Exhibit
10.28


 


Heartland Payment
Systems, Inc.

Second Amended and Restated 2000 Equity Incentive Plan


 


 


ARTICLE I


 


PURPOSE AND EFFECTIVENESS


 


1.1           Purpose.  The purpose of the Plan is to promote the
success of Heartland Payment Systems, Inc. (the “Company”) by providing a
method whereby (i) employees of the Company and its Subsidiaries and (ii)
independent contractors providing services to the Company and its Subsidiaries
may be awarded additional remuneration competitive with industry practices for
services they render, thereby encouraging them to remain in the employ of the
Company or its Subsidiaries and increasing their personal interest in the
continued success and progress of the Company and its Subsidiaries.  The Plan is also intended to aid in (i) attracting
and retaining persons of exceptional ability and leadership qualities to become
officers and employees of the Company and its Subsidiaries and (ii) inducing
independent contractors to agree to provide services to the Company and its
Subsidiaries.


 


It is intended that this purpose will be effected by the granting of
“nonqualified stock options” and/or “incentive stock options” to acquire the
Common Stock of the Company and/or by the granting of awards of shares of
Common Stock.


 


1.2           Effective Date.  The Plan became effective on October 1, 2000,
and was amended and restated on July 29, 2003 and was amended and restated
again on July 22, 2005, but shall be subject to approval by the affirmative
vote of the holders of at least a majority of the outstanding shares of capital
stock of the Company.  Any Options
granted under the Plan prior to such stockholder approval shall be conditioned
upon such approval and shall be null and void if such approval is not obtained.


 


1.3           Term of Plan.  Unless sooner terminated by action of the
Board, the Plan will terminate on July 30, 2013.


 


 


ARTICLE II


 


DEFINITIONS


 


2.1           Certain Defined
Terms.  Capitalized terms not defined
elsewhere in the Plan shall have the following meanings (whether used in the
singular or plural):


 


“Agreement” means a written agreement between a Participant and
the Company which sets out the terms of the grant of an Option or Stock Award,
as any such Agreement may be supplemented or amended from time to time.


 


“Board” means the Board of Directors of the Company.


 


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“Code” means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute or statutes thereto.  Reference to any specific Code section shall
include any successor section.


 


“Common Stock” means the common stock which the Company is currently
authorized to issue or may in the future be authorized to issue.


 


“Committee” means the committee of the Board appointed or
designated pursuant to Section 3.1 to administer the Plan in accordance with
its terms.


 


“Company” means Heartland Payment Systems, Inc. and any
successor entity.


 


“Consultant” means any person who is engaged by the Company or any
Subsidiary to render consulting or advisory services and is compensated for
such services, and any director of the Company whether compensated for such
services or not.


 


“Disability” means a Participant is qualified for long-term
disability benefits under the applicable health and welfare plan of the Company
or, if no such benefits are then in existence, that the Participant is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months.


 


“Date of Grant” means the date on which the Committee makes the
determination granting an Option or Stock Award, or such other date as is
determined by the Board.


 


“Effective Date” means October 1, 2000, the date on which the Plan
originally became effective.


 


“Eligible Employee” means an Employee who is selected by the
Committee, in accordance with Section 5.1 of the Plan to participate in the
Plan.


 


“Employee” means common law employee (as defined in accordance
with the Regulations and Revenue Rulings then applicable under Section 3401(c)
of the Code) of the Company or any Subsidiary of the Company.


 


“ERISA” means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor statute or statutes
thereto.


 


“Fair Market Value” means the value of  Shares as determined by the Committee in
accordance with the provisions of Article X of the Plan.


 


“Exchange Act” means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute or statutes thereto.  Reference to any specific Exchange Act
section shall include any successor section.


 


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“Incentive Option” means an option granted under this Plan that is both
intended to and qualifies as an incentive stock option under Section 422 of the
Code.


 


“Initial Public Offering” or “IPO” means the first underwritten public
offering of equity securities of the Company pursuant to an effective
registration statement under the Securities Act of 1933, as amended, for which
the Company receives not less than $25 million in gross proceeds and following
which there is a public market for the securities so offered.


 


“Nonqualified Option” means an option granted under this Plan
that either is not intended to be or is not denominated as an Incentive Option,
or that does not qualify as an incentive stock option under Section 422 of the
Code.


 


“Officer” means an Employee who is subject to the provisions of
Section 16b of the Exchange Act.


 


“Option” means a Nonqualified Option or an Incentive Option.


 


“Optionee” means an Employee of the Company or a Subsidiary or a
Consultant who has received an Option under this Plan.


 


“Option Price” means the price which must be paid by an Optionee
upon exercise of an Option to purchase a share of Common Stock.


 


“Option Shares” means, with respect to any Option granted under this
Plan, the Common Stock that may be acquired upon the exercise of such Option.


 


“Participant” means an Employee or a Consultant who has received an
Option or a Stock Award under this Plan.


 


“Plan” means this Heartland Payment Systems, Inc. Amended
and Restated 2000 Equity Incentive Plan, as amended from time to time.


 


“Plan Award” means an Option, a Stock Award or a Stock
Appreciation Right.


 


“Secretary” means the secretary of the Company or his designee.


 


“Shares” means shares of Common Stock.


 


“Stock Appreciation Right”
shall mean any right granted under Section 6.12 of the Plan.


 


“Stock Award” means the transfer of Common Stock to an eligible
individual pursuant to Article VIII of the Plan.


 


“Subsidiary” of the Company means any present or future subsidiary
(as defined in Section 424(f) of the Code) of the Company or any business
entity in which the Company owns directly or indirectly, 50% or more of the
voting, capital or profits


 


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interests.  An entity shall be
deemed a subsidiary of the Company for purposes of this definition only for
such periods as the requisite ownership or control relationship is maintained.


 


“Termination of Service” occurs when a Participant ceases to
serve as an Employee of the Company and its Subsidiaries or as a Consultant, as
the case may be, for any reason.


 


“Vesting Date” with respect to any Plan Award granted hereunder
means the date on which such Plan Award ceases to be subject to a risk of
forfeiture, as designated in or determined in accordance with the Agreement
with respect to such Plan Award.  If more
than one Vesting Date is designated for a Plan Award, reference in the Plan to
a Vesting Date in respect of such Plan Award shall be deemed to refer to each
part of such Plan Award and the Vesting Date for such part.


 


 


ARTICLE III


 


ADMINISTRATION


 


3.1           Committee.   The Plan shall be administered by the
Compensation Committee of the Board unless a different committee is appointed
by the Board.  The Board may from time to
time appoint members of the Committee in substitution for or in addition to
members previously appointed, may fill vacancies in the Committee and may
remove members of the Committee.  The
Committee shall select one of its members as its chairman.  The Committee shall hold meetings at such times
and places as may be necessary for the proper administration of the Plan and
shall keep minutes of its meetings.  A
majority of its members shall constitute a quorum and all determinations shall
be made by a majority of such quorum. 
Any determination reduced to writing and signed by all of the members
shall be fully as effective as if it had been made by a majority vote at a
meeting duly called and held.


 


3.2           Powers.  Subject to the provisions of the Plan, the
Committee shall have sole authority, in its absolute discretion:


 


(i)                                     to determine which eligible individuals
shall be granted Plan Awards;


(ii)                                  to grant Plan Awards;


(iii)                               to determine the times when Options may
be granted and the number of Shares that may be purchased pursuant to such
Options;


(iv)                              to determine the Fair Market Value of the
Common Stock in accordance with Article X of the Plan and the exercise price of
the Shares subject to each Option, which price shall be not less than the
minimum specified in Section 6.3;


(v)                                 to determine the time or times when each
Option becomes exercisable, the duration of the exercise period, and any other
restrictions on the exercise of Options issued hereunder;


(vi)                              to prescribe the form or forms of the
Agreements under the Plan;


 


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(vii)                           to determine the circumstances under
which the time for exercising Options should be accelerated and to accelerate
the time for exercising outstanding Options;


(viii)                        to determine the duration and purposes
for leaves of absence which may be granted to a Participant without
constituting a Termination of Service for purposes of the Plan;


(ix)                                to designate whether any Option to be
granted hereunder is to be an Incentive Option or a Nonqualified Option;


(x)                                   to determine the amount (not less than
the par value per share) and the form of the consideration that may be used to
purchase shares of Common Stock upon exercise of any Option (including, without
limitation, the circumstances under which issued and outstanding shares of
Common Stock owned by a Participant may be used by the Participant to exercise an
Option);


(xi)                                to impose restrictions and/or conditions
with respect to shares of Common Stock acquired upon exercise of an Option;


(xii)                             to determine the circumstances under
which shares of Common Stock acquired upon exercise of any Option may be subject
to repurchase by the Company;


(xiii)                          to determine the circumstances and
conditions subject to which shares acquired upon exercise of an Option may be
sold or otherwise transferred, including, without limitation, the circumstances
and conditions subject to which a proposed sale of shares of Common Stock
acquired upon exercise of an Option may be subject to the Company’s right of
first refusal or right of first offer (as well as the terms and conditions of
any such right of first refusal or right of first offer);


(xiv)                         to establish a vesting provision for any
Plan Award relating to the time when (or the circumstances under which) the
Plan Award may vest, including, without limitation, vesting provisions that may
be contingent upon (A) the Company’s meeting specified financial goals, (B) a
change of control of the Company or (C) the occurrence of other specified
events and


(xv)                            to make all other determinations deemed
necessary or advisable for the administration of the Plan;


 


provided, however, that with respect to those
Participants who are not “Officers” or “directors” of the Company within the
meaning of Section 16b of the Exchange Act, the Committee may delegate to any
person or persons (“Subcommittee”) all or any part of its authority as set
forth in clause (i) through (xv) above.


 


3.3           Rules and
Interpretations.  The Committee is
authorized, subject to the provisions of the Plan, to establish, amend and
rescind such rules and regulations as it deems necessary or advisable for the
proper administration of the Plan and to take such other action in connection
with or in relation to the Plan as it deems necessary or advisable.  Each action and determination made or taken
pursuant to the Plan by the Committee, including any interpretation or
construction of the Plan, shall be final and conclusive for all purposes and
upon all persons.


 


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3.4           Liability and
Indemnification.  No member of the
Committee shall be personally liable for any action, determination or interpretation
made by that member or the Committee in good faith with respect to the Plan or
any Option granted pursuant thereto.   
Each member of the Committee shall be indemnified and held harmless by
the Company against any cost or expense (including counsel fees) reasonably
incurred by that member or liability (including any sum paid in settlement of a
claim with the approval of the Company) arising out of any act or omission to
act in connection with this Plan unless arising out of such member’s own fraud
or bad faith.  Such indemnification shall
be in addition to any rights of indemnification the members of the Committee
may have as directors or otherwise under the by-laws of the Company.


 


3.5           Survival of
Provisions.  The provisions of this
Article III shall survive any termination of the Plan.


 


3.6           Costs of Plan.  All expenses and liabilities incurred by the
Committee in the administration of the Plan shall be borne by the Company.  The Committee may employ attorneys,
consultants, accountants or other persons in connection with the administration
of the Plan.  The Company, and its
officers and directors, shall be entitled to rely upon the advice, opinions or
valuations of any such persons.


 


3.7           Additional
Restrictions Following an IPO.   
Upon the Company registering any class of common equity securities under
Section 12 of the Exchange Act coincident with an Initial Public Offering, the
Committee shall be comprised of not less than two persons each of whom
qualifies as both:  (i) a “Non-Employee
Director” within the meaning of the rules promulgated under Section 16b of the
Exchange Act, and (ii) an “outside director” within the meaning of Section
162(m) of the Code.  All members of the
Committee shall be “outside directors” within the meaning of the Section 162(m)
no later than the earliest applicable date described in Treasury Regulation
Section 1.162-27(f)(2) (the “Transition Date”).


 


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ARTICLE IV


 


SHARES SUBJECT TO THE
PLAN


 


4.1           Number of Shares.  The maximum number of Shares with respect to
which Plan Awards may be granted during the term of the Plan is 11,000,000 (or
the number and kind of Shares or other securities which are substituted for
those Shares or to which those Shares are adjusted pursuant to the provisions
of Article IX of the Plan).  The terms of
this Plan shall not apply to Plan Awards granted prior to the Effective
Date.  No fractional Shares shall be
issued with respect to Plan Awards granted under the Plan.


 


4.2           Source of Shares.  During the term of this Plan, the Company
will at all times reserve and keep available the number of shares of Common
Stock that shall be sufficient to satisfy the requirements of this Plan.  Shares of Common Stock will be made available
from the authorized but unissued shares of the Company or from shares
reacquired by the Company, including shares purchased in the open market.  The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Share hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.


 


4.3           Counting of
Shares.  In the event that any
outstanding Plan Award under the Plan for any reason expires, is terminated,
forfeited or is canceled without having been exercised prior to the expiration
date of the Plan, the Shares subject to the outstanding portion of such Plan
Award may, to the extent permitted by rules promulgated under the Exchange Act
and the Code, again be subject to a Plan Award granted under the Plan.  If any shares of Common Stock issued or sold
pursuant to a Stock Award or the exercise of an Option shall have been
repurchased by the Company, then such shares may again be subject to an Option
and/or Award granted under the Plan (other than Incentive Options).


 


 


ARTICLE V


 


ELIGIBLITY AND
PARTICIPATION


 


5.1           General.  The persons who shall be eligible to
participate in the Plan and to receive Plan Awards shall be such employees
(including officers and directors) of the Company and its Subsidiaries or
Consultants as the Committee shall select. 
Plan Awards may be made to employees or Consultants who hold or have
held Plan Awards under this Plan or any similar plan or other awards under any
other plan of the Company or any of its Subsidiaries.  Any member of the Committee shall be eligible
to receive Plan Awards while serving on the Committee, subject to applicable
provisions of the Exchange Act and the rules promulgated thereunder.


 


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5.2           Committee
Discretion.  Plan Awards may be
granted by the Committee at any time and from time to time to new Participants,
or to then Participants, or to a greater or lesser number of Participants, and
may include or exclude previous Participants, as the Committee shall
determine.  Except as required by this
Plan, Plan Awards granted at different times need not contain similar
provisions.  The Committee’s
determinations under the Plan (including without limitation, determinations of
which individuals, if any, are to receive Plan Awards, the form, amount and
timing of such Plan Awards, the terms and provisions of such Plan Awards and
the agreements evidencing same) need not be uniform and may be made by it
selectively among individuals who receive, or are eligible to receive, Plan
Awards under the Plan.


 


 


ARTICLE VI


 


GRANTS OF STOCK OPTIONS;
STOCK APPRECIATION RIGHTS


 


6.1           Grant of Options.  Subject to the limitations of the Plan, the
Committee shall designate from time to time those eligible persons to be
granted Options, the time when each Option shall be granted to such eligible
persons, the number of shares of Common Stock subject to such Option, whether
such Option is an Incentive Option or a Nonqualified Option and, subject to
Section 6.3, the purchase price of the shares of Common Stock subject to such
Option.  Options shall be evidenced by
Agreements in such form and containing such terms and provisions not
inconsistent with the provisions of the Plan as the Committee may from time to
time approve.  Each Optionee shall be
notified promptly of such grant and a written Agreement shall be promptly
executed and delivered by the Company to the Optionee.  Subject to the other provisions of the Plan,
the same person may receive Incentive Options and Nonqualified Options at the
same time and pursuant to the same Agreement, provided that Incentive Options
and Nonqualified Options are clearly designated as such.


 


6.2           Provisions of
Options.  Option Agreements shall
conform to the terms and conditions of the Plan.  Such Agreements may provide that the grant of
any Option under the Plan, or that Stock acquired pursuant to the exercise of
any Option, shall be subject to such other conditions (whether or not
applicable to the Option or Stock received by any other optionee) as the
Committee determines appropriate, including, without limitation, provisions
conditioning vesting upon the occurrence of certain events or performance or
the passage of time, provisions to assist the Optionee in financing the
purchase of Stock through the exercise of Options, provisions for forfeiture,
restrictions on resale or other disposition of shares acquired under the Plan,
provisions conditioning the grant of the option or future options upon the
Optionee retaining ownership of Shares acquired upon exercise for a stated
period of time, provisions giving the Company the right to repurchase shares
acquired under the Plan in the event the Optionee elects to dispose of such
shares, and provisions to comply with federal and state securities laws and
federal and state income tax and other payroll tax withholding
requirements.  All Options shall specify
the term during which the Option


 


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may be exercised, which shall be ten years or less, subject to the
provisions of the Plan with respect to termination of employment.


 


6.3           Option Price.  The price at which Shares may be purchased
upon exercise of an Option shall be fixed by the Committee and may not be less
than the Fair Market Value of the Shares subject to the Option as of the date
the Option is granted.


 


6.4           Limitations on
Exercisability.  No Option or part thereof
may be exercised before the Vesting Date(s) set forth in its terms, other than
in the event of an acceleration as provided in Article IX, or after the Option
expires by its terms as set forth in the applicable Agreement.  In the case of an Option which is exercisable
in installments, installments which are exercisable and not exercised shall
remain exercisable during the term of the Option.  The grant of an Option shall impose no
obligation on the Optionee to exercise such Option.


 


6.5           Vesting.  The Committee may, in its sole discretion,
specify in any Agreement a vesting schedule that must be satisfied before
Options may be exercised, such that all or any portion of an Option may not be
exercised until a Vesting Date or Vesting Dates, or until the occurrence of one
or more specified events, subject in any case to the terms of the Plan.  Subsequent to the grant of an Option, the
Committee, at any time before complete termination of such Option, may
accelerate the time or times at which such Option may be exercised in whole or
in part (without reducing the term of such Option).


 


6.6           Limited
Transferability of Options.  Subject
to the exceptions noted in this Section 6.6 and Section 6.11, no Option shall
be transferable other than by will or the laws of descent and
distribution.  During the lifetime of the
Optionee, the Option shall be exercisable only by such Optionee (or his or her
court-appointed legal representative).


 


6.7           No Rights as a
Stockholder.  An Optionee or a
transferee of an Option shall have no rights as a stockholder with respect to
any Share covered by his Option until he shall have become the holder of record
of such Share, and he shall not be entitled to any dividends or distributions
or other rights in respect of such Share for which the record date is prior to
the date on which he shall have become the holder of record thereof.


 


6.8           Special
Provisions Applicable to Incentive Options.


 


(a) Options granted under this Plan which are intended to qualify as
Incentive Options shall be specifically designated as such in the applicable
Agreement, and may be granted only to Employees.


 


(b) To the extent the aggregate Fair Market Value (determined as of the
time the Option is granted) of the Stock with respect to which any Incentive
Options granted hereunder may be exercisable for the first time by the Optionee
in any calendar year (under this Plan or any other stock option plan of the
Company or any Subsidiary thereof) exceeds $100,000, such Options shall not be
considered Incentive Options.


 


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(c) No Incentive Option may be granted to an individual who, at the
time the Option is granted, owns directly, or indirectly within the meaning of
Section 424(d) of the Code, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any
Subsidiary thereof, unless such Option (i) has an exercise price of at least
110% of the Fair Market Value of the Stock on the Date of Grant of such option;
and (ii) cannot be exercised more than five years after the Date of Grant.


 


(d) Each Optionee who receives an Incentive Option must agree to notify
the Company in writing immediately after the Optionee makes a Disqualifying
Disposition of any Stock acquired pursuant to the exercise of an Incentive
Option.  A Disqualifying Disposition is
any disposition of such Stock before the later of (i) two years after the date
the optionee was granted the Incentive Option or (ii) one year after the date
the Optionee acquired Stock by exercising the Incentive Option, other than a
transfer (i) from a decedent to an estate, (ii) by bequest or inheritance,
(iii) pursuant to a tax-free corporate reorganization, or (iv) to a spouse or
incident to divorce.  Any transfer of
ownership to a broker or nominee shall be deemed to be a disposition unless the
Optionee provides proof satisfactory to the Committee of the Optionee’s
continued beneficial ownership of the Stock.


 


(e) No Incentive Option shall be granted after the date which is ten
years from the date this Plan is adopted by the Board, or the date the Plan is
approved by the stockholders, whichever is earlier.  The Option Price for Incentive Options shall
not be less than the Fair Market Value of the Common Stock on the Date of Grant
of such Incentive Option.


 


(f) No Incentive Option shall be transferable other than by will or the
laws of descent and distribution.


 


(g) No grant of Incentive Options shall be made under this Plan unless
such Plan is approved by the stockholders of the Company within 12 months of
the Effective Date of the Plan.


 


6.9           Financing of
Option Exercises.  The Committee may
permit any Optionee to pay the Option Price under the Option by delivering a
full-recourse, interest bearing promissory note payable in one or more installments
and secured by the purchased Common Stock. 
The terms of any such promissory note (including the interest rate and
the terms of repayment) shall be established by the Committee in its sole
discretion.  In no event may the maximum
credit available to the Optionee exceed the sum of (i) the aggregate option
exercise price or purchase price payable for the purchased Shares plus (ii) any
Federal, state and local income and employment tax liability incurred by the
Optionee in connection with the option exercise.


 


6.10         Cancellation and
Regrant of Options.  The Committee
shall not, without first having obtained the approval of the shareholders of
the Company, effect the cancellation of any or all outstanding Options under
the Plan and the substitution therefor of new Options covering the same or  a different number of Shares but with an
exercise price per share based on the Fair Market Value per Share on the new
option grant date.


 


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6.11         Additional Restrictions
Following an IPO.


 


(a) Subsequent to the Company registering any class of common equity
securities under Section 12 of the Exchange Act coincident with an Initial
Public Offering, no individual may be granted in any fiscal year of the Company
Options covering more than 500,000 shares (as such number may be adjusted from
time to time as provided in Section 9.1). 
Further, Options granted to persons subject to Section 16b of the
Exchange Act (“Officers”) must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions, including (i) a restriction precluding the exercise of such
Option within six months of the Date of Grant (other than in the case of an
event described in sections 9.2 or 9.6 of the Plan), and (ii) any Option
granted to an Officer shall have an Option Price at least equal to the Fair
Market Value of the Company Stock on the Date of Grant of such Option.


 


(b) Subsequent to the Company registering any class of common equity
securities under Section 12 of the Exchange Act coincident with an Initial
Public Offering, the Committee may, in its sole discretion, provide in the
applicable Agreement evidencing a Nonqualified Option that the Optionee may
transfer, assign or otherwise dispose of an option (i) to his spouse, parents,
siblings and lineal descendants, (ii) to a trust for the benefit of the
optionee and any of the foregoing, or (iii) to any corporation or partnership
controlled by the Optionee, subject to such conditions or limitations as it may
establish to ensure compliance with any rule promulgated pursuant to the
Exchange Act, or for other purposes.  The
terms applicable to the assigned portion shall be the same as those in effect
for the Option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Committee may deem appropriate.


 


6.12         Stock Appreciation
Rights.  The Committee is hereby
authorized to grant Stock Appreciation Rights to eligible persons subject to
the terms of the Plan.  Each Stock
Appreciation Right granted under the Plan shall confer on the holder upon
exercise the right to receive, as determined by the Committee, cash or a number
of Shares equal to the excess of (a) the Fair Market Value of one Share on
the date of exercise (or, if the Committee shall so determine, at any time
during a specified period before or after the date of exercise) over (b) the
grant price of the Stock Appreciation Right as determined by the Committee,
which grant price shall not be less than 100% of the Fair Market Value of one
Share on the date of grant of the Stock Appreciation Right.  Subject to the terms of the Plan, the grant
price, term, methods of exercise, dates of exercise, methods of settlement and
any other terms and conditions (including conditions or restrictions on the
exercise thereof) of any Stock Appreciation Right shall be as determined by the
Committee.


 


ARTICLE VII


 


EXERCISES OF STOCK OPTION


 


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7.1           General.  Any Option may be exercised in whole or in
part at any time to the extent such Option has become exercisable during the
term of such Option; provided, however, that each partial exercise shall be for
whole Shares only.  Each Option, or any
exercisable portion thereof, may only be exercised by delivery to the Secretary
or his office in accordance with such procedures for the exercise of Options as
the Committee may establish from time to time of (i) notice in writing signed
by the Optionee (or other person then entitled to exercise such Option) that
such Option, or a specified portion thereof, is being exercised; (ii) payment
in full for the purchased Shares (as specified in Section 7.3 below); (iii)
such representations and documents as are necessary or advisable to effect
compliance with all applicable provisions of Federal or state securities laws
or regulations; (iv) in the event that the Option or portion thereof shall be
exercised pursuant to Section 9.2 by any individual other than the Optionee,
appropriate proof of the right of such individual to exercise the Option or
portion thereof; and (v) full payment to the Company of all amounts which,
under federal or state law, it is required to withhold upon exercise of the
Option (as specified in Section 7.4 below).


 


7.2           Share
Certificates.  Upon receiving notice
of exercise and payment, the Company will cause to be delivered to the
Optionee, as soon as practicable, a certificate in the Optionee’s name for the
Shares purchased, and within a reasonable time thereafter such transfer shall
be evidenced on the books and records of the Company.  The Shares issuable and deliverable upon the
exercise of a Stock Option shall be fully paid and nonassessable.  Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933,
as amended, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the Shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.


 


7.3           Payment for
Shares.  Payment for Shares purchased
under an Option granted hereunder shall be made in full upon exercise of the
Option.  The method or methods of payment
of the purchase price for the Shares to be purchased upon exercise of an Option
and of any amounts required by Section 12.5 shall be determined by the
Committee and may consist of (i) cash, (ii) check, (iii) promissory note, (iv)
whole shares of Common Stock, (v) the delivery, together with a properly
executed exercise notice, of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds required to pay the
purchase price, (vi) any combination of the foregoing methods of payment, or
such other consideration and method of payment as may be permitted for the
issuance of shares under General Corporation Law for the State of New
Jersey.  The permitted method or methods
of payment of the amounts payable upon exercise of an Option, if other than in
cash, shall be set forth in the applicable Agreement and may be subject to such
conditions as the Committee deems appropriate To the extent the Option exercise
price may be paid in Shares as provided above, Shares delivered by the Optionee
may be (i) upon the exercise of an Incentive Option, shares which were received
by the Optionee upon exercise of one or more previously exercised Incentive
Options, but only if such Shares have been held by the Optionee for the periods
of time required by Section 422(a)(1) or six months, whichever is longer, or
(ii) shares which were


 


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received by the Optionee upon exercise of one or more Nonqualified
Options, but only if such Shares have been held by the Optionee for at least
six months.


 


7.4           Share Withholding.  Each Agreement shall require that an Optionee
pay to the Company, at the time of exercise of a Nonqualified Option, such
amount as the Company deems necessary to satisfy the Company’s obligation to withhold
federal or state income or other taxes incurred by reason of the exercise or
the transfer of Shares thereupon.  An
Optionee may satisfy such withholding requirements by having the Company
withhold from the number of Shares otherwise issuable upon exercise of the
Option that number of shares having an aggregate Fair Market Value on the date
of exercise equal to the minimum amount required by law to be withheld;
provided, however, that in the case of an exercise by an Optionee subject to
Section 16b of the Exchange Act, such withholding must be approved by the
Committee before execution thereof.


 


7.5           Additional
Restrictions Following an IPO.


 


(a) Unless a registration statement under the Securities Act and the
applicable rules and regulations thereunder is then in effect with respect to
Shares issued under this Plan, the Company shall require that the offer and
sale of such Shares be exempt from the registration provisions of said
Act.  In furtherance of such exemption,
the Company may require, as a condition precedent to the grant of any Plan
Award, that the Participant give to the Company written representation and
undertaking, satisfactory in form and substance to the Company, that he is
acquiring the Shares for his own account for investment and not with a view to
the distribution or resale thereof and otherwise establish to the Company’s
satisfaction that the offer or sale of the Shares issuable upon exercise of the
Option will not constitute or result in any breach or violation of the
Securities Act or any similar state act or statute or any rules or regulations
thereunder.  In the event a registration
statement under the Securities Act is not then in effect with respect to the
Shares, the Company shall place upon any stock certificate an appropriate
legend referring to the restrictions on disposition under the Act.


 


(b) Until such time as the Common Stock of the Company is first
registered under Section 12 of the Exchange Act, (i) the Participant may not
sell or otherwise transfer Common Stock acquired pursuant to this Article until
such Common Stock has been held for six months and (ii) the right of a
Participant under this Plan to exercise an Option and thereby purchase Shares
shall be subject to any requirement imposed by the Company or the Committee
upon the Participant to execute a stockholders agreement prior to the transfer
of such Shares.  The stockholders
agreement may contain such restrictions and limitations as the Company or the
Committee may deem necessary and appropriate with respect to the Participant’s
ownership rights in the Shares.  Except
as specifically permitted by the provisions of the stockholders agreement, the
Participant shall have no right to sell, transfer or otherwise dispose of the
shares.   Certificates representing
Shares issued upon the exercise of Options shall bear a restrictive legend to
the effect that transferability of such shares are subject to the restrictions
contained in the Plan and the applicable stockholders agreement and that the
Company may cause the transfer agent for the Common Stock to place a stop
transfer order with respect to such shares.


 


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ARTICLE VIII


 


GRANTS OF COMMON STOCK


 


8.1           Stock Awards.  The Committee shall have the sole authority
and discretion under the Plan


 


(i)                                     to select the Employees who are to be
granted Stock Awards hereunder;


(ii)                                  to determine the time or times and the
conditions subject to which Stock Awards may be made;


(iii)                               to establish transfer restrictions and
the terms and conditions on which any such transfer restrictions with respect
to shares of Common Stock acquired pursuant to a Stock Award shall lapse;


(iv)                              to establish vesting provisions with
respect to any shares of Common Stock subject to a Stock Award, including,
without limitation, vesting provisions which may be contingent upon (A) the
Company’s meeting specified financial goals, (B) a change of control of the
Company or (C) the occurrence of other specified events;


(v)                                 to determine the circumstances under
which shares of Common Stock acquired pursuant to a Stock Award may be subject
to repurchase by the Company;


(vi)                              to determine the circumstances and
conditions subject to which any shares of Common Stock acquired pursuant to a
Stock Award may be sold or otherwise transferred, including, without
limitation, the circumstances and conditions subject to which a proposed sale
of shares of Common Stock acquired pursuant to a Stock Award may be subject to
the Company’s right of first refusal or right of first offer (as well as the
terms and conditions of any such right of first refusal or right of first
offer);


(vii)                           to accelerate the time at which any or
all restrictions imposed with respect to any shares of Common Stock subject to
an Award will lapse; and


(viii)                        to establish any other terms,
restrictions and/or conditions applicable to any Award not inconsistent with
the provisions of the Plan.


 


8.2           Vesting.  Stock Awards shall be subject to the right of
the Company to require forfeiture of such Shares by the Participant in the
event that conditions specified by the Committee in the applicable Agreement
are not satisfied prior to the end of the applicable vesting period established
by the Committee for such Award. 
Conditions for repurchase (or forfeiture) may be based on continuing
employment or service or achievement of pre-established performance or other
goals and objectives.  In the event of a
Participant’s termination of employment for any reason prior to the lapse of
restrictions applicable to a Stock Award made to such Participant and unless
otherwise provided for herein by this Plan or as provided for in the Stock
Agreement, all rights to Shares as to which there remain unlapsed restrictions
shall be forfeited by such


 


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participant to the Company without payment or any
consideration by the Company, and neither the participant nor any successors,
heirs, assigns or personal representatives of such participant shall thereafter
have any further rights or interest in such Shares.


 


8.3           Nontransferability
of Stock Awards.  Shares of Stock
Awards may not be sold, assigned, transferred, pledged or otherwise encumbered,
except as permitted by the Committee, during the applicable vesting
period.  Shares of Stock Awards shall be
evidenced in such manner as the Committee may determine.  Any certificates issued in respect of shares
of Stock Awards shall be registered in the name of the Participant and, unless
otherwise determined by the Committee, deposited by the Participant, together
with a stock power endorsed in blank, with the Company (or its designee).  At the expiration of the vesting period, the
Company (or such designee) shall deliver such certificates to the Participant
or, if the Participant has died, to the Participant’s Designated
Beneficiary.  Each certificate evidencing
stock subject to Stock Awards shall bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Award.  Any attempt to dispose of stock in
contravention of such terms, conditions and restrictions shall be
ineffective.  During the restriction
period, the Participant shall have the rights of a shareholder for all such
Shares of Common Stock, including the right to vote and the right to receive
dividends thereon as paid.


 


8.4           Tax Withholding.  To the extent that the Company is required to
withhold any Federal, state or local taxes in respect of any compensation
income realized by the Participant in respect of shares acquired pursuant to an
Award, or in respect of the vesting of any such shares of Common Stock, then
the Company shall deduct from any payments of any kind otherwise due to such
Participant the aggregate amount of such Federal, state or local taxes required
to be so withheld, or if such payments are insufficient to satisfy such
Federal, state or local taxes, or if no such payments are due or to become due
to such Participant, then such Participant will be required to pay to the
Company, or make other arrangements satisfactory to the Company regarding
payment to the Company of, the aggregate amount of any such taxes.  All matters with respect to the total amount
of taxes to be withheld in respect of any such compensation income shall be
determined by the Committee, in its sole discretion.


 


8.5                                 Additional Restrictions Following an IPO.


 


(a) In the event that the Company becomes a “publicly held corporation”
within the meaning of Section 162(m), the Committee will not on or after the
Transition Date grant any Award to any Employee who is likely to be a “covered
employee” within the meaning of Section 162(m), unless the grant of such Award
complies with the requirements set forth in Section 162(m) with respect to the
Company’s entitlement to a deduction for such Award, including without
limitation the requirements relating to objective performance goals established
by the Committee and shareholder approval.


 


(b) Until such time as the Common Stock of the Company is first
registered under Section 12 of the Exchange Act, (i) the Participant may not
sell or otherwise transfer Common Stock acquired pursuant to this Article until
such Common Stock has been held for six months and (ii) the right of a
Participant under this Plan to receive a Stock


 


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Award shall be subject to any requirement imposed by the Company or the
Committee upon the Participant to execute a stockholders agreement prior to the
transfer of such Shares.  The
stockholders agreement may contain such restrictions and limitations as the
Company or the Committee may deem necessary and appropriate with respect to the
Participant’s ownership rights in the Shares. 
Except as specifically permitted by the provisions of the stockholders
agreement, the Participant shall have no right to sell, transfer or otherwise
dispose of the shares.    Certificates
representing Stock Awards shall bear a restrictive legend to the effect that
transferability of such shares are subject to the restrictions contained in the
Plan and the applicable Agreement and the Company may cause the transfer agent
for the Common Stock to place a stop transfer order with respect to such
shares.


 


 


ARTICLE IX


 


EVENTS AFFECTING PLAN
RESERVE OR PLAN AWARDS


 


9.1                                 Capital Adjustments.


 


(a) If the Company subdivides its outstanding shares of Common Stock
into a greater number of shares of Common Stock (by stock dividend, stock
split, reclassification or otherwise) or combines its outstanding shares of
Common Stock into a smaller number of shares of Common Stock (by reverse stock
split, reclassification or otherwise), or the Committee determines that any
stock dividend, extraordinary cash dividend, reclassification,
recapitalization, reorganization, split-up, spin-off, combination, exchange of
shares, warrants or rights offering to purchase Common Stock, or other similar
corporate event (including mergers or consolidations) affects the Common Stock
such that an adjustment is required in order to preserve the benefits or
potential benefits intended to be made available under this Plan, then the
Committee shall, in such manner as it may deem equitable and appropriate, make
such adjustments to any or all of (i) the number of shares of Common Stock
reserved for the Plan, (ii) the number of shares subject to outstanding Options
and Stock Awards, and (iii) the exercise price with respect to outstanding
Options, provided, however, that the number of shares subject to any Option
shall always be a whole number.  The
Committee may provide for a cash payment to any Participant of a Plan Award in
connection with any adjustment made pursuant to this Section 9.1.


 


Any such adjustment to an Option shall be made without a change to the
total exercise price applicable to the unexercised portion of the Option
(except for any change in the aggregate price resulting from rounding-off of share
quantities or prices), and shall be final and binding upon all Participants,
the Company, their representatives, and all other interested persons.


 


(b) In the event of a
transaction involving (i) a merger or consolidation in which the Company is not
the surviving company or (ii) the sale or disposition of all or substantially
all of the Company’s assets, provision shall be made in connection with such
transaction for the assumption of Options theretofore granted under the Plan,
or


 


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the substitution for such
Options of new options of the successor corporation, with appropriate
adjustment as to the number and kind of Shares and the purchase price for
Shares thereunder, or, in the discretion of the Committee, the Plan and the
Options issued hereunder shall terminate on the effective date of such
transaction if appropriate provision is made for payment to the Participant of
an amount in cash equal to the Fair Market Value of a Share multiplied by the number
of Shares subject to the Options (to the extent such Options have not been
exercised) less the exercise price for such Options (to the extent such Options
have not been exercised); provided, however, that if the Board desires to have
a transaction described in clause (i) or (ii) above treated as a pooling of
interests under generally accepted accounting principles, the Committee shall
not take any action or make any determination under this Article IX which would
prevent such treatment.


 


(c) In the event of the proposed dissolution or liquidation of the
Company, the Committee shall notify the Optionee at least fifteen (15) days
prior to such proposed action.  To the
extent it has not been previously exercised, the Option will terminate
immediately prior to the consummation of such proposed action.


 


9.2           Death
or Disability of a Participant.  If a
Participant who is an Employee or a director of the Company ceases to be an
Employee or a director of the Company (i) by reason of his death, or (ii)
solely in the case of an Employee, because of his Disability, then
notwithstanding any contrary waiting period, installment period or vesting
schedule in any Agreement or in the Plan, unless the applicable Agreement
provides otherwise, each outstanding Plan Award granted under the Plan to such
Participant shall immediately become vested and, if an Option, exercisable in
full in respect of the aggregate number of shares covered thereby.  Each Option may be exercised by the Participant’s
estate or the Participant, as the case may be, for a period of twelve months
from the date of death or six months from Termination of Service due to
Disability.  In no event, however, shall
an Option remain exercisable beyond the latest date on which it could have been
exercised without regard to this Section 9.2.


 


9.3           Other Termination
of Service.  If a Participant who is
an Employee or a director ceases to be an Employee or a director for any reason
other than death or Disability, or if there is a termination of the
relationship in respect of which a Consultant was granted an Option hereunder,
except as otherwise determined by the Committee, all Plan Awards held by the
Participant that were not vested and exercisable immediately prior to such
termination shall become null and void at the time of the termination.  Any Options that were exercisable immediately
prior to the termination will continue to be exercisable for a period of (i)
one month in the case of voluntary resignation; and (ii) three months in the
case of involuntary dismissal (or such shorter or longer period as the
Committee may determine), and shall thereupon terminate.  Any termination by the Company for Cause will
be treated in accordance with the provisions of Section 9.4.  In no event, however, shall an Option remain
exercisable beyond the latest date on which it could have been exercised
without regard to this Section 9.3.


 


9.4           Termination by
Company for Cause.  If a
Participant’s employment or service relationship with the Company or a
Subsidiary shall be terminated by the Company or


 


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such Subsidiary for Cause, then all Plan Awards held by such
Participant, whether or not then vested or exercisable, shall immediately
terminate.  For these purposes, Cause
shall have the meaning ascribed thereto in any employment agreement to which
such Participant is a party or, in the absence thereof, shall include but not
be limited to, insubordination, dishonesty, other significant misconduct of any
kind and the refusal to perform his duties and responsibilities for any reason
other than illness or incapacity.


 


9.5           Leave of Absence.  The Committee may determine whether any given
leave of absence constitutes a termination of employment; provided, however,
that for purposes of the Plan (i) a leave of absence, duly authorized in
writing by the Company for military service or sickness, or for any other
purpose approved by the Company if the period of such leave does not exceed 90
days, and (ii) a leave of absence in excess of 90 days, duly authorized in
writing by the Company, provided the Employee’s right to reemployment is
guaranteed either by statute or contract, shall not be deemed a termination of
employment.  Plan Awards granted under
the Plan shall not be affected by any change of employment so long as the
Participant continues to be an employee of the Company or any Subsidiary.


 


9.6                                 Change-In-Control. 
No Agreement issued pursuant to the Plan may provide for


the acceleration of any vesting schedule solely because of the
occurrence of any “Approved Transaction, Board Change or Control Purchase”,
each of which is a “Change-in-Control” of the Company.  Awards may provide for an acceleration of a
vesting schedule in the event of the involuntary dismissal of a Participant
within a specified period of time following a Change-in-Control,
notwithstanding any contrary waiting period, installment period, or vesting
schedule in any Agreement or in the Plan. Such period of time is to be
determined by the Committee at the date of grant of the Plan Award and
specified in the Agreement.


 


“Approved Transaction” means any transaction in which the Board (or, if
approval of the Board is not required as a matter of law, the stockholders of
the Company) shall approve (i) any merger, consolidation or binding share
exchange of the Company, pursuant to which shares of common stock of the
Company would be changed or converted into or exchanged for cash, securities or
other property, other than any such transaction in which the common
stockholders of the Company immediately prior to such transaction have the same
proportionate ownership of the common stock of, and voting power with respect
to, the surviving corporation immediately after such transaction, (ii) the
adoption of any plan or proposal for the liquidation or dissolution of the
Company, or (iii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company.


 


“Board Change” means, during any period of two consecutive years,
individuals who at the beginning of such period constituted the entire Board
cease for any reason to constitute a majority thereof, unless the election, or
the nomination for election, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at
the beginning of the period.


 


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“Control Purchase” means any transaction (or series of related
transactions) in which (i) any person (as such term is defined in Sections
13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other entity (other
than the Company, any Subsidiary or any employee benefit plan sponsored by the
Company or any Subsidiary) shall purchase any common stock of the Company (or
securities convertible into common stock of the Company) for cash, securities
or any other consideration pursuant to a tender offer or exchange offer,
without the prior consent of the Board, or (ii) any person (as such term is so
defined), corporation or other entity (other than the Company, any Subsidiary,
any employee benefit plan sponsored by the Company or any Subsidiary, or any
Controlling Person (as defined below)) shall become the “beneficial owner” (as
such term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the then outstanding securities of the Company
ordinarily having the right to vote in the election of directors, other than in
a transaction (or series of related transactions) approved by the Board.  For purposes of this definition, “Controlling
Person” means each of the Chairman of the Board, the President and each of the
directors of the Company as of the Effective Date of this Plan, and (b) the
respective family members, estates and heirs of each of the persons referred to
in clause (a) above and any trust or other investment vehicle for the primary
benefit of any of such persons or their respective family members or heirs.  As used with respect to any person, the term
“family member” means the spouse, parents, siblings and lineal descendants of
such person.


 


9.7           Recapture of
Option Profit.  An Option may, in the
sole discretion of the Committee and on the Date of Grant, contain a “Harmful
Conduct” provision.  Such a provision
shall provide that in the case of an Employee who has been granted an Option
and exercised such Option under this Plan, who has terminated employment, and
who has engaged in Harmful Conduct, the Committee may, in its sole discretion,
require such Employee to pay to the Company his Recent Option Profit.  For the purposes of this Section 9.7,
“Harmful Conduct” means a breach in any material respect of an agreement to not
reveal confidential information regarding the business operations of the
Company or any Subsidiary, or to refrain from solicitation of the customers,
suppliers or employees of the Company or any Subsidiary.  “Recent Option Profit” means an amount equal
to the excess of (i) the Fair Market Value of the Stock purchased by such
individual through the exercise of Options during the fifteen month period
commencing twelve months before the individual’s last day of employment and
ending three months after the last day of employment over (ii) the amount paid
to exercise such Options.


 


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ARTICLE X


 


FAIR MARKET VALUE


 


10.1         General.  The fair market value of the Common Stock of
the Company on any relevant date shall be determined in accordance with the
following provisions:


 


(i)                                     If the Common Stock is at the time listed
on any Stock Exchange, then the Fair Market Value shall be the closing selling
price on the date in question on the Stock Exchange determined by the Committee
to be the primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange.  If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists;


(ii)                                  If the Common Stock is at the time traded
on the Nasdaq National Market, then the Fair Market Value shall be the closing
selling price on the date in question, as such price is reported by the
National Association of Securities Dealers on the Nasdaq National Market.  If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists;


(iii)                               If the Common Stock is not quoted on the
NASDAQ System or is regularly quoted by a recognized securities dealer but
selling prices are not reported, its Fair Market Value shall be the mean
between the high bid and low asked prices for the Common Stock on the last
market trading day prior to the day of determination; or


(iv)                              If for any day the Fair Market Value of a
share of the Common Stock is not determinable by any of the foregoing means,
then the Fair Market Value for such day shall be determined in good faith by
the Committee on the basis of such quotations and other considerations as the
Committee deems appropriate.


 


 


ARTICLE XI


 


GOVERNMENT REGULATIONS
AND REGISTRATION OF SHARES


 


11.1         General.  The Plan, and the grant and exercise of Plan
Awards hereunder, and the Company’s obligation to sell and deliver stock under
Options, shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any regulatory or governmental agency as
may be required.


 


11.2         Additional
Restrictions Following an IPO.  The
obligation of the Company with respect to Plan Awards shall be subject to all
applicable laws, rules and regulations and such approvals by any governmental
agencies as may be required, including, without limitation, the effectiveness
of any registration statement required under the Securities Act of 1933, and
the rules and regulations of any securities exchange or association on which
the Common Stock may be listed or quoted. 
For so long as the Common Stock of the Company is registered under the
Exchange Act, the Company shall use its


 


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reasonable efforts to comply with any legal
requirements (i) to maintain a registration statement in effect under the
Securities Act of 1933 with respect to all shares of the applicable series of
Common Stock that may be issued to Participants under the Plan, and (ii) to
file in a timely manner all reports required to be filed by it under the
Exchange Act.


 


 


ARTICLE XII


 


MISCELLANEOUS PROVISIONS


 


12.1         Legends.  Each certificate evidencing Common Stock
obtained through the Plan shall bear such legends as the Committee deems
necessary or appropriate to reflect or refer to any terms, conditions or
restrictions applicable to such Shares, including, without limitation, any to
the effect that the Shares represented thereby may not be disposed of unless
the Company has received an opinion of counsel, acceptable to the Company, that
such dispositions will not violate any federal or state securities laws.


 


12.2         Rights
of Company.  Nothing contained in the
Plan or in any Agreement, and no action of the Company or the Committee with
respect thereto, shall confer or be construed to confer on any Participant any
right to continue in the employ of the Company or any of its Subsidiaries or
interfere in any way with the right of the Company or a Subsidiary to terminate
the employment of the Participant at any time, with or without cause; subject,
however, to the provisions of any employment agreement between the Participant
and the Company or any Subsidiary.  The
grant of Options pursuant to the Plan shall not affect in any way the right or
power of the Company to make reclassifications, reorganizations or other
changes of or to its capital or business structure or to merge, consolidate,
liquidate, sell or otherwise dispose of all or any part of its business or
assets.


 


12.3         Designation of
Beneficiaries.  Each Participant who
shall be granted a Plan Award may designate a beneficiary or beneficiaries and
may change such designation from time to time by filing a written designation
of beneficiary or beneficiaries with the Committee on a form to be prescribed
by it, provided that no such designation shall be effective unless so filed
prior to the death of such person.


 


12.4         Compliance with
Other Laws and Regulations. 
Notwithstanding anything contained herein to the contrary, the Company
shall not be required to sell or issue shares of Common Stock if the issuance
thereof would constitute a violation by the Company of any provisions of any
law or regulation of any governmental authority or any national securities
exchange or other forum in which shares of Common Stock are traded (including
without limitation Section 16 of the Exchange Act); and, as a condition of any
sale or issuance of shares of Common Stock, the Committee may require such
agreements or undertakings, if any, as the Committee may deem necessary or
advisable to assure compliance with any such law or regulation.  The Plan, the grant of Plan Awards and
exercise of Options hereunder, and the obligation of the Company to sell and
deliver shares of Common Stock, shall be subject to all applicable federal and
state


 


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laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required.


 


12.5         Payroll Tax
Withholding.  The Company’s
obligation to deliver shares of Common Stock under the Plan shall be subject to
applicable federal, state and local tax withholding requirements.  Federal, state and local withholding tax due
upon the exercise of any Option may, in the discretion of the Committee, be
paid in shares of Common Stock already owned by the Optionee or through the
withholding of shares otherwise issuable to such Optionee, upon such terms and
conditions (including, without limitation, the conditions referenced in Section
7.6) as the Committee shall determine which shares shall have an aggregate Fair
Market Value equal to the required minimum withholding payment.  If the Optionee shall fail to pay, or make
arrangements satisfactory to the Committee for the payment to the Company of
all such federal, state and local taxes required to be withheld by the Company,
then the Company shall, to the extent permitted by law, have the right to
deduct from any payment of any kind otherwise due to such Optionee an amount
equal to federal, state or local taxes of any kind required to be withheld by
the Company.


 


12.6         Non-Exclusivity of
the Plan.  Neither the adoption of
the Plan by the Board nor the submission of the Plan to the stockholders of the
Company for approval shall be construed as creating any limitations on the
power of the Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options and the awarding
of stock and cash otherwise than under the Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.


 


12.7         Exclusion from Benefit
Computation.  By acceptance of a Plan
Award, unless otherwise provided in the applicable Agreement, each Participant
shall be deemed to have agreed that such Plan Award is special incentive
compensation that will not be taken into account, in any manner, as salary,
compensation or bonus in determining the amount of any payment under any health
and welfare, pension, retirement or other employee benefit plan, program or
policy of the Company or any Subsidiary. 
In addition, each beneficiary of a deceased Participant shall be deemed
to have agreed that such Plan Award will not affect the amount of any life
insurance coverage, if any, provided by the Company on the life of the
Participant which is payable to such beneficiary under any life insurance plan covering
employees of the Company or any Subsidiary.


 


12.8         Governing Law.  The Plan shall be governed by, and construed
in accordance with, the laws of the State of New Jersey.


 


12.9         Use of Proceeds.  Proceeds from the sale of shares of Common
Stock pursuant to Options granted under this Plan shall constitute general
funds of the Company.


 


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ARTICLE XIII


 


TERMINATION AND AMENDMENT


 


13.1         General.  Unless the Plan shall theretofore have been
terminated as hereinafter provided, no Plan Awards may be granted on or after
the tenth anniversary of the Effective Date. 
The Board or the Committee may at any time prior to the tenth
anniversary of the Effective Date terminate the Plan, and may, from time to
time, suspend or discontinue the Plan or modify or amend the Plan in such
respects as it shall deem advisable; except that no such modification or
amendment shall be effective prior to approval by the Company’s stockholders to
the extent such approval is required by applicable legal requirements.


 


13.2         Shareholder
Approval.  Continuance of the Plan
shall be subject to approval by the shareholders of the Company within twelve
(12) months before or after the date the Plan is adopted.  Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and
the rules of any stock exchange upon which the Common Stock may be listed
during such period of time.


 


13.3         Modification.  No termination, modification or amendment of
the Plan may, without the consent of the person to whom any Plan Award shall
theretofore have been granted, adversely affect the rights of such person with
respect to such Plan Award.  No
modification, extension, renewal or other change in any Option granted under
the Plan shall be made after the grant of such Option, unless the same is
consistent with the provisions of the Plan. 
With the consent of the Participant and subject to the terms and
conditions of the Plan, the Committee may amend outstanding Agreements with any
Participant, including, without limitation, any amendment which would (i)
accelerate the time or times at which the Option may be exercised and/or (ii)
extend the scheduled expiration date of the Option.  The Committee may, subject to the approval of
the Shareholders, and solely with the Holder’s consent unless otherwise
provided in the Agreement, agree to cancel any Option under the Plan and issue
a new Option in substitution therefore, provided that the Option so substituted
shall satisfy all of the requirements of the Plan as of the date such new
Option is made.


 


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