Exhibit 10.2






	 	 	 	 	 



EXHIBIT 10.2




PRIMUS GUARANTY, LTD.

INCENTIVE COMPENSATION PLAN

(including amendments through July 29, 2010)




Section 1. Purpose





The Plan authorizes the Administrator to provide Employees, who are in a position to
contribute to the long-term success of the Company or its subsidiaries, with Shares, Share Units,
and Options to acquire Shares in the Company, as well as cash-based incentives. The Company
believes that this incentive program will cause those persons to increase their interest in the
welfare of the Company and its subsidiaries, and aid in attracting, retaining and motivating
employees of outstanding ability. The Plan is intended to qualify certain compensation awarded
under the Plan as “performance-based” compensation under Section 162(m) of the U.S. Internal
Revenue Code of 1986, as amended (the “Code”), to the extent deemed appropriate by the
Administrator.



Primus Asset Management, Inc., CypressTree Investment Management, LLC, Primus Guaranty (UK)
Ltd. and the Company are each sponsors of the Plan for their respective Employees and will provide
all benefits and payments under the Plan to their respective Employees.



Section 2. Definitions




Capitalized terms not otherwise defined herein shall have the meanings set forth in this
Section 2.



(a) “Administrator” shall mean the Compensation Committee or the Board, where the Board
is acting as the Administrator or performing the functions of the Administrator, as set forth in
Section 4.



(b) “Award” shall mean a compensatory award made pursuant to the Plan pursuant to which a
Grantee receives, or has the opportunity to receive, Shares or cash.



(c) “Board” shall mean the Board of Directors of the Company.



(d) “Change in Control” shall have the meaning set forth in the Senior Management
Severance Pay Plan.



(e) “Cause” shall have the meaning ascribed thereto in any employment agreement between
the Company or any of its subsidiaries and the Grantee, or, if there is no employment agreement or
if any such employment agreement does not contain a definition of “cause”, then Cause shall mean
a finding by the Administrator that the Grantee has (i) been charged with a felony or a crime
involving moral turpitude, (ii) committed an act of fraud or embezzlement against the Company or
its subsidiaries, (iii) failed, refused or neglected to substantially perform his or her duties
(other than by reason of a physical or mental impairment) or to implement the directives of the
Company, or (iv) willfully engaged in conduct that is materially injurious to the Company,
monetarily or otherwise.



(f) “Company” shall mean Primus Guaranty, Ltd., a company organized under the laws of
Bermuda.



(g) “Compensation Committee” shall mean the Compensation Committee of the Board.


 


 









 





(h) “Disability” shall have the meaning ascribed thereto in any employment agreement
between the Company or any subsidiary of the Company and the Grantee, or, if there is no employment
agreement or if any such employment agreement does not contain a definition of “disability”, then
Disability shall mean
the Grantee’s inability, by reason of a physical or mental impairment, to substantially
perform his or her job functions for a period of six consecutive months.



(i) “Economic Results” shall mean Economic Results as described in the Company’s annual
report filed with the U.S. Securities and Exchange Commission for the applicable fiscal year, which
means the Company’s net income or loss under U.S. generally accepted accounting principles
(“GAAP”), as adjusted as described in the annual report to calculate Economic Results.



(j) “Employee” shall mean any person or entity that is providing, or has agreed to
provide, services to the Company or a subsidiary of the Company, whether as an employee, director
or independent contractor.



(k) “Fair Market Value” of a Share on any given date shall mean the closing price on the
date of the grant, as quoted on the stock exchange or market on which the Shares are listed.



(l) “Forfeiture” means the right of the Company or any of its affiliates to acquire
Shares issued under the Plan upon a Grantee’s termination of employment with the Company and its
subsidiaries at a price per Share that is less than Fair Market Value, or, in the case of Share
Units, the forfeiture by the Grantee of the right to receive Shares at a future date or upon the
occurrence of a future event, in each case as set forth in a Grant Certificate.



(m) “Grant Certificate” shall mean a certificate accepted by the Grantee, or other
written agreement between the Company and the Grantee, evidencing the grant of an Option, Share
Unit or Shares hereunder and containing such terms and conditions, not inconsistent with the Plan,
as the Administrator shall approve.



(n) “Grantee” shall mean an Employee granted an Award under the Plan.



(o) “ISO” shall mean any Option or portion thereof that is designated in a Grant
Certificate as an ISO and meets the requirements of an incentive stock option under Section 422 of
the Code.



(p) “Nonqualified Option” shall mean any Option or portion thereof that either is
designated by the Administrator as such or is otherwise not an ISO.



(q) “Options” shall refer to options issued under and subject to the Plan.



(r) “Plan” shall mean the Primus Guaranty, Ltd. Incentive Compensation Plan as set forth
herein and as amended from time to time.



(s) “Qualified Member” shall mean a member of the Compensation Committee who is a
“non-employee director” of the Company as defined in Rule 16b-3(b)(3) under the U.S. Securities
Exchange Act of 1934 and an “outside director” within the meaning of U.S. Treasury Regulation §
1.162-27 under Section 162(m) of the Code.



(t) “Retirement” shall mean the termination of a Grantee’s employment with the Company
and its subsidiaries that is approved by the Administrator and occurs on or after the Grantee’s
attainment of age 62.



(u) “Share” shall mean a common share, par value $.08, of the Company.



(v) “Share Units” shall have the meaning set forth in Section 7(d).



(w) “Unvested Shares” shall refer to Shares issued under and subject to the Plan that are
subject to Forfeiture, except where such Forfeiture can occur only upon a termination of employment
for Cause.


 


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Section 3. Shares Available under the Plan




(a) Aggregate Number of Shares Available for Awards. The total number of Shares
underlying Options and Share Units granted under the Plan plus the total number of Shares awarded
under the Plan other than pursuant to the exercise of Options or maturity of Share Units shall not
exceed the sum of 11,149,213, plus the number of Shares or Share Units awarded to Employees outside
of the Plan, up to a maximum of 4,700,000, that are forfeited or reacquired by the Company at a
price less than the Fair Market Value thereof upon such Employee’s termination of employment with
the Company and its subsidiaries (the “Plan Limit”). If Options or Share Units are forfeited,
cancelled or terminate unexercised for any reason, or if Shares awarded under the Plan are
reacquired by the Company pursuant to a Forfeiture, then the Shares subject to such Options and
Share Units and such reacquired Shares shall be added back to the Plan Limit. The Plan Limit shall
not apply to any Unvested Shares or Share Units granted under the Plan pursuant to awards made
under any other plan, and such Share Units that are forfeited or Unvested Shares that are
reacquired by the Company pursuant to a Forfeiture shall not increase the Plan Limit.



(b) Per Grantee Limitation on Share-Based Awards. In any calendar year, no Grantee may
be granted Awards that relate to more than 3 million Shares. This Section 3(b) shall apply only
with respect to Awards that are denominated by a specified number of Shares, even if the Award may
be settled in cash or a form other than Shares. If the number of Shares ultimately payable in
respect of an Award is a function of future achievement of performance targets, then for purposes
of this limitation, the number of Shares to which such Award relates shall equal the number of
Shares that would be payable assuming maximum performance was achieved.



(c) Per Grantee Limitation on Other Awards. In any calendar year, no Grantee may be
granted Awards not otherwise described in Section 3(b) that can be settled for cash, Shares or
other consideration having a value in excess of $10 million.



Section 4. Administration of the Plan




(a) Authority of the Administrator. The Plan shall be administered by the Administrator.
The Administrator may delegate to officers or managers of the Company or any subsidiary of the
Company the authority, subject to such terms as the Administrator shall determine, to perform such
functions as the Administrator may determine, to the extent permitted under applicable law. At any
time that a member of the Compensation Committee is not a Qualified Member, (i) any action of the
Compensation Committee relating to an Award intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code and regulations thereunder may be
taken by a subcommittee, designated by the Compensation Committee or the Board, composed solely of
two or more Qualified Members, and (ii) any action relating to an Award granted or to be granted to
a Grantee who is then subject to Section 16 of the U.S. Securities Exchange Act of 1934 in respect
of the Company may be taken either by the Board, a subcommittee of the Compensation Committee
consisting of two or more Qualified Members or by the Compensation Committee but with each such
member who is not a Qualified Member abstaining or recusing himself or herself from such action,
provided that, upon such abstention or recusal, the subcommittee or the Compensation Committee
remains composed of two or more Qualified Members. Such action, authorized by such a subcommittee
or by the Compensation Committee upon the abstention or recusal of such non-Qualified Member(s),
shall be the action of the Compensation Committee for purposes of the Plan. Other provisions of the
Plan notwithstanding, the Board may perform any function of the Administrator under the Plan, and
that authority specifically reserved to the Board under the terms of the Plan, the Company’s
Certificate of Incorporation, Articles of Association, Bye-Laws, or applicable law shall be
exercised by the Board and not by the Administrator. The Board shall serve as the Administrator in
respect of any Awards made to any non-employee director. The Administrator shall have full and
final authority to take the following actions, in each case subject to and consistent with the
provisions of the Plan:



(i) to select the Employees to whom Awards may be granted, and the number of Shares or
cash-value relating thereto;



(ii) to determine the terms and conditions of any Awards granted under the Plan, including,
with respect to Options granted under the Plan, including the exercise price, conditions relating
to exercise, and termination of the right to exercise;


 


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(iii) to determine the conditions relating to the Forfeiture of Unvested Shares or Share
Units;



(iv) to determine whether any Option shall be an ISO or a Nonqualified Option;



(v) to determine the restrictions or conditions related to the delivery, holding and
disposition of Shares issued under the Plan;



(vi) to prescribe the form of each Grant Certificate;



(vii) to adopt, amend, suspend, waive and rescind such rules and regulations and appoint
such agents as the Administrator may deem necessary or advisable to administer the Plan;



(viii) to correct any defect or supply any omission or reconcile any inconsistency in the
Plan and to construe and interpret the Plan and any Grant Certificate or other instrument
hereunder; and



(ix) to make all other decisions and determinations as may be required under the terms of
the Plan or as the Administrator may deem necessary or advisable for the administration of the
Plan.



(b) Manner of Exercise of Administrator Authority. Any action of the Administrator with
respect to the Plan shall be final, conclusive and binding on all persons, including the Company,
subsidiaries of the Company, Grantees, or any person claiming any rights under the Plan from or
through any Grantee, except to the extent the Administrator may subsequently modify, or take
further action not consistent with, its prior action. If not specified in the Plan, the time at
which the Administrator must or may make any determination shall be determined by the
Administrator, and any such determination may thereafter be modified by the Administrator (subject
to Section 13). The express grant of any specific power to the Administrator, and the taking of
any action by the Administrator, shall not be construed as limiting any power or authority of the
Administrator. The Administrator may delegate to officers or managers of the Company or any
subsidiary of the Company the authority, subject to such terms as the Administrator shall
determine, to perform such functions as the Administrator may determine, to the extent permitted
under applicable law.



(c) Limitation of Liability. The Administrator shall be entitled to, in good faith, rely
or act upon any report or other information furnished to it by any officer or other employee of the
Company or any of its subsidiaries, the Company’s independent certified public accountants or any
executive compensation consultant, legal counsel or other professional retained by the Company to
assist in the administration of the Plan. To the fullest extent permitted by applicable law,
neither the Administrator, any member of the Compensation Committee, nor any officer or employee of
the Company acting on their behalf, shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan, and the Administrator, each
member of the Compensation Committee and any officer or employee of the Company acting on its
behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company
with respect to any such action, determination or interpretation.


 


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Section 5. Awards.




(a) Type of Awards. The Administrator shall have the discretion to determine the type of
Awards to be granted under the Plan. Such Awards may be in a form payable in either Shares or
cash, including, but
not limited to, options to purchase Shares, Shares, and Share Units. The Administrator is
authorized to grant Awards as a bonus, or to grant Awards in lieu of obligations of the Company or
any subsidiary to pay cash or grant other awards under other plans or compensatory arrangements, to
the extent permitted by such other plans or arrangements. Shares issued pursuant to an award in
the nature of a purchase right (e.g., options) shall be purchased for such consideration, paid for
at such times, by such methods, and in such forms, including cash, Shares, other awards, or other
consideration, as the Administrator shall determine.



(b) Terms and Conditions of Awards. The Administrator shall determine the size of each
Award to be granted (including, where applicable, the number of Shares to which an award will
relate), and all other terms and conditions of each such award (including, but not limited to, any
exercise price, grant price, or purchase price, any restrictions or conditions relating to
transferability, forfeiture, exercisability, or settlement of an award, and any schedule or
performance conditions for the lapse of such restrictions or conditions, and accelerations or
modifications thereof, based in each case on such considerations as the Administrator shall
determine). The Administrator may determine whether, to what extent, and under what circumstances
an award may be settled, or the exercise price of an award may be paid, in cash, Shares, other
awards, or other consideration, or an award may be cancelled, forfeited, or surrendered. The right
of a Grantee to exercise or receive a grant or settlement of any award, and the timing thereof, may
be subject to such performance conditions as may be specified by the Administrator. The
Administrator may use such business criteria and measures of performance as it may deem appropriate
in establishing performance conditions, and may exercise its discretion to reduce or increase the
amounts payable under any Award subject to performance conditions, except as limited under Section
11(a) in the case of a Performance Award intended to qualify under Section 162(m) of the Code.



Section 6. Terms Relating to Options.




(a) Generally. Options granted under the Plan shall be subject to the terms of the Plan
and such other terms as the Administrator shall set forth in a Grant Certificate. Unless otherwise
determined by the Administrator and set forth in a Grant Certificate:



(i) Vesting. Options shall vest in four equal installments on the first, second, third
and fourth anniversaries of the date of grant.



(ii) Exercise Price. The exercise price per Share shall be the Fair Market Value of a
Share on the date of grant of the Option.



(iii) Termination of Options. Upon the Grantee’s termination of employment with the
Company and its subsidiaries for any reason, Options that are not then vested and exercisable
(after taking into account any accelerated vesting pursuant to Section 10) shall immediately
terminate. Options that are vested and exercisable (after taking into account any accelerated
vesting pursuant to Section 10) shall generally remain exercisable until, and terminate upon, the
91st day following such termination of employment; provided, however, that (i) if such termination
is for Cause, the Options will terminate immediately, and (ii) if such termination is on account of
death, Disability or Retirement, the Options will remain exercisable until, and terminate upon, the
first anniversary of such termination. If not terminated earlier pursuant to the provisions of
this Section 6(a)(iii), each Option will terminate upon the tenth anniversary of the date of grant,
or such earlier time as may be provided by action of the Administrator pursuant to Section 8.


(iv) Tax Status. Each Option shall be a Nonqualified Option.



 


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(b) Exercise of Options. Only the vested portion of any Option may be exercised. A
Grantee shall exercise an Option by delivery of written notice to the Company setting forth the
number of Shares with respect to which the Option is to be exercised, together with a certified
check or bank draft payable to the order of the Company for an amount equal to the sum of the
exercise price for such Shares and any
employment tax required to be withheld. The Administrator may, in its sole discretion, permit
other forms of payment, including notes or other contractual obligations of a Grantee to make
payment on a deferred basis. Before the Company issues any Shares to a Grantee pursuant to the
exercise of an Option, the Company shall have the right to require that the Grantee make such
provision, or furnish the Company such authorization, necessary or desirable so that the Company
may satisfy its obligation under applicable income tax laws to withhold for income or other taxes
due upon or incident to such exercise. The Administrator, may, in its discretion, permit such
withholding obligation to be satisfied through the withholding of Shares that would otherwise be
delivered upon exercise of the Option.



(c) Transferability. No Option may be sold, transferred, assigned, pledged or otherwise
encumbered, except by will or the laws of descent and distribution, and an Option shall be
exercisable during the Grantee’s lifetime only by the Grantee. Upon a Grantee’s death, the estate
or other beneficiary of such deceased Grantee shall be subject to all the terms and conditions of
the Plan and Grant Certificate, including the provisions relating to the termination of the right
to exercise the Option.



(d) Option Grant Guidelines. Beginning in 2003, the number of Shares subject to Option
grants in a particular year will be targeted at 1% of the total outstanding Shares. Option awards
will be concentrated among a small number of key employees who, in the opinion of the
Administrator, are likely to make the greatest contribution to the creation of shareholder value
over the vesting period.



Section 7. Terms Relating to Awards of Shares and Share Units.




(a) Grant and Restrictions. The Administrator may award Shares that either are or are
not subject to vesting. Unvested Shares shall be subject to such restrictions on transferability
and other restrictions as the Administrator may impose, which restrictions may lapse separately or
in combination at such times, under such circumstances, in such installments, or otherwise, as the
Administrator may determine. Except to the extent restricted under the terms of the Plan and any
Grant Certificate, a Grantee awarded Unvested Shares shall have all of the rights of a shareholder
including, without limitation, the right to vote Unvested Shares or the right to receive dividends
thereon. The Administrator may require the Grantee to pay (in cash or such other form as
determined by the Administrator) for Shares at a price per Share up to the Fair Market Value
thereof. The grant of Shares or the lapse of restrictions on Unvested Shares shall be conditional
on the Grantee’s satisfaction of any withholding tax obligation that arises in connection
therewith.



(b) Forfeiture. Except as otherwise determined by the Administrator, upon termination of
employment or service (as determined under criteria established by the Administrator) during the
applicable restriction period, Unvested Shares that are at that time subject to Forfeiture shall be
reacquired by the Company or its subsidiaries for such consideration as determined by the
Administrator and set forth in a Grant Certificate; provided, however, that the Administrator may
provide in any Grant Certificate, or may determine in any individual case, that restrictions or
Forfeiture conditions relating to Unvested Shares will be waived in whole or in part in the event
of termination resulting from specified causes.



(c) Dividends. Any dividends paid on Unvested Shares shall be either paid at the
dividend payment date in cash or in Unvested Shares having a Fair Market Value equal to the amount
of such dividends, or the payment of such dividends shall be deferred and/or the amount or value
thereof automatically reinvested in additional Unvested Shares, other Awards, or other investment
vehicles, as the Administrator shall determine or permit the Grantee to elect, in either case in
accordance with Section 409A of the Code, if applicable. Shares distributed in connection with a
stock split or stock dividend, and other property distributed as a dividend, shall be subject to
restrictions and a risk of Forfeiture to the same extent as the Unvested Shares with respect to
which such stock or other property has been distributed, unless otherwise determined by the
Administrator. Unless otherwise determined by the Administrator, no dividends or cash bonus equal
to dividends shall be payable in respect of unvested Share Units, and cash bonuses shall be payable
in respect of Shares underlying vested Share Units in the amount that dividends
would have been paid on the underlying Shares had they been issued and outstanding. Any such
amounts shall be paid in the calendar year in which the applicable dividends are paid to
shareholders.


 


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(d) Share Units. In lieu of awarding Shares under the foregoing provisions of this
Section 7, the Administrator may award “Share Units”, which represent the right of the Grantee to
receive delivery of a specified number of Shares or cash, as the Administrator determines, at a
future date or upon the occurrence of a future event as specified by the Administrator, subject to
satisfaction by the Grantee of the same vesting conditions that would have been imposed had the
award been in the form of Unvested Shares. The Grantee shall have no rights or obligations as a
shareholder unless and until Shares are actually delivered upon maturity of the Share Unit award.



Section 8. Adjustment Upon Changes in Capitalization




In the event any recapitalization, forward or reverse split, reorganization, merger,
consolidation, incorporation, spin-off, combination, repurchase, exchange of Shares or other
securities, dividend or distribution of Shares or other special and nonrecurring dividend or
distribution (whether in the form of cash, securities or other property), liquidation, dissolution,
sale or purchase of assets or other similar transactions or events, affects the Shares such that an
adjustment is, in the sole discretion of the Administrator, appropriate in order to prevent
dilution or enlargement of the rights of Grantees under the Plan, then the Administrator shall
equitably adjust any or all of (i) the number and kind of securities deemed to be available
thereafter for grants of Awards under Section 3, (ii) the number and kind of securities subject to
Unvested Shares, Share Units or outstanding Options, and (iii) the exercise price per Share. In
addition, the Administrator is authorized to make adjustments in the terms and conditions of, and
the criteria included in, Unvested Shares, Share Units or Options (including, without limitation,
cancellation of Options and Share Units in exchange for the intrinsic (i.e., in-the-money) value,
if any, of the vested portion thereof, or substitution of Unvested Shares, Share Units or Options
using securities or other obligations of a successor or other entity) in recognition of unusual or
nonrecurring events (including, without limitation, a Change in Control or an event described in
the preceding sentence) affecting the Company or any subsidiary of the Company or the financial
statements of the Company or any subsidiary of the Company, or in response to changes in applicable
laws, regulations, or accounting principles. Notwithstanding any other provision contained herein,
any adjustments to outstanding Awards pursuant to this Section 8 shall be consistent with Section
409A of the Code, if applicable.



Section 9. Restrictions on Shares.




(a) Restrictions on Issuing Shares. No Shares shall be issued or transferred to an
Employee under the Plan unless and until all applicable legal requirements have been complied with
to the satisfaction of the Administrator. The Administrator shall have the right to condition the
award or delivery of Shares or exercise of any Option on the Grantee’s undertaking in writing to
comply with such restrictions on any subsequent disposition of the Shares issued or transferred
thereunder as the Administrator shall deem necessary or advisable as a result of any applicable
law, regulation, official interpretation thereof, or any underwriting agreement.



(b) Transfer of ISO Shares. The Grantee shall notify the Company of any transfer of
Shares that were acquired upon exercise of an ISO that occurs within one year of such exercise or
two years of the date the ISO was granted.



(c) Certificates for Shares. Shares issued under the Plan may be evidenced in such
manner as the Administrator shall determine. If certificates representing Shares are registered in
the name of a Grantee, such certificates may bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Shares, and the Company may retain physical
possession of the certificates, in which case the Grantee shall be required to have delivered a
power of transfer to the Company, endorsed in blank, relating to the Shares.


 


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Section 10. Acceleration of Vesting.




Unless otherwise provided in a Grant Certificate, all Options, Share Units and Unvested Shares
held by a Grantee shall become (i) fully vested upon a termination of the Grantee’s employment with
the Company and its subsidiaries by reason of the Grantee’s death, Disability or Retirement and
(ii) fully vested immediately upon a Change in Control. Unless the Grantee has elected, in
accordance with Section 409A of the Code, to defer distribution of the Shares or cash underlying
Share Units that become vested pursuant to this Section 10, such Shares or cash shall be
distributed to the Grantee on the applicable vesting date, or within a specified period thereafter,
as provided in the Grant Certificate. Notwithstanding the foregoing, in the event that Share Units
become vested and payable upon a Change in Control and such Share Units constitute nonqualified
deferred compensation subject to Section 409A of the Code, the Shares or cash payable in settlement
of such Share Units shall be paid on the date of the Change in Control only if the applicable
transaction or event constitutes a change in control under Section 409A of the Code (any such
event, a “409A CIC”); otherwise such Shares of cash payable with respect to vested Share Units
shall be paid on the earlier of (a) the otherwise applicable payment date or (b) the occurrence of
a 409A CIC.



Section 11. Performance Awards




(a) Performance Awards Granted to Designated Covered Employees. If the Administrator
determines that an Award to be granted to an eligible person who is designated by the Administrator
as likely to be a Covered Employee (as defined below) should qualify as “performance-based
compensation” for purposes of Section 162(m) of the Code, the grant, exercise, and/or settlement
of such Award (a “Performance Award”) shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 11(a). This Section 11(a) shall not
apply to Awards that otherwise qualify as “performance-based compensation” by reason of U.S.
Treasury Regulation §1.162-27(e)(2)(vi) (relating to certain stock options and stock appreciation
rights).



(i) Performance Goals Generally. The performance goals for such Performance Awards shall
consist of one or more business criteria and a targeted level or levels of performance with respect
to each such criteria, as specified by the Administrator consistent with this Section 11(a).
Performance goals shall be objective and shall otherwise meet the requirements of Section 162(m) of
the Code and regulations thereunder (including U.S. Treasury Regulation §1.162-27 and successor
regulations thereto), including the requirement that the level or levels of performance targeted by
the Administrator result in the achievement of performance goals being “substantially uncertain.”
The Administrator may determine that such Performance Awards shall be granted, exercised, and/or
settled upon achievement of any one performance goal or that two or more of the performance goals
must be achieved as a condition to grant, exercise, and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to any one Grantee or to different
Grantees.



(ii) Business Criteria. One or more of the following business criteria for the Company,
on a consolidated basis, and/or for specified subsidiaries, divisions, or other business units of
the Company (where the criteria are applicable), shall be used by the Administrator in establishing
performance goals for such Performance Awards: (1) earnings per share; (2) revenues; (3) cash flow;
(4) cash flow return on investment; (5) return on net assets, return on assets, return on
investment, return on invested capital, return on equity; profitability; (6) economic value added
(“EVA”); (7) operating margins or profit margins; (8) income or earnings before or after taxes;
pretax earnings; pretax earnings before interest, depreciation and amortization; operating
earnings; pretax operating earnings, before or after interest expense and before or after
incentives, and extraordinary or special items; net income; (9) total stockholder return or stock
price; (10) book value per share; (11) expense management; improvements in capital structure;
working capital; costs; (12) any of the above goals as compared to the performance of a published
or special index deemed applicable by the Administrator including, but not limited to, the
Standard & Poor’s 500 Stock Index or a group of comparator companies; and (13) Economic Results or
such measures as the Compensation Committee may deem appropriate. EVA means the amount by which a
business unit’s
earnings exceed the cost of the equity and debt capital used by the business unit during the
performance period, as determined by the Administrator. Income of a business unit may be before
payment of bonuses, capital charges, non-recurring or extraordinary income or expense, and general
and administrative expenses for the performance period, if so specified by the Administrator.


 


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(iii) Performance Period; Timing for Establishing Performance Award Terms. Achievement
of performance goals in respect of such Performance Awards shall be measured over a performance
period of up to ten years, as specified by the Administrator. Performance goals, amounts payable
upon achievement of such goals, and other material terms of Performance Awards shall be established
by the Administrator (i) while the performance outcome for that performance period is substantially
uncertain and (ii) no more than 90 days after the commencement of the performance period to which
the performance goal relates or, if less, the number of days which is equal to 25 percent of the
relevant performance period.



(iv) Performance Award Pool. The Administrator may establish a Performance Award pool,
which shall be an unfunded pool, for purposes of measuring performance of the Company in connection
with Performance Awards. The amount of such Performance Award pool shall be based upon the
achievement of a performance goal or goals based on one or more of the business criteria set forth
in Section 11(a)(ii) hereof during the given performance period, as specified by the Administrator
in accordance with Section 11(a)(iii) hereof. The Administrator may specify the amount of the
Performance Award pool as a percentage of any of such business criteria, a percentage thereof in
excess of a threshold amount, or as another amount which need not bear a strictly mathematical
relationship to such business criteria. In such case, Performance Awards may be granted as rights
to payment of a specified portion of the Award pool, and such grants shall be subject to the
requirements of Section 11(a)(iii).



(v) Settlement of Performance Awards; Other Terms. Settlement of such Performance Awards
shall be in cash, Shares, or other Awards, in the discretion of the Administrator. The
Administrator may, in its discretion, reduce the amount of a settlement otherwise to be made in
connection with such Performance Awards, but may not exercise discretion to increase any such
amount payable to a Covered Employee in respect of a Performance Award subject to this Section 11.
To the extent consistent with Section 162(m) of the Code, the Administrator shall specify the
circumstances in which such Performance Awards shall be paid or forfeited in the event of
termination of employment by the Grantee prior to the end of a performance period or settlement of
Performance Awards.



(vi) Impact of Extraordinary Items or Changes in Accounting. To the extent applicable,
the determination of achievement of performance goals for Performance Awards shall be based upon,
but not necessarily in accordance with, GAAP and performed in a manner consistent with the methods
used in the Company’s audited financial statements, and, unless the Compensation Committee decides
otherwise within the period described in Section 11(a)(iii), without regard to (1) extraordinary
items as determined by the Company’s independent public accountants in accordance with GAAP,
(2) changes in accounting methods, or (3) non-recurring acquisition expenses and restructuring
charges. Notwithstanding the foregoing, in calculating operating earnings or operating income
(including on a per share basis), the Administrator may, within the period described in
Section 11(a)(iii), provide that such calculation shall be made on the same basis as reflected in a
release of the Company’s earnings for a previously completed period as specified by the
Administrator.



(b) Written Determinations. Determinations by the Administrator as to the establishment
of performance goals, the amount potentially payable in respect of Performance Awards, the
achievement of performance goals relating to Performance Awards, and the amount of any final
Performance Award shall be recorded in writing. Specifically, the Administrator shall certify in
writing, in a manner conforming to applicable regulations under Section 162(m) of the Code, prior
to settlement of each Performance Award, that the performance goals and other material terms of the
Performance Award upon which settlement of the Performance Award was conditioned have been
satisfied. The Administrator may not delegate any
responsibility relating to such Performance Awards, and the Board shall not perform such
functions at any time that the Compensation Committee is composed solely of Qualified Members.


 


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(c) Status of Section 11(a) Awards under Section 162(m) of the Code. It is the intent of
the Company that Performance Awards under Section 11(a) constitute “performance-based
compensation” within the meaning of Section 162(m) of the Code and regulations thereunder.
Accordingly, the terms of Sections 11(a), 11(b) and 11(c), including the definitions of Covered
Employee and other terms used therein, shall be interpreted in a manner consistent with
Section 162(m) of the Code and regulations thereunder. The foregoing notwithstanding, because the
Administrator cannot determine with certainty whether a given Grantee will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term “Covered Employee” as
used herein shall mean only a person designated by the Administrator, at the time of grant of a
Performance Award, as likely to be a Covered Employee with respect to a specified fiscal year. If
any provision of the Plan as in effect on the date of adoption of any agreements relating to
Performance Awards does not comply or is inconsistent with the requirements of Section 162(m) of
the Code or regulations thereunder, such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.



Section 12. General Provisions




(a) Each Award shall be evidenced by a Grant Certificate. The terms and provisions of such
certificates may vary among Grantees and among different Awards granted to the same Grantee.



(b) The grant of an Award in any year shall not give the Grantee any right to similar
grants in future years, any right to continue such Grantee’s employment relationship with the
Company or its subsidiaries (for the applicable vesting period or otherwise), or, until Shares are
issued pursuant to the exercise of an Option or maturity of a Share Unit, any rights as a
shareholder of the Company. All Grantees shall remain subject to discharge to the same extent as
if the Plan were not in effect. For purposes of the Plan, a sale of any subsidiary of the Company
that employs a Grantee shall be treated as the termination of such Grantee’s employment unless such
Grantee remains employed by the Company or another subsidiary of the Company, provided that, in the
event that any Award that constitutes nonqualified deferred compensation subject to Section 409A of
the Code is to be paid upon a Grantee’s termination of employment, such Award shall only be
distributed in accordance with Section 409A of the Code.



(c) No Grantee, and no beneficiary or other persons claiming under or through the Grantee,
shall have any right, title or interest by reason of any award under the Plan to any particular
assets of the Company or subsidiaries of the Company, or any Shares allocated or reserved for the
purposes of the Plan or subject to any award except as set forth herein. The Company shall not be
required to establish any fund or make any other segregation of assets to assure satisfaction of
the Company’s obligations under the Plan.



(d) Neither the adoption of the Plan by the Board nor the submission of the Plan or of any
amendment to shareholders for approval shall be construed as creating any limitations on the power
of the Board to adopt such other compensatory arrangements as it may deem desirable, including the
granting of awards otherwise than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.



(e) All Awards under the Plan shall be subject to applicable U.S. federal (including
FICA), state, local and non-U.S. tax withholding requirements. The Company may require that the
Grantee or other person receiving or exercising Awards pay to the Company the amount of any taxes
that the Company is required to withhold with respect to such Awards, or the Company may deduct
from other wages paid by the Company or any of its subsidiaries, as applicable, the amount of any
withholding taxes due with respect to such Awards. Unless the Administrator determines otherwise,
when Awards paid in Shares are exercised or become vested or payable, Shares shall be withheld to
satisfy the Company’s tax withholding
obligation with respect to the Awards, up to an amount that does not exceed the
then-applicable minimum withholding tax rate applicable to the Award.


 


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(f) Awards are intended to comply with the requirements of Section 409A of the Code, or an
exception, and shall in all respects be administered in accordance with Section 409A, if
applicable. If an Award is subject to Section 409A of the Code, distributions upon termination of
employment or service will only be made upon “separation from service” under Section 409A. In the
event that any Awards constitute nonqualified deferred compensation under Section 409A of the Code,
if (i) the Grantee is a “specified employee” of the Company as of the specified employee
identification date for purposes of Section 409A (as determined in accordance with the policies and
procedures adopted by the Company) and (ii) the delivery of any cash or Shares payable pursuant to
an Award is required to be delayed for a period of six months after separation from service
pursuant to Section 409A, such cash or Shares shall be paid within 15 days after the end of the
six-month period, or if the Grantee dies during such six-month period, the amounts withheld on
account of Section 409A shall be paid to the Grantee’s beneficiary within 60 days following the
Grantee’s death. Any Awards that are subject to Section 457A of the Code are intended to comply
with the requirements of Section 457A and shall in all respects be administered in accordance with
Section 457A.



(g) In the event that any Award is taxable to a Grantee prior to the date on which the
Grantee receives payment or distribution with respect to the Award, by reason of Section 409A of
the Code or Section 457A of the Code, or with respect to FICA tax under the Code, then, to the
extent permitted by Sections 409A and 457A of the Code, the Company may determine that the Grantee
may receive a payment or distribution with respect to the Award at the time the Award is includible
in the Grantee’s taxable income or taxable for FICA purposes. Such payment or distribution shall
be equal to the Grantee’s U.S. federal, state, and local tax obligations resulting from the
inclusion in income of the Award under Section 409A or 457A of the Code or taxation for FICA
purposes, as applicable, consistent with Sections 409A and 457A, as applicable. The cash or Shares
otherwise payable to the Grantee pursuant to the Award shall be reduced by the payment or
distribution made to the Grantee with respect to the early taxation of the Award.



Section 13. Effective Date; Amendment or Termination




The Plan shall be effective upon its adoption by the Board of Directors of the Company. The
Administrator may, at any time, alter, amend, suspend, discontinue or terminate the Plan; provided,
however, that no such action shall adversely affect the rights of Grantees with respect to Awards
previously granted hereunder. The Administrator shall also have the authority to establish separate
sub-plans under the Plan with respect to Grantees resident in a particular jurisdiction (the terms
of which shall not be inconsistent with those of the Plan) if necessary or desirable to comply with
the applicable laws of such jurisdiction.



Unless earlier terminated by the Administrator, the Plan shall terminate on the day before the
tenth anniversary of the later of the date the Company’s shareholders originally approved the Plan
or the date of any subsequent shareholder approval of the Plan. Upon any such termination of the
Plan, no new authorizations of grants of Awards may be made, but then-outstanding Awards shall
remain outstanding in accordance with their terms, and the Administrator otherwise shall retain its
full powers under the Plan with respect to such Awards.



For the avoidance of doubt, the Plan amends and restates the Company’s 2004 Share Incentive
Plan, and supersedes and replaces the Company’s Annual Performance Bonus Plan.




 


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