LONG TERM INCENTIVE COMPENSATION PLAN

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The Hercules Incorporated Long Term Incentive Compensation Plan, the terms of which are herein set forth (as the same is now in effect or as hereafter amended from time to time, the “Plan”), is intended to advance the interests of Hercules Incorporated, a Delaware corporation (the “Company”), and its stockholders by providing a means by which the Company and its participating subsidiaries and affiliates shall be able to motivate selected key employees (including officers and directors who are employees) to direct their efforts to those activities that will contribute materially to the Company’s success. The Plan is also intended to serve the best interests of the stockholders by linking remunerative benefits paid to employees who have substantial responsibility for the successful operation, administration and management of the Company and/or its participating subsidiaries and affiliates with the enhancement of stockholder value while such key employees increase their proprietary interest in the Company. Finally, the Plan is intended to enable the Company to attract and retain in its employ highly qualified persons for the successful conduct of its business.

The Plan became effective as of April 1, 1991, and was amended and restated as of June 30, 1993, April 27, 1995, April 24, 1997, April 29, 1999, and is hereby further amended and restated as of January 1, 2008 to reflect the requirements of Section 409A of the Internal Revenue Code of 1986, as amended. Notwithstanding anything to the contrary, the said amended and restated Plan shall not terminate or adversely affect any Awards granted prior hereto.

Section 2.1   Definitions

The following words and phrases when used in the Plan with an initial capital letter, unless their context clearly indicates to the contrary, shall have the respective meanings set forth below in this Section 2.1:

(1)            Accelerated Date. As defined in Subsection 5.10.2.

(2)            Act. The Securities Exchange Act of 1934, as now in effect or as hereafter amended from time to time. References to any section or subsection of the Act are to such section or subsection as the same may from time to time be amended or renumbered and/or any comparable or succeeding provisions of any legislation that amends, supplements or replaces such section or subsection.

(3)            APD Election. As defined in Subsection 13.4.2

(4)            Attributable Shares. As defined in Subsection 9.6.

(5)            Award. A grant of Award Items in accordance with the provisions of the Plan. A grant of a particular Award Item may sometimes be referred to as follows: “Stock Option Award” for a grant of Stock Options; “Stock Appreciation Right Award” for Stock Appreciation Rights; “PASO Award” for Performance Accelerated Stock Options; “CVA Award” for Cash Value Awards; “Performance Shares Award” for Performance Shares; “Restricted Stock Award” for Restricted Stock; “Restricted Stock Units Award” for Restricted Stock Units and “Phantom Unit Award” for Phantom Units.

(6)            Award Commitment. The written commitment delivered by the Company to the Grantee evidencing an Award and setting forth such terms and conditions of the Award as may be deemed appropriate by the Committee. The Award Commitment shall be in a form approved by the Committee, and shall be deemed amended from time to time to include such additional terms and conditions as the Committee may specify after the execution in the exercise of its powers under the Plan.

(7)            Award Items. Individually and collectively, as the case may be, the items awarded to any Grantee in accordance with the provisions of the Plan in the form of Options, Stock Appreciation Rights, Performance Accelerated Stock Options, Cash Value Awards, Performance Shares, Restricted Stock, Restricted Stock Units, Phantom Units or other award, or any combination of the foregoing.

(8)            Base Salary. The regular salary paid to an employee. Base salary shall not include bonuses or other forms of compensation which are not considered regular earnings by the Committee.

(9)            Beneficiary. Any individual, estate or trust who or which by designation of the Grantee pursuant to Section 20.2 or operation of law succeeds to the rights and obligations of the Grantee under the Plan and Award Commitment upon the Grantee’s death.

(10)            Board. The Board of Directors of the Company.

(11)            Bonus. An amount payable pursuant to the Management Incentive Compensation Plan or any other short term incentive compensation plan approved by the Committee.

(12)            Cash Value Award or CVA. A grant in accordance with the provisions of the Plan in the form of a designated cash value payable in cash, Common Stock or Restricted Stock, or a combination thereof, all as determined by the Grantor at the Payout Date.

(13)            CEO. The Chief Executive Officer of the Company.

(14)            Change in Control. The occurrence of an event defined in Section 18.4, which event is of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A promulgated under the Act as in effect on the date hereof or, if Item 6(e) is no longer in effect, any regulations issued by the Securities and Exchange Commission pursuant to the Act which serves similar purposes.

(15)            Code. The Internal Revenue Code of 1986, as now in effect or as hereafter amended from time to time, and as construed and interpreted by valid regulations issued by the United States Internal Revenue Service thereunder. References to any section or subsection of the Code are to such section or subsection as the same may from time to time be amended or renumbered and/or any comparable or succeeding provisions of any legislation that amends, supplements or replaces such section or subsection.

(16)            Committee. The Human Resources Committee of the Board or such other committee as may be designated by the Board to administer the Plan.

(17)            Common Stock. Voting common stock authorized for issuance by the Company and issued and outstanding.

(18)            Company. Hercules Incorporated and its successors and assigns.

(19)            Date of Grant. The date designated by the Grantor as the date as of which the Grantor grants an Award, which shall not be earlier than the date on which the Grantor approves the granting of such Award.

(20)            Designated Retirement Date. As defined in Section 13.4.3.

(21)            Disability. A physical or mental impairment sufficient to make the individual eligible for benefits under the Long-Term Disability Plan of Hercules Incorporated or under a disability plan of one of the Participating Subsidiaries (whether or not a participant in such disability plan), so long as for Incentive Stock Options such impairment also constitutes a disability within the meaning of Section 22(e)(3) of the Code.

(22)            Fair Market Value. Unless otherwise indicated in the provisions of the Plan, as of any date the closing price for one share of Common Stock as reported on the Composite Tape for New York Stock Exchange Listed Companies and published in the Eastern Edition of The Wall Street Journal, or, if there is no trading on the date in question, the closing price of the Common Stock, as so reported and published, on the next preceding date on which there was trading in Common Stock.

(23)            Grantee. An employee of the Company or any Participating Subsidiary to whom an Award is granted. At the time of award, such employee (including any director or officer who is also an employee) must be in the regular full-time employment of the Company or any Participating Subsidiary, without limitation as to length of service.

(24)            Grantor. The Committee or the CEO, as the case may be, who grants an Award. The Committee shall (i) grant Awards to Reporting Persons and (ii) establish the maximum aggregate amount of particular Award Items to be granted to Nonreporting Persons as a group and (iii) establish the guidelines and oversight under which, pursuant to authorities granted by the Committee, the CEO may grant Awards to Nonreporting Persons. Notwithstanding anything to the contrary, the CEO is not intended to be nor shall be construed as a member of the Committee. In making awards to Nonreporting Persons, the CEO is acting as a delegee of the Committee and is at all times accountable

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to the Committee and authorized to act only in accordance with the provisions of the Plan and the guidelines and direction provided by the Committee from time to time.

(25)            Hercules Incorporated Deferred Compensation Plan. The Hercules Incorporated Deferred Compensation Plan as the same is now in effect or as hereafter amended from time to time.

(26)            Hercules Incorporated Non-Qualified Savings Plan. The Hercules Incorporated Non-Qualified Savings Plan (a portion of the Hercules Incorporated Deferred Compensation Plan) as the same is now in effect or as hereafter amended from time to time.

(27)            Hercules Pension Plan. The Pension Plan of Hercules Incorporated as the same is now in effect or as hereafter amended from time to time.

(28)            Hercules Pension Restoration Plan. The Hercules Employee Pension Restoration Plan as the same is now in effect or as hereafter amended from time to time.

(29)            Incentive Stock Option or ISO. An Option granted pursuant to Section 5.1 which is intended to meet, and structured with a view to satisfying, the requirements of Section 422 of the Code and is designated by the Committee as an Incentive Stock Option. The Award of an Incentive Stock Option shall contain such provisions as are necessary to comply with such Section 422.

(30)            Management Incentive Compensation Plan. The Hercules Incorporated Annual Management Incentive Compensation Plan as the same is now in effect or as hereafter amended from time to time.

(31)            Maximum Award. The number or amount of Performance Accelerated Stock Options, Cash Value Awards, or Performance Shares, as the case may be, which vest when the maximum performance in the relevant Performance Range is achieved.

(32)            Minimum Award. The number or amount of Performance Accelerated Stock Options, Cash Value Awards, or Performance Shares, as the case may be, which vest when the minimum performance in the relevant Performance Range is achieved.

(33)            Nonqualified Option. An Option granted pursuant to Section 5.1 which does not qualify as, and is not designated by the Committee as, an Incentive Stock Option and is designated as a Nonqualified Option.

(34)            Nonreporting Person. A Grantee who is not subject to Section 16 of the Act.

(35)           Normal Retirement Date. Age 65.

(36)            Normal Vesting Date. As defined in Subsection 5.10.1.

(37)            Option or Stock Option. A right granted pursuant to Article V that for a specified period of time entitles the holder thereof to purchase full shares of Common Stock at a stated price. At the discretion of the Committee, an Option may be an Incentive Stock Option or a Nonqualified Stock Option.

(38)            Optionee. A Grantee to whom an Option or Stock Appreciation Right or Performance Accelerated Stock Option, as the case may be, is granted pursuant to Article V.

(39)            Option Period. As defined in Section 5.3.

(40)            Option Price. The per share price at which shares of Common Stock may be purchased upon exercise of a particular Option or Performance Accelerated Stock Option.

(41)            Other Market-Based Awards. Awards granted in accordance with Section 9.1.

(42)            Other Performance-Based Awards. Awards granted in accordance with Section 9.2.

(43)            Participating Subsidiary. Any Subsidiary (existing from time to time) designated by the Board as a Participating Subsidiary; provided, however, for Incentive Stock Options only, “Participating Subsidiary” means any such Subsidiary which at the time such Option is granted qualifies as a “Subsidiary” of the Company under Section 424(b) of the Code.

(44)            PASO Period. As defined in Subsection 5.10.3.

(45)            Payout Schedule. The distribution scheme for applicable Award Items for a given Plan Year upon performance of varying goals, all as established by either the Committee with respect to the Company, or by the CEO (or his designee or designees) with respect to a given subsidiary, business unit, corporate staff group or individual.

(46)            Performance Accelerated Stock Option or “PASO”. Stock Option with a normal vesting date established by the Committee; provided, however, that under certain circumstances such vesting date may be accelerated by the Committee to an earlier date if the Committee determines that the applicable Performance Goal has been met.

(47)            Performance Goal. The level of performance established by the Grantor, which must be achieved in order to earn or vest the applicable Minimum Award, Target Award, Maximum Award or intermediate level of Award Items.

(48)            Performance Period. The period of time selected by the Committee during which the achievement of Performance Goals is measured for purposes of determining the extent to which an applicable Award Item has been earned or will vest.

(49)            Performance Share. A contingent right to receive, when certain performance criteria have been attained, without payment to the Company, the amounts of Common Stock and cash determined under Article VI. Such rights are subject to forfeiture or reduction if the applicable Performance Goals are not met within the applicable Performance Period.

(50)            Performance Share Award. A Performance Share Award under Article VI, settlement of which is contingent upon attainment during a Performance Period of Performance Goals.

(51)            Performance Share Fair Market Value. As defined in Subsection 6.8.5.

(52)            Phantom Unit. A right to receive, without payment to the Company, an amount of cash equal to the value of a share of Common Stock as of a future date, plus dividend equivalents and interest payments provided for in Article VIII. A “unit” of phantom units does not represent or entitle the recipient to any equity securities of the Company, but instead involves the creation of an unfunded account for the recipient, the value of which is measured by reference to the value of Common Stock.

(53)            Phantom Unit Award. An Award of Phantom Units under Article VIII, subject to such forfeiture provisions as are set forth in the Award Commitment.

(54)            Phantom Unit Fair Market Value. As defined in Section 8.3.

(55)            Reduction in Force. Termination of employment by the Company or a Participating Subsidiary in such a manner that the employee so terminated is eligible to receive benefits under the Company or a Participating Subsidiary dismissal salary plan.

(56)            Related Entity. A corporation, partnership, joint venture or other entity not more than 50% but at least 20% of whose outstanding voting stock or voting power for the election of directors is beneficially owned directly or indirectly by the Company.

(57)            Reporting Person. A Grantee who is subject to Section 16 of the Act.

(58)            Restricted Stock. Shares of Common Stock issued, without payment to the Company, pursuant to a Restricted Stock Award granted under Article VII. For a specific period of time such shares are subject to a substantial risk of forfeiture and to such restrictions against sale, transfer or other disposition, as determined by the Committee at the time of grant.

(59)            Restricted Stock Award. An Award of Restricted Stock under Article VII.

(60)            Restricted Stock Unit . A right to receive, without payment to the Company, a number of shares of Common Stock as of a future date, plus dividend equivalents and interest payments provided for in Article VIII. A unit of a Restricted Stock Unit does not represent or entitle the recipient to any equity securities of the Company until such future date. In the interim, the unit represents an unfunded account

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for the recipient, the value which is measured by reference to the value of Common Stock.

(61)            Restricted Stock Unit Award . An award of Restricted Stock Units under Article VIII, subject to such forfeiture provisions as are set forth in the Award Commitment.

(62)            Restricted Period. As defined in Section 7.2.

(63)            Restriction Range. As defined in Section 7.2.

(64)            Retirement. Termination of employment at Normal Retirement Date or with consent of the Company with immediate eligibility for retirement benefits under a retirement or pension plan maintained by the Company, a Participating Subsidiary or Related Entity.

(65)            Rule 16b-3. Rule 16b-3 of the General Rules and Regulations under the Act, or any law, rule, regulation or other provision that may hereafter replace such Rule.

(66)            SAR. A Stock Appreciation Right, as defined below.

(67)            SAR Fair Market Value. As defined in Subsection 5.9.3.

(68)            Separation from Service . As defined in Section 409A of the Code and the regulations promulgated thereunder. All references in this Plan to Retirement, termination of employment or other cessation of employment may serve as the basis for a payout of an Award subject to Section 409A only if such cessation of employment would constitute a Separation from Service.

(69)            Specified Employee . An employee as defined by Section 409A(a)(2)(B)(i) of the Code.

(70)            Stock Appreciation Right. A right granted pursuant to Article V pursuant to which the holder of a related Option, upon exercise of the Stock Appreciation Right and in lieu of exercising the related Option, is entitled to surrender the related Option, or any applicable portion thereof, to the extent unexercised, and to receive an amount equal to the appreciation in market value of a fixed number of shares of Common Stock from the Date of Grant. Stock Appreciation Rights may be payable in shares of Common Stock or cash, or a combination of both. Under the Plan, Stock Appreciation Rights are granted in tandem with Options.

(71)            Stock Appreciation Right Award. An Award of Stock Appreciation Rights under Article V.

(72)            Stock Option Award. An Award of Options under Article V.

(73)            Subsidiary. Any corporation, partnership, joint venture or other entity in which the Company owns, directly or indirectly through one or more intermediaries, at

least 50% of the outstanding voting stock or voting power for the election of directors or equivalent governing body. In the case of Incentive Stock Options, Subsidiary shall mean any corporation that qualifies as a “subsidiary corporation” of the Company under Section 424(f) of the Code.

(74)            Substitution Awards. As defined in Section 11.

(75)            Suspension Period. As defined in Article XIII.

(76)            Target Award. The number or amount of Performance Accelerated Stock Options, Cash Value Awards or Performance Shares, as the case may be, which vest when the target performance in the relevant Performance Range is achieved.

Section 2.2   Construction

Whenever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply. Headings of sections and subsections of this Plan are inserted for convenience of reference, are not a part of this Plan, and are not to be considered in the construction hereof. The words “hereof,” “herein,” “hereunder” and other similar compounds of the word “here” shall mean and refer to the entire Plan, and not to any particular provision or section. The words “includes”, “including” and other similar compounds of the word “include” shall mean and refer to including without limitation. All references herein to specific Articles, Sections or Subsections shall mean Articles, Sections or Subsections of this document unless otherwise qualified.

Section 3.1   Common Stock

Only Common Stock may be delivered under this Plan, such shares to be made available from authorized but unissued shares or from shares reacquired by the Company, including shares purchased in the open market.

Section 3.2   Number of Shares Deliverable

Subject to adjustments as provided in Section 14.2: (i) during the period of October 1, 1996, through June 27, 2012, the maximum aggregate number of shares for all Award Items shall be 15,000,000; and (ii) of the maximum 15,000,000 shares available, no more than 8,200,000 shares may be granted for Award Items which are other than Options.

Section 3.3   Reusable Shares

In the event that shares of Common Stock underlying an Award are returned to the Company for any reason (including forfeited or unexercised items) other than the surrender of Options upon the exercise of a Stock Appreciation Rights, the shares so affected shall be

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Section 3.4   Shares Not Charged Against Available Shares

Shares of Common Stock issued in payment of Stock Appreciation Rights shall not be charged against the number of shares of Common Stock available for subsequent Awards. Shares of Common Stock substituted in accordance with Article XI for shares previously awarded under this Plan or the Hercules Incorporated Restricted Stock Plan of 1986 shall not be counted against the authorized aggregate number of shares which may be issued under the Plan.

Section 4.1   General

4.1.1   Subject to the provisions of this Plan, the Committee may (i) determine and designate at any time and from time to time those Reporting Persons to whom Awards are to be granted; (ii) determine the time or times when Awards shall be granted; (iii) determine the form or forms of Awards to be granted to any Reporting Person or to Nonreporting Persons, as a group; (iv) determine the number of Award Items subject to each Award to be granted to any Reporting Person; (v) determine the maximum aggregate number of shares of Award Items subject to Awards to be granted to Nonreporting Persons, as a group; (vi) determine the terms and conditions of each Award; (vii) determine the number of shares of Restricted Stock a Reporting Person may acquire by exchange pursuant to Section 13.1 and the time or times of such acquisition; and (viii) determine the number of Options a Reporting or Nonreporting Person may acquire by exchange pursuant to Section 13.1 and the time or times of acquisition.

4.1.2   The CEO shall, subject to the provisions of the Plan, (i) determine and designate at any time and from time to time those Nonreporting Persons to whom Awards are to be granted; (ii) determine the form or forms of Award to be granted any Nonreporting Person and (iii) determine the number of Award Items subject to each Award to be granted to any Nonreporting Person. Awards may be granted singly, in combination or in tandem and may be made in combination or in tandem with or in replacement of, or as alternatives to awards or grants under any other employee plan maintained by the Company or its present or future Participating Subsidiaries. Unless this Plan is extended, no Awards shall be granted or exchanges effected under the Plan after June 27, 2012, but any then-current restrictions applicable to any Awards theretofore granted or exchanges theretofore effected shall extend beyond that date in accordance with their provisions and any shares of Common Stock used in payment of Cash Value Awards and/or Performance Shares originally granted before June 27, 2012, may be delivered after June 27, 2012, in accordance with the provisions of the applicable Award. Notwithstanding the later delivery of such shares of Common Stock, the number of such shares

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Section 4.2   Eligibility

The persons who shall be eligible to receive Awards granted pursuant to this Plan shall be such employees (including directors and officers who are also employees) of the Company or any of the Participating Subsidiaries as the relevant Grantor shall select from time to time from among those who contribute or may be expected to contribute to the successful performance of the Company or any Participating Subsidiary. Employees eligible for Phantom Unit Awards shall include, in addition to employees of the Company or any of the Participating Subsidiaries, any employees of any other Subsidiary or Related Entity.

Section 4.3   Terms and Conditions; Award Commitments

4.3.1    Terms And Conditions. Each Award granted pursuant to this Plan shall be subject to all of the terms, conditions and restrictions provided in this Plan and such other terms, conditions and restrictions, if any, as may be specified by the Committee with respect to the Award in question at the time of the making of the Award or as may be specified thereafter by the Committee in the exercise of its powers under the Plan. Without limiting the foregoing, it is understood that the Committee may, at any time and from time to time after the granting of an Award hereunder, specify such additional terms, conditions and restrictions with respect to such Award as may be deemed necessary or appropriate to ensure compliance with any and all applicable laws, including, but not limited to, terms and conditions for compliance with Federal and state securities laws and methods of withholding or providing for the payment of required taxes. The terms, conditions and restrictions with respect to any Award, Grantee or Award Commitment need not be identical with the terms, conditions and restrictions with respect to any other Award, Grantee or Award Commitment.

4.3.2    Award Commitments. Each Award granted pursuant to the Plan shall be subject to all the terms, conditions and restrictions provided in the Plan and such other terms, conditions and restrictions, if any, as may be specified by the Committee with respect to the Award in question at the time of the making of the Award or as may be specified thereafter by the Committee in the exercise of its powers under the Plan. Each Award granted pursuant to the Plan shall be evidenced by an Award Commitment and shall comply with, and be subject to, the provisions of the Plan. The Award Commitment shall not be a precondition to the granting of Awards; however, no person shall have any rights under any Award granted under the Plan unless and until the Company shall have executed and delivered an Award Commitment to the Grantee to whom such Award shall have been granted. An executed original of the Award Commitment shall be provided to both the Company and the Grantee.

Section 5.1   Award of Options

5.1.1    Grants. From time to time and upon the recommendation of the CEO, the Committee may grant Stock Option Awards in such number as it may determine to such

5.1.2    Types of Options. Options granted pursuant to the Plan may be either in the form of Incentive Stock Options or in the form of Nonqualified Options. Incentive Stock Options and Nonqualified Options shall be granted separately hereunder. The Committee shall determine whether and to what extent Options granted under the Plan shall be Incentive Stock Options or Nonqualified Options and the Option shall be so designated.

5.1.3    Substantial Stockholder. No Option shall be granted hereunder to any person who, at the time such Option is to be granted, owns stock of the Company or of any of its Subsidiaries possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any such Subsidiary. For purposes of the preceding sentence, the attribution rules of stock ownership set forth in Section 424(d) of the Code shall apply.

5.1.4    Maximum Award To An Individual. During the period from April 29, 1999, through June 27, 2012, , no person shall be granted or receive more than 1,000,000 Options and/or Performance Accelerated Stock Options in the aggregate per year.

Section 5.2   Option Price

The Option Price of Common Stock covered by each Option shall be determined by the Committee but shall not be less than 100% of the Fair Market Value of a share of Common Stock on the Date of Grant.

Section 5.3   Option Periods

The Committee shall determine the term of each Option. Subject to earlier termination as provided in Articles XI, XII and XIII, the term shall not exceed ten (10) years from the Date of Grant.

Section 5.4   Exercise of Options

5.4.1    Exercisability. Subject to Subsection 5.4.2 and Articles XII and XIII, each Option shall be exercisable at any time or times during the Option Period and in such amount or amounts as the Committee may prescribe and specify in the applicable Award Commitment (subject further in the case of Incentive Stock Options, to such restrictions as may be imposed from time to time by the Code).

5.4.2    Certain Limitations. The Committee may provide that an Option may not be exercised in whole or in part for any period or periods of time, from zero to nine and one-half

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5.4.3    Method of Exercise. A Grantee may exercise an Option, in whole or from time to time in part, by giving written notice of exercise to the Company. The notice of exercise shall be on a form approved by the Committee and shall state the number of shares with respect to which the Option is being exercised. Such notice must be received by the office of the Company designated in the Award Commitment on or before the expiration date of the Option.

Section 5.5   Time and Method of Payment

5.5.1    Form of Payment. The Optionee shall pay the Option Price in cash or, with the Committee’s permission and according to such rules as they may prescribe, by delivering shares of Common Stock already owned by the Optionee for at least six months prior to the date of exercise and having a Fair Market Value on the date of exercise equal to the Option Price, or a combination of cash and shares. The Committee may also permit payment in accordance with a cashless exercise program under which, if so instructed by the Optionee, shares of Common Stock may be issued directly to the Optionee’s broker or dealer upon receipt of the purchase price in cash from the broker or dealer.

5.5.2    Time of Payment. The Optionee shall pay the Option Price not later than ten (10) days after the date of a statement from the Company following exercise setting forth the Option Price, Fair Market Value of Common Stock on the exercise date, the number of shares of Common Stock that may be delivered in payment of the Option Price (if applicable) and the amount of withholding tax due, if any. If the Optionee fails to pay the Option Price within the ten (10) day period, the Committee shall have the right to take whatever action it deems appropriate, including voiding the Option exercise.

5.5.3    Methods for Tendering Shares. The Committee shall determine acceptable methods for tendering shares of Common Stock as payment upon exercise of an Option and may impose such limitations and restrictions on the use of shares of Common stock to exercise an Option as it deems appropriate.

5.5.4    ISO Limitation. Common Stock acquired by the Grantee which is identified as having been obtained through an Incentive Stock Option under the Plan and still subject to Incentive Stock Option holding requirements as defined in the Code, may not be tendered in payment of the Option Price.

Section 5.6   Delivery of Shares

No shares of Common Stock shall be delivered pursuant to the exercise, in whole or in part, of any Option, unless and until (i) payment in full of the Option Price therefor is received by the Company and (ii) compliance with all applicable requirements and conditions of this Plan, the Award Commitment and such rules and regulations as may be established by the Committee

Section 5.7   Stockholder Rights

An Optionee shall have none of the rights or privileges of a stockholder with respect to any shares of Common Stock covered by an Option unless and until the Optionee has given written notice of exercise of the Option, has paid in full the Option Price for such shares of Common Stock and has otherwise complied with this Plan, the Award Commitment and such rules and regulations as may be established by the Committee, and the shares are issued to him. No adjustment shall be made for dividends in cash or property or other distributions or rights with respect to any such shares of Common Stock for which the record date is prior to the date on which the Optionee or a transferee of the Option shall have become the holder of record of any such shares covered by the Option.

Section 5.8   Incentive Stock Options

5.8.1    Individual Limitation. No Grantee may be granted an ISO under this Plan (or any other plans of the Company or any Participating Subsidiary) which would result in Common Stock with an aggregate Fair Market Value (measured as of the Date of Grant) of more than $100,000 first becoming exercisable in any one calendar year, or which would entitle such Grantee to purchase a number of shares greater than the maximum number permitted by Section 422(d)(1) of the Code as in effect on the Date of Grant.

5.8.2    Code Qualification. Whenever possible, each provision in the Plan and in every Option granted under this Plan which is designated by the Committee as an ISO shall be interpreted in such a manner as to entitle the Option to the tax treatment afforded by Section 422 of the Code. If any provision of the Plan or any Option designated by the Committee as an ISO shall be held not to comply with requirements necessary to entitle such Option to such tax treatment, then (i) such provision shall be deemed to have contained from the outset such language as shall be necessary to entitle such Option to the tax treatment afforded under Section 422 of the Code, and (ii) all other provisions of this Plan and the Award Commitment shall remain in full force and effect. If any Award Commitment covering an Option designated by the Committee to be an ISO under the Plan shall not explicitly include any terms required to entitle such ISO to the tax treatment afforded by Section 422 of the Code, all such terms shall be deemed implicit in the designation of such Option and such Option shall be deemed to have been granted subject to all such terms.

5.8.3    Notice of Disposition. An Optionee shall give prompt notice to the Company of any disposition of shares of Common Stock acquired upon exercise of an ISO if such disposition occurs within either two (2) years after grant or one year after receipt of such shares by such Optionee. Such Optionee shall also comply with any applicable withholding requirements.

Section 5.9     Stock Appreciation Rights Awards

5.9.1    Grants. The Committee may grant SARs at the same time as Optionees are awarded Options under the Plan. Each SAR shall be in tandem with and relate to a specific Option under the Plan and shall specify that the number of Option Shares subject to the SAR shall be equal to the number of shares of Common Stock that the Optionee is entitled to receive pursuant to the related Option.

5.9.2    SAR Exercise. A SAR may be exercised, in whole or in part, within the period specified for the exercise of the Option in the related Option grant only upon surrender of the related Option (or portion thereof) by the Optionee. Each SAR shall be exercisable at such time or times, on the conditions and to the extent, but only to the extent, that the related Option is exercisable, provided that no such SAR (except in the case of death or physical or mental incapacity) shall be exercisable prior to the expiration of six (6) months following the Date of Grant and, provided further, that any SAR granted hereunder may provide, at the election of the Committee, that the SAR may be exercised only at a time when the Optionee to whom the SAR has been granted is subject to the provisions of Section 16(b) of the Act. Each SAR and all rights and obligations thereunder shall terminate and may no longer be exercised upon the termination or exercise of the related Option. An Optionee may exercise a SAR by giving written notice of exercise to the Company stating the number of shares of Common Stock subject to exercisable Options with respect to which the SARs are being exercised. The date upon which such written notice is received by the Company shall be the exercise date for the SARs.

An Option and SAR covering the same share of Common Stock may not be exercised simultaneously.

5.9.3    Value of SAR Payment. If an Optionee exercises a SAR, he shall receive an amount equal to the product of (i) the amount by which the SAR Fair Market Value on the exercise date of one share of Common Stock exceeds the Option Price of the related Option, times (ii) the number of shares covered by the Option, or portion thereof, which is surrendered. For purposes of this Article V, “SAR Fair Market Value” of a SAR or share of Common Stock on any date shall be the average of the daily closing prices of a share of Common Stock for five (5) consecutive business days immediately preceding the day in question as reported on the Composite Tape for New York Stock Exchange Listed Companies and published in the Eastern Edition of The Wall Street Journal, subject to the provisions of Section 5.9.4.

5.9.4   Time and Method of Payment.

5.9.4.1     Any payment which may become due from the Company by reason of an Optionee’s exercise of a SAR may be paid to the Optionee all in cash, all in shares of Common Stock or partly in shares and partly in cash, as determined by the Committee. The Committee shall determine the timing of any payment made.

5.9.4.2     If paid in cash, the amount thereof shall be the amount of appreciation determined under Subsection 5.9.3. The payments to be made, in whole or in part, in cash upon the exercise of SARs by any Reporting Person shall be made in accordance with the provisions relating to the exercise of SARs of Rule 16b-3 of the General Rules and Regulations

5.9.4.3     In the event that all or a portion of the payment is made in shares of Common Stock, the number of shares of Common Stock received shall be determined by dividing the amount of the appreciation determined under Subsection 5.9.3 by the SAR Fair Market Value of a share of Common Stock on the exercise date of the SAR. Cash will be paid in lieu of any fractional share of Common Stock or, if the Committee should so determine, the number of shares of Common Stock will be rounded downward to the next whole share of Common Stock. All shares shall be valued at their SAR Fair Market Value as of the date of such exercise; provided, however, that with respect to exercises of SARs by an employee who is subject to the provisions of Section 16(b) of the Act during any period commencing on the third business day following the date of release for publication of the quarterly or annual summary statements of the Company’s sales and earnings and ending on the twelfth business day following such date (a “window period”), the Committee may prescribe, by rule of general application, such other measure of fair market value per share as the Committee may, in its discretion, determine, but not in excess of the highest sale price of the Common Stock reported on the Composite Tape for New York Stock Exchange Listed Companies and published in the Eastern Edition of The Wall Street Journal during such window period. Notwithstanding the foregoing, the fair market value (or SAR Fair Market Value, if applicable) of SARs that relate to an ISO, shall not be in excess of the maximum amount that would be permissible under Section 422 of the Code without disqualifying such option as an ISO under such Section 422.

5.9.5    Effect of SAR and Option Exercises. Upon exercise of a SAR, the number of shares of Common Stock subject to exercise under the related Option shall automatically be reduced by the number of shares of Common Stock represented by the Option or portion thereof surrendered, as provided in Subsection 5.1.1. Shares of Common Stock subject to Options or portions thereof surrendered upon the exercise of SARs shall not be available for subsequent awards under the Plan. The exercise of any number of Options shall result in an equivalent reduction in the number of shares of Common Stock covered by the related SAR and such shares may not again be subject to a SAR under this Plan.

5.9.6    Nature of SARs. SARs shall be used solely as a device for the measurement and determination of the amount to be paid to Grantees as provided in the Plan. SARs shall not constitute or be treated as property or as a trust fund of any kind. All amounts at any time attributable to the SARs shall be and remain the sole property of the Company and all Grantees’ rights hereunder are limited to the rights to receive cash and shares of Common Stock as provided in the Plan.

Section 5.10   Performance Accelerated Stock Options Awards

5.10.1    Grants. From time to time and upon the recommendation of the CEO, the Committee may grant PASOs in such number as it may determine to such Reporting Persons as the Committee may select. From time to time, the CEO may grant PASOs in such number as he may determine to such Nonreporting Persons as he may select; provided, however, each and all such grants shall be subject to Subsection 5.1.4 and any maximum aggregate amount of PASOs established by the Committee for grants under the Plan for Nonreporting Persons as a group. The

5.10.2    Accelerated Date. The date or event designated by the Grantor (which shall be earlier than the Normal Vesting Date) at which the vesting of some or all PASOs shall occur if the Grantor determines that the applicable Performance Goals have been met.

5.10.3    PASO Period. The Committee shall determine the term of each PASO. Subject to earlier termination as provided in Article XII, the term shall not exceed ten (10) years.

5.10.4    Exercisability. Subject to Subsection 5.10.2 and Article XII, or as otherwise determined by the Committee, each PASO shall be exercisable at any time or times during the PASO Period and in such amount or amounts as the Committee may prescribe and specify in the applicable Award Commitment.

5.10.5    Corporate or Business Goals. From time to time, the Grantor shall determine Performance Goals to be used for, among other things, purposes of determining the Accelerated Date. If the Grantor shall determine minimum target and/or maximum performance goals and (i) if the minimum performance goal is not reached, then the Normal Vesting Date of the affected PASOs shall not be accelerated, and the Grantor may either determine new goals on the PASOs or allow the PASOs to vest at the Normal Vesting Date; (ii) if the minimum performance goal is reached but the target performance goal is not reached, then the Grantor may accelerate the Normal Vesting Date to an Accelerated Date for part of the affected PASOs (as specified in the applicable Award Commitment), and for the remainder of the PASOs, the Grantor may determine new goals or allow the PASOs to vest at the Normal Vesting Date; (iii) if the performance goal is reached and the maximum performance goal is not reached, then the Grantor may accelerate the Normal Vesting Date to an Accelerated Date for part of the affected PASOs, and for the remainder of the PASOs, the Grantor may determine new goals or allow the PASOs to vest at the Normal Vesting Date; and (iv) if the maximum performance goal is reached, then the Normal Vesting Date for all affected PASOs shall be accelerated to the Accelerated Date.

5.10.6    PASOs Treated Like Options. Except as otherwise provided in the Plan, PASOs shall be treated identical to Options; provided, however, that if there is a conflict between a provision specifically covering PASOs and one generally covering Options, then the specific provision shall control as to PASOs.

Section 6.1   Grants

From time to time and upon the recommendation of the CEO, the Committee may grant Performance Share Awards in such number as it may determine to such Reporting Persons as the Committee may select. From time to time, the CEO may grant in such number as he may

Section 6.2   Performance Period

At the time of a Performance Share Award grant, the Committee shall establish a Performance Period of not less than one year nor more than seven (7), commencing the Date of Grant of the Award.

Section 6.3   Performance Goals

At the time of each grant (but no later than ninety (90) days after the beginning of the Performance Period), the Committee shall establish for all Performance Share Awards the Performance Goals for the Company and any Participating Subsidiary, while the CEO (or his designee or designees) shall establish for each individual Performance Share Award the business unit, corporate staff group and individual Performance Goals (other than his own which will be the same as the Performance Goals for the Company), if any. All of the designated Performance Goals must be met as a precondition to any distribution or payment being made with respect to the Performance Share Award following the end of the Performance Period. Except as provided in Article XII, these Performance Goals (although their measurement, including adjustments, if any, as permitted under Subsection 6.8.3, will not occur until after the expiration of the applicable Performance Period) must be met during the continuance of the Grantee’s employment with the Company or any Participating Subsidiary, prior to the expiration of the applicable Performance Period and prior to the lapse of restrictions and delivery of any shares of Common Stock and/or the making of any payment with respect to the Performance Share Award. Performance Goals may vary among Grantees and among Awards to a Grantee. Performance Goals shall be based upon such performance criteria or combination of factors as the Grantor may deem appropriate, including, but not limited to, specified levels of earnings per share, return on investment, return on stockholders’ equity and such other goals related to the Company’s performance as are deemed appropriate by the Committee.

Section 6.4   Payout Schedule

In tandem with the establishment of the Performance Goals, the Grantor shall establish a Payout Schedule for that Performance Period for each Performance Share Award. Each Payout Schedule shall establish for each Performance Period minimum, target, maximum and intermediate performance and distribution levels for determining the shares of Common Stock deliverable and/or cash payable, if any, upon settlement of the Performance Share Award at the conclusion of the Performance Period. Settlement of Performance Share Awards shall occur within ninety (90) days following the end of the calendar year in which the Performance Period ends.

Section 6.5   Issuance of Stock and Stock Certificates

6.5.1    Issuance. As soon as possible after the Date of Grant of a Performance Share Award, the Company shall cause to be issued to the Grantee such number of shares of

6.5.2    Custody and Legends. Each certificate for shares of Common Stock issued in respect of the Performance Share Award awarded under Subsection 6.5.1 shall be held in custody by the Company for the Grantee’s account until the expiration or termination of the applicable Performance Period (except as provided in Article XII) and the satisfaction of any and all other conditions of the Award Commitment applicable to Performance Shares covered by the Performance Share Award. Such certificate shall be imprinted with a legend to indicate that the transferability thereof and the shares of stock represented thereby are subject to the terms, conditions and restrictions (including forfeiture and restrictions against transfer) contained in this Plan and/or an Award Commitment entered into between the registered owner of such shares and the Company, a copy of which Plan and Award Commitment is on file in the office of the Company’s Corporate Secretary. Such legend shall not be removed from any stock certificate evidencing Performance Shares until the lapse or release of the restrictions as described in Section 6.8. Each certificate also sha