EX-10.1



 





EXHIBIT 10.1




NEW JERSEY RESOURCES CORPORATION




2007 STOCK AWARD AND INCENTIVE PLAN




As amended,

January 12, 2007




 









 








NEW JERSEY RESOURCES CORPORATION




2007 STOCK AWARD AND INCENTIVE PLAN




	 	 	 	 	 
	 	 	Page
	1. Purpose 
	 	 	1	 
	 
	 	 	 	 
	2. Definitions 
	 	 	1	 
	 
	 	 	 	 
	3. Administration 
	 	 	3	 
	 
	 	 	 	 
	4. Stock Subject to Plan 
	 	 	4	 
	 
	 	 	 	 
	5. Eligibility; Per-Person Award Limitations 
	 	 	4	 
	 
	 	 	 	 
	6. Specific Terms of Awards 
	 	 	5	 
	 
	 	 	 	 
	7. Performance Awards
	 	 	9	 
	 
	 	 	 	 
	8. Certain Provisions Applicable to Awards 
	 	 	11	 
	 
	 	 	 	 
	9. Change in Control 
	 	 	12	 
	 
	 	 	 	 
	10. Additional Award Forfeiture Provisions 
	 	 	14	 
	 
	 	 	 	 
	11. General Provisions
	 	 	14	 






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NEW JERSEY RESOURCES CORPORATION




2007 STOCK AWARD AND INCENTIVE PLAN




     1. Purpose. The purpose of this 2007 Stock Award and Incentive Plan (the “Plan”) is to aid
New Jersey Resources Corporation, a New Jersey corporation (together with its successors and
assigns, the “Company”), in attracting, retaining, motivating and rewarding employees, non-employee
directors, and other service providers of the Company or its subsidiaries or affiliates,
strengthening the Company’s capability to develop, maintain and direct a competent management team,
to provide for equitable and competitive compensation opportunities, to recognize individual
contributions and reward achievement of Company goals, and promote the creation of long-term value
for shareholders by closely aligning the interests of Participants with those of shareholders. The
Plan authorizes stock-based and cash-based incentives for Participants.



     2. Definitions. In addition to the terms defined in Section 1 above and elsewhere in the
Plan, the following capitalized terms used in the Plan have the respective meanings set forth in
this Section:



     (a) “Annual Limit” shall have the meaning specified in Section 5(b).



     (b) “Award” means any Option, SAR, Restricted Stock, Deferred Stock, Stock granted as a bonus
or in lieu of another award, Dividend Equivalent, Other Stock-Based Award, or Performance Award,
together with any related right or interest, granted to a Participant under the Plan.



     (c) “Beneficiary” means the legal representatives of the Participant’s estate entitled by will
or the laws of descent and distribution to receive the benefits under a Participant’s Award upon a
Participant’s death, provided that, if and to the extent authorized by the Committee, a Participant
may be permitted to designate a Beneficiary, in which case the “Beneficiary” instead will be the
person, persons, trust or trusts (if any are then surviving) which have been designated by the
Participant in his or her most recent written and duly filed beneficiary designation to receive the
benefits specified under the Participant’s Award upon such Participant’s death.



     (d) “Board” means the Company’s Board of Directors.



     (e) “Change in Control” and related terms have the meanings as defined in Section 9.



     (f) “Code” means the Internal Revenue Code of 1986, as amended. References to any provision
of the Code or regulation thereunder shall include any successor provisions and regulations, and
reference to regulations includes any applicable guidance or pronouncement of the Department of the
Treasury and Internal Revenue Service.



     (g) “Committee” means the Leadership Development and Compensation Committee of the Board (or a
designated successor to such committee), the composition and governance of which is established in
the Committee’s Charter as approved from time to time by the Board and subject to other corporate
governance documents of the Company. No action of the Committee shall be void or deemed to be
without authority due to the failure of any member, at the time the action was taken, to meet any
qualification standard set forth in the Committee Charter or this Plan. The full Board may perform
any function of the Committee hereunder (except to the extent limited under applicable New York
Stock Exchange rules), in which case the term “Committee” shall refer to the Board.



 









 





     (h) “Covered Employee” means an Eligible Person who is a Covered Employee as specified in
Section 11(j).



     (i) “Deferred Stock” means a right, granted under this Plan, to receive Stock or other Awards
or a combination thereof at the end of a specified deferral period.



     (j) “Dividend Equivalent” means a right, granted under this Plan, to receive cash, Stock,
other Awards or other property equal in value to all or a specified portion of the dividends paid
with respect to a specified number of shares of Stock.



     (k) “Effective Date” means the effective date specified in Section 11(p).



     (l) “Eligible Person” has the meaning specified in Section 5.



     (m) “Exchange Act” means the Securities Exchange Act of 1934, as amended. References to any
provision of the Exchange Act or rule (including a proposed rule) thereunder shall include any
successor provisions and rules.



     (n) “Fair Market Value” means the fair market value of Stock, Awards or other property as
determined in good faith by the Committee or under procedures established by the Committee. Unless
otherwise determined by the Committee, the Fair Market Value of Stock on a given day shall be, as
specified by the Committee, either (1) the average of the high and low sales prices of the Stock,
or (2) the closing price of the Stock, on the date on which it is to be valued hereunder as
reported for New York Stock Exchange — Composite Transactions. Fair Market Value relating to the
exercise price or base price of any Non-409A Option or SAR and relating to the market value of
Stock measured at the time of exercise shall conform to requirements under Code Section 409A.



     (o) “409A Awards” means Awards that constitute a deferral of compensation under Code Section
409A and regulations thereunder. “Non-409A Awards” means Awards other than 409A Awards. Although
the Committee retains authority under the Plan to grant Options, SARs and Restricted Stock on terms
that will qualify those Awards as 409A Awards, Options, SARs, and Restricted Stock are intended to
be Non-409A Awards unless otherwise expressly specified by the Committee.



     (p) “Incentive Stock Option” or “ISO” means any Option designated as an incentive stock option
within the meaning of Code Section 422 and qualifying thereunder.



     (q) “Option” means a right to purchase Stock granted under Section 6(b).



     (r) “Other Stock-Based Awards” means Awards granted to a Participant under Section 6(h).



     (s) “Participant” means a person who has been granted an Award under the Plan which remains
outstanding, including a person who is no longer an Eligible Person.



     (t) “Performance Award” means a conditional right, granted to a Participant under Sections
6(i) or 7, to receive cash, Stock or other Awards or payments.



     (u) “Preeexisting Plan” means the Employee and Outside Director Long-Term Incentive
Compensation Plan (effective January 23, 2002).



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     (v) “Restricted Stock” means Stock granted under this Plan which is subject to certain
restrictions and to a risk of forfeiture.



     (w) “Stock” means the Company’s Common Stock, par value $2.50 per share, and any other equity
securities of the Company that may be substituted or resubstituted for Stock pursuant to Section
11(c).



     (x) “Stock Appreciation Rights” or “SAR” means a right granted to a Participant under Section
6(c).



     3. Administration.



     (a) Authority of the Committee. The Plan shall be administered by the Committee, which shall
have full and final authority, in each case subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants; to grant Awards; to determine the type and
number of Awards, the dates on which Awards may be exercised and on which the risk of forfeiture or
deferral period relating to Awards shall lapse or terminate, the acceleration of any such dates,
the expiration date of any Award, 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, Stock, other Awards, or
other property, and other terms and conditions of, and all other matters relating to, Awards; to
prescribe documents evidencing or setting terms of Awards (such Award documents need not be
identical for each Participant or each Award), amendments thereto, and rules and regulations for
the administration of the Plan and amendments thereto; to construe and interpret the Plan and Award
documents and correct defects, supply omissions or reconcile inconsistencies therein; and to make
all other decisions and determinations as the Committee may deem necessary or advisable for the
administration of the Plan. Decisions of the Committee with respect to the administration and
interpretation of the Plan shall be final, conclusive, and binding upon all persons interested in
the Plan, including Participants, Beneficiaries, transferees under Section 11(b) and other persons
claiming rights from or through a Participant, and shareholders. The foregoing notwithstanding,
(i) the Board shall perform the functions of the Committee for purposes of granting Awards under
the Plan to non-employee directors (the functions of the Committee with respect to other aspects of
non-employee director awards is not exclusive to the Board, however); and (ii) Committee decisions
with regard to the grant of awards [to executive officers] will be subject to the ratification of
the Board of Directors, unless otherwise determined by the Board.



     (b) Manner of Exercise of Committee Authority. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be construed as limiting any
power or authority of the Committee. The Committee may act through subcommittees, including for
purposes of perfecting exemptions under Rule 16b-3 or qualifying Awards under Code Section 162(m)
as performance-based compensation, in which case the subcommittee shall be subject to and have
authority under the charter applicable to the Committee, and the acts of the subcommittee shall be
deemed to be acts of the Committee hereunder. The Committee may delegate to officers or managers
of the Company or any subsidiary or affiliate, or committees thereof, the authority, subject to
such terms as the Committee shall determine, to perform such functions, including administrative
functions, as the Committee may determine, to the extent (i) that such delegation will not result
in the loss of an exemption under Rule 16b-3(d) for Awards granted to Participants subject to
Section 16 of the Exchange Act in respect of the Company and will not cause Awards intended to
qualify as “performance-based compensation” under Code Section 162(m) to fail to so qualify, and
(ii) permitted under applicable provisions of the New Jersey Business Corporation Act.



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     (c) Limitation of Liability. The Committee and each member thereof, and any person acting
pursuant to authority delegated by the Committee, shall be entitled, in good faith, to rely or act
upon any report or other information furnished by any executive officer, other officer or employee
of the Company or a subsidiary or affiliate, the Company’s independent auditors, consultants or any
other agents assisting in the administration of the Plan. Members of the Committee, any person
acting pursuant to authority delegated by the Committee, and any officer or employee of the Company
or a subsidiary or affiliate acting at the direction or on behalf of the Committee or a delegee
shall not be personally liable for any action or determination taken or made in good faith with
respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected
by the Company with respect to any such action or determination.



     4. Stock Subject To Plan.



     (a) Overall Number of Shares Available for Delivery. The total number of shares of Stock
reserved and available for delivery in connection with Awards under the Plan shall be (i) 750,000
shares, plus (ii) the number of shares that, immediately prior to the Effective Date, remain
available for new awards under the Preexisting Plan plus (iii) the number of shares subject to
awards under the Preexisting Plan which become available in accordance with Section 4(b) after the
Effective Date; provided, however, that the total number of shares with respect to which ISOs may
be granted shall not exceed the number specified under clause (i) above. Any shares of Stock
delivered under the Plan shall consist of authorized and unissued shares or treasury shares.



     (b) Share Counting Rules. The Committee may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute
awards) and make adjustments in accordance with this Section 4(b). Shares shall be counted against
those reserved to the extent such shares have been delivered and are no longer subject to a risk of
forfeiture. Accordingly, (i) to the extent that an Award under the Plan or an award under the
Pre-existing Plan is canceled, expired, forfeited, settled in cash, settled by delivery of fewer
shares than the number underlying the Award or award, or otherwise terminated without delivery of
shares to the participant, the shares retained by or returned to the Company will not be deemed to
have been delivered under the Plan; and (ii) shares that are withheld from such an Award or award
or separately surrendered by the participant in payment of the exercise price or taxes relating to
such an Award or award shall be deemed to constitute shares not delivered and will be available
under the Plan. The Committee may determine that Awards may be outstanding that relate to more
shares than the aggregate remaining available under the Plan so long as Awards will not in fact
result in delivery and vesting of shares in excess of the number then available under the Plan. In
addition, in the case of any Award granted in assumption of or in substitution for an award of a
company or business acquired by the Company or a subsidiary or affiliate or with which the Company
or a subsidiary or affiliate combines, shares delivered or deliverable in connection with such
assumed or substitute Award shall not be counted against the number of shares reserved under the
Plan.



     5. Eligibility; Per-Person Award Limitations.



     (a) Eligibility. Awards may be granted under the Plan only to Eligible Persons. For purposes
of the Plan, an “Eligible Person” means (i) an employee of the Company or any subsidiary or
affiliate, including any executive officer or employee director of the Company or a subsidiary or
affiliate, (ii) any person who has been offered employment by the Company or a subsidiary or
affiliate, provided that such prospective employee may not receive any payment or exercise any
right relating to an Award until such person has commenced employment with the Company or a
subsidiary or affiliate, (iii) any non-employee director of the Company, and (iv) any person who
provides substantial services to the Company or a subsidiary or affiliate. An employee on leave of
absence may be considered as still in the employ of the Company or a



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subsidiary or affiliate for purposes of eligibility for participation in the Plan. For purposes of
the Plan, a joint venture in which the Company or a subsidiary has a substantial direct or indirect
equity investment shall be deemed an affiliate, if so determined by the Committee. Holders of
awards granted by a company or business acquired by the Company or a subsidiary or affiliate, or
with which the Company or a subsidiary or affiliate combines, are eligible for grants of substitute
awards granted in assumption of or in substitution for such outstanding awards previously granted
under the Plan in connection with such acquisition or combination transaction.



     (b) Per-Person Award Limitations. In each calendar year during any part of which the Plan is
in effect, an Eligible Person may be granted Awards intended to qualify as “performance-based
compensation” under Code Section 162(m) under the Plan relating to up to his or her Annual Limit.
A Participant’s Annual Limit, in any year during any part of which the Participant is then eligible
under the Plan, shall equal 300,000 shares plus the amount of the Participant’s unused Annual Limit
relating to the same type of Award as of the close of the previous year, subject to adjustment as
provided in Section 11(c). In the case of an Award which is not valued in a way in which the
limitation set forth in the preceding sentence would operate as an effective limitation satisfying
applicable law (including Treasury Regulation 1.162-27(e)(4)), an Eligible Person may not be
granted Awards authorizing the earning during any calendar year of an amount that exceeds the
Eligible Person’s Annual Limit, which for this purpose shall equal $2.5 million plus the amount of
the Eligible Person’s unused cash Annual Limit as of the close of the previous year (this
limitation is separate and not affected by the number of Awards granted during such calendar year
subject to the limitation in the preceding sentence). For this purpose, (i) “earning” means
satisfying performance conditions so that an amount becomes payable, without regard to whether it
is to be paid currently or on a deferred basis or continues to be subject to any service
requirement or other non-performance condition, (ii) a Participant’s Annual Limit is used to the
extent an amount or number of shares may be potentially earned or paid under an Award, regardless
of whether such amount or shares are in fact earned or paid, and (iii) the Annual Limit applies to
Dividend Equivalents under Section 6(g) only if such Dividend Equivalents are granted separately
from and not as a feature of another Award.



6. Specific Terms Of Awards.




     (a) General. Awards may be granted on the terms and conditions set forth in this Section 6.
In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or
thereafter (subject to Sections 11(e) and 11(k)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment or service by the
Participant and terms permitting a Participant to make elections relating to his or her Award. The
Committee shall retain full power and discretion with respect to any term or condition of an Award
that is not mandatory under the Plan, subject to Section 11(k) and the terms of the Award
agreement. The Committee may require payment of consideration for an Award except as limited by
the Plan.



     (b) Options. The Committee is authorized to grant Options to Participants on the following
terms and conditions:




	 	(i)	 	Exercise Price. The exercise price per share of Stock purchasable under an
Option (including both ISOs and non-qualified Options) shall be determined by the
Committee, provided that such exercise price shall be not less than the Fair Market
Value of a share of Stock on the date of grant of such Option, subject to Section
8(a). Notwithstanding the foregoing, any substitute award granted in assumption of or
in substitution for an outstanding award granted by a company or business acquired by
the Company or a subsidiary or affiliate, or with which the Company or a subsidiary or
affiliate combines may be granted with an




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	 	 	 	exercise price per share of Stock other than as required above. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date on which the stock is issued, except as provided in Section 11(c) of the Plan.






	 	(ii)	 	Option Term; Time and Method of Exercise. The Committee shall determine the
term of each Option, provided that in no event shall the term of any Option exceed a
period of ten years from the date of grant. The Committee shall determine the time or
times at which or the circumstances under which an Option may be exercised in whole or
in part (including based on achievement of performance goals and/or future service
requirements), the methods by which such exercise price may be paid or deemed to be
paid and the form of such payment (subject to Sections 11(k) and 11(l)), including,
without limitation, cash, Stock (including by withholding Stock deliverable upon
exercise), other Awards or awards granted under other plans of the Company or any
subsidiary or affiliate, or other property (including through broker-assisted
“cashless exercise” arrangements, to the extent permitted by applicable law), and the
methods by or forms in which Stock will be delivered or deemed to be delivered in
satisfaction of Options to Participants (including, in the case of 409A Awards,
deferred delivery of shares subject to the Option, as mandated by the Committee, with
such deferred shares subject to any vesting, forfeiture or other terms as the
Committee may specify).
	 
	 	(iii)	 	ISOs. The terms of any ISO granted under the Plan shall comply in all
respects with the provisions of Code Section 422.





     (c) Stock Appreciation Rights. The Committee is authorized to grant SARs to Participants on
the following terms and conditions:




	 	(i)	 	Right to Payment. An SAR shall confer on the Participant to whom it is
granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market
Value of one share of Stock on the date of exercise over (B) the grant price of the
SAR as determined by the Committee.
	 
	 	(ii)	 	Other Terms. The Committee shall determine the term of each SAR, provided
that in no event shall the term of an SAR exceed a period of ten years from the date
of grant. The Committee shall determine at the date of grant or thereafter, the time
or times at which and the circumstances under which a SAR may be exercised in whole or
in part (including based on achievement of performance goals and/or future service
requirements), the method of exercise, method of settlement, form of consideration
payable in settlement, method by or forms in which Stock will be delivered or deemed
to be delivered to Participants, whether or not a SAR shall be free-standing or in
tandem or combination with any other Award, and whether or not the SAR will be a 409A
Award or Non-409A Award. Limited SARs that may only be exercised in connection with a
Change in Control or termination of service following a Change in Control as specified
by the Committee may be granted on such terms, not inconsistent with this Section
6(c), as the Committee may determine. The Committee may require that an outstanding
Option be exchanged for an SAR exercisable for Stock having vesting, expiration, and
other terms substantially the same as the Option, so long as such exchange will not
result in additional accounting expense to the Company.




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     (d) Restricted Stock. The Committee is authorized to grant Restricted Stock to Participants
on the following terms and conditions:




	 	(i)	 	Grant and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions, if any, as
the Committee may impose, which restrictions may lapse separately or in combination at
such times, under such circumstances (including based on achievement of performance
goals and/or future service requirements), in such installments or otherwise and under
such other circumstances as the Committee may determine at the date of grant or
thereafter. Except to the extent restricted under the terms of the Plan and any Award
document relating to the Restricted Stock, a Participant granted Restricted Stock
shall have all of the rights of a shareholder, including the right to vote the
Restricted Stock and the right to receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee).
	 
	 	(ii)	 	Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service during the applicable restriction period,
Restricted Stock that is at that time subject to restrictions shall be forfeited and
reacquired by the Company; provided that the Committee may provide, by rule or
regulation or in any Award document, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock will lapse in whole
or in part, including in the event of terminations resulting from specified causes.
	 
	 	(iii)	 	Certificates for Stock. Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee shall determine. If certificates
representing Restricted Stock are registered in the name of the Participant, the
Committee may require that such certificates bear an appropriate legend referring to
the terms, conditions and restrictions applicable to such Restricted Stock, that the
Company retain physical possession of the certificates, and that the Participant
deliver a stock power to the Company, endorsed in blank, relating to the Restricted
Stock.
	 
	 	(iv)	 	Dividends and Splits. As a condition to the grant of an Award of Restricted
Stock, the Committee may require that any dividends paid on a share of Restricted
Stock shall be either (A) paid with respect to such Restricted Stock at the dividend
payment date in cash, in kind, or in a number of shares of unrestricted Stock having a
Fair Market Value equal to the amount of such dividends, or (B) automatically
reinvested in additional Restricted Stock or held in kind, which shall be subject to
the same terms as applied to the original Restricted Stock to which it relates, or (C)
deferred as to payment, either as a cash deferral or with the amount or value thereof
automatically deemed reinvested in shares of Deferred Stock, other Awards or other
investment vehicles, subject to such terms as the Committee shall determine or permit
a Participant to elect. Unless otherwise determined by the Committee, Stock
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 Restricted Stock with respect to which such Stock or other
property has been distributed.





     (e) Deferred Stock. The Committee is authorized to grant Deferred Stock to Participants,
subject to the following terms and conditions:



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	 	(i)	 	Award and Restrictions. Issuance of Stock will occur upon expiration of the
deferral period specified for an Award of Deferred Stock by the Committee (or, if
permitted by the Committee, as elected by the Participant). In addition, Deferred
Stock shall be subject to such restrictions on transferability, risk of forfeiture and
other restrictions, if any, as the Committee may impose, which restrictions may lapse
at the expiration of the deferral period or at earlier specified times (including
based on achievement of performance goals and/or future service requirements),
separately or in combination, in installments or otherwise, and under such other
circumstances as the Committee may determine at the date of grant or thereafter.
Deferred Stock may be satisfied by delivery of Stock, other Awards, or a combination
thereof (subject to Section 11(l)), as determined by the Committee at the date of
grant or thereafter.
	 
	 	(ii)	 	Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service during the applicable deferral period or portion
thereof to which forfeiture conditions apply (as provided in the Award document
evidencing the Deferred Stock), all Deferred Stock that is at that time subject to
such forfeiture conditions shall be forfeited; provided that the Committee may
provide, by rule or regulation or in any Award document, or may determine in any
individual case, that restrictions or forfeiture conditions relating to Deferred Stock
will lapse in whole or in part, including in the event of terminations resulting from
specified causes. Deferred Stock subject to a risk of forfeiture may be called
“restricted stock units” or otherwise designated by the Committee.
	 
	 	(iii)	 	Dividend Equivalents. Unless otherwise determined by the Committee,
Dividend Equivalents on the specified number of shares of Stock covered by an Award of
Deferred Stock shall be either (A) paid with respect to such Deferred Stock at the
dividend payment date in cash or in shares of unrestricted Stock having a Fair Market
Value equal to the amount of such dividends, or (B) deferred with respect to such
Deferred Stock, either as a cash deferral or with the amount or value thereof
automatically deemed reinvested in additional Deferred Stock, other Awards or other
investment vehicles having a Fair Market Value equal to the amount of such dividends,
as the Committee shall determine or permit a Participant to elect.





     (f) Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant to
Participants Stock as a bonus, or to grant Stock or other Awards in lieu of obligations of the
Company or a subsidiary or affiliate to pay cash or deliver other property under the Plan or under
other plans or compensatory arrangements, subject to such terms as shall be determined by the
Committee.



     (g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to a
Participant, which may be awarded on a free-standing basis or in connection with another Award.
The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or
shall be deemed to have been reinvested in additional Stock, Awards, or other investment vehicles,
and subject to restrictions on transferability, risks of forfeiture and such other terms as the
Committee may specify.



     (h) Other Stock-Based Awards. The Committee is authorized, subject to limitations under
applicable law, to grant to Participants such other Awards that may be denominated or payable in,
valued in whole or in part by reference to, or otherwise based on, or related to, Stock or factors
that may influence the value of Stock, including, without limitation, convertible or exchangeable
debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock,
Awards with value and payment contingent upon performance of the



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Company or business units thereof or any other factors designated by the Committee, and Awards
valued by reference to the book value of Stock or the value of securities of or the performance of
specified subsidiaries or affiliates or other business units. The Committee shall determine the
terms and conditions of such Awards. Stock delivered pursuant to an Award in the nature of a
purchase right granted under this Section 6(h) shall be purchased for such consideration, paid for
at such times, by such methods, and in such forms, including, without limitation, cash, Stock,
other Awards, notes, or other property, as the Committee shall determine. Cash awards, as an
element of or supplement to any other Award under the Plan, may also be granted pursuant to this
Section 6(h).



     (i) Performance Awards. Performance Awards, denominated in cash or in Stock or other Awards,
may be granted by the Committee in accordance with Section 7.



     7. Performance Awards.



     (a) Performance Awards Generally. Performance Awards may be denominated as a cash amount,
number of shares of Stock, or specified number of other Awards (or a combination) which may be
earned upon achievement or satisfaction of performance conditions specified by the Committee. In
addition, the Committee may specify that any other Award shall constitute a Performance Award by
conditioning the right of a Participant to exercise the Award or have it settled, and the timing
thereof, upon achievement or satisfaction of such performance conditions as may be specified by the
Committee. The Committee may use such business criteria and other measures of performance as it
may deem appropriate in establishing any 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 Sections 7(b) in the case of a Performance Award intended to qualify as
“performance-based compensation” under Code Section 162(m).



     (b) Performance Awards Granted to Covered Employees. If the Committee determines that a
Performance Award to be granted to an Eligible Person who is designated by the Committee as likely
to be a Covered Employee should qualify as “performance-based compensation” for purposes of Code
Section 162(m), the grant, exercise and/or settlement of such Performance Award shall be contingent
upon achievement of a preestablished performance goal and other terms set forth in this Section
7(b).




	 	(i)	 	Performance Goal Generally. The performance goal for such Performance Awards
shall consist of one or more business criteria and a targeted level or levels of
performance with respect to each of such criteria, as specified by the Committee
consistent with this Section 7(b). The performance goal shall be objective and shall
otherwise meet the requirements of Code Section 162(m) and regulations thereunder,
including the requirement that the level or levels of performance targeted by the
Committee result in the achievement of performance goals being “substantially
uncertain.” The Committee 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 Participant or to different Participants.
	 
	 	(ii)	 	Business Criteria. One or more of the following business criteria for the
Company, on a consolidated basis, and/or for specified subsidiaries or affiliates or
other business units of the Company shall be used by the Committee in establishing
performance goals for such Performance Awards:




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(1) Revenues;




(2) Expenses;




(3) Gross margin or gross profit;




(4) Any earnings or net income measure, including earnings from
operations, earnings before taxes, earnings before interest and/or taxes
and/or depreciation, statutory earnings before realized gains (losses), or
net income available to common shareholders;




(5) Operating margin or operating profit;




(6) Earnings or earnings per share (EPS), including or excluding
extraordinary items;




(7) Operating cash flow, free cash flow, cash flow return on investment,
or net cash provided by operations;




(8) Return on equity, assets, capital employed or investment;




(9) Economic profit or value created;




(10) Stock price or total shareholder return; and




(11) Strategic business criteria, consisting of one or more objectives
based on meeting specified market penetration, total market
capitalization, business retention, new product generation, rate increase
actions, geographic business expansion goals, cost targets (including cost
of capital), investment portfolio yield, customer satisfaction, employee
satisfaction, agency ratings, management of employment practices and
employee benefits, supervision of litigation and information technology,
and goals relating to acquisitions or divestitures of subsidiaries,
affiliates, joint ventures or lines of business.




	 	 	 	The targeted level or levels of performance with respect to such business criteria
may be established at such levels and in such terms as the Committee may determine,
in its discretion, including in absolute terms, as a goal relative to performance in
prior periods, or as a goal compared to the performance of one or more comparable
companies or an index covering multiple companies. Performance Goals may be
particular to a Participant, the Company or a division, subsidiary or other business
segment of the Company, or may be based on the performance of the Company as a
whole.
	 
	 	(iii)	 	Performance Period; Timing for Establishing Performance Goals. Achievement
of performance goals in respect of such Performance Awards shall be measured over a
performance period of up to one year or more than one year, as specified by the
Committee. A performance goal shall be established not later than the earlier of (A)
90 days after the beginning of any performance period applicable to such Performance
Award or (B) the time 25% of such performance period has elapsed.
	 
	 	(iv)	 	Performance Award Pool. The Committee may establish a Performance Award
pool, which shall be an unfunded pool, for purposes of measuring performance of




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	 	 	 	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 7(b)(ii) during the
given performance period, as specified by the Committee in accordance with Section
7(b)(iv). The Committee 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.






	 	(v)	 	Settlement of Performance Awards; Other Terms. Settlement of Performance
Awards shall be in cash, Stock, other Awards or other property, in the discretion of
the Committee. The Committee may, in its discretion, increase or 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 7(b) beyond the level of
payment authorized for achievement of the performance goal specified under this
Section 7(b) based on the actual level of achievement of such goal. Any settlement
which changes the form of payment from that originally specified shall be implemented
in a manner such that the Performance Award and other related Awards do not, solely
for that reason, fail to qualify as “performance-based compensation” for purposes of
Code Section 162(m). The Committee shall specify the circumstances in which such
Performance Awards shall be paid or forfeited in the event of termination of
employment by the Participant or other event (including a Change in Control) prior to
the end of a performance period or settlement of such Performance Awards.





     (c) Written Determinations. Determinations by the Committee as to the establishment of
performance goals, the amount potentially payable in respect of Performance Awards, the level of
actual achievement of the specified performance goals relating to Performance Awards, and the
amount of any final Performance Award shall be recorded in writing in the case of Performance
Awards intended to qualify under Section 162(m). Specifically, the Committee shall certify in
writing, in a manner conforming to applicable regulations under Section 162(m), prior to settlement
of each such Award granted to a Covered Employee, that the performance objective relating to the
Performance Award and other material terms of the Award upon which settlement of the Award was
conditioned have been satisfied.



     8. Certain Provisions Applicable To Awards.



     (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan
may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with,
or in substitution or exchange for, any other Award or any award granted under another plan of the
Company, any subsidiary or affiliate, or any business entity to be acquired by the Company or a
subsidiary or affiliate, or any other right of a Participant to receive payment from the Company or
any subsidiary or affiliate; provided, however, that a 409A Award may not be granted in tandem with
a Non-409A Award. Awards granted in addition to or in tandem with other Awards or awards may be
granted either as of the same time as or a different time from the grant of such other Awards or
awards. Subject to Sections 11(k) and (l) and subject to the restriction on repricing under
Section 11(e), the Committee may determine that, in granting a new Award, the in-the-money value or
fair value of any surrendered Award or award or the value of any other right to payment surrendered
by the Participant may be applied to the purchase of any other Award.



- 11 -









 





     (b) Term of Awards. The term of each Award shall be for such period as may be determined by
the Committee, subject to the express limitations set forth in Sections 6(b)(ii), 6(c)(ii) and 8 or
elsewhere in the Plan.



     (c) Form and Timing of Payment under Awards; Deferrals. Subject to the terms of the Plan
(including Sections 11(k) and (l)) and any applicable Award document, payments to be made by the
Company or a subsidiary or affiliate upon the exercise of an Option or other Award or settlement of
an Award may be made in such forms as the Committee shall determine, including, without limitation,
cash, Stock, other Awards or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be accelerated, and cash
paid in lieu of Stock in connection with such settlement, in the discretion of the Committee or
upon occurrence of one or more specified events, subject to Sections 11(k) and (l). Subject to
Section 11(k), installment or deferred payments may be required by the Committee (subject to
Section 11(e)) or permitted at the election of the Participant on terms and conditions established
by the Committee. Payments may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in
Stock. In the case of any 409A Award that is vested and no longer subject to a risk of forfeiture
(within the meaning of Code Section 83), such Award will be distributed to the Participant, upon
application of the Participant, if the Participant has had an unforeseeable emergency within the
meaning of Code Sections 409A(a)(2)(A)(vi) and 409A(a)(2)(B)(ii), in accordance with Section
409A(a)(2)(B)(ii).



9. Change in Control.




     (a) Effect of “Change in Control.” In the event of a “Change in Control,” the Committee may
provide that any of the following provisions shall apply in the Award document or otherwise:




	 	(i)	 	The lapse of forfeiture conditions and other restrictions applicable to
Awards granted under the Plan , and/or the payment of such Awards as of the time of
the Change in Control or other specified time without regard to vesting or other
conditions, except to the extent of any waiver by the Participant and subject to
applicable restrictions set forth in Section 11(a); and
	 
	 	(ii)	 	The vesting and exercisability of any Award carrying a right to exercise that
was not previously exercisable and vested as of the time of the Change in Control and,
upon any termination of employment or service by the Participant other than a
termination for cause within two years after the Change in Control, provision for such
Awards to remain outstanding and exercisable until the earlier of three years after
such termination or the stated expiration date of such Award, subject only to
applicable restrictions set forth in Section 11(a);
	 
	 	(iii)	 	The lapse of any deferral of settlement terms, forfeiture conditions and
other restrictions applicable to an unvested Award granted under the Plan and
provision for such Awards to be fully payable as of the time of the Change in Control
or other specified time without regard to deferral and vesting conditions, except to
the extent of any waiver by the Participant (if permitted under Section 409A) and
subject to applicable restrictions set forth in Section 11(a); and
	 
	 	(iv)	 	With respect to an outstanding Award subject to achievement of performance
goals and conditions, such performance goals and conditions may be deemed to be met or
exceeded.










- 12 -









 










provided, however, that no distribution shall occur with respect to a 409A Award unless the Change
in Control also constitutes a 409A Ownership/Control Change.




     (b) Definition of “Change in Control.” “Change in Control” means the occurrence of any one of
the following events after the date of grant of any affected Award:




	 	(i)	 	Any Person (as defined below) has acquired Voting Securities (as defined
below) of the Company and, immediately thereafter, is the “beneficial owner” (within
the meaning of Rule 13d-3, as promulgated under Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) of Voting Securities of the
Company representing thirty-five (35%) percent or more of the combined Voting Power
(as defined below) of the Company’s securities;
	 
	 	(ii)	 	Within any 24-month period, the persons who were directors of the Company
immediately before the beginning of such period (the “Incumbent Directors”) shall
cease (for any reason other than death) to constitute at least a majority of the Board
or the board of directors of any successor to the Company, provided that any
director who was not a director at the beginning of such period shall be deemed to be
an Incumbent Director if such director (A) was elected to the Board by, or on
the recommendation of or with the approval of, at least two-thirds of the directors
who then qualified as Incumbent Directors either actually or by prior operation of
this Section 9(b)(ii) and (B) was not designated by a person who has entered
into an agreement with the Company to effect a Corporate Event, as described in
Section 9(b)(iii); or
	 
	 	(iii)	 	The stockholders of the Company have approved a merger, consolidation, share
exchange, division, sale or other disposition of all or substantially all of the
assets of the Company, or a complete liquidation of the Company (a “Corporate Event”),
and such Corporate Event has been consummated, except that a Corporate Event shall
not trigger a Change in Control under this clause (iii) if the shareholders of the
Company immediately prior to such Corporate Event shall hold, directly or indirectly
and without substantial change in the proportionate interest of each shareholder,
immediately following such Corporate Event a majority of the Voting Power of
(x) in the case of a merger or consolidation, the surviving or resulting
corporation, (y) in the case of a share exchange, the acquiring corporation or
(z) in the case of a division or a sale or other disposition of assets, each
surviving, resulting or acquiring corporation which, immediately following the
relevant Corporate Event, holds more than 10% of the consolidated assets of the
Company immediately prior to such Event.




For purposes of this Section 9(b), “Person” shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act, as supplemented by Section 13(d)(3) of the Exchange Act; provided,
however, that Person shall not include (i) the Company or any subsidiary of the Company or
(ii) any employee benefit plan sponsored by the Company or any subsidiary of the Company.
For purposes of this Section 9(b), a specified percentage of “Voting Power” of a company shall mean
such number of the Voting Securities as shall enable the holders thereof to cast such percentage of
all the votes which could be cast in an annual election of directors (without consideration of the
rights of any class of stock other than the common stock of the company to elect directors by a
separate class vote); and “Voting Securities” shall mean all securities of a company entitling the
holders thereof to vote in an annual election of directors (without consideration of the rights of
any class of stock other than the common stock of the company to elect directors by a separate
class vote).




- 13 -









 








     (c) Definition of “409A Ownership/Control Change.” A “409A Ownership/Control Change” shall be
deemed to have occurred if a Change in Control occurs which involves transactions which constitute
a change in the ownership or effective control of the Company, or in the ownership of a substantial
portion of the assets of the Company, within the meaning of Code Section 409A(a)(2)(A)(v).



     10. Additional Award Forfeiture Provisions.



     The Committee may condition a Participant’s right to receive a grant of an Award, to exercise
the Award, to retain cash, Stock, other Awards, or other property acquired in connection with an
Award, or to retain the profit or gain realized by a Participant in connection with an Award,
including cash or other proceeds received upon sale of Stock acquired in connection with an Award,
upon compliance by the Participant with specified conditions relating to non-competition,
confidentiality of information relating to or possessed by the Company, non-solicitation of
customers, suppliers, and employees of the Company, cooperation in litigation, non-disparagement of
the Company and its subsidiaries and affiliates and the officers, directors and affiliates of the
Company and its subsidiaries and affiliates, and other restrictions upon or covenants of the
Participant, including during specified periods following termination of employment or service to
the Company.



     11. General Provisions.



     (a) Compliance with Legal and Other Requirements. The Company may, to the extent deemed
necessary or advisable by the Committee and subject to Section 11(k), postpone the issuance or
delivery of Stock or payment of other benefits under any Award until completion of such
registration or qualification of such Stock or other required action under any federal or state
law, rule or regulation, listing or other required action with respect to any stock exchange or
automated quotation system upon which the Stock or other securities of the Company are listed or
quoted, or compliance with any other obligation of the Company, as the Committee may consider
appropriate, and may require any Participant to make such representations, furnish such information
and comply with or be subject to such other conditions as it may consider appropriate in connection
with the issuance or delivery of Stock or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other obligations. The foregoing
notwithstanding, in connection with a Change in Control, the Company shall take or cause to be
taken no action, and shall undertake or permit to arise no legal or contractual obligation, that
results or would result in any postponement of the issuance or delivery of Stock or payment of
benefits under any Award or the imposition of any other conditions on such issuance, delivery or
payment, to the extent that such postponement or other condition would represent a greater burden
on a Participant than existed on the 90th day preceding the Change in Control.



     (b) Limits on Transferability; Beneficiaries. No Award or other right or interest of a
Participant under the Plan shall be pledged, hypothecated or otherwise encumbered or subject to any
lien, obligation or liability of such Participant to any party (other than the Company or a
subsidiary or affiliate thereof), or assigned or transferred by such Participant otherwise than by
will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant,
and such Awards or rights that may be exercisable shall be exercised during the lifetime of the
Participant only by the Participant or his or her guardian or legal representative, except that
Awards and other rights (other than ISOs and SARs in tandem therewith) may be transferred to one or
more transferees during the lifetime of the Participant for purposes of estate-planning, and may be
exercised by such transferees in accordance with the terms of such Award, but only if and to the
extent such transfers are permitted by the Committee and the Committee has determined that there
will be no transfer of the Award to a third party for value, and subject to any terms and
conditions which the Committee may impose thereon (which may include limitations the Committee may
deem appropriate in order that offers and sales under the Plan will meet



- 14 -









 







applicable requirements of registration forms under the Securities Act of 1933 specified by the
Securities and Exchange Commission). A Beneficiary, transferee, or other person claiming any
rights under the Plan from or through any Participant shall be subject to all terms and conditions
of the Plan and any Award document applicable to such Participant, except as otherwise determined
by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the
Committee.



     (c) Adjustments. In the event that any large, non-recurring dividend or other distribution
(whether in the form of cash or property other than Stock), recapitalization, forward or reverse
split, Stock dividend, reorganization, merger, consolidation, spinoff, combination, repurchase,
share exchange, liquidation, dissolution, equity restructuring as defined under FAS 123R, or other
similar corporate transaction or event affects the Stock such that an adjustment is determined by
the Committee to be appropriate or, in the case of any outstanding Award, which is necessary in
order to prevent dilution or enlargement of the rights of the Participant, then the Committee
shall, in an equitable manner as determined by the Committee, adjust any or all of (i) the number
and kind of shares of Stock which may be delivered in connection with Awards granted thereafter,
including the number of shares available under Section 4, (ii) the number and kind of shares of
Stock by which annual per-person Award limitations are measured under Section 5, (iii) the number
and kind of shares of Stock subject to or deliverable in respect of outstanding Awards, (iv) the
exercise price, grant price or purchase price relating to any Award or, if deemed appropriate, the
Committee may make provision for a payment of cash or property to the holder of an outstanding
Option (subject to Section 11(l)), and (v) the performance goals or conditions of outstanding
Awards that are based on share prices. In addition, the Committee is authorized to make
adjustments in the terms and conditions of, and the criteria included in, Awards (including
Performance Awards and performance goals and any hypothetical funding pool relating thereto) in
recognition of unusual or nonrecurring events (including, without limitation, events described in
the preceding sentence, as well as acquisitions and dispositions of businesses and assets)
affecting the Company, any subsidiary or affiliate or other business unit, or the financial
statements of the Company or any subsidiary or affiliate, or in response to changes in applicable
laws, regulations, accounting principles, tax rates and regulations or business conditions or in
view of the Committee’s assessment of the business strategy of the Company, any subsidiary or
affiliate or business unit thereof, performance of comparable organizations, economic and business
conditions, personal performance of a Participant, and any other circumstances deemed relevant;
provided that no such adjustment shall be authorized or made if and to the extent that the
existence of such authority (i) would cause Options, SARs, or Performance Awards granted under the
Plan to Participants designated by the Committee as Covered Employees and intended to qualify as
“performance-based compensation” under Code Section 162(m) and regulations thereunder to otherwise
fail to qualify as “performance-based compensation” under Code Section 162(m) and regulations
thereunder, or (ii) would cause the Committee to be deemed to have authority to change the targets,
within the meaning of Treasury Regulation 1.162-27(e)(4)(vi), under the performance goals relating
to Options or SARs granted to Covered Employees and intended to qualify as “performance-based
compensation” under Code Section 162(m) and regulations thereunder.



     (d) Tax Provisions.




	 	(i)	 	Withholding. The Company and any subsidiary or affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under the Plan,
including from a distribution of Stock, or any payroll or other payment to a
Participant, amounts of withholding and other taxes due or potentially payable in
connection with any transaction involving an Award, and to take such other action as
the Committee may deem advisable to enable the Company and Participants to satisfy
obligations for the payment of withholding taxes and other tax obligations relating to
any Award. This authority shall include authority to




- 15 -









 






	 	 	 	withhold or receive Stock or other property and to make cash payments in respect
thereof in satisfaction of a Participant’s withholding obligations, either on a
mandatory or elective basis in the discretion of the Committee, or in satisfaction
of other tax obligations. Other provisions of the Plan notwithstanding, only the
minimum amount of Stock deliverable in connection with an Award necessary to
satisfy statutory withholding requirements will be withheld, unless withholding of
any additional amount of Stock will not result in additional accounting expense to
the Company.






	 	(ii)	 	Required Consent to and Notification of Code Section 83(b) Election. No
election under Section 83(b) of the Code (to include in gross income in the year of
transfer the amounts specified in Code Section 83(b)) or under a similar provision of
the laws of a jurisdiction outside the United States may be made unless expressly
permitted by the terms of the Award document or by action of the Committee in writing
prior to the making of such election. In any case in which a Participant is permitted
to make such an election in connection with an Award, the Participant shall notify the
Company of such election within ten days of filing notice of the election with the
Internal Revenue Service or other governmental authority, in addition to any filing
and notification required pursuant to regulations issued under Code Section 83(b) or
other applicable provision.
	 
	 	(iii)	 	Requirement of Notification Upon Disqualifying Disposition Under Code
Section 421(b). If any Participant shall make any disposition of shares of Stock
delivered pursuant to the exercise of an ISO under the circumstances described in Code
Section 421(b) (i.e., a disqualifying disposition), such Participant shall notify the
Company of such disposition within ten days thereof.





     (e) Changes to the Plan. The Board may amend, suspend or terminate the Plan or the
Committee’s authority to grant Awards under the Plan without the consent of shareholders or
Participants; provided, however, that any amendment to the Plan shall be submitted to the Company’s
shareholders for approval not later than the earliest annual meeting for which the record date is
at or after the date of such Board action if such shareholder approval is required by any federal
or state law or regulation or the rules of the New York Stock Exchange , or if such amendment would
materially increase the number of shares reserved for issuance and delivery under the Plan, and the
Board may otherwise, in its discretion, determine to submit other amendments to the Plan to
shareholders for approval. The Committee is authorized to amend outstanding awards, except as
limited by the Plan. The Board and Committee may not amend outstanding Awards (including by means
of an amendment to the Plan) without the consent of an affected Participant if such an amendment
would materially and adversely affect the rights of such Participant with respect to the
outstanding Award (for this purpose, actions that alter the timing of federal income taxation of a
Participant will not be deemed material unless such action results in an income tax penalty on the
Participant, and any discretion that is reserved by the Board or Committee with respect to an Award
is unaffected by this provision). Without the approval of shareholders, the Committee will not
amend or replace previously granted Options or SARs in a transaction that constitutes a
“repricing,” which for this purpose means any of the following or any other action that has the
same effect:




	 	•	 	Lowering the exercise price of an option or SAR after it is granted;
	 
	 	•	 	Any other action that is treated as a repricing under generally accepted accounting
principles;
	 
	 	•	 	Canceling an option or SAR at a time when its exercise price exceeds the fair market
value of the underlying Stock, in exchange for another option or SAR, restricted stock,
other equity, cash or other property; this shareholder approval requirement will apply to




- 16 -









 






	 	 	 	any repurchase or buyout of such an option or SAR authorized under any other provision of
the Plan;




provided, however, that the foregoing transactions shall not be deemed a repricing if pursuant to
an adjustment authorized under Section 11(c). With regard to other terms of Awards, the Committee
shall have no authority to waive or modify any such Award term after the Award has been granted to
the extent the waived or modified term would be mandatory under the Plan for any Award newly
granted at the date of the waiver or modification. A cancellation and exchange described in clause
(iii) of the preceding sentence will be considered a repricing regardless of whether the Option,
Restricted Stock or other equity is delivered simultaneously with the cancellation, regardless of
whether it is treated as a repricing under generally accepted accounting principles, and regardless
of whether it is voluntary on the part of the Participant.




     (f) Right of Setoff. The Company or any subsidiary or affiliate may, to the extent permitted
by applicable law, deduct from and set off against any amounts the Company or a subsidiary or
affiliate may owe to the Participant from time to time, including amounts payable in connection
with any Award, owed as wages, fringe benefits, or other compensation owed to the Participant, such
amounts as may be owed by the Participant to the Company, including but not limited to amounts owed
under Section 10(a), although the Participant shall remain liable for any part of the Participant’s
payment obligation not satisfied through such deduction and setoff. By accepting any Award granted
hereunder, the Participant agrees to any deduction or setoff under this Section 11(f).



     (g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an
“unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made
to a Participant or obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than those of a general
creditor of the Company; provided that the Committee may authorize the creation of trusts and
deposit therein cash, Stock, other Awards or other property, or make other arrangements to meet the
Company’s obligations under the Plan. Such trusts or other arrangements shall be consistent with
the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of
each affected Participant.



     (h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its
submission to the shareholders of the Company for approval shall be construed as creating any
limitations on the power of the Board or a committee thereof to adopt such other incentive
arrangements, apart from the Plan, as it may deem desirable, including incentive arrangements and
awards which do not qualify under Code Section 162(m), and such other arrangements may be either
applicable generally or only in specific cases.



     (i) Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined by
the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid
cash consideration, the Participant shall be repaid the amount of such cash consideration. No
fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The
Committee shall determine whether cash, other Awards or other property shall be issued or paid in
lieu of such fractional shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.



     (j) Compliance with Code Section 162(m). It is the intent of the Company that Options and
SARs granted to Covered Employees and other Awards designated as Awards to Covered Employees
subject to Section 7 shall constitute qualified “performance-based compensation” within the meaning
of Code Section 162(m) and regulations thereunder, unless otherwise determined by the Committee at
the time of allocation of an Award. Accordingly, the



- 17 -









 







terms of Sections 7(b) and (c), including the definitions of Covered Employee and other terms used
therein, shall be interpreted in a manner consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee cannot determine with certainty
whether a given Participant 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 Committee as likely to be a Covered Employee with respect to a specified fiscal year. If any
provision of the Plan or any Award document relating to a Performance Award that is designated as
intended to comply with Code Section 162(m) does not comply or is inconsistent with the
requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements, and no provision shall be
deemed to confer upon the Committee or any other person discretion to increase the amount of
compensation otherwise payable in connection with any such Award upon attainment of the applicable
performance objectives.



(k) Certain Limitations on Awards to Ensure Compliance with Section 409A.





	 	(i)	 	409A Awards and Deferrals. Other provisions of the Plan notwithstanding,
the terms of any 409A Award (which for this purpose means only such an Award held by
an employee subject to United States federal income tax), including any authority of
the Company and rights of the Participant with respect to the 409A Award, shall be
limited to those terms permitted under Section 409A, and any terms not permitted under
Section 409A shall be automatically modified and limited to the extent necessary to
conform with Section 409A. The following rules will apply to 409A Awards:






	 	(A)	 	If a Participant is permitted to elect to defer an Award or
any payment under an Award, such election will be permitted only at times in
compliance with Section 409A (including transition rules thereunder);
	 
	 	(B)	 	The Committee may, in its discretion, require or permit on an
elective basis a change in the distribution terms applicable to 409A Awards
(and Non-409A Awards that qualify for the short-term deferral exemption under
Section 409A) during 2007] in accordance with, and to the fullest extent
permitted by, Proposed Treasury Regulation § 1.409A (including Preamble §
XI.C) and IRS Notice 2005-1 and IRS Notice 2006-79, and at any other time in
accordance with Section 409A and guidance thereunder. The Director of Human
Resources of the Company is authorized to modify any such outstanding Awards
to permit election of different deferral periods provided that any such
modifications may not otherwise increase the benefits to Participants or the
costs of such Awards to the Company;
	 
	 	(C)	 	The Company shall have no authority to accelerate
distributions relating to 409A Awards in excess of the authority permitted
under Section 409A;
	 
	 	(D)	 	Any distribution of a 409A Award triggered by a Participant’s
termination of employment and intended to qualify under Section
409A(a)(2)(A)(i) shall be made only at the time that the Participant has had a
“separation from service” within the meaning of Section 409A(a)(2)(A)(i) (or
earlier at such time, after a termination of employment, that there occurs
another event triggering a distribution under the Plan or the applicable Award
agreement in compliance with Section 409A);




- 18 -









 






	 	(E)	 	Any distribution of a 409A Award subject to Section
409A(a)(2)(A)(i) that would be made within six months following a separation
from service of a “Specified Employee” (or “key employee”) as defined under
Section 409A(a)(2)(B)(i) shall instead occur at the expiration of the
six-month period under Section 409A(a)(2)(B)(i). In the case of installments,
this delay shall not affect the timing of any installment otherwise payable
after the six-month delay period;
	 
	 	(F)	 	In the case of any distribution of a 409A Award, if the
timing of such distribution is not otherwise specified in the Plan or an Award
agreement or other governing document, the distribution shall be made not
later than 75 days after the date at which the settlement of the Award is
specified to occur;
	 
	 	(G)	 	If any portion of an Award that is scheduled to vest at a
single specified date (a vesting “tranche”) is partly deemed a 409A Award and
partly deemed exempt from Section 409A (as a short-term deferral or
otherwise), the time of settlement of the entire tranche will be governed by
the distribution rules applicable to the 409A Award [(except to the extent
that this rule cannot apply to a distribution that would otherwise occur in
2007; and
	 
	 	(H)	 	The rules applicable to 409A Awards under this Section
11(k)(i) constitute further restrictions on terms of Awards set forth
elsewhere in this Plan. Thus, for example, a 409A Option/SAR shall be subject
to restrictions, including restrictions on rights otherwise specified in
Section 6(b) or 6(c), in order that such Award shall not result in
constructive receipt of income before exercise or tax penalties under Section
409A.






	 	(ii)	 	Rules Applicable to Non-409A Options/SARs. With respect to Non-409A Options/
SARs, in applying Code Sections 1563(a)(1), (2) and (3) for purposes of determining a
controlled group of corporations under Code Section 414(b), the language “at least 20
percent” shall be used instead of “at least 80 percent” at each place it appears in
Sections 1563(a)(1), (2) and (3), and in applying Treasury Regulation § 1.414(c)-2 (or
any successor provision) for purposes of determining trades or businesses (whether or
not incorporated) that are under common control for purposes of Section 414(c), the
language “at least 20 percent” shall be used instead of “at least 80 percent” at each
place it appears in Treasury Regulation §1.414(c)-2.
	 
	 	(iii)	 	Distributions Upon Vesting. In the case of any Award providing for a
distribution upon the lapse of a risk of forfeiture, if the timing of such
distribution is not otherwise specified in the Plan or an Award agreement or other
governing document, the distribution shall be made not later than March 15 of the year
following the year in which the risk of forfeiture lapsed.
	 
	 	(iv)	 	Scope and Application of this Provision. For purposes of this Section 11(k),
references to a term or event (including any authority or right of the Company or a
Participant) being “permitted” under Section 409A mean that the term or event will not
cause the Participant to be deemed to be in constructive receipt of compensation
relating to the 409A Award prior to the distribution of cash, shares or other property
or to be liable for payment of interest or a tax penalty under Section 409A.










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     (l) Governing Law. The validity, construction, and effect of the Plan, any rules and
regulations relating to the Plan and any Award document shall be determined in accordance with the
laws of the State of New Jersey, without giving effect to principles of conflicts of laws, and
applicable provisions of federal law.



     (m) Awards to Participants Outside the United States. The Committee may modify the terms of
any Award under the Plan made to or held by a Participant who is then resident or primarily
employed outside of the United States, or establish one or more sub-plans for such participants, in
any manner deemed by the Committee to be necessary or appropriate in order that such Award shall
conform to laws, regulations, and customs of the country in which the Participant is then resident
or primarily employed, or so that the value and other benefits of the Award to the Participant, as
affected by foreign tax laws and other restrictions applicable as a result of the Participant’s
residence or employment abroad shall be comparable to the value of such an Award to a Participant
who is resident or primarily employed in the United States. An Award may be modified under this
Section 11(m) in a manner that is inconsistent with the express terms of the Plan, so long as such
modifications will not contravene any applicable law or regulation or result in actual liability
under Section 16(b) for the Participant whose Award is modified.



     (n) Limitation on Rights Conferred under Plan. Neither the Plan nor any action taken
hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue
as an Eligible Person or Participant or in the employ or service of the Company or a subsidiary or
affiliate, (ii) interfering in any way with the right of the Company or a subsidiary or affiliate
to terminate any Eligible Person’s or Participant’s employment or service at any time (subject to
the terms and provisions of any separate written agreements), (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the Plan or to be treated uniformly with other
Participants and employees, or (iv) conferring on a Participant any of the rights of a shareholder
of the Company unless and until the Participant is duly issued or transferred shares of Stock in
accordance with the terms of an Award or an Option is duly exercised. Except as expressly provided
in the Plan and an Award document, neither the Plan nor any Award document shall confer on any
person other than the Company and the Participant any rights or remedies thereunder. Any Award
shall not be deemed compensation for purposes of computing benefits under any retirement plan of
the Company or any subsidiary or affiliate and shall not affect any benefits under any other
benefit plan at any time in effect und which the availability or amount of benefits is related to
the level of compensation (unless required by any such other plan or arrangement with specific
reference to Awards under this Plan).



     (o) Severability. If any of the provisions of this Plan or any Award document is finally held
to be invalid, illegal or unenforceable (whether in whole or in part), such provision shall be
deemed modified to the extent, but only to the extent, of such invalidity, illegality or
unenforceability, and the remaining provisions shall not be affected thereby; provided, that, if
any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds
the maximum scope determined to be acceptable to permit such provision to be enforceable, such
provision shall be deemed to be modified to the minimum extent necessary to modify such scope in
order to make such provision enforceable hereunder. The Plan and any Award documents contain the
entire agreement of the parties with respect to the subject matter thereof and supersede all prior
agreements, promises, covenants, arrangements, communications, representations and warranties
between them, whether written or oral with respect to the subject matter thereof. No rule of
strict construction shall be applied against the Company, the Committee, or any other person in the
interpretation of any terms of the Plan, Award, or agreement or other document relating thereto.



     (p) Plan Effective Date and Termination. The Plan shall become effective if, and at such time
as, the shareholders of the Company have approved it by a majority of the votes



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cast at a meeting of shareholders by the holders of shares entitled to vote thereon, provided that
the total vote cast on the proposal represents over 50% in interest of all securities entitled to
vote on the proposal. The date of such shareholder approval shall be the Effective Date. Upon
such approval of the Plan by the shareholders of the Company, no further awards shall be granted
under the Employee and Outside Director Long-Term Incentive Compensation Plan, but any outstanding
awards under that plan shall continue in accordance with their terms. Unless earlier terminated by
action of the Board of Directors, the authority to make new grants under the Plan shall terminate
on the date that is ten years after the latest date upon which shareholders of the Company have
approved the Plan, and the Plan will remain in effect until such time as no Stock remains available
for delivery under the Plan and the Company has no further rights or obligations under the Plan
with respect to outstanding Awards under the Plan.




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