EX-10.7



 





Exhibit 10.7




STEWART & STEVENSON LLC

2007 INCENTIVE COMPENSATION PLAN




 









 





STEWART & STEVENSON LLC

2007 INCENTIVE COMPENSATION PLAN




	 	 	 	 	 
	SECTION	 	PAGE	 
	1. Purpose
	 	 	1	 
	 
	 	 	 	 
	2. Term
	 	 	1	 
	 
	 	 	 	 
	3. Definitions
	 	 	1	 
	 
	 	 	 	 
	4. Shares Available Under Plan
	 	 	5	 
	 
	 	 	 	 
	5. Limitations on Awards
	 	 	5	 
	 
	 	 	 	 
	6. Stock Options
	 	 	6	 
	 
	 	 	 	 
	7. Appreciation Rights
	 	 	7	 
	 
	 	 	 	 
	8. Restricted Shares
	 	 	8	 
	 
	 	 	 	 
	9. Restricted Stock Units
	 	 	9	 
	 
	 	 	 	 
	10. Performance Shares and Performance Units
	 	 	10	 
	 
	 	 	 	 
	11. Senior Executive Plan Bonuses
	 	 	11	 
	 
	 	 	 	 
	12. Transferability
	 	 	12	 
	 
	 	 	 	 
	13. Adjustments
	 	 	12	 
	 
	 	 	 	 
	14. Fractional Shares
	 	 	13	 
	 
	 	 	 	 
	15. Withholding Taxes
	 	 	13	 
	 
	 	 	 	 
	16. Administration of the Plan
	 	 	13	 
	 
	 	 	 	 
	17. Amendments and Other Matters
	 	 	14	 
	 
	 	 	 	 
	18. Governing Law
	 	 	14	 






 









 





STEWART & STEVENSON LLC

2007 INCENTIVE COMPENSATION PLAN




     Stewart & Stevenson LLC, a Delaware limited liability company (the “Company”), establishes the
Stewart & Stevenson LLC 2007 Incentive Compensation Plan (the “Plan”), effective as of September 5,
2007, subject to the approval of the Common Equity (as defined below) holders.



     1. Purpose. The purpose of the Plan is to attract and retain the best available talent and
encourage the highest level of performance by directors, executive officers and selected employees,
and to provide them incentives to put forth maximum efforts for the success of the Company’s
business, in order to serve the best interests of the Company and its Common Equity holders.



     2. Term. The Plan will expire on the tenth anniversary of the date on which it is approved by
the holders of the Common Equity (as defined below) of the Company. No further Awards will be made
under the Plan on or after such tenth anniversary. Awards that are outstanding on the date the
Plan terminates will remain in effect according to their terms and the provisions of the Plan.



     3. Definitions. The following terms, when used in the Plan with initial capital letters, will
have the following meanings:




     (a)
Appreciation Right means a right granted pursuant to Section 7.




     (b) Award means the award of a Senior Executive Plan Bonus; the grant of Appreciation
Rights, Stock Options, Performance Shares, Performance Units or Restricted Stock Units; or
the grant or sale of Restricted Shares.




     (c) Board means the Board of Directors of the Company.




     (d) Code means the Internal Revenue Code of 1986, as in effect from time to time.




     (e) Committee means:




     (i) with respect to any matter arising under the Plan that relates to a
Participant who is subject to Section 16 of the Exchange Act, the Incentive
Compensation Plan Subcommittee of the Compensation Committee of the Board, which
subcommittee at all times will consist of two or more members of the Compensation
Committee of the Board, all of whom are intended (A) to meet all applicable
independence requirements of the New York Stock Exchange or the principal national
securities exchange or principal market on or in which the Common Equity is traded
and (B) to qualify as “non-employee directors” as defined in Rule 16b-3 and as
“outside directors” as defined in regulations adopted under Section 162(m) of the
Code, as such terms may be amended from time to



 









 







time, provided, however, that the failure of a member of the Subcommittee to so
qualify will not invalidate any Award granted to such Participant under the Plan;




     (ii) with respect to any matter arising under the Plan that relates to any
other Participant, the Compensation Committee of the Board; and




     (iii) to the extent the administration of the Plan has been assumed by the
Board pursuant to Section 16, the Board.




     (f) Common Equity means the common units, or if the Company shall be converted to a
corporation the common stock, par value $.01 per share, of the Company or any security into
which such Common Equity may be changed by reason of any transaction or event of the type
described in Section 13.




     (g) Date of Grant means the date specified by the Committee on which an Award will
become effective.




     (h) Deferral Period means the period of time during which Restricted Stock Units are
subject to deferral limitations under Section 9.




     (i) Eligible Director means a member of the Board who is not an employee of the Company
or any Subsidiary.




     (j) Evidence of Award means an agreement, certificate, resolution or other type or form
of writing or other evidence approved by the Committee which sets forth the terms and
conditions of an Award. An Evidence of Award may be in any electronic medium, may be
limited to a notation on the books and records of the Company and need not be signed by a
representative of the Company or a Participant.




     (k) Exchange Act means the Securities Exchange Act of 1934, as amended.




     (l) Grant Price means the price per share of Common Equity at which an Appreciation
Right is granted.




     (m) Management Objectives means the measurable performance objectives, if any,
established by the Committee for a Performance Period that are to be achieved with respect
to an Award. Management Objectives may be described in terms of company-wide objectives
(i.e., the performance of the Company and all of its Subsidiaries) or in terms of objectives
that are related to the performance of the individual Participant or of the division,
Subsidiary, department, region or function within the Company or a Subsidiary in which the
Participant receiving the Award is employed or on which the Participant’s efforts have the
most influence. The achievement of the Management Objectives established by the Committee
for any Performance Period will be determined without regard to any change in accounting
standards by the Financial Accounting Standards Board or any successor entity.




     The Management Objectives applicable to any Award to a Participant who is, or is
determined by the Committee to be likely to become, a “covered employee” within the



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meaning of Section 162(m) of the Code (or any successor provision) will be limited to
specified levels of, growth in, or performance relative to peer company or peer company
group performance in, one or more of the following performance measures (excluding the
effect of extraordinary or nonrecurring items unless the Committee specifically includes any
such extraordinary or nonrecurring item at the time such Award is granted):




	 	(i)	 	profitability measures;
	 
	 	(ii)	 	revenue or sales measures;
	 
	 	(iii)	 	business unit performance;
	 
	 	(iv)	 	leverage measures;
	 
	 	(v)	 	stockholder return;
	 
	 	(vi)	 	expense management;
	 
	 	(vii)	 	asset and liability measures;
	 
	 	(viii)	 	individual performance;
	 
	 	(ix)	 	supply chain efficiency;
	 
	 	(x)	 	customer satisfaction;
	 
	 	(xi)	 	productivity measures;
	 
	 	(xii)	 	cash flow measures;
	 
	 	(xiii)	 	return measures; and

(xiv) product development and/or performance






     If the Committee determines that, as a result of a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which the Company
conducts its business, or any other events or circumstances, the Management Objectives are
no longer suitable, the Committee may in its discretion modify such Management Objectives or
the related minimum acceptable level of achievement, in whole or in part, with respect to a
Performance Period as the Committee deems appropriate and equitable.




     (n) Market Value per Share means, at any date, the closing sale price of the Common
Equity on that date (or, if there are no sales on that date, the last preceding date on
which there was a sale) on the principal national securities exchange or in the principal
market on or in which the Common Equity is traded, or if not so traded, as reasonably
determined by the Committee.



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     (o) Option Price means the purchase price per share payable on exercise of a Stock
Option.




     (p) Participant means a person who is selected by the Committee to receive an Award
under the Plan and who at that time is an executive officer or other employee of the Company
or any Subsidiary or an Eligible Director.




     (q) Performance Share means a bookkeeping entry that records the equivalent of one unit
or share of Common Equity awarded pursuant to Section 10.




     (r) Performance Period means, with respect to an Award, a period of time within which
the Management Objectives relating to such Award are to be measured. The Performance Period
for a Senior Executive Plan Bonus will be the fiscal year of the Company, and, unless
otherwise expressly provided in the Plan, the Performance Period for all other Awards will
be established by the Committee at the time of the Award.




     (s) Performance Unit means a unit equivalent to $1.00 (or such other value as the
Committee determines) granted pursuant to Section 10.




     (t) Restricted Shares means units or shares of Common Equity granted or sold pursuant
to Section 8 as to which neither the ownership restrictions nor the restrictions on transfer
have expired.




     (u) Restricted Stock Units means an Award pursuant to Section 9 of the right to receive
units or shares of Common Equity at the end of a specified Deferral Period.




     (v) Rule 16b-3 means Rule 16b-3 under Section 16 of the Exchange Act as amended (or any
successor rule to the same effect), as in effect from time to time.




     (w) Senior Executive Plan Bonus means an Award of annual incentive compensation made
pursuant to and subject to the conditions set forth in Section 11.




     (x) Spread means the excess of the Market Value per Share on the date an Appreciation
Right is exercised over (i) the Option Price provided for in the Stock Option granted in
tandem with the Appreciation Right or (ii) if there is no tandem Stock Option, the Grant
Price provided for in the Appreciation Right, in either case multiplied by the number of
units or shares of Common Equity in respect of which the Appreciation Right is exercised.




     (y) Stock Option means the right to purchase units or shares of Common Equity upon
exercise of an option granted pursuant to Section 6.




     (z) Subsidiary means (i) any corporation of which at least 50% of the combined voting
power of the then outstanding units or shares of Voting Stock is owned directly or
indirectly by the Company, (ii) any partnership of which at least 50% of the profits
interest or capital interest is owned directly or indirectly by the Company and (iii) any
other entity of which at least 50% of the total equity interest is owned directly or
indirectly by the Company.



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     (aa) Voting Stock means the securities entitled to vote generally in the election of
directors or persons who serve similar functions.



     4. Shares Available Under Plan. The aggregate number of units or shares of Common Equity that
may be (i) subject to an Award of Appreciation Rights or Stock Options or (ii) issued or
transferred as Restricted Shares and released from all restrictions or in payment of Performance
Shares, Performance Units, Restricted Stock Units or Senior Executive Plan Bonuses will not exceed
in the aggregate 2.5 million units or shares. Such units or shares may be units or shares of
original issuance or treasury units or shares or a combination of the foregoing. The number of
units or shares of Common Equity available under this Section 4 will be subject to adjustment as
provided in Section 13 and will be further adjusted to include units or shares that relate to Awards
that expire or are forfeited. The number of units or shares of Common Equity available under this
Section 4 will not be adjusted to include (i) any units or shares withheld by, or tendered to, the
Company in payment of the Option Price with respect to a Stock Option or in satisfaction of the
taxes required to be withheld in connection with any Award granted under the Plan or (ii) any units
or shares subject to an Appreciation Right that are not transferred to a Participant upon exercise
of the Appreciation Right.



     5. Limitations on Awards. Awards under the Plan will be subject to the following limitations:




     (a) The maximum number of units or shares of Common Equity that:




     (i) may be subject to Stock Options or Appreciation Rights granted to a
Participant during any calendar year will not exceed 400,000 units or shares plus an
additional 100,000 units or shares with respect to Stock Options or Appreciation
Rights granted a Participant who has not previously been employed by the Company or
any Subsidiary and




     (ii) may be granted to a Participant during any calendar year as Performance
Shares, Restricted Shares or Restricted Stock Units may not exceed
200,000 units or shares plus an additional 50,000 units or shares with respect to Performance Shares,
Restricted Shares or Restricted Stock Units granted a Participant who has not
previously been employed by the Company or any Subsidiary.




     The limitations set forth in this Section 5(a) will apply without regard to
whether the applicable Award is settled in cash or in shares of Common Equity.




     (b) The maximum aggregate cash value of payments to any Participant for any Performance
Period pursuant to an award of Performance Units will not exceed 2% of such fiscal year’s
EBITDA (not including the effects of discontinued operations or extraordinary or
non-recurring items).




     (c) The payment of a Senior Executive Plan Bonus to any Participant in respect of any
fiscal year will not exceed 2% of such fiscal year’s EBITDA (not including the effects of
discontinued operations or extraordinary or non-recurring items).



5









 





     6. Stock Options. The Committee may from time to time authorize grants of options to any
Participant to purchase units or shares of Common Equity upon such terms and conditions as it may
determine in accordance with this Section 6. Each grant of Stock Options may utilize any or all of
the authorizations, and will be subject to all of the requirements, contained in the following
provisions:




     (a) Each grant will specify the number of units or shares of Common Equity to which it
relates.




     (b) Each grant will specify the Option Price, which will not be less than 100% of the
Market Value per Share on the Date of Grant.




     (c) Each grant will specify whether the Option Price will be payable (i) in cash or by
check acceptable to the Company, (ii) by the actual or constructive transfer to the Company
of units or shares of Common Equity owned by the Participant for at least six months (or,
with the consent of the Committee, for less than six months) having an aggregate Market
Value per Share at the date of exercise equal to the aggregate Option Price, (iii) with the
consent of the Committee, by authorizing the Company to withhold a number of units or shares
of Common Equity otherwise issuable to the Participant having an aggregate Market Value per
Share on the date of exercise equal to the aggregate Option Price or (iv) by a combination
of such methods of payment; provided, however, that the payment methods described in clauses
(ii) and (iii) will not be available at any time that the Company is prohibited from
purchasing or acquiring such units or shares of Common Equity.




     (d) To the extent permitted by law, any grant may provide for deferred payment of the
Option Price from the proceeds of sale through a bank or broker of some or all of the units
or shares to which such exercise relates.




     (e) Successive grants may be made to the same Participant whether or not any Stock
Options or other Awards previously granted to such Participant remain unexercised or
outstanding.




     (f) Each grant will specify the required period or periods of continuous service by the
Participant with the Company or any Subsidiary that are necessary before the Stock Options
or installments thereof will become exercisable.




     (g) Any grant may specify the Management Objectives that must be achieved as a
condition to the exercise of the Stock Options.




     (h) Any grant may provide for the earlier exercise of the Stock Options in the event of
a change in control or other similar transaction or event.




     (i) Stock Options may be (i) options which are intended to qualify under particular
provisions of the Code, (ii) options which are not intended to so qualify or (iii)
combinations of the foregoing.



6









 






     (j) On or after the Date of Grant, the Committee may provide for the payment to the
Participant of dividend equivalents thereon in cash or Common Equity on a current, deferred
or contingent basis.




     (k) The Committee will have the right to substitute Appreciation Rights for outstanding
Options granted to one or more Participants, provided the terms and the economic benefit of
the substituted Appreciation Rights are at least equivalent to the terms and economic
benefit of such Options, as determined by the Committee in its discretion.




     (l) Any grant may provide for the effect on the Stock Options or any units or shares of
Common Equity issued, or other payment made, with respect to the Stock Options of any
conduct of the Participant determined by the Committee to be injurious, detrimental or
prejudicial to any significant interest of the Company or any Subsidiary.




     (m) Each grant will be evidenced by an Evidence of Award, which may contain such terms
and provisions, consistent with the Plan, as the Committee may approve, including without
limitation provisions relating to the Participant’s termination of employment or other
termination of service by reason of retirement, death, disability or otherwise.



     7. Appreciation Rights. The Committee may also from time to time authorize grants to any
Participant of Appreciation Rights upon such terms and conditions as it may determine in accordance
with this Section 7. Appreciation Rights may be granted in tandem with Stock Options or separate
and apart from a grant of Stock Options. An Appreciation Right will be a right of the Participant
to receive from the Company upon exercise an amount which will be determined by the Committee at
the Date of Grant and will be expressed as a percentage of the Spread (not exceeding 100%) at the
time of exercise. An Appreciation Right granted in tandem with a Stock Option may be exercised
only by surrender of the related Stock Option. Each grant of an Appreciation Right may utilize any
or all of the authorizations, and will be subject to all of the requirements, contained in the
following provisions:




     (a) Each grant will state whether it is made in tandem with Stock Options and, if not
made in tandem with any Stock Options, will specify the number of units or shares of Common
Equity in respect of which it is made.




     (b) Each grant made in tandem with Stock Options will specify the Option Price and each
grant not made in tandem with Stock Options will specify the Grant Price, which in either
case will not be less than 100% of the Market Value per Share on the Date of Grant.




     (c) Any grant may provide that the amount payable on exercise of an Appreciation Right
may be paid (i) in cash, (ii) in units or shares of Common Equity having an aggregate Market
Value per Share equal to the Spread (or the designated percentage of the Spread) or (iii) in
a combination thereof, as determined by the Committee in its discretion.



7









 






     (d) Any grant may specify that the amount payable to the Participant on exercise of an
Appreciation Right may not exceed a maximum amount specified by the Committee at the Date of
Grant.




     (e) Successive grants may be made to the same Participant whether or not any
Appreciation Rights or other Awards previously granted to such Participant remain
unexercised or outstanding.




     (f) Each grant will specify the required period or periods of continuous service by the
Participant with the Company or any Subsidiary that are necessary before the Appreciation
Rights or installments thereof will become exercisable, and will provide that no
Appreciation Rights may be exercised except at a time when the Spread is positive and, with
respect to any grant made in tandem with Stock Options, when the related Stock Options are
also exercisable.




     (g) Any grant may specify the Management Objectives that must be achieved as a
condition to the exercise of the Appreciation Rights.




     (h) Any grant may provide for the earlier exercise of the Appreciation Rights in the
event of a change in control or other similar transaction or event.




     (i) On or after the Date of Grant, the Committee may provide for the payment to the
Participant of dividend equivalents thereon in cash or Common Equity on a current, deferred
or contingent basis.




     (j) Any grant may provide for the effect on the Appreciation Rights or any units or shares of Common Equity issued, or other payment made, with respect to the Appreciation
Rights of any conduct of the Participant determined by the Committee to be injurious,
detrimental or prejudicial to any significant interest of the Company or any Subsidiary.




     (k) Each grant will be evidenced by an Evidence of Award, which may contain such terms
and provisions, consistent with the Plan, as the Committee may approve, including without
limitation provisions relating to the Participant’s termination of employment or other
termination of service by reason of retirement, death, disability or otherwise.



     8. Restricted Shares. The Committee may also from time to time authorize grants or sales to
any Participant of Restricted Shares upon such terms and conditions as it may determine in
accordance with this Section 8. Each grant or sale will constitute an immediate transfer of the
ownership of units or shares of Common Equity to the Participant in consideration of the
performance of services, entitling such Participant to voting and other ownership rights, but
subject to the restrictions set forth in this Section 8. Each such grant or sale may utilize any
or all of the authorizations, and will be subject to all of the requirements, contained in the
following provisions:




     (a) Each grant or sale may be made without additional consideration or in consideration
of a payment by the Participant that is less than the Market Value per Share



8









 







at the Date of Grant, except as may otherwise be required by the Delaware General
Corporation Law.




     (b) Each grant or sale may limit the Participant’s dividend rights during the period in
which the units or shares of Restricted Shares are subject to any such restrictions.




     (c) Each grant or sale may provide that the Restricted Shares will be subject, for a
period to be determined by the Committee at the Date of Grant, to one or more restrictions,
including without limitation a restriction that constitutes a “substantial risk of
forfeiture” within the meaning of Section 83 of the Code and the regulations of the Internal
Revenue Service under such section.




     (d) Any grant or sale may specify the Management Objectives that, if achieved, will
result in the termination or early termination of the restrictions applicable to the units
or shares.




     (e) Any grant or sale may provide for the early termination of any such restrictions in
the event of a change in control or other similar transaction or event.




     (f) Each grant or sale will provide that during the period for which such restriction
or restrictions are to continue, the transferability of the Restricted Shares will be
prohibited or restricted in a manner and to the extent prescribed by the Committee at the
Date of Grant (which restrictions may include without limitation rights of repurchase or
first refusal in favor of the Company or provisions subjecting the Restricted Shares to
continuing restrictions in the hands of any transferee).




     (g) Any grant or sale may provide for the effect on the Restricted Shares or any units
or shares of Common Equity issued free of restrictions, or other payment made, with respect
to the Restricted Shares of any conduct of the Participant determined by the Committee to be
injurious, detrimental or prejudicial to any significant interest of the Company or any
Subsidiary.




     (h) Each grant or sale will be evidenced by an Evidence of Award, which may contain
such terms and provisions, consistent with the Plan, as the Committee may approve, including
without limitation provisions relating to the Participant’s termination of employment or
other termination of service by reason of retirement, death, disability or otherwise.



     9. Restricted Stock Units. The Committee may also from time to time authorize grants or sales
to any Participant of Restricted Stock Units upon such terms and conditions as it may determine in
accordance with this Section 9. Each grant or sale will constitute the agreement by the Company to
issue or transfer units or shares of Common Equity to the Participant in the future in
consideration of the performance of services, subject to the fulfillment during the Deferral Period
of such conditions as the Committee may specify. Each such grant or sale may utilize any or all of
the authorizations, and will be subject to all of the requirements, contained in the following
provisions:



9









 






     (a) Each grant or sale may be made without additional consideration from the
Participant or in consideration of a payment by the Participant that is less than the Market
Value per Share on the Date of Grant, except as may otherwise be required by the Delaware
General Corporation Law.




     (b) Each grant or sale will provide that the Restricted Stock Units will be subject to
a Deferral Period, which will be fixed by the Committee on the Date of Grant, and any grant
or sale may provide for the earlier termination of such period in the event of a change in
control or other similar transaction or event.




     (c) During the Deferral Period, the Participant will not have any right to transfer any
rights under the Restricted Stock Units, will not have any rights of ownership in the
Restricted Stock Units and will not have any right to vote the Restricted Stock Units, but
the Committee may on or after the Date of Grant authorize the payment of dividend
equivalents on such units or shares in cash or Common Equity on a current, deferred or
contingent basis.




     (d) Any grant or sale may provide for the effect on the Restricted Stock Units or any
units or shares of Common Equity issued free of restrictions, or other payment made, with
respect to the Restricted Stock Units of any conduct of the Participant determined by the
Committee to be injurious, detrimental or prejudicial to any significant interest of the
Company or any Subsidiary.




     (e) Each grant or sale will be evidenced by an Evidence of Award, which will contain
such terms and provisions as the Committee may determine consistent with the Plan, including
without limitation provisions relating to the Participant’s termination of employment or
other termination of service by reason of retirement, death, disability or otherwise.



     10. Performance Shares and Performance Units. The Committee may also from time to time
authorize grants to any Participant of Performance Shares and Performance Units, which will become
payable upon achievement of specified Management Objectives, upon such terms and conditions as it
may determine in accordance with this Section 10. Each such grant may utilize any or all of the
authorizations, and will be subject to all of the requirements, contained in the following
provisions:




     (a) Each grant will specify the number of Performance Shares or Performance Units to
which it relates.




     (b) The Performance Period with respect to each Performance Share and Performance Unit
will be determined by the Committee at the time of grant.




     (c) Each grant will specify the Management Objectives that, if achieved, will result in
the payment of the Performance Shares or Performance Units.




     (d) Each grant will specify the time and manner of payment of Performance Shares or
Performance Units which have become payable, which payment may be made in (i) cash, (ii)
units or shares of Common Equity having an aggregate Market Value per



10









 







Share equal to the aggregate value of the Performance Shares or Performance Units which
have become payable or (iii) any combination thereof, as determined by the Committee in its
discretion at the time of payment.




     (e) Any grant of Performance Shares may specify that the amount payable with respect
thereto may not exceed a maximum specified by the Committee on the Date of Grant. Any grant
of Performance Units may specify that the amount payable, or the number of units or shares
of Common Equity issued, with respect to the Performance Units may not exceed maximums
specified by the Committee on the Date of Grant.




     (f) On or after the Date of Grant, the Committee may provide for the payment to the
Participant of dividend equivalents on Performance Shares in cash or Common Equity on a
current, deferred or contingent basis.




     (g) Any grant may provide for the effect on the Performance Shares or Performance Units
or any units or shares of Common Equity issued, or other payment made, with respect to the
Performance Shares or Performance Units of any conduct of the Participant determined by the
Committee to be injurious, detrimental or prejudicial to any significant interest of the
Company or any Subsidiary.




     (h) Each grant will be evidenced by an Evidence of Award, which will contain such terms
and provisions as the Committee may determine consistent with the Plan, including without
limitation provisions relating to the payment of the Performance Shares or Performance Units
in the event of a change in control or other similar transaction or event and provisions
relating to the Participant’s termination of employment or other termination of service by
reason of retirement, death, disability or otherwise.



     11. Senior Executive Plan Bonuses. The Committee may from time to time authorize the payment
of annual incentive compensation to a Participant who is, or is determined by the Committee to be
likely to become, a “covered employee” within the meaning of Section 162(m) of the Code (or any
successor provision), which incentive compensation will become payable upon achievement of
specified Management Objectives. Subject to Section 5(c), Senior Executive Plan Bonuses will be
payable upon such terms and conditions as the Committee may determine in accordance with the
following provisions:




     (a) No later than 90 days after the first day of the Company’s fiscal year, the
Committee will specify the Management Objectives that, if achieved, will result in the
payment of a Senior Executive Plan Bonus for such year.




     (b) Following the close of the Company’s fiscal year, the Committee will certify in
writing whether the specified Management Objectives have been achieved. Approved minutes of
a meeting of the Committee at which such certification is made will be treated as written
certification for this purpose. The Committee will also specify the time and manner of
payment of a Senior Executive Plan Bonus which becomes payable, which payment may be made in
(i) cash, (ii) units or shares of Common Equity having an aggregate Market Value per Share
equal to the aggregate value of the Senior Executive



11









 







Plan Bonus which has become payable or (iii) any combination thereof, as determined by
the Committee in its discretion at the time of payment.




     (c) If a change in control occurs during a Performance Period, the Senior Executive
Plan Bonus payable to each Participant for the Performance Period will be determined at the
highest level of achievement of the Management Objectives, without regard to actual
performance and without proration for less than a full Performance Period. The Senior
Executive Plan Bonus will be paid at such time following the change in control as the
Committee determines in its discretion, but in no event later than 30 days after the date of
an event which results in a change in control.




     (d) Each grant may be evidenced by an Evidence of Award, which will contain such terms
and provisions as the Committee may determine consistent with the Plan, including without
limitation provisions relating to the Participant’s termination of employment by reason of
retirement, death, disability or otherwise.



     12. Transferability. Except as may be specifically provided therein, no Award may be sold,
pledged, assigned or transferred in any manner other than by will or the laws of descent and
distribution, pursuant to a qualified domestic relations order or, with the consent of the
Committee, by gifts to family members of the Participant, including to trusts in which family
members of the Participant own more than 50% of the beneficial interests, to foundations in which
family members of the Participant or the Participant controls the management of assets and to other
entities in which more than 50% of the voting interests are owned by family members of the
Participant or the Participant. No Stock Option or Appreciation Right granted to a Participant
will be exercisable during the Participant’s lifetime by any person other than the Participant or
the Participant’s guardian or legal representative or any permitted transferee.



     13. Adjustments.




     (a) The Committee will make or provide for such adjustments in (i) the maximum number
of units or shares of Common Equity specified in Sections 4 and 5, (ii) the number of units
or shares of Common Equity covered by outstanding Stock Options, Appreciation Rights,
Performance Shares and Restricted Stock Units granted under the Plan, (iii) the Option Price
or Grant Price applicable to any Stock Options and Appreciation Rights, and (iv) the kind of
units or shares covered by any such Awards (including units or shares of another issuer), as
the Committee in its discretion, exercised in good faith, determines is equitably required
to prevent dilution or enlargement of the rights of Participants that otherwise would result
from (x) any stock dividend, stock split, combination of units or shares, recapitalization
or other change in the capital structure of the Company, or (y) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or
other distribution of assets, issuance of rights or warrants to purchase securities, or (z)
any other corporate transaction or event having an effect similar to any of the foregoing.
In the event of any such transaction or event, the Committee, in its discretion, may provide
in substitution for any or all outstanding Awards such alternative consideration as it, in
good faith, may determine to be equitable in the circumstances and may require in connection
with such substitution the surrender of all Awards so replaced.



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     (b) The Committee may accelerate the payment of, or vesting with respect to, any Award
under the Plan upon the occurrence of a transaction or event described in this Section 13;provided, however, that in the case of any Award that constitutes a deferral of compensation
within the meaning of Section 409A of the Code, the Committee will not accelerate the
payment of the Award unless it determines in good faith that such transaction or event
satisfies the requirements of a change in control event under guidance issued by the
Secretary of the Treasury under Section 409A.



     14. Fractional Shares. the Company will not be required to issue any fractional share of
Common Equity pursuant to the Plan. The Committee may provide for the elimination of fractions or
for the settlement of fractions in cash.



     15. Withholding Taxes. To the extent that the Company is required to withhold federal, state,
local or foreign taxes in connection with any payment made or benefit realized by a Participant or
other person under the Plan, and the amounts available to the Company for such withholding are
insufficient, it will be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory to the Company for
payment of the balance of such taxes required to be withheld. In addition, if permitted by the
Committee, the Participant or such other person may elect to have any withholding obligation of the
Company satisfied with units or shares of Common Equity that would otherwise be transferred to the
Participant or such other person in payment of the Participant’s Award. However, without the
consent of the Committee, units or shares of Common Equity will not be withheld in excess of the
minimum number of units or shares required to satisfy the Company’s withholding obligation.



     16. Administration of the Plan.




     (a) Unless the administration of the Plan has been expressly assumed by the Board
pursuant to a resolution of the Board, the Plan will be administered by the Committee. A
majority of the Committee will constitute a quorum, and the action of the members of the
Committee present at any meeting at which a quorum is present, or acts unanimously approved
in writing, will be the acts of the Committee.




     (b) The Committee has the full authority and discretion to administer the Plan and to
take any action that is necessary or advisable in connection with the administration of the
Plan, including without limitation the authority and discretion to interpret and construe
any provision of the Plan or of any agreement, notification or document evidencing an Award.
The interpretation and construction by the Committee of any such provision and any
determination by the Committee pursuant to any provision of the Plan or of any such
agreement, notification or document will be final and conclusive. No member of the
Committee will be liable for any such action or determination made in good faith.




     (c) It is the Company’s intention that any Award granted under the Plan that
constitutes a deferral of compensation within the meaning of Section 409A of the Code and
the guidance issued by the Secretary of the Treasury under Section 409A satisfy the
requirements of Section 409A. In granting such an Award, the Committee will use its



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best efforts to exercise its authority under the Plan with respect to the terms of such
Award in a manner that the Committee determines in good faith will cause the Award to comply
with Section 409A and thereby avoid the imposition of penalty taxes and interest upon the
Participant receiving the Award.




     (d)
If the administration of the Plan is assumed by the Board pursuant to Section 16(a),
the Board will have the same authority, power, duties, responsibilities and discretion given
to the Committee under the terms of the Plan.



     17. Amendments and Other Matters.




     (a) The Plan may be amended from time to time by the Committee or the Board but may not
be amended without further approval by the stockholders of the Company if such amendment
would result in the Plan no longer satisfying any applicable requirements of the New York
Stock Exchange (or the principal national securities exchange on which the Common Equity is
traded), Rule 16b-3 or Section 162(m) of the Code.




     (b) Neither the Committee nor the Board will authorize the amendment of any outstanding
Stock Option to reduce the Option Price without the further approval of the stockholders of
the Company. Furthermore, no Stock Option will be cancelled and replaced with Stock Options
having a lower Option Price without further approval of the stockholders of the Company.
The provisions of this Section 17(b) are intended to prohibit the repricing of “underwater”
Stock Options and will not be construed to prohibit the adjustments provided for in Section 13.




     (c) The Plan may be terminated at any time by action of the Board. The termination of
the Plan will not adversely affect the terms of any outstanding Award.




     (d) The Plan does not confer upon any Participant any right with respect to continuance
of employment or other service with the Company or any Subsidiary, nor will it interfere in
any way with any right the Company or any Subsidiary would otherwise have to terminate such
Participant’s employment or other service at any time.




     (e) If the Committee determines, with the advice of legal counsel, that any provision
of the Plan would prevent the payment of any Award intended to qualify as performance-based
compensation within the meaning of Section 162(m) of the Code from so qualifying, such Plan
provision will be invalid and cease to have any effect without affecting the validity or
effectiveness of any other provision of the Plan. If the Committee determines with the
advice of legal counsel, that compliance with any provision of the Plan is not required in
order for the payment of any Award (i) intended to qualify as performance based compensation
with the meaning of Section 162(m) of the Code to so qualify, or (ii) to be otherwise
deductible for federal income tax purposes, then the Committee may in its discretion not
comply with such Plan provision.



     18. Governing Law. The Plan, all Awards and all actions taken under the Plan and the Awards
will be governed in all respects in accordance with the laws of the State of Delaware,



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     including without limitation, the Delaware statute of limitations, but without giving effect to the principles of conflicts of laws of such State.




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