherwise be free of
restrictions and the receipt of which has been deferred pursuant to Section 7.2,
a Participant shall have no right to exercise any Stock Option or Stock
Appreciation Right or receive payment of any Performance Restricted Share or
Restricted Stock Award if: (i) the Participant is discharged for willful,
deliberate, or gross misconduct as determined by the Committee in its sole
discretion; or (ii) if following the Participant’s termination of employment
with the Company and, within a period of three years thereafter, the Participant
engages in any business or enters into any employment which the Committee in its
sole discretion determines to be either directly or indirectly competitive with
the business of the Company or substantially injurious to the Company’s
financial interest (the occurrence of an event described above in (i) or (ii) of
this Section 8.9 shall be referred to herein as “Injurious Conduct”).
Furthermore, notwithstanding any other provision of the Plan to the contrary, in
the event that a Participant receives or is entitled to cash or the delivery or
vesting of Common Stock pursuant to an award during the 12 month period prior to
the Participant’s termination of employment with the Company or during the 24
months following the Participant’s termination of employment, then the
Committee, in its sole discretion, may require the Participant to return or
forfeit the cash and/or Common Stock received with respect to such award (or its
economic value as of (i) the date of the exercise of Stock Options or Stock
Appreciation Rights; (ii) the date immediately following the end of the
Restricted Period for Performance Restricted Shares or for Restricted Stock
Awards; and (iii) the date of grant or payment with respect to Stock Awards or
Cash Incentive Awards, as the case may be) in the event that the Participant
engages in Injurious Conduct. A Participant may request the Committee in writing
to determine whether any proposed business or employment activity would
constitute Injurious Conduct. Such a request shall fully describe the proposed
activity and the Committee’s determination shall be limited to the specific
activity so described. The Committee’s right to require forfeiture under this
Section 8.9 must be exercised within 90 days after the discovery of an
occurrence triggering the Committee’s right to require forfeiture but in no
event later than 24 months after the Participant’s termination of employment
with the Company.

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ARTICLE IX – AMENDMENT AND TERMINATION

 

9.1 Amendment and Termination

 

The Board of Directors may modify, amend, or terminate the Plan at any time
except that, to the extent then required by applicable law, rule, or regulation,
approval of the holders of a majority of shares of Common Stock represented in
person or by proxy at a meeting of the shareholders will be required to increase
the maximum number of shares of Common Stock available for distribution under
the Plan (other than increases due to adjustments in accordance with the Plan).
No modification, amendment, or termination of the Plan shall adversely affect
the rights of a Participant under a grant previously made to him without the
consent of such Participant.

 

ARTICLE X – EFFECTIVE DATE, DURATION OF PLAN AND TERMINATION OF PRIOR PLAN

 

10.1 Effective Date and Duration of Plan

 

The Plan shall become effective immediately upon the approval and adoption
thereof at the Annual Meeting of the shareholders on April 26, 1999. All rights
granted under the Plan must be granted within ten years from its adoption date
by the shareholders of the Company. Any rights outstanding ten years after the
adoption of the Plan may be exercised within the periods prescribed under or
pursuant to the Plan.

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10.2 Termination of Grants Under the Prior Plan

 

Upon the effective date of this Plan, no further grants or awards are permitted
under the Prior Plan. All grants and awards under the Prior Plan that remain
outstanding shall be administered and paid in accordance with the provisions of
the Prior Plan.