PALL CORPORATION

 

                          2005 STOCK COMPENSATION PLAN

 

                                      _____

 

 

    1.   PURPOSE

 

         This document sets forth the Pall Corporation 2005 Stock Compensation

Plan as adopted by the Board of Directors of Pall Corporation on September 17,

2004, approved by shareholders at the 2004 Annual Meeting of Shareholders on

November 17, 2004 and amended by the Board of Directors on July 19, 2005.

 

         The purpose of the Plan is to attract and retain individuals of

outstanding ability to serve as employees in positions of responsibility with

the Corporation and its Affiliated Companies, or to serve as non-employee

directors of the Corporation, by providing them with the opportunity to acquire

a proprietary interest (or to increase their proprietary interest) in the

Corporation, and to provide them with incentives and awards that will motivate

their efforts and contributions towards the success of the Corporation and its

Affiliated Companies and the growth of their businesses.

 

    2.   DEFINITIONS

 

         As used herein, the following terms shall have the following meanings:

 

         "AFFILIATED COMPANIES" shall mean each direct or indirect subsidiary of

the Corporation.

 

         "ANNUAL AWARD UNITS" shall mean Units awarded to an Eligible Director

pursuant to Section 8.

 

         "ANNUAL AWARD GRANT DATE" shall mean, with respect to any calendar year

beginning on or after January 1, 2005, January 5 of such year or, if January 5

of such year is not a Trading Day, the next day following January 5 of such year

that is a Trading Day.

 

         "AWARD" shall mean the grant of any Option, Share or Unit to any

Eligible Employee or Eligible Director under the Plan.

 

         "BENEFICIARY" shall mean the person or persons designated by a

Participant in accordance with Section 15 to receive any payment that is

required to be made under the Plan upon or after the Participant's death.

 

         "BOARD OF DIRECTORS" shall mean the Board of Directors of the

Corporation.

 

         "CEO" shall mean the Chief Executive Officer of the Corporation.

 

 

 

 

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         "CHANGE IN CONTROL" means the occurrence of any of the following:

 

         (a)      the "Distribution Date" as defined in Section 3 of the Rights

                  Agreement dated as of November 17, 1989 between the

                  Corporation and United States Trust Company of New York as

                  Rights Agent, as amended by Amendment No. 1 thereto dated

                  April 20, 1999, and as the same may have been further amended

                  or extended to the time in question or in any successor

                  agreement (the "Rights Agreement"); or

 

         (b)      any event described in Section 11(a)(ii)(B) of the Rights

                  Agreement; or

 

         (c)      any event described in Section 13 of the Rights Agreement; or

 

         (d)      the date on which the number of duly elected and qualified

                  directors of the Corporation who were not either elected by

                  the Board of Directors or nominated by the Board of Directors

                  or its Nominating Committee for election by the shareholders

                  shall equal or exceed one-third of the total number of

                  directors of the Corporation as fixed by its by-laws;

 

provided, however, that no Change in Control shall be deemed to have occurred,

and no rights arising upon a Change in Control as provided in Section 12 hereof

shall exist (other than the rights provided for in Section 12(b) hereof), to the

extent that the Board of Directors so determines by resolution adopted and not

rescinded prior to the Change in Control.

 

         "CODE" shall mean the Internal Revenue Code of 1986, as amended.

 

         "COMMITTEE" shall mean (i) the Board of Directors, with respect to any

Award that may be granted, or that has been granted, to any Eligible Director;

(ii) the Compensation Committee, with respect to any Award that may be granted,

or that has been granted, to any Eligible Employee, except as otherwise provided

in (iii); or (iii) the CEO, with respect to those specific matters pertaining to

Awards to Eligible Employees who are not Elected Officers that are within the

scope of the authority granted to the CEO under Section 14(d) or delegated to

the CEO by the Compensation Committee under to Section 14(e).

 

         "COMMON STOCK" shall mean the common stock ($0.10 par value) of the

Corporation.

 

         "COMPENSATION COMMITTEE" shall mean the Compensation Committee of the

Board of Directors.

 

         "CORPORATION" shall mean Pall Corporation, a New York Corporation.

 

         "COVERED EXECUTIVE" shall mean, with respect to any Award granted

hereunder, any individual who at the Date of Grant of such Award is a "Covered

Employee" of the Corporation for such year for purposes of section 162(m) of the

Code.

 

         "DATE OF GRANT" shall mean, with respect to any Award, the date on

which the Committee approves the grant of such Award, or such later date as may

be specified as the date of grant of such Award in the instrument evidencing the

grant of such Award.

 

 

 

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         "DISABILITY" shall mean, with respect to any Eligible Employee, such

employee's "permanent and total disability" as defined in section 22(e)(3) of

the Code or any successor provision.

 

         "DIVIDEND EQUIVALENT UNITS" shall mean additional Units credited with

respect to a Participant's Restricted Units, Performance Units, or Annual Award

Units pursuant to Section 6(c), Section 7(b) or Section 8(b).

 

         "DIVIDEND PAYMENT DATE" shall mean each date on which the Corporation

pays a dividend on its Common Stock.

 

         "ELECTED OFFICER" shall mean any individual who is an Elected Officer

under Section 4.01(a)(i) of the By-Laws of the Corporation.

 

         "ELIGIBLE DIRECTOR" shall mean any member of the Board of Directors who

is not an employee of the Corporation or any of its Affiliated Companies.

 

         "ELIGIBLE EMPLOYEE" shall mean any employee of the Corporation or any

of its Affiliated Companies who, in the judgment of the Committee, is expected

to make significant contributions to the success of the Corporation and its

Affiliated Companies and to the growth of their businesses.

 

         "FAIR MARKET VALUE" shall mean, with respect to any Share or Unit or

any fractional Share or fractional Unit as of any date of reference herein, the

closing price of a share of Common Stock as reported in the New York Stock

Exchange Consolidated Transactions for such date or, if such date is not a

Trading Day, on the next Trading Day preceding such date.

 

         "INCENTIVE STOCK OPTION" shall mean an Option that is an "incentive

stock option" within the meaning of Section 422 of the Code.

 

         "NON-QUALIFIED STOCK OPTION" shall mean an Option that is not an

Incentive Stock Option.

 

         "OPTION" shall mean an option to purchase Shares granted pursuant to

Section 5 of the Plan or, solely for purposes of Section 5(h)(ii), granted under

any other stock option plan maintained by the Corporation.

 

         "PARTICIPANT" shall mean any Eligible Employee or Eligible Director who

holds an Award granted under the Plan, and any successor, permitted transferee

or Beneficiary that succeeds to such individual's interest in such Award.

 

         "PERFORMANCE GOALS" shall mean the performance goals established by the

Committee in connection with Awards granted to Eligible Employees under Section

7 that must be met in order for payment to be made with respect to such Awards.

 

         "PERFORMANCE PERIOD" shall mean the period established by the Committee

for measuring whether, and to what extent, any Performance Goals established in

connection with any Award granted under Section 7 hereof have been met.

 

 

 

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         "PERFORMANCE SHARES" shall mean Shares that may be issued and delivered

at the end of a Performance Period pursuant to an Award made to an Eligible

Employee under Section 7, depending on the achievement, or the level of

achievement, of one or more Performance Goals within such period, as provided in

Section 7.

 

         "PERFORMANCE UNITS" shall mean Units credited to an Eligible Employee

at the beginning of a Performance Period pursuant to an Award made to such

employee under Section 7, and any Dividend Equivalent Units that are credited to

the employee with respect to such Units during such Performance Period, payment

with respect to which Units and related Dividend Equivalent Units depends on the

achievement, or the level of achievement, of one or more Performance Goals

within such period, as provided in Section 7.

 

         "PLAN" shall mean the Pall Corporation 2005 Stock Compensation Plan, as

set forth herein and as amended from time to time.

 

         "PRO RATA PORTION" shall mean, with respect to any portion of the

Restricted Shares or Restricted Units granted pursuant to an Award made

hereunder to an Eligible Employee, or with respect to any Performance Shares or

Performance Units included in an Award made hereunder to an Eligible Employee,

the percentage determined by dividing (i) the number of months in the period

commencing on the first day of the Restricted Period established for such

portion of the Restricted Shares or Restricted Units so granted, or the

Performance Period established for the Performance Shares or Performance Units

so awarded, and ending on the date of the Eligible Employee's Termination of

Employment, by (ii) the total number of months in such Restricted Period, or in

such Performance Period.

 

         "RESTRICTED PERIOD" shall mean the period of time during which

Restricted Shares or Restricted Share Units are subject to Restrictions as set

forth in Section 6.

 

         "RESTRICTED SHARES" shall mean Shares which are granted subject to

Restrictions pursuant to Section 6.

 

         "RESTRICTED UNITS" shall mean Units credited to an Eligible Employee

subject to Restrictions at the beginning of a Restricted Period pursuant to an

Award made to such employee under Section 6, and any Dividend Equivalent Units

that are credited to the employee with respect to such Units during such

Restricted Period as provided in Section 6.

 

         "RESTRICTIONS" shall mean the restrictions to which Restricted Shares

or Restricted Units are subject under the provisions of Section 6.

 

         "RETIREMENT" shall mean the termination of a Participant's employment

with the Corporation and all of its Affiliated Companies, if at the time of such

termination of employment the Participant has attained age 62 and is eligible to

receive a Retirement Benefit under the Pall Corporation Cash Balance Pension

Plan or (ii), in the case of any Participant who is not a resident of the U.S.,

a similar type of benefit under any plan or program maintained by the

Corporation or any of its Affiliated Companies (or to which the Corporation or

any of its Affiliated Companies makes contributions) that provides benefits to

Employees upon their retirement.

 

 

 

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         "SHARE" shall mean a share of Common Stock.

 

         "TERMINATION OF BOARD MEMBERSHIP" shall mean, with respect to any

Eligible Director, his or her ceasing to be a member of the Board of Directors.

 

         "TERMINATION OF EMPLOYMENT" shall mean, with respect to any Eligible

Employee, his or her ceasing to be employed by the Corporation or any of its

Affiliated Companies.

 

         "TRADING DAY" shall mean any day on which the New York Stock Exchange

is open for trading.

 

         "UNIT" shall mean a unit of measurement equivalent to one share of

Common Stock, with none of the attendant rights of a shareholder of such share,

(including among the rights which the holder of a Unit does not have are the

right to vote such share and the right to receive dividends thereon), except to

the extent otherwise specifically provided herein.

 

    3.   AWARDS

 

         (a) Form of Awards. Awards under the Plan may be made in the form of

Options, Restricted Shares, Restricted Units, Performance Shares, Performance

Units, and Annual Award Units. An Award in any of the foregoing forms other than

Annual Award Units may be granted to any individual Eligible Employee, or to any

group of Eligible Employees, upon terms and conditions that differ from the

terms and conditions upon which any other Awards in the same form are made to

other individual Eligible Employees or groups of Eligible Employees.

 

         (b) Written Instrument. Each Award made to an Eligible Employee or

Eligible Director under the Plan shall be evidenced by a written instrument in

such form as the Committee shall prescribe, setting forth the terms and

conditions of the Award. The instrument evidencing the grant of any Award

hereunder shall specify that the Award shall be subject to all of the terms and

provisions of the Plan as in effect from time to time but subject to the

limitation on amendments set forth in Section 16 of the Plan.

 

         (c) Surrender and Exchange of Awards. The Committee may in its

discretion grant to a Participant who has been granted an Award under the Plan

or an award under any other employee compensation or benefit plan maintained by

the Corporation or any of its Affiliates (any such Award or award is referred to

herein as a "Prior Award"), in exchange for the surrender and cancellation of

such Prior Award or any portion thereof, a new Award under the Plan. As the

Committee may determine in its discretion, the new Award so granted may be in a

form different than that of the Prior Award surrendered, and may be granted

subject to terms and conditions that differ from those to which the surrendered

Prior Award were subject. Notwithstanding the foregoing, no grant of a new Award

in exchange for a Prior Award may be made hereunder unless (i) the aggregate

fair value of the new Award does not exceed the aggregate fair value of the

Prior Award, determined as of the time the new Award is granted; and (ii) the

grant of the new Award would not constitute a "repricing" of any Option or would

not otherwise be treated as a "material revision" of the Plan for purposes of

the applicable rules of the New York Stock Exchange.

 

 

 

 

 

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    4.   SHARES AVAILABLE FOR AWARDS

 

         Shares distributed in respect of Awards made under the Plan may be

authorized but unissued Shares, Shares held in the treasury of the Corporation,

or Shares purchased by the Corporation on the open market at such time or times

and in such manner as it may determine. The Corporation shall be under no

obligation to issue or acquire Shares in respect of an Award made under the Plan

before the time when delivery of Shares is due under the terms of the Award. The

number of Shares available for distribution in respect of Awards made under the

Plan shall be subject to the following limitations:

 

         (a) The aggregate number of Shares that may be distributed in respect

of Awards made under the Plan shall be limited to 5,000,000 Shares. Of that

aggregate number, no more than 2,500,000 Shares in the aggregate shall be

available for Awards of Restricted Shares, Restricted Units, Performance Shares,

Performance Units and Annual Award Units. The maximum aggregate number of Shares

that may be issued pursuant to the exercise of Incentive Stock Options granted

under the Plan shall not exceed 2,500,000 Shares.

 

         (b) Upon the grant of any Award, the overall aggregate number of Shares

available for further Awards under the Plan, and if the Award so granted was in

a form subject to a limitation on the aggregate number of shares available for

Awards in that form, the aggregate number of Shares available for further Awards

under the Plan in that form, shall be reduced by the number of Shares subject to

the Award so granted.

 

         (c) There shall be added back to the aggregate number of Shares

available for the grant of Awards under the Plan, as determined under (a) and

(b) above, the following: (i) any Shares as to which an Option granted hereunder

has not been exercised at the time of its expiration, cancellation or

forfeiture; (ii) any Shares that otherwise would have been issued upon the

exercise of an Option granted hereunder that are surrendered in payment of the

exercise price of such Option; (iii) any Shares included in any other form of

Award granted hereunder, to the extent that the Participant's right to receive

such Shares, or any cash payment in settlement of such Award, becomes forfeited;

(iv) any Shares that otherwise would have been issued upon the exercise of an

Option or in payment with respect to any other form of Award granted hereunder,

that are surrendered in payment or partial payment of taxes required to be

withheld with respect to the exercise of such option or the making of such

payment; (v) any Shares represented by Restricted Units or Performance Units

granted hereunder as to which payment is made in cash instead of by the issuance

and delivery of Shares; and (vi) any Shares subject to an Option granted

hereunder, or covered by any other form of Award made hereunder, to the extent

such Option or other Award is surrendered in exchange for any other Award made

hereunder, subject to the limitations set forth in the last sentence of Section

3(c) hereof.

 

         (d) The limitations provided in this Section 4 shall be subject to

adjustment as provided in Section 13.

 

    5.   AWARDS OF OPTIONS.

 

         Subject to the limitations set forth in Section 4 and to the other

terms and conditions of the Plan, Options may be granted under the Plan to such

Eligible Employees for the purchase of such number of Shares, at such times, and

upon such terms and conditions, as the Committee in its discretion may

determine. Options shall be granted in accordance with the provisions set forth

below.

 

 

 

 

 

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         (a) Type of Options. Each Option granted hereunder shall be identified

in the instrument evidencing such grant as either (i) an Option intended to be

treated as an Incentive Stock Option, or (ii) an Option that shall be treated as

a Non-Qualified Stock Option.

 

         (b) Maximum Number of Shares Subject to Options. The total number of

Shares with respect to which Options may be granted to any Eligible Employee

during any period of 24 consecutive months shall not exceed 300,000 Shares,

subject to adjustment as provided in Section 13.

 

         (c) Term of Options. The term during which an Option may be exercised

shall be such period of time as determined by the Committee and specified in the

Option, but in no event may the term of any Option exceed ten years from the

Date of Grant of the Option. Notwithstanding any other provision in the Plan to

the contrary, no Option may be exercised after its expiration.

 

         (d) Exercise of Options. Each Option granted hereunder shall become

exercisable, in whole or in part, at such time or times during its term as the

instrument evidencing the grant of such Option shall specify. To the extent that

an Option has become exercisable pursuant to the preceding sentence, it may be

exercised thereafter at any time or from time to time during its term, as to any

or all Shares as to which the Option has become and remains exercisable, subject

to the provisions of (e) below.

 

         (e) Termination of Employment. Except as the instrument evidencing the

grant of an Option may otherwise provide, the portion of any outstanding Option

held by an Eligible Employee on the date of his or her Termination of Employment

that has not become exercisable prior to such date, and the portion of such

Option which was exercisable but had not been exercised prior to such date,

shall be forfeited on such date.

 

         The instrument evidencing the grant of an Option may provide for the

portion of the Option that is exercisable at the time of the Eligible Employee's

Termination of Employment to remain exercisable, and for the portion of such

Option that is not yet exercisable at such time to become exercisable in

accordance with the terms of the Option and remain exercisable thereafter,

during such period of time after the date on which the Eligible Employee's

Termination of Employment occurs (but not beyond the expiration of the term of

the Option), in such circumstances and subject to such terms and conditions, as

are specified in such instrument. However, to the extent that any Option granted

hereunder to an Eligible Employee as an Incentive Stock Option is exercised more

than three months after the date of such employee's Termination of Employment

for any reason other than Disability, or more than one year after such date if

the employee's Termination of Employment occurred because of Disability, the

Option shall be treated as a Non-Qualified Stock Option for purposes of the

Plan.

 

 

 

 

 

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         (f) Exercise Price and Method of Exercise. The price at which Shares

may be purchased upon any exercise of an Option shall be the price per share

determined by the Committee and specified in the instrument evidencing the grant

of such Option, but in no event shall the exercise price per share be less than

(i) the Fair Market Value of a Share determined as of the Date of Grant of the

Option, or (ii), if greater, the par value of a Share.

 

         An Option shall be exercised by delivery of a written notice of

exercise, in a form satisfactory to the Committee, to the Corporation at its

principal business office and addressed to the attention of the Corporation's

Secretary or such other person as the Corporate Secretary may have designated to

receive such notice.. The notice shall specify the number of Shares with respect

to which the Option is being exercised. The notice shall be accompanied by

payment of the exercise price of the Shares for which the Option is being

exercised, which payment shall be made under one or more of the methods of

payment provided in (g) below. An Option may not be exercised at any one time as

to less than 100 Shares, or less than the number of Shares to which the Option

is then exercisable if that number is less than 100 Shares.

 

         (g) Payment. Payment of the exercise price for Shares purchased upon

the exercise of an Option shall be made by one, or by a combination of any, of

the following methods: (i) in cash, which may be paid by check or other

instrument acceptable to the Corporation, or by wire transfer of funds, in each

case in United States dollars; (ii) if permitted by the Committee and subject to

any terms and conditions it may impose on the use of such methods, by (A) the

delivery to the Corporation of other Shares owned by the Participant, or (B) the

surrender to the Corporation of Shares that otherwise would have been delivered

to the Participant upon exercise of the Option; (iii) to the extent permissible

under applicable law, through any cashless exercise sale and remittance

procedure that the Committee in its discretion may from time to time approve;

(iv) to the extent permissible under applicable law and permitted by the

Committee, by the execution by the Participant and delivery to the Corporation

of a promissory note or other instrument evidencing the Participant's agreement

to pay part or all of the option exercise price on a deferred or installment

payment basis, upon such terms and conditions (including without limitation

terms requiring Shares purchased upon the exercise of the Option to be pledged

to the Corporation to secure payment of any outstanding balance of the option

exercise price ) as the Committee shall require; or (v) any other method of

payment as the Committee may from time to time approve.

 

         For purposes of determining the portion of the exercise price payable

upon the exercise of an Option that will be treated as satisfied by the delivery

or surrender of Shares pursuant to clause (ii) (A) or (B) above, Shares so

delivered or surrendered shall be valued at their Fair Market Value determined

as of the Trading Day next preceding the date on which the Option is exercised.

 

         (h) Incentive Stock Options. Notwithstanding any other provisions of

the Plan, Incentive Stock Options granted under the Plan shall be subject to the

following provisions:

 

             (i) No Incentive Stock Option may be granted under the Plan after

         November 16, 2014, unless the shareholders of the Corporation have

         approved an extension of the period for granting Incentive Stock

         Options under the Plan beyond that date.

 

 

 

 

 

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             (ii) To the extent that the aggregate Fair Market Value of Shares

         with respect to which Incentive Stock Options granted under the Plan

         and under all other stock option plans maintained by the Corporation

         are exercisable for the first time by a Participant during any calendar

         year shall exceed $100,000, the Incentive Stock Options so exercisable

         shall be treated as Non-Qualified Stock Options. For purposes of the

         foregoing, the Fair Market Value of Shares as to which any Incentive

         Stock Option may be exercised shall be determined as of the date on

         which such Option is granted. The determination of whether the

         limitation set forth in the second preceding sentence shall apply with

         respect to any Incentive Stock Option granted under the Plan shall be

         made in accordance with applicable provisions of section 422 of the

         Code and the regulations issued thereunder.

 

             (iii) No Incentive Stock Option shall be granted to an Eligible

         Employee if, as of the Date of Grant of such Option, such Eligible

         Employee owns stock possessing more than ten percent of the total

         combined voting power of all classes of stock of the Corporation,

         unless (A) the exercise price per Share under such Option is at least

         110% percent of the Fair Market Value of a Share determined as of the

         Date of Grant of such Option, and (B) such Option is not exercisable

         after the expiration of five years from the Date of Grant of such

         Option.

 

             (iv) The instrument evidencing the grant of any Incentive Stock

         Option shall require that if any Shares acquired upon the exercise of

         such option are disposed of within 2 years from the Date of Grant of

         such option, or within one year from the date as of which the Shares

         disposed of were transferred to the Participant pursuant to the

         exercise of such option, the Participant shall give the Corporation

         written notice of such disposition, within ten days following the date

         of such disposition.

 

         (i) Other Option Provisions. The instrument evidencing the grant of any

Option hereunder may contain such other terms and conditions, not inconsistent

with the provisions of the Plan or any applicable law, as the Committee may

determine.

 

         (j) Rights of a Shareholder. Upon the exercise of an Option or any

portion thereof in accordance with the Plan, the provisions of the instrument

evidencing the grant of such Option and any applicable rules and regulations

established by the Committee, the holder of the Option shall have all of the

rights of a shareholder of the Corporation with respect to the Shares issued as

a result of such exercise.

 

         6.       AWARDS OF RESTRICTED SHARES AND RESTRICTED UNITS

 

         Subject to the limitations set forth in Section 4 and to the other

terms and conditions of the Plan, Restricted Shares or Restricted Units may be

granted to such Eligible Employees, at such times, and in such amounts, as the

Committee may determine in its discretion. Restricted Shares and Restricted

Units shall be granted in accordance with the provisions set forth below.

 

 

 

 

 

 

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         (a) Restrictions and Restricted Period. At the time of each grant of

Restricted Shares or Restricted Units to any Participant, the Committee shall

establish a period of time within which the Restricted Shares or Restricted

Units covered by such grant (and the Participant's right to receive payment with

respect to such restricted Units) may not be sold, assigned, transferred (other

than a transfer to the Participant's Beneficiary occurring by reason of the

Participant's death), made subject to gift, or otherwise disposed of, mortgaged,

pledged or otherwise encumbered, whether voluntarily or by operation of law. The

Committee in its discretion may prescribe a separate Restricted Period for any

specified portion of the Restricted Shares or Restricted Units granted pursuant

to any Award.

 

         (b) Rights While Restricted Shares Remain Subject to Restrictions.

Restricted Shares granted to a Participant hereunder shall be issued to the

Participant as of the Date of Grant as uncertificated shares. Until the

Restrictions to which such shares are subject lapse in accordance with the

provisions of (d) below or Section 12(c), the Restricted Shares granted to a

Participant shall be held in the Participant's name in a bookkeeping account

maintained by the Corporation. A separate account shall be maintained for all

Restricted Shares granted to a Participant with a Restricted Period ending on

the same date.

 

         Except for the Restrictions to which such shares are subject, and

subject to the forfeiture provisions applicable under (e) below, a Participant

shall have, with respect to all Restricted Shares so held for his account, all

of the rights of a shareholder of the Corporation, including full voting rights

with respect to such shares and the right to receive currently with respect to

the Participant's Restricted Shares all dividends and other distributions

payable generally on the Corporation's Shares. If any dividends or distributions

so payable are paid in Shares, the Shares paid as a dividend or distribution

with respect to a Participant's Restricted Shares shall be subject to the same

Restrictions and provisions relating to forfeiture as apply to the Restricted

Shares with respect to which they were paid. Such stock dividend Shares shall

themselves be treated as Restricted Shares, and shall be credited to the same

account which the Corporation maintains for those Restricted Shares of the

Participant with respect to which such stock dividends or distributions were

paid.

 

         Notwithstanding the foregoing, if the instrument evidencing the grant

of any Restricted Shares to a Participant so provides, all cash dividends and

distributions payable generally on the Corporation's Shares that are otherwise

payable with respect to the Restricted Shares granted to the Participant shall

not be paid currently to the Participant but instead, shall be applied to the

purchase of additional Shares for the Participant's account. The additional

Shares so purchased shall be subject to the same Restrictions and provisions

relating to forfeiture as apply to the Restricted Shares with respect to which

they were paid. Such additional Shares shall themselves be treated as Restricted

Shares, and shall be credited to the same account which the Corporation

maintains for those Restricted Shares of the Participant with respect to which

such dividends or distributions were paid. The purchase of any such additional

Shares shall be made either (i) through the Corporation's Dividend Reinvestment

Plan, or (ii) in accordance with such other procedure as may be specified in the

instrument evidencing the grant of the Restricted Shares on which such dividends

are paid.

 

         (c) Rights While Restricted Units Remain Subject to Restrictions. No

Shares shall be issued at the time any award of Restricted Units is made

hereunder. Restricted Units granted to a Participant hereunder shall be credited

to a bookkeeping account maintained by the Corporation for the Participant. A

separate account shall be maintained for all Restricted Units granted to a

Participant with a Restricted Period ending on the same date, and for all

Dividend Equivalent Units that are to be credited to such account in accordance

with the next following paragraph.

 

 

 

 

 

 

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         Until the Restrictions applicable to the Restricted Units credited upon

grant to any account maintained for a Participant in accordance with the

preceding paragraph shall lapse, additional Restricted Units shall be credited

to such account with respect to the Restricted Units so credited, as of each

Dividend Payment Date. The number of additional Restricted Units to be credited

shall be determined by first multiplying (A) the total number of Restricted

Units standing to the Participant's credit in such account on the day

immediately preceding such Dividend Payment Date (including all Dividend

Equivalent Units credited to such account on all previous Dividend Payment

Dates), by (B) the per-share dollar amount of the dividend paid on such Dividend

Payment Date and then, dividing the resulting amount by the Closing Price of one

share of Common Stock on such Dividend Payment Date.

 

         (d) Lapse of Restrictions and Payment. Upon the expiration of the

Restricted Period for any Restricted Shares or Restricted Units granted to a

Participant hereunder but subject to the provisions of (e) below, the

Restrictions applicable to such Restricted Shares or Restricted Units shall

lapse, and payment with respect to such Restricted Shares or Restricted Units

(including any related Dividend Equivalent Units) shall be made in accordance

with the following provisions:

 

             (i) In the case of Restricted Shares, payment shall be made by

         delivery to the Participant of a stock certificate for the number of

         such Restricted Shares, free and clear of all Restrictions to which

         such shares were subject. However, if the Restricted Shares with

         respect to which the applicable Restrictions have lapsed includes a

         fractional Share, payment for such fractional Share shall be made in

         cash, in an amount equal to the Fair Market Value of such fractional

         Share determined as of the date on which such Restrictions lapsed.

         Delivery of such stock certificate and any such cash payment shall be

         made to the Participant as soon after the lapse of the applicable

         Restriction as is practicable.

 

             (ii) In the case of Restricted Units (including related Dividend

         Equivalent Units), payment shall be made (A) by the issuance and

         delivery to the Participant of a stock certificate for a number of

         Shares equal to the number of whole Restricted Units and related

         Dividend Equivalent Units with respect to which the applicable

         Restrictions have lapsed, and (B) by payment in cash for any fractional

         Restricted Unit payable as a result of the lapse of such Restrictions,

         in an amount equal to the Fair Market Value of such fractional

         Restricted Unit determined as of the date as of which such Restrictions

         lapsed. Notwithstanding the foregoing, payment for Restricted Units

         (including related Dividend Equivalent Units) with respect to which the

         applicable Restrictions have lapsed shall be made solely in cash, in an

         amount equal to the Fair Market Value of all of such Units and any

         fractional Unit, determined as of the date on which such Restrictions

         lapsed, if the instrument evidencing the grant of such Restricted Units

         so provides. Payment shall be made in such manner and at such time or

         times as provided in such instrument. If such instrument so permits,

         payment with respect to any part or all of an Eligible Employee's

         Restricted Units (including related Dividend Equivalent Units) may be

         deferred, at the Eligible Employee's election, upon such terms and

         conditions as are specified in such instrument.

 

 

 

 

                                       11

<PAGE>

 

         (e) Termination of Employment. Upon an Eligible Employee's Termination

of Employment for any reason prior to the expiration of the Restricted Period

for any Restricted Shares or Restricted Units (and related Dividend Equivalent

Units) standing to his or her credit immediately prior to such Termination of

Employment, the Eligible Employee's right to receive payment with respect to

such Restricted Shares, Restricted Units and Dividend Equivalent Units shall be

forfeited and cancelled as of the date of such Termination of Employment, and no

payment of any kind shall be made with respect to such Restricted Shares,

Restricted Units and Dividend Equivalent Units, except as otherwise provided in

the instrument or instruments evidencing the grant of such Shares or Units.

 

         If the Committee so determines in its discretion, the instrument

evidencing the Award of such Restricted Shares or Restricted Units may provide

that if the Eligible Employee's Termination of Employment prior to the end of

the Restricted Period established for such Restricted Shares or Restricted Units

occurs as a result of the Eligible Employee's death, Disability, Retirement, or

for any other reason other than discharge by the Corporation or any of its

Affiliated Companies for "cause" as defined in such instrument, payment shall be

made with respect to all or a Pro Rata Portion of such Restricted Shares or

Restricted Units and any related Dividend Equivalent Units. In such case, only

the Eligible Employee's right to receive payment with respect to any remaining

portion of the Restricted Shares or Restricted Units (and related Dividend

Equivalent Units) for which such Restricted Period was established shall be

cancelled and forfeited. Any payment required to be made with respect to an

Eligible Employee's Restricted Shares or Restricted Units (and related Dividend

Equivalent Units) pursuant to this paragraph shall be made as soon as

practicable after the date of such employee's Termination of Employment, and

shall be made in the manner specified in Section 6(d)

 

         (f) Notice of Code Section 83(b) Election. A Participant who files an

election under section 83(b) of the Code to include in gross income the Fair

Market Value of any Restricted Shares granted hereunder while such Shares are

still subject to Restrictions shall furnish the Corporation with a copy of the

election so filed by the Participant, within ten days of the filing of such

election with the Internal Revenue Service.

 

    7.   AWARDS OF PERFORMANCE SHARES AND PERFORMANCE UNITS

 

         Subject to the limitations set forth in Section 4 and to the other

terms and conditions of the Plan, Performance Shares or Performance Units may be

granted to such Eligible Employees, at such times, in such amounts, and upon

such terms and conditions, as the Committee may determine in its discretion.

Performance Shares and Performance Units shall be granted in accordance with the

provisions set forth below.

 

 

 

 

 

                                       12

<PAGE>

 

         (a) Establishment of Performance Goals and Performance Targets. In

connection with each Award of Performance Shares or Performance Units, the

Committee shall establish in writing, and the instrument evidencing the grant of

such Award shall specify, (i) the Performance Goal or Goals and the Performance

Period that will apply with respect to such Award; (ii) the level or levels of

achievement of the Performance Goal or Goals that must be met in order for

payment to be made with respect to the Award; (iii) the number of Performance

Shares that will be issued and delivered to the recipient of the Award, or the

percentage of the Performance Units (and any related Dividend Equivalent Units)

credited to the recipient in connection with the Award as to which payment will

be made, if the Performance Goal or Goals applicable to such Award (A) have been

fully achieved, (B) have been exceeded, or (C) have not been fully achieved but

have been achieved at or beyond any minimum or intermediate level of achievement

specified in the instrument evidencing the grant of such Award, and (iv) such

other terms and conditions pertaining to the Award as the Committee in its

discretion may determine. In connection with any such Award made to any Covered

Executive, the matters described in the preceding sentence shall be established

within such period of time as may be permitted by the regulations issued under

section 162(m) of the Code.

 

         (b) Accounts and Dividend Equivalent Units for Performance Units

Awards. No Shares shall be issued at the time any award of Performance Units is

made hereunder. Performance Units granted to an Eligible Employee hereunder

shall be credited to a bookkeeping account maintained by the Corporation for

such employee. A separate account shall be maintained for all Performance Units

included in each separate Award of Performance Units made to an Eligible

Employee, and for all Dividend Equivalent Units that are to be credited with

respect to the Performance Units included in such Award in accordance with the

next following sentence. If the instrument evidencing the grant of any Award of

Performance Units so provides, Dividend Equivalent Units shall be credited with

respect to the Performance Units included in such Award on each Dividend Payment

Date occurring within the Performance Period applicable to such Award in the

same manner as Dividend Equivalent Units are credited with respect to Restricted

Units during the applicable Restricted Period, as set forth in Section 6(c)

above.

 

         (c) Limit on Award Amounts. The total number of Shares for which any

Award of Performance Shares may be made to any Eligible Employee, and the total

number of Units for which any Award of Performance Units may be made to any

Eligible Employee (exclusive of any Dividend Equivalent Units credited with

respect to the Performance Units awarded to such employee), may not exceed

75,000 Shares, or 75,000 Units, for each 12-month period included in the

Performance Period established for such Award. The foregoing limits shall be

subject to adjustment as provided in Section 13.

 

         (d) Performance Goals for Covered Executives. In the case of any Award

of Performance Shares or Performance Units to any Eligible Employee who is a

Covered Executive, the Performance Goal or Goals established in connection with

such Award shall be based on one or more of the following business criteria, as

determined by the Committee in its discretion: (i) the attainment of specified

levels of, or increases in, the Corporation's after-tax or pretax return on

stockholder's equity, (ii) the attainment of specified levels in the fair market

value of the Corporation's Shares; (iii) the attainment of specified levels of

growth in the value of an investment in the Corporation's Shares, assuming that

all dividends paid on the Corporation's Common Stock are reinvested in

additional Shares; (iv) the attainment of specified levels of, or increases in,

the Corporation's pre-tax or after-tax earnings, profits, net income, or

earnings per share; (v) the attainment of specified levels of, or increases in,

the Corporation's earnings before income tax, depreciation and amortization

(EBITDA); (vi) attainment of specified levels of, or increases in, the

Corporation's net sales, gross revenues or cash flow from operations; (vii) the

attainment of specified levels of, or increases in, the Corporation's working

capital, or in its return on capital employed or invested; (viii) the attainment

of specified levels of, or decreases in, the Corporation's operating costs or

any one or more components thereof, or in the amount of all or any specified

portion of the Corporation's debt or other outstanding financial obligations.

 

 

 

 

 

                                       13

<PAGE>

 

         Any of the business criteria described in the preceding sentence which

the Committee establishes as a Performance Goal may be measured either by the

performance of the Corporation and its Affiliated Companies on a consolidated

basis, or by the performance of any one or more of the Corporation's

subsidiaries, divisions, or other business units, as the Committee in its

discretion may determine. In its discretion, the Committee may also establish

Performance Goals, based on any of the business criteria described in this

Section 7(d), that require the attainment of a specified level of performance of

the Corporation, or any of its subsidiaries, divisions or other business units,

relative to the performance of other specified corporations, in order for such

Goals to be met.

 

         The Committee may also, in its discretion, include in any Performance

Goal the attainment of which depends on a determination of the net earnings or

income of the Corporation or any of its subsidiaries, divisions or other

business units, provisions which require such determination to be made by

eliminating the effects of any decreases in or charges to earnings for (A) the

effect of foreign currency exchange rates, (B) any acquisitions, divestitures,

discontinuances of business operations, restructurings or other special charges,

(C) the cumulative effect of any accounting changes, and (D) any "extraordinary

items" as determined under generally accepted accounting principles, to the

extent that such decreases or charges referred to in clauses (A) through (D) are

separately disclosed in the Corporation's Annual Report for each fiscal year

within the applicable Performance Period.

 

         (e) Performance Goals for Non-Covered Executives. In the case of Awards

of Performance Shares or Performance Units made hereunder to Eligible Employees

who are not Covered Executives, the Performance Goal or Goals applicable to such

Awards shall be such corporate or individual goals as the Committee in its

discretion may determine.

 

         (f) Measurement of Performance. At the end of the Performance Period

established in connection with any Award, the Committee shall determine the

extent to which the Performance Goal or Goals established for such Award have

been attained, and shall determine, on that basis, the number of Performance

Shares or Performance Units included in such Award that have been earned and as

to which payment will be made pursuant to section 7(h) below, subject to the

adjustments provide for in Section (7)(g) and the forfeiture provisions of

Section 7(i). In the case of any Award granted to a Covered Executive, the

Committee shall certify in writing the extent to which it has determined that

the Performance Goal or Goals established by it for such Award have been

attained.

 

         (g) Adjustment of Award Amounts. The Number of Shares or the amount of

cash otherwise payable with respect to an Award on the basis of the level of

attainment of the applicable Performance Goals as determined by the Committee

under Section 7(f) shall be subject to adjustment in accordance with the

following provisions.

 

 

 

 

 

                                       14

<PAGE>

 

             (i) To the extent not inconsistent with the terms of the Plan and

         if the instrument evidencing the Award so provides, the number of

         Shares or the amount of cash otherwise so payable with respect to an

         Award to an Eligible Employee who is not a Covered Executive may be

         increased or decreased to the extent determined by the Committee in its

         discretion, based on the Committee's evaluation of the Eligible

         Employee's individual performance or to reflect such other events,

         circumstances or factors as the Committee in its discretion deems

         appropriate in determining the extent to which payment should be made

         with respect to the Eligible Employee's Award.

 

             (ii) The Committee shall not have any authority to increase the

         number of Shares or the amount of cash otherwise so payable with

         respect to any Award to a Covered Executive. However, if the instrument

         evidencing such Award so provides, the Committee may in its discretion

         reduce the number of Shares or the amount of cash otherwise so payable

         with respect to such Award (A) to reflect any decreases in or charges

         to earnings that were not taken into account pursuant to clause (A),

         (B), (C), or (D) of Section 7(e) in determining net earnings or income

         for purposes of any Performance Goal established in connection with

         such Award; (B) to reflect any credits to earnings for extraordinary

         items of income or gain that were taken into account in determining net

         earnings or income for such purposes; (C) to reflect the Committee's

         evaluation of the Covered Executive's individual performance; or (D) to

         reflect any other events, circumstances or factors which the Committee

         believes to be appropriate in determining the extent to which payment

         should be made with respect to the Covered Executive's Award.

 

         (h) Payment of Awards. Payment with respect to that number of

Performance Shares or Performance Units subject to any Award which the Committee

has determined under Section 7(f) above to have been earned, as adjusted to the

extent determined by the Committee under Section 7(g), shall be made in

accordance with the following provisions:

 

             (i) In the case of any such Performance Shares, payment shall be

         made by the issuance and delivery to the Participant of a stock

         certificate for the requisite number of such Shares. If the instrument

         evidencing the Award of such Shares so provides, a cash payment shall

         also be made to the Participant, in an amount equal to all of the

         dividends that would have been paid to the Participant upon such earned

         and adjusted number of Shares if such Shares had been issued to the

         Participant as of the Date of Grant of the Award in question. Such

         Shares shall be issued and delivered, and, if applicable, such cash

         payment shall be made, to the Participant as soon as practicable after

         the end of the Performance Period applicable to the Award in question.

 

             (ii) In the case of any such Performance Units, (including related

         Dividend Equivalent Units), payment shall be made (A) by the issuance

         and delivery to the Participant of a stock certificate for a number of

         Shares equal to the total number of such whole Performance Units and

         related Dividend Equivalent Units, and (B) by payment in cash for any

         fractional Unit in an amount equal to the Fair Market Value of such

         fractional Unit determined as of the Trading Day immediately preceding

         the date as of which payment is to be made. Notwithstanding the

         foregoing, payment for such Performance Units (including related

         Dividend Equivalent Units) shall be made solely in cash, in an amount

         equal to the Fair Market Value of all of such Units and any fractional

         Unit, determined as of the Trading Day immediately preceding the date

         as of which payment is to be made, if the instrument evidencing the

         grant of such Performance Units so provides. Payment shall be made in

         such manner and at such time or times as provided in such instrument.

         If such instrument so permits, payment with respect to any part or all

         of an Eligible Employee's Performance Units (including any related

         Dividend Equivalent Units) may be deferred, at the Eligible Employee's

         election, upon such terms and conditions as are specified in such

         instrument.

 

 

 

                                       15

<PAGE>

 

         (i) Termination of Employment. Upon an Eligible Employee's Termination

of Employment for any reason prior to the end of the Performance Period

established for any Award of Performance Shares or Performance Units made to the

Eligible Employee hereunder, such Award shall be cancelled as of the date of

such Termination of Employment, the Eligible Employee's right to receive payment

with respect to any Performance Shares or Performance Units included in such

Award and any Dividend Equivalent Units that were credited with respect to such

Performance Units, shall be forfeited as of such date, and no payment of any

kind shall be made with respect to such Award, except as otherwise provided in

the instrument evidencing the grant of such Award.

 

         If the Committee so determines in its discretion, the instrument

evidencing any Award of Performance Shares or Performance Units may provide that

if the Eligible Employee's Termination of Employment prior to the end of the

Performance Period established for such Award occurs as a result of the Eligible

Employee's death, Disability, Retirement, or for any other reason other than

discharge by the Corporation or any of its Affiliated Companies for "cause" as

defined in such instrument, payment shall be made at the end of the Performance

Period, in accordance with the provisions of Section 7(h), with respect to all

or a Pro Rata Portion of the number of Shares and/or the amount of cash that

otherwise would have been payable to the Eligible Employee, as determined in

accordance with the provisions of Sections 7(f) and (g), if the Eligible

Employee's Termination of Employment had not occurred prior to the end of such

Performance Period. In such case, only the Eligible Employee's right to receive

payment with respect to any remaining portion of the Performance Shares or

Performance Units (and related Dividend Equivalent Units) included in such Award

shall be cancelled and forfeited.

 

    8.   AWARDS TO ELIGIBLE DIRECTORS

 

         Subject to the limitations set forth in Section 4 and to the other

terms and conditions of the Plan, Annual Award Units shall be granted to

Eligible Directors in accordance with the provisions set forth below:

 

         (a) Annual Grants. On each Annual Award Grant Date, each member of the

Board of Directors who is an Eligible Director on such date shall automatically

be granted 1,000 Annual Award Units. Each person who is elected a director of

the Corporation by shareholders at an annual meeting of shareholders for the

first time (i.e., disregarding any previous election of such person by the Board

of Directors) and thereby becomes an Eligible Director shall automatically be

granted 1,000Annual Award Units on the date of such annual meeting of

shareholders.

 

 

 

 

 

                                       16

<PAGE>

 

         (b) Accounts and Dividend Equivalent Units. No Shares shall be issued

at the time any Annual Award Units are granted hereunder. Annual Award Units

granted to an Eligible Director hereunder shall be credited to a bookkeeping

account maintained by the Corporation for the Eligible Director. As of each

Dividend Payment Date occurring prior to the date on which payment with respect

to an Eligible Director's Annual Award Units is made pursuant to (c) below,

Dividend Equivalent Units shall be credited to the Eligible Director's account

with respect to all Annual Award Units (and all Dividend Equivalent Units

credited to such account on all previous Dividend Payment Dates) standing to the

Eligible Director's credit in such account immediately prior to such Dividend

Payment Date. The number of Dividend Equivalent Units to be so credited shall be

determined in the same manner as Dividend Equivalent Units are credited with

respect to Restricted Units during the applicable Restricted Period, as set

forth in Section 6(c) above.

 

         (c) Payment with respect to Annual Award Units. Upon an Eligible

Director's Termination of Board Membership for any reason other than removal for

cause in accordance with law, the Eligible Director (or if such Termination has

occurred by reason of death, his or her Beneficiary) shall be entitled to

receive payment with respect to all Annual Award Units and related Dividend

Equivalent Units then standing to his or her credit in the account maintained

for the Eligible Director pursuant to (b) above. Payment shall be made (i) by

the issuance and delivery to the Eligible Director, or to his or her

Beneficiary, of a stock certificate for a number of Shares equal to the number

of whole Annual Award Units and related Dividend Equivalent Units standing to

the Eligible Director's credit immediately prior to such Termination of Board

Membership, and (ii) by payment in cash for any fractional Annual Award Unit

standing to the Eligible Director's credit at such time. Payment shall be made

as soon as practicable after the date on which the Eligible Director's

Termination of Board Membership occurs.

 

         (d) Forfeiture of Annual Award Units. Upon an Eligible Director's

Termination of Board Membership as a result of removal for cause in accordance

with law, all Annual Award Units and related Dividend Equivalent Units standing

to his or her credit immediately prior to such Termination of Board Membership

shall be cancelled as of the date of such Termination of Board Membership, the

Eligible Director's right to receive payment with respect to such Annual Award

Units and Dividend Equivalent Units shall be forfeited as of such date, and no

payment of any kind shall be made with respect to such Annual Award Units and

Dividend Equivalent Units.

 

    9.   TRANSFERABILITY OF AWARDS

 

         Any Option granted to an Eligible Employee under the Plan shall be

nontransferable and may be exercised during the Eligible Employee's lifetime

only by the Eligible Employee. A Participant's right to receive payment of

Shares or cash with respect to any other Award granted to the Participant under

the Plan shall not be subject in any manner to anticipation, alienation, sale,

transfer, assignment, pledge, encumbrance, attachment, or garnishment by

creditors of the Participant.

 

Notwithstanding the foregoing, if the instrument evidencing the grant of any

Award other than an Incentive Stock Option so provides, the recipient of such

Award may transfer his or her rights with respect to such Award, or any portion

thereof, to any "family member" of the recipient, as that term is defined in the

General Instructions to Form S-8 promulgated by the Securities and Exchange

Commission under the Securities Act of 1933, as amended, subject to such

limitations, terms and conditions as may be specified in such instrument.

 

 

 

 

 

 

                                       17

<PAGE>

 

10.      LISTING AND QUALIFICATION OF SHARES

 

The Corporation, in its discretion, may postpone the issuance, delivery, or

distribution of Shares with respect to any Award until completion of such stock

exchange listing or other qualification of such Shares under any state or

federal law, rule or regulation as the Corporation may consider appropriate, and

may require any Participant to make such representations and furnish such

information as it may consider appropriate in connection with the issuance or

delivery of the Shares in compliance with applicable laws, rules and

regulations.

 

11.      TAXES

 

         Notwithstanding any other provision of the Plan, the Corporation or any

of its Affiliated Companies may make such provisions and take such steps as it

may deem necessary or appropriate for the withholding of all federal, state and

local taxes required by law to be withheld with respect to the exercise of any

Option or with respect any payments to be made in respect of any other form of

Award granted to a Participant under the Plan, including but not limited to (i)

deducting the amount of taxes so required to be withheld from any other

compensation or other amounts then or thereafter payable to the Participant,

and/or (ii) withholding delivery of any Shares or payment of any cash amount

otherwise required to be delivered or paid to the Participant with respect to

the exercise of such Option, or with respect to such other form of Award, until

the amount of taxes so required to be withheld has been paid in full to the

Corporation or any of its Affiliated Companies. With the approval of the

Compensation Committee and subject to such terms and conditions as it may

require, such amount may be paid in Shares previously owned by the Participant,

or by the surrender of a portion of the Shares that otherwise would be delivered

or paid to such Participant with respect to his or her Award, or by a

combination of payments in cash and Shares.

 

12.      CHANGE IN CONTROL

 

         Notwithstanding any other provision in the Plan to the contrary (but

subject to the "provided, however" clause contained in the definition of "Change

in Control" in Section 2), upon the occurrence of a Change in Control, the

following provisions shall apply.

 

         (a) Each Option outstanding under the Plan on the day preceding the

date on which the Change in Control occurs shall become immediately and fully

exercisable on the date of the Change in Control, and shall remain fully

exercisable, irrespective of the Participant's subsequent Termination of

Employment for any reason, until the date on which the Option otherwise would

expire by the passage of time in accordance with its terms.

 

         (b) If a Change in Control would be treated as having occurred but for

the adoption by the Board of Directors of a resolution described in the

"provided, however" clause in the definition of "Change in Control" in Section

2, and if such resolution so provides and has not been rescinded prior to the

Change in Control, the Board of Directors shall have the right in its discretion

(i) to direct that all Options then outstanding and held by Participants shall

be cancelled as of a date to be fixed by the Board, provided, however, that not

 

 

 

 

 

 

                                       18

<PAGE>

 

less than 30 days written notice of the date so fixed shall be given to each

such Participant, and each such Participant shall have the right during such

period (irrespective of the Participant's Termination of Employment during such

period) to exercise his or her Option as to all or any part of the Shares

covered thereby, including any Shares as to which the Option has not yet become

exercisable, or (ii) to authorize the substitution for each outstanding Option

of a new Option, provided that (A) each such new Option has a value at the time

it is granted that is at least equal to the value of the outstanding Option in

substitution for which it is granted, and contains terms and conditions no less

favorable to the Participant than those contained in his or her outstanding

Option, and (B) in the case of any new Incentive Stock Option that is granted in

substitution of an outstanding Incentive Stock Option, the requirements of

section 424(a) of the Code are met with regard to such substitution.

 

         (c) The Restricted Periods applicable to all Restricted Shares and

Restricted Units (including any related Dividend Equivalent Units) granted to a

Participant hereunder that are still outstanding on the day immediately

preceding the date on which such Change in Control occurs shall expire on such

date; all Restrictions applicable to such outstanding Restricted Shares,

Restricted Units and related Dividend Equivalent Units shall lapse on such date;

and the Participant's rights to receive payment with respect to all such

outstanding Shares, Restricted Units and related Dividend Equivalent Units shall

become nonforfeitable as of such date. Payment with respect to such outstanding

Restricted Shares, Restricted Units and related Dividend Equivalent Units shall

be made at the time or times, and in the manner, specified in the instrument or

instruments evidencing the grant thereof, except as the Committee may otherwise

determine in its discretion at any time prior to the Change in Control.

 

         (d) The Performance Periods applicable to all Performance Shares and

Performance Units (including any related Dividend Equivalent Units) granted to a

Participant hereunder that are still outstanding on the day immediately

preceding the date on which such Change in Control occurs shall end on such

date; all Performance Goals that were established in connection with the Award

of such Performance Shares or Performance Units shall be deemed to have been

attained as of such date to the fullest extent necessary in order for the

Participant to be entitled to receive payment with respect to the maximum number

of such Performance Shares, or with respect to the maximum percentage of such

Performance Units (and any related Dividend Equivalent Units), as to which

payment could be made under the terms of the applicable Awards, as specified in

the instrument or instruments evidencing the grant thereof; and the Participant

shall acquire on such date a nonforfeitable right to receive payment with

respect to such maximum number of Performance Shares (including any cash payment

with respect to dividends that would have been paid thereon, if the instrument

evidencing the grant of such shares provides for such cash payment), or with

respect to such maximum percentage of Performance Units (and any related

Dividend Equivalent Units), determined without any adjustment under Section

7(g)(i) or (ii); provided, however, that any Participant who, pursuant to

Section 7(i), would have been entitled to receive payment with respect to only a

Pro Rata Portion of the number of Shares or the amount of cash otherwise payable

with respect to such Performance Shares or Performance Units if no Change in

Control had occurred, shall be entitled to receive only a Pro Rata Portion of

the payment that otherwise would be made with respect to such Performance Shares

or Performance Units under the provisions of this Section 7(d). Payment with

respect to such Performance Shares, Performance Units and related Dividend

Equivalent Units shall be made at the time or times, and in the manner,

specified in the instrument or instruments evidencing the grant thereof, except

as the Committee may otherwise determine in its discretion at any time prior to

the Change in Control.

 

 

 

 

 

                                       19

<PAGE>

 

         (e) If any payment that is required to be made hereunder with respect

to any outstanding Award as a result of the occurrence of a Change in Control is

to be made by the issuance and delivery of Shares to the Participant, the

Corporation shall take whatever steps are necessary to cause such Shares to be

issued to the Participant, and to be treated as outstanding, at the effective

time of the transaction constituting the Change in Control.

 

13.      CERTAIN ADJUSTMENTS TO SHARES

 

         In the event of any change in the shares of Common Stock by reason of

any stock dividend, stock split, recapitalization, reorganization, merger,

consolidation, split-up, combination or exchange of shares, or any rights

offering to purchase shares of Common Stock at a price substantially below fair

market value, or any similar change affecting the shares of Common Stock, (i)

the maximum aggregate number and kind of shares specified herein as available

for the grant of Awards, or for the grant of any particular form of Award, under

the Plan, (ii) the number and kind of shares that may be issued and delivered to

Participants upon the exercise of any Option, or in payment with respect to any

Award of Restricted Shares or Performance Shares, that is outstanding at the

time of such change, (iii) the number and kind of shares represented by any

Restricted Units, Performance Units, Annual Award Units or Dividend Equivalent

Units that are outstanding at the time of such change, and (iv) the exercise

price per share of any Options granted hereunder that are outstanding at the

time of such change, shall be appropriately adjusted consistent with such change

in such manner as the Compensation Committee, in its sole discretion, may deem

equitable to prevent substantial dilution or enlargement of the rights granted

to, or available for, the Participants hereunder.

 

         In the case of any outstanding Incentive Stock Option, any such change

shall be made in the manner that satisfies the requirements that must be met

under section 424 of the Code in order for such change not to be treated as a

"modification" of such Option as defined under section 424 of the Code.

 

         The Committee shall give notice to each Participant of any adjustment

made pursuant to this Section and, upon such notice, such adjustment shall be

effective and binding for all purposes.

 

14.      ADMINISTRATION

 

         The Plan shall be administered in accordance with the provisions set

forth below.

 

         (a) In General. Except as otherwise specifically provided in the Plan,

the Plan shall be administered by (i) the Board of Directors, with respect to

all matters pertaining to Awards that may be granted or that have been granted

hereunder to Eligible Directors; (ii) by the Compensation Committee, with

respect to all matters pertaining to Awards that may be made or that have been

made to Eligible Employees, except as otherwise provided in (iii); and (iii) by

the CEO, with respect to those specific matters pertaining to Awards to Eligible

Employees who are not Elected Officers that are within the scope of the

authority granted to the CEO under (d) below or delegated by the Compensation

Committee to the CEO pursuant to (e) below.

 

 

 

 

 

 

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<PAGE>

 

         (b) The Committee's Authority and Powers. In addition to the

responsibilities and powers assigned to the Committee elsewhere in the Plan, the

Committee shall have the authority, in its discretion, to establish from time to

time guidelines or regulations for the administration of the Plan, to interpret

the Plan, and to make all determinations it considers necessary or advisable for

the administration of the Plan. All decisions, actions or interpretations of the

Committee under the Plan shall be final, conclusive and binding upon all

parties. Notwithstanding the foregoing, any determination made by the Committee

after the occurrence of a Change in Control that denies in whole or in part any

claim made by any individual for benefits under the Plan shall be subject to

judicial review under a "de novo," rather than a deferential, standard.

 

         (c) Modification of Awards. To the extent not inconsistent with the

terms of the Plan or any provision of applicable law, the Committee in its

discretion may waive or modify any of the terms and conditions set forth in the

instrument evidencing the grant of any Award made to a Participant hereunder,

including without limitation, (i) in the case of any Option, to permit such

Option to become exercisable as to any portion of the Shares subject to the

Option at any time earlier than the time specified in such instrument, to extend

the term of such Option beyond the date specified in such instrument as the

expiration date for the term of the Option (but not beyond the day immediately

preceding the tenth anniversary of the Date of Grant of the Option), or to

permit such Option, to the extent it has become or becomes exercisable, to

remain exercisable for any period of time (including any period after the

Eligible Employee's Termination of Employment) beyond the period of time

specified in such instrument but not beyond the date of expiration of the

Option, including any extension thereof permitted under this clause (i); and

(ii) in the case of any Award of Restricted Shares or Restricted Units, to cause

the Restricted Period applicable to such Restricted Shares or restricted Units

to expire, and the Restrictions applicable to such Restricted Shares or

Restricted Units to lapse, as of any date earlier than the date provided for in

such instrument;

 

         Notwithstanding the foregoing, no waiver or amendment may be authorized

or directed by the Committee pursuant to this Section 14 (c) without the consent

of the Participant if (A) it would adversely affect, to any material extent, any

of the rights or obligations of the Participant with respect to such Award, or

(B) in the case of any Option granted hereunder that was intended to constitute

an Incentive Stock Option, if such waiver or amendment would cause such Option

to fail to be treated as an "incentive stock option" within the meaning of

section 422 of the Code. In addition, no such waiver or amendment may be

authorized or directed by the Committee pursuant to this Section 14(c) with

respect to any Option, Performance Shares or Performance Units awarded to any

Covered Executive, if such waiver or amendment would cause the delivery of

Shares or the payment of any cash amounts that are made with respect to such

Award to fail to be deductible for federal income tax purposes pursuant to the

applicable provisions of section 162(m) of the Code and the regulations issued

thereunder.

 

         (d) The CEO's Authority and Powers. With respect to such number of

Shares as the Compensation Committee may in its discretion determine to be

available from time to time for the grant of Awards in any form to Eligible

Employees who are not Elected Officers, the CEO shall have the authority (i) to

determine which of such Eligible Employees shall receive Awards in each form

specified by the Compensation Committee; (ii) to determine the time or times

when Awards in such form shall be made to such Eligible Employees; (iii) to

determine the number of Shares that will be subject to any Option, or the number

 

 

 

 

 

                                       21

<PAGE>

 

of Restricted Shares, Restricted Units, Performance Shares or Performance Units,

to be included in any Award to any such Eligible Employee; (iv) with respect to

any Award of Performance Shares or Performance Units made to any such Eligible

Employees, to make all determinations which the Committee is authorized to make

with respect to such Award under the provisions of Section 7(a)(i),(ii) and

(iii), Section 7(e) and Section 7(g)(i); and (v) with respect to any Awards made

to any such Eligible Employees pursuant to the CEO's exercise of the authority

granted to him under this Section 14(d), to exercise all of the authority and

powers granted to the Committee under (b) above and under the second paragraph

of (e) below, but only to the extent that any such exercise by the CEO is not

inconsistent with any action taken by the Compensation Committee, or with any

determination, decision or interpretation of the Plan made by the Compensation

Committee, under (b) above or any delegation made by the Compensation Committee

under the second paragraph of (e) below.

 

         Except for the matters specified in the foregoing paragraph and any

additional matters pertaining to Awards to Eligible Employees who are not

Elected Officers with respect to which authority has been granted to the CEO

pursuant to (e) below, the CEO shall not have any of the authority or powers

otherwise granted to the Committee under any other provisions of the Plan.

 

         The Compensation Committee in its discretion may at any time, by

resolution duly adopted by it and without any amendment of the Plan, revoke or

modify in any manner or respect the authority and powers granted to the CEO

under this Section 14(d).

 

         (e) Delegation. In addition to the authority and powers granted to the

CEO under (d) above, the Compensation Committee in its discretion may, by

resolution duly adopted by it, delegate to the CEO authority with respect to

such other matters pertaining to Awards to Eligible Employees who are not

Elected Officers as the Compensation Committee may specify in such resolution.

Any authority so delegated to the CEO may be revoked or modified by the

Compensation Committee, in whole or in part, at any time.

 

         The Committee may delegate any ministerial or nondiscretionary function

pertaining to the administration of the Plan to any one or more officers or

other employees of the Corporation or any of its Affiliated Companies.

 

         (f) Non-U.S. Participants. In order to comply with any applicable

provisions of local law and regulations in any foreign country in which the

Corporation or any of its Affiliated Companies operates, the Committee may in

its sole discretion (i) modify the terms and conditions of Awards granted under

the Plan to Eligible Employees located in such foreign country, (ii) establish

subplans with such modifications to the terms of the Plan as it determines to be

necessary or appropriate under the circumstances applicable in such foreign

country, or (iii) take any other action that it deems necessary or appropriate

in order to comply with, or obtain any exemptions from the applicability of, the

local laws and regulations in such foreign country.

 

 

 

 

 

 

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<PAGE>

 

15.      DESIGNATION AND CHANGE OF BENEFICIARY

 

         Each Participant shall file with the Committee, or with such employee

of the Corporation who has been designated by the Committee to receive same, a

written designation of one or more persons as the Beneficiary who shall be

entitled to receive any Shares or cash amount payable under the Plan upon or

after the Participant's death. A Participant may, from time to time, revoke or

change his or her Beneficiary designation without the consent of any previously

designated Beneficiary by filing a new designation with the Committee or its

designee. The last such designation received by the Committee or its designee

shall be controlling; provided, however, that no designation, or change or

revocation thereof, shall be effective unless received by the Committee prior to

the Participant's death, and in no event shall it be effective as of a date

prior to such receipt. If at the date of a Participant's death, there is no

designation of a Beneficiary in effect for the Participant pursuant to the

provisions of this Section 15, or if no Beneficiary designated by the

Participant in accordance with the provisions hereof survives to receive any

Shares or cash amount payable under the Plan with respect to the Participant

after his or death, the Participant's estate shall be treated as the

Participant's Beneficiary for purposes of the Plan.

 

16.      AMENDMENT OR TERMINATION

 

         The Board of Directors may, with prospective or retroactive effect,

amend, suspend or terminate the Plan or any portion thereof at any time;

provided, however, that (a) no amendment, suspension or termination of the Plan

shall adversely affect the rights of any Participant with respect to any Awards

previously granted to the Participant without his or her written consent, and

(b) no amendment which constitutes a "material revision" of the Plan, as the

term material revision is defined in the applicable rules of the New York Stock

Exchange, shall be effective unless approved by the shareholders of the

Corporation in the manner required by such rules and by applicable law.

 

17.      GENERAL PROVISIONS

 

         (a) Rights of Participants. A Participant's rights and interests under

the Plan shall be subject to the following provisions:

 

             (i) A Participant shall have the status of a general unsecured

         creditor of the Corporation with respect to his or her right to receive

         any payment under the Plan. The Plan shall constitute a mere promise by

         the Corporation or the applicable Affiliated Company to make payments

         in the future of the benefits provided for herein. It is intended that

         the arrangements reflected in the Plan be treated as unfunded for tax

         purposes, as well as for purposes of any applicable provisions of Title

         I of ERISA.

 

             (ii) Neither the Plan nor any action taken hereunder shall be

         construed as giving any Participant any right to be retained in the

         employment of the Corporation or any of its Affiliated Companies, or

         shall interfere with the right of the Corporation or any of its

         Affiliated Companies with whom the Participant is employed to terminate

         the Participant's employment at any time subject, however, to the

         Participant's rights under any employment contract in effect between

         the Participant and the Corporation or any of its Affiliated Companies.

 

             (iii) No Award made to a Participant under the Plan, and no payment

         made with respect to such Award, shall be considered as compensation

         under any employee benefit plan of the Corporation or any of its

         Affiliated Companies, except as specifically provided in such plan or

         as otherwise determined by the Board of Directors.

 

 

 

 

 

                                       23

<PAGE>

 

         (b) Successors. The obligations of the Corporation under the Plan shall

be binding upon any successor corporation or organization resulting from the

merger, consolidation or other reorganization of the Corporation, or upon any

successor corporation or organization succeeding to substantially all of the

assets and business of the Corporation. The Corporation agrees that it will make

appropriate provision for the preservation of Participants' rights under the

Plan in any agreement or plan which it may enter into or adopt to effect any

such merger, consolidation, reorganization or transfer of assets.

 

         The provisions of the Plan and the terms and conditions contained in

the instrument evidencing any Award made to a Participant hereunder shall be

binding upon the Participant, his or her successors and permitted transferees.

 

         (c) Governing Law. The Plan shall be governed by and construed in

accordance with the laws of the State of New York.

 

16.      EFFECTIVE DATE

 

         The Plan was adopted on September 17, 2004 by the Board of Directors,

subject, however, to approval by the shareholders of the Corporation, in

accordance with the requirements of the New York Stock Exchange and applicable

law, at the 2004 annual meeting of the Corporation's shareholders including any

adjournment thereof. The effective date of the Plan shall be the date of such

approval by the Corporation's shareholders, and no Awards may be granted

hereunder prior to such date.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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</TEXT>

</DOCUMENT>