**EXHIBIT 10.3**

JONES APPAREL GROUP, INC.1999 STOCK INCENTIVE PLAN

(as amended on December 10, 2004)

        1. Purpose ofthe 1999 Stock Incentive Plan. Jones Apparel Group, Inc. (the"Company") desires to attract and retain the best available talent andto encourage the highest level of performance. The 1999 Stock Incentive Plan(the "Stock Incentive Plan") is intended to contribute significantlyto the attainment of these objectives by (i) providing long-term incentives andrewards to all key employees of the Company (including officers and directorswho are key employees of the Company and also including key employees of anysubsidiary of the Company which may include officers or directors of anysubsidiary of the Company who are also key employees of said subsidiary), andthose directors and officers, consultants, advisers, agents or independentrepresentatives of the Company or of any subsidiary (together, "EligibleIndividuals"), who are contributing or in a position to contribute to thelong-term success and growth of the Company or of any subsidiary, (ii) assistingthe Company and any subsidiary in attracting and retaining Eligible Individualswith experience and ability, and (iii) associating more closely the interests ofsuch Eligible Individuals with those of the Company's stockholders.

        2. Scope andDuration of the Stock Incentive Plan. Under the Stock Incentive Plan,options ("Options") to purchase shares of common stock, par value $.01per share ("Common Stock"), may be granted to Eligible Individuals.Options granted to employees (including officers and directors who areemployees) of the Company or a subsidiary corporation thereof, may, at the timeof grant, be designated by the Company's Board of Directors either as incentivestock options ("ISOs"), with the attendant tax benefits as providedfor under Sections 421 and 422 of the Internal Revenue Code of 1986, as amended(the "Code") or as nonqualified stock options. Stock appreciationrights (the "Rights") may be granted in association with Options.Shares of Common Stock subject to restrictions and granted pursuant to Paragraph7 of the Stock Incentive Plan ("Restricted Stock") may also be grantedto Eligible Individuals hereunder. The grant of any of an Option, a Right and/orRestricted Stock is sometimes referred to herein as an "Award." Theaggregate number of shares of Common Stock reserved for grant from time to timeunder the Stock Incentive Plan is 18,500,000 shares of Common Stock, whichshares of Common Stock may be authorized but unissued shares of Common Stock orshares of Common Stock, which shall have been or which may be reacquired by theCompany, as the Board of Directors of the Company shall from time to timedetermine. Restricted Stock issued pursuant to the Stock Incentive Plan, evenwhile subject to restrictions, will be counted against the maximum number ofshares issuable hereunder. Such aggregate numbers shall be subject to adjustmentas provided in Paragraph 11. If an Option shall expire or terminate for anyreason without having been exercised in full or surrendered in full inconnection with the exercise of a Right, the shares of Common Stock representedby the portion of the Option not so exercised or surrendered shall (unless theStock Incentive Plan shall have been terminated) become available for otherAwards of Options under the Stock Incentive Plan, except that up to 2,000,000shares of Common Stock represented by Options granted from and after May 19,2004 which are not so exercised or surrendered shall (unless the Stock IncentivePlan shall have been terminated) become available for other Awards of eitherOptions or Restricted Stock under the Stock Incentive 

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Plan. If Restricted Stock is forfeited for any reason, theforfeited shares of Restricted Stock shall (unless the Stock Incentive Planshall have been terminated) become available for other Awards of RestrictedStock or Options under the Stock Incentive Plan. Subject to Paragraph 14, noOption, Right or Restricted Stock shall be granted under the Stock IncentivePlan after May 19, 2009.

        3. Administrationof the Stock Incentive Plan.  

        (a) This StockIncentive Plan will be administered by the Board of Directors of the Company(the "Board of Directors"). The Board of Directors, in its discretion,may designate a Compensation Committee (the "Compensation Committee"or "Committee") composed of at least two members of the Board ofDirectors to administer this Stock Incentive Plan. Members of the CompensationCommittee shall meet such qualifications as the Board of Directors maydetermine; provided, however, that each member shall qualify as a"Non-Employee Director" under Section 16 of the Securities ExchangeAct of 1934, as amended (the "Exchange Act") and as an "OutsideDirector" as defined in Code Section 162(m) and any regulations promulgatedthereunder. The Board, in its discretion, may also designate a CEO Committee(the "CEO Committee"), composed of the director of the Company who isserving as the Company's chief executive officer.

        (b) The Board ofDirectors or the Committee (hereinafter, the terms "CompensationCommittee" or "Committee", shall mean the Board of Directorswhenever no such Compensation Committee has been designated), shall haveauthority in its discretion, subject to and not inconsistent with the expressprovisions of this Stock Incentive Plan, to direct the grant of Awards; todetermine the purchase price of the Common Stock covered by each Award; theEligible Individuals to whom, and the time or times at which, Awards shall begranted and subject to the maximum set forth in Paragraph 4 hereof, the numberof shares of Common Stock to be covered by each Award; to designate Options asISOs; to direct the grant of Rights in connection with any Option; to interpretthe Stock Incentive Plan; to determine the time or times at which Options may beexercised; to determine the terms and conditions of the restrictions relating tothe Restricted Stock (which restrictions may vary among Awards as the Committeeshall deem appropriate); to prescribe, amend and rescind rules and regulationsrelating to the Stock Incentive Plan, including, without limitation, such rulesand regulations as it shall deem advisable, so that transactions involvingAwards may qualify for exemption under such rules and regulations as theSecurities and Exchange Commission may promulgate from time to time exemptingtransactions from Section 16(b) of the Securities and Exchange Act of 1934 (the"Exchange Act"); to determine the terms and provisions of and to causethe Company to enter into agreements with Eligible Individuals in connectionwith Awards granted under the Stock Incentive Plan (the "Agreements"),which Agreements may vary from one another as the Committee shall deemappropriate; and to make all other determinations it may deem necessary oradvisable for the administration of the Stock Incentive Plan. Notwithstandingthe foregoing, except as provided in Section 11, the Committee shall not havethe authority to reduce the exercise price of any outstanding Option, to offerto grant any new Option in exchange for the cancellation of an outstandingOption with a higher exercise price, to increase the maximum number of shares ofCommon Stock reserved for issuance under the Stock Incentive Plan or to alterthe classes of persons constituting Eligible Individuals.

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        Members of theCommittee shall serve at the pleasure of the Board of Directors. The Committeeshall have and may exercise all of the powers of the Board of Directors underthe Stock Incentive Plan, other than the power to appoint a director toCommittee membership. A majority of the Committee shall constitute a quorum, andacts of a majority of the members present at any meeting at which a quorum ispresent shall be deemed the acts of the Committee. The Committee may also act byinstrument signed by a majority of the members of the Committee.

        Every action,decision, interpretation or determination by the Committee with respect to theapplication or administration of this Stock Incentive Plan shall be final andbinding upon the Company and each person holding any Award granted under thisStock Incentive Plan.

        (c) Subject to theexpress provisions of this Plan, the Committee shall have the authority, in itsdiscretion, to delegate to the CEO Committee the authority to direct the grantof Awards to Eligible Individuals (as such term is defined in the Plan), solelyin connection with either the hiring or the promotion of such EligibleIndividuals by the Company or by any subsidiary of the Company and, inconnection with such Awards, to determine the purchase price of the Common Stockcovered by such Awards, the number of shares of Common Stock to be covered bysuch Awards, to designate any such Awards of Options as ISOs, to direct thegrant of Rights in connection with any such Options, to determine the time ortimes at which such Options may be exercised, and to determine the terms andconditions of the restrictions relating to such Awards of Restricted Stock; provided,however, that the CEO Committee shall have no authority to (i) grantAwards to the chief executive officer of the Company or to any other EligibleIndividual who at the time of the Award is, or is reasonably expected to become,subject to the provisions of Section 16 of the Exchange Act, pursuant to Rule16a-2 under the Exchange Act, (ii) during any calendar year, grant Options topurchase more than 200,000 shares of Common Stock in the aggregate or grant morethan 75,000 shares of Restricted Stock in the aggregate, (iii) grant to anyEligible Individual Awards of Options to purchase more than 25,000 shares ofCommon Stock in the aggregate and/or Awards of more than 10,000 shares ofRestricted Stock in the aggregate or (iv) grant Awards that are inconsistentwith the express provisions of the Plan.

        4. Eligibility:Factors to be Considered in Granting Awards and Designating ISOs.
           (a) Awards may be granted only to (i) key employees (including officers anddirectors who are employees) of the Company or any subsidiary corporationthereof on the date of grant (Options so granted may be designated as ISOs), and(ii) directors or officers of the Company or a subsidiary corporation thereof onthe date of grant, without regard to whether they are employees, and (iii)consultants or advisers to or agents or independent representatives of theCompany or a subsidiary thereof. In determining the persons to whom Awards shallbe granted and the number of shares of Common Stock to be covered by each Award,the Committee, or, if applicable, the CEO Committee, shall take into account thenature of the duties of the respective persons, their present and potentialcontributions to the Company's (including subsidiaries') successful operationand such other factors as the Board of Directors in its discretion shall deemrelevant. Subject to the provisions of Paragraph 2 and clause (c) below, anEligible Individual may receive Awards on more than one occasion under the StockIncentive Plan. No person shall be eligible for an Award if he shall have filedwith the Secretary of the Company an instrument waiving such eligibility;provided that any 

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such waiver may be revoked by filing with the Secretary ofthe Company an instrument of revocation, which revocation will be effective uponsuch filing.

           (b) In the case of each ISO granted to an employee, the aggregate fair marketvalue (determined at the time the ISO is granted) of the Common Stock withrespect to which the ISO is exercisable for the first time by such employeeduring any calendar year (under all plans of the Company and any subsidiarycorporation thereof) may not exceed $100,000.

           (c) In no event shall any Eligible Individual be granted Options to purchasemore than 3,000,000 shares of Common Stock or shares of Restricted Stock asPerformance-Based Awards (as defined in paragraph 12) in excess of 1,500,000over the ten-year term of this Stock Incentive Plan.

        5. Awards ofOptions.

        (a) Options.
        (i) The    purchase price per share of the Common Stock covered by each Option shall be    established by the Committee, or, if applicable, the CEO Committee, but in    no event shall it be less than the fair market value of a share of the    Common Stock on the date the Option is granted; provided, however, that if    an Option is granted prior to May 19, 2004 to a director of the Company for    services solely as a director, and such grant is approved by the Board of    Directors, the purchase price may be less than such fair market value. If,    at the time an Option is granted, the Common Stock is publicly traded, such    fair market value shall be the closing price (or the mean of the latest bid    and asked prices) of a share of Common Stock on such date as reported in The    Wall Street Journal (or a publication or reporting service deemed equivalent    to The Wall Street Journal for such purpose by the Board of Directors) for    any national securities exchange or other securities market which at the    time is included in the stock price quotations of such publication. In the    event that the Committee shall determine such stock price quotation is not    representative of fair market value by reason of the lack of a significant    number of recent transactions or otherwise, the Committee may determine fair    market value in such a manner as it shall deem appropriate under the    circumstances. If, at the time an Option is granted, the Common Stock is not    publicly traded, the Committee shall make a good faith attempt to determine    such fair market value.

        (ii) In the    case of an employee who at the time an ISO is granted owns stock possessing    more than 10% of the total combined voting power of all classes of the stock    of the employer corporation or of its parent or a subsidiary corporation    thereof (a "10% Holder"), the purchase price of the Common Stock    covered by any ISO shall in no event be less than 110% of the fair market    value of the Common Stock at the time the ISO is granted.

        (b) Term of Options. The term of each Option shall be fixed by theCommittee, or, if applicable, the CEO Committee, but in no event shall it beexercisable more than 10 years from the date of grant in the case of Optionsgranted prior to May 28, 2003, or more than seven years from the

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date of grant in the case of Options granted from and afterMay 28, 2003, in each case, subject to earlier termination as provided inParagraphs 9 and 10. An ISO granted to a 10% Holder shall not be exercisablemore than five years from the date of grant.

        (c) Exercise of Options.
        (i) Subject to    the provisions of the Stock Incentive Plan, an Option granted to an employee    under the Stock Incentive Plan shall become fully exercisable at such time    or times as the Committee or, if applicable, the CEO Committee, in its sole    discretion shall determine at the time of the granting of the Option or    thereafter, except that in no event shall any such Option be exercisable    later than 10 years after its grant in the case of Options granted prior to    May 28, 2003, or more than seven years from the date of grant in the case of    Options granted from and after May 28, 2003.

        (ii) An Option    may be exercised as to any or all full shares of Common Stock as to which    the Option is then exercisable.

        (iii) The    purchase price of the shares of Common Stock as to which an Option is    exercised shall be paid in full in cash at the time of exercise; provided,    that the purchase price may be paid (i) in whole or in part, by surrender or    delivery to the Company of previously-owned securities of the Company    already beneficially owned by the Optionee for at least six months and    having a fair market value on the date of the exercise equal to the portion    of the purchase price being so paid, or (ii) in cash by a broker-dealer    acceptable to the Company to whom the Optionee has submitted an irrevocable    notice of exercise. Fair market value shall be determined as provided in    Paragraph 5 for the determination of such value on the date of the grant. In    addition, the holder shall, upon notification of the amount due and prior to    or concurrently with delivery to the holder of a certificate representing    such shares of Common Stock, pay promptly any amount necessary to satisfy    applicable Federal, state or local tax requirements.

        (iv) Except as    provided in Paragraphs 9 and 10, no Option may be exercised unless the    original grantee thereof is then an Eligible Individual.

        (v) The Option    holder shall have the rights of a stockholder with respect to shares of    Common Stock covered by an Option only upon becoming the holder of record of    such shares of Common Stock.

        (vi)    Notwithstanding any other provision of this Stock Incentive Plan, the    Company shall not be required to issue or deliver any share of stock upon    the exercise of an Option prior to the admission of such share to listing on    any stock exchange or automated quotation system on which the Company's    Common Stock may then be listed.

        6. Awards andExercise of Rights.
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        (a) A Right may beawarded by the Committee, or, if applicable, the CEO Committee, in associationwith any Option either at the time such Option is granted or at any time priorto the exercise, termination or expiration of such Option. Each such Right shallbe subject to the same terms and conditions as the related Option and shall beexercisable only to the extent such Option is exercisable, and the Right Value,as hereinafter defined, is a positive amount.

        (b) A Right shallentitle the holder to surrender to the Company unexercised the related Option(or any portion or portions thereof which the holder from time to time shalldetermine to surrender for this purpose) and to receive in exchange therefor,subject to the provisions of the Stock Incentive Plan and such rules andregulations as from time to time may be established by the Committee, a paymenthaving an aggregate value equal to the product of (A) the "RightValue" of one share of Common Stock, as hereinafter defined, and (B) thenumber of shares of Common Stock called for by the Option, or portion thereof,which is surrendered. For purposes of the Stock Incentive Plan, the Right Valueof one share of Common Stock shall be the excess of: (i) the fair market valueof one share of Common Stock on the date on which the Right is exercised, over(ii) the purchase price per share of the Common Stock covered by the surrenderedOption. The date on which the Committee shall receive notice from the holder ofthe exercise of a Right shall be considered the date on which the Right isexercised.

        Upon exercise of aRight, a holder shall indicate to the Committee what portion of the payment hedesires to receive in cash and what portion in shares of Common Stock of theCompany; provided, that the Board of Directors shall have sole discretion todetermine in any case or cases that payment will be made in the form of allcash, all shares of Common Stock, or any combination thereof. If the holder isto receive a portion of such payment in shares of Common Stock, the number ofshares of Common Stock shall be determined by dividing the amount of suchportion by the fair market value of one share of Common Stock on the date onwhich the Right is exercised. The number of shares of Common Stock which may bereceived pursuant to the exercise of a Right may not exceed the number of sharesof Common Stock covered by the related Option, or portion thereof, which issurrendered. No fractional shares of Common Stock will be issued, but insteadcash will be paid for any such fractional share of Common Stock.

        No payment will berequired from the holder upon exercise of a Right, except that the holder shall,upon notification of the amount due and prior to or concurrently with deliveryto the holder of cash or a certificate representing shares of Common Stock, paypromptly any amount necessary to satisfy applicable Federal, state or local taxrequirements, and the Company shall have the right to deduct from any paymentany taxes required by law to be withheld by the Company with respect to suchpayment.

        (c) The fairmarket value of one share of Common Stock for the date on which a Right isexercised shall be determined as provided in Paragraph 5 for the determinationof such value on the date of grant.

        (d) Upon exerciseof a Right, the number of shares of Common Stock subject to exercise under therelated Option shall automatically be reduced by the number of shares of CommonStock represented by the Option, or portion thereof, which is surrendered.Shares of Common Stock subject to Options, or portions thereof, which aresurrendered in connection with the exercise 

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of Rights shall not be available for subsequent Optionor Restricted Stock grants under the Stock Incentive Plan.

        (e) Whetherpayments upon exercise of Rights are made in cash, shares of Common Stock or acombination thereof, the Committee shall have the sole discretion as to thetiming of the payments, including whether payment shall be made in a lump sum orinstallments, but payments may not be deferred beyond the first business day ofthe twenty-fifth calendar month next following the month of exercise of a Right.Deferred payments may bear interest at a rate determined by the Committee,provided that such rate of interest shall not be less than the lowest rate whichavoids imputation of interest at a higher rate under the Code. The Board ofDirectors may make such further provisions and adopt such rules and regulationsas it shall deem appropriate, not inconsistent with the Stock Incentive Plan,related to the timing of the exercise of a Right and the determination of theform and timing of payment to the holder upon such exercise.

        7. Awards ofRestricted Stock. The Committee, or, if applicable, the CEO Committee, mayauthorize the issuance or transfer of shares of Restricted Stock to EligibleIndividuals either alone or in addition to other Awards under the StockIncentive Plan. The terms and conditions of the vesting of an Award ofRestricted Stock shall be set forth in the Agreement with the recipient thereof,except that Awards of Restricted Stock that will fully vest in fewer than threeyears from the date of grant may not exceed 5% of the total number of shares ofCommon Stock reserved for issuance under the Stock Incentive Plan. TheCommittee, or, if applicable, the CEO Committee, may condition the grant ofRestricted Stock upon the attainment of specified performance goals pursuant toParagraph 12 hereof or such other factors as the Committee, or, if applicable,the CEO Committee, may determine, in its sole discretion. Awards of RestrictedStock shall also be subject to the following provisions:

        (a) The RestrictedStock may be issued at a purchase price less than the fair market value thereofor for no consideration, as determined by the Committee, or, if applicable, theCEO Committee.

        (b) RestrictedStock may be subject to: (i) restrictions on the sale or other dispositionthereof, (ii) rights of repurchase or first refusal, and (iii) such otherrestrictions, conditions and terms as the Committee, or, if applicable, the CEOCommittee, deems appropriate.

        (c) Each Award ofRestricted Stock will constitute an immediate transfer of ownership of suchshares, entitling the recipient to dividend, voting and other ownership rights.The holder of Restricted Stock shall not be required to return any dividendsreceived thereon to the Company in the event of the forfeiture of such shares.

        (d) The Committeeshall determine whether shares of Restricted Stock are to be held in escrow bythe Company or by an escrow agent appointed by the Committee, or if such sharesare to be delivered to the recipient of the Award with an appropriate legendreferring to the terms, conditions and restrictions applicable to the Award, insubstantially the following form:

"The sale, transfer, alienation, attachment,    assignment, pledge or encumbrance of the shares of stock represented hereby    are subject to the 

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terms and conditions (including forfeiture) of the Jones    Apparel Group, Inc. 1999 Stock Incentive Plan and an Agreement entered into    by the registered owner and the Company dated __________. Copies of such    Plan and Agreement are on file at the offices of the Company. Any attempt to    dispose of these shares in contravention of the applicable restrictions,    including by way of sale, assignment, transfer, pledge, hypothecation or    otherwise, shall be null and void and without effect."

If and when all restrictions on such shares have lapsedwithout a prior forfeiture of the shares, such legend shall be removed from thecertificate representing the shares.

        8. Nontransferabilityof Awards. No Award granted under the Stock Incentive Plan shall betransferable, other than by will or by the laws of descent and distribution,except that all or any portion of an Option (other than Options which are ISOs)may be transferred to or for the benefit of (by trust) the spouse or linealdescendants of a holder of such Option, subject to such restrictions on transferwhich may be imposed by federal and state securities laws, and if prior theretothe transferee agrees to be bound by the terms of the Stock Incentive Plan andthe Options, as the case may be ("Permitted Transferee"). Optionswhich are ISOs may be exercised, during the lifetime of the holder, only by theholder, or by his guardian or legal representative.

        9. Terminationof Relationship to the Company.
        (a) In the eventthat any original grantee of an Option or Right shall cease to be an EligibleIndividual of the Company (or any subsidiary corporation thereof), except as setforth in Paragraph 10, such Award may (subject to the provisions of the StockIncentive Plan) be exercised (to the extent that the original grantee wasentitled to exercise such Option or Right at the termination of his employmentor service as a director, officer, consultant, adviser, agent or independentrepresentative, as the case may be) at any time within three months after suchtermination (or for such other period following termination as the grantee andthe Company may have agreed to in writing), but not more than 10 years (fiveyears in the case of a 10% Holder) after the date on which such Award wasgranted or the expiration of the Award, if earlier. Notwithstanding theforegoing, except as provided in Paragraph 10, if the position of an originalgrantee shall be terminated by the Company or any subsidiary thereof for causeor if the original grantee terminates his employment or position voluntarily andwithout the written consent of the Company or any subsidiary corporationthereof, as the case may be, the Options or Rights granted to such person,whether held by such person or by a Permitted Transferee shall, to the extentnot theretofore exercised, forthwith terminate immediately upon suchtermination. Subject to such exceptions as may be determined by the Committee,in the event any original Restricted Stock grantee shall cease to be an EligibleIndividual of the Company (or any subsidiary corporation thereof), except as setforth in Paragraph 10, all shares of Restricted Stock remaining subject toapplicable restrictions shall be forfeited by the recipient and be immediatelytransferred to, and reacquired by, the Company at no cost to the Company.

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        (b) Other than asprovided in Paragraph 10(a), Awards granted under the Stock Incentive Plan shallnot be affected by any change of duties or position so long as the holderremains an Eligible Individual.

        (c) Any Agreementmay contain such provisions as the Committee shall approve with reference to thedetermination of the date employment terminates or the date other positions orrelationships terminate for purposes of the Stock Incentive Plan and the effectof leaves of absence, which provisions may vary from one another.

        (d) Nothing in theStock Incentive Plan or in any Award pursuant to the Stock Incentive Plan shallconfer upon any Eligible Individual or other person any right to continue in theemploy of the Company or any subsidiary corporation thereof (or the right to beretained by, or have any continued relationship with, the Company or anysubsidiary corporation thereof), or affect the right of the Company or any suchsubsidiary corporation thereof, as the case may be, to terminate his employment,retention or relationship at any time. The grant of any Award pursuant to theStock Incentive Plan shall be entirely in the discretion of the Committee, or,if applicable, the CEO Committee, and nothing in the Stock Incentive Plan shallbe construed to confer on any Eligible Individual any right to receive any Awardunder the Stock Incentive Plan.

        10. Death,Disability or Retirement.
        (a) If a person towhom an Award has been granted under the Stock Incentive Plan shall (i) die (andthe conditions in sub-paragraph (b) below are met), or (ii) become permanentlyand totally disabled or enter retirement (as such terms are defined below) whileserving as an Eligible Individual, then the following provisions shall apply:(A) in the case of an Option or Stock Appreciation Right, the Award shall becomeimmediately fully exercisable and the period for exercise provided in Paragraph9 shall be extended to (i) one year after the date of death of the originalgrantee, or (ii) in the case of the permanent and total disability of theoriginal grantee, to one year after the date of permanent and total disabilityof the original grantee, or (iii) three years in the case of a retirement (asdefined below), but, in any case, not more than 10 years (five years in the caseof a 10% Holder) after the date such Award was granted, or the expiration of theAward, if earlier, as shall be prescribed in the original grantee's AwardAgreement, and (B) in the case of Restricted Stock, the period of restrictionsapplicable to all unvested shares shall terminate on the date of termination ofemployment by reason of retirement, disability or death. An Award may beexercised as set forth herein in the event of the original grantee's death, by aPermitted Transferee or the person or persons to whom the holder's rights underthe Award pass by will or applicable law, or if no such person has the right, byhis executors or administrators; or in the event of the original grantee'spermanent and total disability, by the holder or his guardian.

        (b) In the case ofdeath of a person to whom an Award was originally granted, the provisions ofsubparagraph (a) apply if such person dies (i) while in the employ of theCompany or a subsidiary corporation thereof or while serving as an EligibleIndividual of the Company or a subsidiary corporation thereof or (ii) withinthree months after the termination of such position other 

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than termination for cause, or voluntarily on the originalgrantee's part and without the consent of the Company or a subsidiarycorporation thereof, or (iii) within three years following his retirement.

        (c) The term"permanent and total disability" as used above shall have the meaningset forth in Section 22(e)(3) of the Code.

        (d) The term"retirement" as used above shall mean voluntary termination ofemployment with the Company or a subsidiary corporation thereof by the EligibleIndividual after attaining age 55 with at least 10 years of service with theapproval of the Company or, if the individual has not attained age 55 and/or hasless than 10 years of service, the Company determines that circumstances existthat warrant the granting of retirement status.

        11. Adjustmentsupon Changes in Capitalization. Notwithstanding any other provision of theStock Incentive Plan, in the event of changes in the outstanding Common Stock ofthe Company by reason of stock dividends, stock splits, reverse stock splits,recapitalizations, mergers, consolidations, combinations or exchanges of shares,spin-offs, reorganizations, liquidations and the like, the Committee mayappropriately adjust the aggregate number and class of shares of Common Stock asto which Awards may be granted under the Stock Incentive Plan, the maximumnumber and class of shares that may be awarded to any Eligible Individual, thenumber and class of shares subject to outstanding Awards, and the Option orRestricted Stock price per share. In the event of (i) the dissolution orliquidation of the Company, or (ii) the disposition by the Company ofsubstantially all of the assets or stock of a subsidiary of which the originalgrantee is then an employee, officer or director, consultant, adviser, agent orindependent representative or if (iii) a "change in control" (ashereinafter defined) of the Company has occurred or is about to occur, then, ifthe Committee shall so determine: (A) with respect to Options, each Option underthe Stock Incentive Plan, if such event shall occur with respect to the Company,or each Option granted to an employee, officer, director, consultant, adviser,agent or independent representative of a subsidiary respecting which such eventshall occur, shall (x) become immediately and fully exercisable or (y) terminatesimultaneously with the happening of such event, and the Company shall pay theOptionee in lieu thereof an amount equal to (a) the excess of the fair marketvalue over the exercise price of one share on the date on which such eventoccurs, multiplied by (b) the number of shares subject to the Option, withoutregard to whether the Option is then otherwise exercisable, and (B) with respectto Restricted Stock, any Restricted Stock not forfeited prior to the change incontrol shall become immediately and fully vested, and the Committee shall havesole discretion to waive automatic forfeitures, if any, arising from the changein control.

        12. Performance-BasedAwards. Certain Awards of Restricted Stock granted under the Stock IncentivePlan may be granted, in the sole discretion of the Committee, in a mannerconstituting "qualified performance-based compensation" within themeaning of Section 162(m) of the Code. Such Awards (the "Performance-BasedAwards") shall be based upon one or more of the following factors: stockprice, earnings per share, net earnings, operating earnings, return on assets,shareholder return, return on equity, growth in assets, sales, cash flow, marketshare, relative performance to a group of companies comparable to the Company,and strategic business criteria consisting of one or more objectives based onthe Company's meeting specified goals relating to revenue, market 

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penetration, business expansion, costs or acquisitions ordivestitures. With respect to Performance-Based Awards, (i) the Committee shallestablish in writing the objective performance-based goals applicable to a givenfiscal period no later than 90 days after the commencement of such fiscal period(but in no event after 25% of such period has elapsed) and (ii) noPerformance-Based Awards shall be payable to any recipient for a given fiscalperiod until the Committee certifies in writing that the objective performancegoals (and any other material terms) applicable to such period have beensatisfied.

        13. Effectivenessof the Stock Incentive Plan. Awards may be granted under the Stock IncentivePlan, subject to its authorization and adoption by stockholders of the Company,at any time or from time to time after its adoption by the Committee, but theamendment and restatement of the Stock Incentive Plan shall not be effectiveunless it shall have been authorized and adopted by a majority of the votesproperly cast thereon at a meeting of stockholders of the Company duly calledand held after the date of adoption of the amended and restated Stock IncentivePlan by the Board of Directors. If so adopted, the amended and restated StockIncentive Plan shall become effective as of the date of its adoption by theBoard of Directors. The exercise of Options shall also be expressly subject tothe condition that at the time of exercise a registration statement under theSecurities Act of 1933, as amended (the "Act") shall be effective, orother provisions satisfactory to the Committee shall have been made to ensurethat such exercise will not result in a violation of such Act, and such otherqualification under any state or Federal law, rule or regulation as the Companyshall determine to be necessary or advisable shall have been effected. Ifthe shares of Common Stock issuable upon exercise of an Option or if shares ofRestricted Stock are not registered under such Act, and if the Committee shalldeem it advisable, the recipient may be required to represent and agree inwriting (i) that any shares of Common Stock acquired pursuant to the StockIncentive Plan will not be sold except pursuant to an effective registrationstatement under such Act or an exemption from the registration provisions of theAct and (ii) that such recipient will be acquiring such shares of Common Stockfor his own account and not with a view to the distribution thereof and (iii)that the holder accepts such restrictions on transfer of such shares, including,without limitation, the affixing to any certificate representing such shares ofan appropriate legend restricting transfer as the Company may reasonably impose.

        14. Terminationand Amendment of the Stock Incentive Plan. The Board of Directors of theCompany may amend, modify or terminate the Stock Incentive Plan at any timeprior to the termination of the Stock Incentive Plan, except that no amendmentmay be made without shareholder approval (i) if the Board of Directorsdetermines that such approval is necessary to comply with any tax or regulatoryrequirement, including any approval requirement which is a prerequisite forexemptive relief from Section 16 of the Exchange Act, for which or with whichthe Board of Directors determines that it is desirable to qualify or comply, or(ii) if such amendment grants the Committee the authority, except as providedfor in Section 11, to (a) reduce the exercise price of any outstanding Option,(b) offer to grant any new Option in exchange for the cancellation of anoutstanding Option with a higher exercise price, (c) increase the maximum numberof shares of Common Stock reserved for issuance under the Stock Incentive Plan,(d) alter the classes of persons constituting Eligible Individuals or (e) grantAwards of Restricted Stock that will fully vest in fewer than three years fromthe date of grant in excess of 5% of the total number of shares of Common 

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Stock reserved for issuance under the Stock Incentive Plan.No suspension, termination, modification or amendment of the Stock IncentivePlan may, without the express written consent of the Eligible Individual (or hisPermitted Transferee) to whom an Award shall theretofore have been granted,adversely affect the rights of such Eligible Individual (or his PermittedTransferee) under such Award.

        15. Financingfor Investment in Stock of the Company. The Board of Directors may cause theCompany or any subsidiary to give or arrange for financing, including directloans, secured or unsecured, or guaranties of loans by banks which loans may besecured in whole or in part by assets of the Company or any subsidiary, to anyEligible Individual under the Stock Incentive Plan who shall have been soemployed or so served for a period of at least six months at the end of thefiscal year ended immediately prior to arranging such financing; but the Boardof Directors may, in any specific case, authorize financing for an EligibleIndividual who shall not have served for such a period. Such financing shall befor the purpose of providing funds for the purchase by the Eligible Individualof shares of Common Stock pursuant to the exercise of an Option or an Award ofRestricted Stock and/or for payment of taxes incurred in connection with suchexercise or Award, and/or for the purpose of otherwise purchasing or carrying astock investment in the Company. The maximum amount of liability incurred by theCompany and its subsidiaries in connection with all such financing outstandingshall be determined from time to time in the discretion of the Board ofDirectors. Each loan shall bear interest at a rate not less than that providedby the Code and other applicable law, rules, and regulations in order to avoidthe imputation of interest at a higher rate. Each recipient of such financingshall be personally liable for the full amount of all financing extended to him.Such financing shall be based upon the judgment of the Board of Directors thatsuch financing may reasonably be expected to benefit the Company, and that suchfinancing as may be granted shall be consistent with the Certificate ofIncorporation and By-Laws of the Company or such subsidiary, and applicablelaws. If any such financing is authorized by the Board of Directors, suchfinancing shall be administered by the Board of Directors.

        16. Severability.In the event that any one or more provisions of the Stock Incentive Plan or anyAgreement, or any action taken pursuant to the Stock Incentive Plan or suchAgreement, should, for any reason, be unenforceable or invalid in any respectunder the laws of the United States, any state of the United States or any othergovernment, such unenforceability or invalidity shall not affect any otherprovision of the Stock Incentive Plan or of such or any other Agreement, but insuch particular jurisdiction and instance the Stock Incentive Plan and theaffected Agreement shall be construed as if such unenforceable or invalidprovision had not been contained therein or if the action in question had notbeen taken thereunder.

        17. ApplicableLaw. The Stock Incentive Plan shall be governed and interpreted, construedand applied in accordance with the laws of the State of Pennsylvania.

        18. Withholding.A holder shall, upon notification of the amount due and prior to or concurrentlywith delivery to such holder of a certificate representing such shares of CommonStock, pay promptly any amount necessary to satisfy applicable Federal, state,local or other tax requirements. 

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        19. Miscellaneous.
           (a) The terms "parent," "subsidiary" and "subsidiarycorporation" shall have the meanings set forth in Sections 424(e) and (f)of the Code, respectively.

           (b) The term "terminated for cause" shall mean termination by theCompany (or a subsidiary thereof) of the employment of or other relationshipwith, the original grantee by reason of the grantee's (i) willful refusal toperform his obligations to the Company (or a subsidiary thereof), (ii) willfulmisconduct, contrary to the interests of the Company (or a subsidiary thereof),or (iii) commission of a serious criminal act, whether denominated a felony,misdemeanor or otherwise. In the event of any dispute regarding whether atermination for cause has occurred, the Board of Directors may by resolutionresolve such dispute, and such resolution shall be final and conclusive on allparties.

           (c) The term "change in control" shall mean an event or series ofevents that results in (i) a person, partnership, joint venture, corporation orother entity, or two or more of any of the foregoing acting as a"person" within the meaning of Sections 13(d)(3) of the Exchange Act,other than the Company, a majority-owned subsidiary of the Company or anemployee benefit plan of the Company or such subsidiary (or such plan's relatedtrust), become(s) the "beneficial owner" (as defined in Rule 13d-3under the Exchange Act) of 20% or more of the then outstanding voting stock ofthe Company; (ii) during any period of two consecutive years, individuals who atthe beginning of such period constitute the Company's Board of Directors(together with any new director whose election by the Company's Board or whosenomination for election by the Company's shareholders, was approved by a vote ofat least two-thirds of the directors then still in office who either weredirectors at the beginning of such period or whose election or nomination forelection was previously so approved) cease for any reason to constitute amajority of the directors then in office; (iii) all or substantially all of thebusiness of the Company is disposed of pursuant to a merger, consolidation orother transaction in which the Company is not the surviving corporation or theCompany combines with another company and is the surviving corporation (unlessthe shareholders of the Company immediately following such merger,consolidation, combination, or other transaction beneficially own, directly orindirectly, more than 50% of the aggregate voting stock or other ownershipinterests of (x) the entity or entities, if any, that succeed to the business ofthe Company or (y) the combined company).

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