EXHIBIT 10.53

 

INTERDIGITAL COMMUNICATIONS CORPORATION

 

2002 Stock Award and Incentive Plan, as amended through June 4, 2003

 

1. Purpose. The purpose of this 2002 Stock Award and Incentive Plan (the “Plan”)
is to aid InterDigital Communications Corporation, a Pennsylvania corporation
(the “Company”), in attracting, retaining, motivating and rewarding employees
and other persons who provide services to the Company or its subsidiaries or
affiliates, to provide for equitable and competitive compensation opportunities,
to encourage long-term service, to recognize individual contributions and reward
achievement of Company goals, and to promote the creation of long-term value for
shareholders by closely aligning the interests of Participants with those of
shareholders. The Plan authorizes stock-based and cash-based incentives for
Participants.

 

2. Definitions. In addition to the terms defined in Section 1 above and
elsewhere in the Plan, the following capitalized terms used in the Plan have the
respective meanings set forth in this Section:

 

(a) “Award” means any Non-qualified Stock Option, SAR, Restricted Stock,
Deferred Stock, Stock granted as a bonus or in lieu of another award, Dividend
Equivalent, Other Stock-Based Award, or Performance Award, together with any
related right or interest, granted to a Participant under the Plan.

 

(b) “Beneficiary” means the legal representatives of the Participant’s estate
entitled by will or the laws of descent and distribution to receive the benefits
under a Participant’s Award upon a Participant’s death, provided that, if and to
the extent authorized by the Committee, a Participant may be permitted to
designate a Beneficiary, in which case the “Beneficiary” instead shall be the
person(s) (if any are then surviving), trust(s) or entity(ies) which have been
designated by the Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under the
Participant’s Award upon such Participant’s death.

 

(c) “Board” means the Company’s Board of Directors.

 

(d) “Change in Control” and related terms have the meanings specified in Section
8.

 

(e) “Code” means the Internal Revenue Code of 1986, as amended.

 

(f) “Committee” means a committee of two or more directors designated by the
Board to administer the Plan. The full Board may perform any function of the
Committee hereunder, in which case the term “Committee” shall refer to the
Board. Initially, the Compensation and Stock Option Committee of the Board of
Directors will be designated as the “Committee” under the Plan.

 

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(g) “Deferred Stock” means a right, granted to a Participant under Section 6(e),
to receive Stock or other Awards or a combination thereof at the end of a
specified deferral period.

 

(h) “Dividend Equivalent” means a right, granted to a Participant under Section
6(g), to receive cash, Stock, other Awards or other property equal in value to
all or a specified portion of the dividends paid with respect to a specified
number of shares of Stock.

 

(i) “Effective Date” means the effective date specified in Section 10(p).

 

(j) “Eligible Person” has the meaning specified in Section 5.

 

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

 

(l) “Fair Market Value” means the fair market value of Stock, Awards or other
property as determined by the Committee or under procedures established by the
Committee. Unless otherwise determined by the Committee, the Fair Market Value
of Stock shall be the closing sale price reported on the composite tape of the
principal stock exchange on which the Stock is listed on the day as of which
such value is being determined or, if there is no sale on that day, then on the
last previous day on which a sale was reported.

 

(m) “Non-qualified Stock Option” means an option to purchase Stock or other
Awards pursuant to Section 6(b), which option is designated as a non-qualified
stock option and is not intended to qualify as an incentive stock option within
the meaning of Code Section 422.

 

(n) “Other Stock-Based Awards” means Awards granted to a Participant under
Section 6(h).

 

(o) “Participant” means a person who has been granted an Award under the Plan
which remains outstanding, including a person who is no longer an Eligible
Person.

 

(p) “Performance Award” means a conditional right, granted to a Participant
under Section 6(i), to receive cash, Stock or other Awards or payments, as
determined by the Committee, based upon performance criteria specified by the
Committee.

 

(q) “Restricted Stock” means Stock granted to a Participant under Section 6(d)
which is subject to certain restrictions and to a risk of forfeiture.

 

(r) “Stock” means the Company’s Common Stock, and any other equity securities of
the Company that may be substituted or resubstituted for Stock pursuant to
Section 10(c).

 

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(s) “Stock Appreciation Rights” or “SAR” means a right granted to a Participant
under Section 6(c).

 

3. Administration.

 

(a) Authority of the Committee. The Plan shall be administered by the Committee,
which shall have full and final authority, in each case subject to and
consistent with the provisions of the Plan, to select Eligible Persons to become
Participants; to grant Awards; to determine the type and number of Awards, the
dates on which Awards may be exercised and on which the risk of forfeiture or
deferral period relating to Awards shall lapse or terminate, the acceleration of
any such dates, the expiration date of any Award, whether, to what extent, and
under what circumstances an Award may be settled, or the exercise price of an
Award may be paid, in cash, Stock, other Awards, or other property, and other
terms and conditions of, and all other matters relating to, Awards; to prescribe
documents evidencing or setting terms of Awards (such Award documents need not
be identical for each Participant), amendments thereto, rules and regulations
for the administration of the Plan and amendments thereto, and standardized
terms and conditions of awards and amendments thereto (which, if so specified by
the Committee, shall be deemed to be incorporated into and a part of this Plan);
to construe and interpret the Plan and Award documents and correct defects,
supply omissions or reconcile inconsistencies therein; and to make all other
decisions and determinations as the Committee may deem necessary or advisable
for the administration of the Plan. Decisions of the Committee with respect to
the administration and interpretation of the Plan shall be final, conclusive,
and binding upon all persons interested in the Plan, including Participants,
Beneficiaries, transferees under Section 10(b) and other persons claiming rights
from or through a Participant, and shareholders.

 

(b) Manner of Exercise of Committee Authority. The express grant of any specific
power to the Committee, and the taking of any action by the Committee, shall not
be construed as limiting any power or authority of the Committee. The Committee
may delegate to officers or managers of the Company or any subsidiary or
affiliate, or committees thereof, the authority, subject to such terms as the
Committee shall determine, to perform such functions, including administrative
functions.

 

(c) Limitation of Liability. The Committee and each member thereof, and any
person acting pursuant to authority delegated by the Committee, shall be
entitled, in good faith, to rely or act upon any report or other information
furnished by any executive officer, other officer or employee of the Company or
a subsidiary or affiliate, the Company’s independent auditors, consultants or
any other agents assisting in the administration of the Plan. Members of the
Committee, any person acting pursuant to authority delegated by the Committee,
and any officer or employee of the Company or a subsidiary or affiliate acting
at the direction or on behalf of the Committee or a delegate shall not be
personally liable for any action or determination taken or made in good faith
with respect to the Plan, and shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action or
determination.

 

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4. Stock Subject to Plan.

 

(a) Overall Number of Shares Available for Delivery. Subject to adjustment as
provided in Section 10(c), the total number of shares of Stock reserved and
available for delivery in connection with Awards under the Plan shall be one
million five hundred thousand. Any shares of Stock delivered under the Plan
shall consist of authorized and unissued shares or treasury shares.

 

(b) Share Counting Rules. The Committee may adopt reasonable counting procedures
to ensure appropriate counting, avoid double counting (as, for example, in the
case of tandem or substitute awards) and make adjustments if the number of
shares of Stock actually delivered differs from the number of shares previously
counted in connection with an Award. Shares subject to an Award that is
canceled, expired, forfeited, settled in cash or otherwise terminated without a
delivery of shares to the Participant will again be available for Awards, and
shares withheld in payment of the exercise price or taxes relating to an Award
and shares equal to the number surrendered in payment of any exercise price or
taxes relating to an Award shall be deemed to constitute shares not delivered to
the Participant and shall be deemed again to be available for Awards under the
Plan. In addition, in the case of any Award granted in substitution for an award
of a company or business acquired by the Company or a subsidiary or affiliate,
shares issued or issuable in connection with such substitute Award shall not be
counted against the number of shares reserved under the Plan, but shall be
available under the Plan by virtue of the Company’s assumption of the plan or
arrangement of the acquired company or business.

 

5. Eligibility. Awards may be granted under the Plan only to Eligible Persons.
For purposes of the Plan, an “Eligible Person” means an employee of the Company
or any subsidiary or affiliate, or a consultant or other person who provides
substantial services to the Company or subsidiary or affiliate, but excluding
any person who (i) is the Company’s president, principal financial officer,
principal accounting officer (or, if there is no such accounting officer, the
controller), any vice-president of the Company in charge of a principal business
unit, division or function (such as sales, administration or finance), any other
person who performs a policy-making function for the Company, (ii) is an officer
of one or more of the Company’s subsidiaries to the extent that he or she
performs such policy-making functions identified in clause (i) for the Company,
or (iii) is a member of the Board. The term “Eligible Person” shall also include
any person who has been offered employment by the Company or a subsidiary or
affiliate, provided that such prospective employee may not receive any payment
or exercise any right relating to an Award until such person has commenced
employment with the Company or a subsidiary or affiliate of the Company. An
employee on leave of absence may be considered as still in the employ of the
Company or a subsidiary or affiliate for purposes of eligibility for
participation in the Plan, if so determined by the Committee. A joint venture in
which the Company or a subsidiary has a substantial direct or indirect equity
investment may be deemed an affiliate, if so determined by the Committee, but
such determination shall be solely for purposes of this Plan.

 

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6. Specific Terms of Awards.

 

(a) General. Awards may be granted on the terms and conditions set forth in this
Section 6. In addition, the Committee may impose on any Award or the exercise
thereof, at the date of grant or thereafter (subject to Section 10(e)), such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall determine, including terms requiring forfeiture of
Awards in the event of termination of employment or service by the Participant
and terms permitting a Participant to make elections relating to his or her
Award. The Committee shall retain full power and discretion with respect to any
term or condition of an Award that is not mandatory under the Plan. The
Committee may require payment of consideration for an Award, except as otherwise
limited by the Plan.

 

(b) Non-qualified Stock Options. The Committee is authorized to grant
Non-qualified Stock Options to Participants on the following terms and
conditions:

 

(i) Exercise Price. The exercise price per share of Stock purchasable under a
Non-qualified Stock Option shall be determined by the Committee, but such
exercise price shall be not less than the Fair Market Value of a share of Stock
on the date of grant of such Non-qualified Stock Option, subject to Sections
6(f) and 8(a), unless the Committee finds there to exist extraordinary
circumstances such that the grant of a Non-Qualified Stock Option with an
exercise price less than such Fair Market Value is appropriate.

 

(ii) Option Term; Time and Method of Exercise. The Committee shall determine the
term of each Non-qualified Stock Option. The Committee shall determine the time
or times at which or the circumstances under which a Non-qualified Stock Option
may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the methods by which such
exercise price may be paid or deemed to be paid and the form of such payment
(subject to Section 10(k)), including, without limitation, cash, Stock, other
Awards or awards granted under other plans of the Company or any subsidiary or
affiliate, or other property (including notes and other contractual obligations
of Participants to make payment on a deferred basis, such as through “cashless
exercise” arrangements, to the extent permitted by applicable law), and the
methods by or forms in which Stock will be delivered or deemed to be delivered
in satisfaction of Non-qualified Stock Options to Participants (including
deferred delivery of shares representing the Non-qualified Stock Option
“profit,” at the election of the Participant or as mandated by the Committee,
with such deferred shares subject to any vesting, forfeiture or other terms as
the Committee may specify).

 

(c) Stock Appreciation Rights. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:

 

(i) Right to Payment. An SAR shall confer on the Participant to whom it is
granted a right to receive, upon exercise thereof, the excess of (A) the Fair
Market Value of one share of Stock on the date of exercise (or, in the case of

 

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a “Limited SAR,” the Fair Market Value determined by reference to the Change in
Control Price, as defined under Section 8(d) hereof) over (B) the grant price of
the SAR as determined by the Committee.

 

(ii) Other Terms. The Committee shall determine at the date of grant or
thereafter, the time or times at which and the circumstances under which a SAR
may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the method of exercise,
method of settlement, form of consideration payable in settlement, method by or
forms in which Stock will be delivered or deemed to be delivered to
Participants, and whether or not a SAR shall be free-standing or in tandem or
combination with any other Award. Limited SARs that may only be exercised in
connection with a Change in Control or other event as specified by the Committee
may be granted on such terms, not inconsistent with this Section 6(c), as the
Committee may determine.

 

(d) Restricted Stock. The Committee is authorized to grant Restricted Stock to
Participants on the following terms and conditions:

 

(i) Grant and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions, if
any, as the Committee may impose, which restrictions may lapse separately or in
combination at such times, under such circumstances (including based on
achievement of performance goals and/or future service requirements), in such
installments or otherwise and under such other circumstances as the Committee
may determine at the date of grant or thereafter. Except to the extent
restricted under the terms of the Plan and any Award document relating to the
Restricted Stock, a Participant granted Restricted Stock shall have all of the
rights of a shareholder, including the right to vote the Restricted Stock and
the right to receive dividends thereon (subject to any mandatory reinvestment or
other requirement imposed by the Committee).

 

(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service during the applicable restriction period,
Restricted Stock that is at that time subject to restrictions shall be forfeited
and reacquired by the Company; provided that the Committee may provide, by rule
or regulation or in any Award document, or may determine in any individual case,
that restrictions or forfeiture conditions relating to Restricted Stock will
lapse in whole or in part, including in the event of terminations resulting from
specified causes.

 

(iii) Certificates for Stock. Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee shall determine. If certificates
representing Restricted Stock are registered in the name of the Participant, the
Committee may require that such certificates bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such
Restricted Stock, that the Company retain physical possession of the
certificates, and that the Participant deliver a stock power to the Company,
endorsed in blank, relating to the Restricted Stock.

 

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(iv) Dividends and Splits. As a condition to the grant of an Award of Restricted
Stock, the Committee may require that any dividends paid on a share of
Restricted Stock shall be either (A) paid with respect to such Restricted Stock
at the dividend payment date in cash, in kind, or in a number of shares of
unrestricted Stock having a Fair Market Value equal to the amount of such
dividends, or (B) automatically reinvested in additional Restricted Stock or
held in kind, which shall be subject to the same terms as applied to the
original Restricted Stock to which it relates, or (C) deferred as to payment,
either as a cash deferral or with the amount or value thereof automatically
deemed reinvested in shares of Deferred Stock, other Awards or other investment
vehicles, subject to such terms as the Committee shall determine or permit a
Participant to elect. Unless otherwise determined by the Committee, Stock
distributed in connection with a Stock split or Stock dividend, and other
property distributed as a dividend, shall be subject to restrictions and a risk
of forfeiture to the same extent as the Restricted Stock with respect to which
such Stock or other property has been distributed.

 

(e) Deferred Stock. The Committee is authorized to grant Deferred Stock to
Participants, which are rights to receive Stock, other Awards, or a combination
thereof at the end of a specified deferral period, subject to the following
terms and conditions:

 

(i) Award and Restrictions. Issuance of Stock will occur upon expiration of the
deferral period specified for an Award of Deferred Stock by the Committee (or,
if permitted by the Committee, as elected by the Participant). In addition,
Deferred Stock shall be subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee may impose, which
restrictions may lapse at the expiration of the deferral period or at earlier
specified times (including based on achievement of performance goals and/or
future service requirements), separately or in combination, in installments or
otherwise, and under such other circumstances as the Committee may determine at
the date of grant or thereafter. Deferred Stock may be satisfied by delivery of
Stock, other Awards, or a combination thereof (subject to Section 10(k)), as
determined by the Committee at the date of grant or thereafter.

 

(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service during the applicable deferral period or
portion thereof to which forfeiture conditions apply (as provided in the Award
document evidencing the Deferred Stock), all Deferred Stock that is at that time
subject to such forfeiture conditions shall be forfeited; provided that the
Committee may provide, by rule or regulation or in any Award document, or may
determine in any individual case, that restrictions or forfeiture conditions
relating to Deferred Stock will lapse in whole or in part, including in the
event of terminations resulting from specified causes.

 

(iii) Dividend Equivalents. Unless otherwise determined by the Committee,
Dividend Equivalents on the specified number of shares of Stock covered by an
Award of Deferred Stock shall be either (A) paid with respect to such Deferred
Stock at the dividend payment date in cash or in shares of unrestricted Stock
having a Fair Market Value equal to the amount of such dividends, or (B)
deferred

 

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with respect to such Deferred Stock, either as a cash deferral or with the
amount or value thereof automatically deemed reinvested in additional Deferred
Stock, other Awards or other investment vehicles having a Fair Market Value
equal to the amount of such dividends, as the Committee shall determine or
permit a Participant to elect.

 

(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized
to grant Stock as a bonus, or to grant Stock or other Awards in lieu of
obligations of the Company or a subsidiary or affiliate to pay cash or deliver
other property under the Plan or under other plans or compensatory arrangements,
subject to such terms as shall be determined by the Committee.

 

(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Stock,
other Awards, or other property equivalent to all or a portion of the dividends
paid with respect to a specified number of shares of Stock. Dividend Equivalents
may be awarded on a freestanding basis or in connection with another Award. The
Committee may provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional Stock,
Awards, or other investment vehicles, and subject to restrictions on
transferability, risks of forfeiture and such other terms as the Committee may
specify.

 

(h) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Stock or factors that may influence
the value of Stock, including, without limitation, convertible or exchangeable
debt securities, other rights convertible or exchangeable into Stock, purchase
rights for Stock, Awards with value and payment contingent upon performance of
the Company or business units thereof or any other factors designated by the
Committee, and Awards valued by reference to the book value of Stock or the
value of securities of or the performance of specified subsidiaries or
affiliates or other business units. The Committee shall determine the terms and
conditions of such Awards. Stock delivered pursuant to an Award in the nature of
a purchase right granted under this Section 6(h) shall be purchased for such
consideration, paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Stock, other Awards, notes, or other
property, as the Committee shall determine. Cash awards, as an element of or
supplement to any other Award under the Plan, may also be granted pursuant to
this Section 6(h).

 

(i) Performance Awards. The Committee is authorized to grant Performance Awards
on the terms and conditions specified in this Section 6(i). Performance Awards
may be denominated as a cash amount, number of shares of Stock, or specified
number of other Awards (or a combination) which may be earned upon achievement
or satisfaction of performance conditions specified by the Committee. In
addition, the Committee may specify that any other Award shall constitute a
Performance Award by conditioning the right of a Participant to exercise the
Award or have it settled, and the timing thereof, upon achievement or
satisfaction of such performance conditions as may be specified by the
Committee. The Committee may use such business criteria

 

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and other measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce or increase
the amounts payable under any Award subject to performance conditions.

 

7. Certain Provisions Applicable to Awards.

 

(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under
the Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution or exchange for, any other Award
or any award granted under another plan of the Company, any subsidiary or
affiliate, or any business entity to be acquired by the Company or a subsidiary
or affiliate, or any other right of a Participant to receive payment from the
Company or any subsidiary or affiliate. Awards granted in addition to or in
tandem with other Awards or awards may be granted either as of the same time as
or a different time from the grant of such other Awards or awards. Subject to
Section 10(k), the Committee may determine that, in granting a new Award, the
in-the-money value of any surrendered Award or award may be applied to reduce
the exercise price of any Non-qualified Stock Option, grant price of any SAR, or
purchase price of any other Award.

 

(b) Term of Awards. The term of each Award shall be for such period as may be
determined by the Committee.

 

(c) Form and Timing of Payment under Awards; Deferrals. Subject to the terms of
the Plan (including Section 10(k)) and any applicable Award document, payments
to be made by the Company or a subsidiary or affiliate upon the exercise of a
Non-qualified Stock Option or other Award or settlement of an Award may be made
in such forms as the Committee shall determine, including, without limitation,
cash, Stock, other Awards or other property, and may be made in a single payment
or transfer, in installments, or on a deferred basis. The settlement of any
Award may be accelerated, and cash paid in lieu of Stock in connection with such
settlement, in the discretion of the Committee or upon occurrence of one or more
specified events (subject to Section 10(k)). Installment or deferred payments
may be required by the Committee (subject to Section 10(e)) or permitted at the
election of the Participant on terms and conditions established by the
Committee. Payments may include, without limitation, provisions for the payment
or crediting of reasonable interest on installment or deferred payments or the
grant or crediting of Dividend Equivalents or other amounts in respect of
installment or deferred payments denominated in Stock.

 

(d) Loan Provisions. With the consent of the Committee, and subject at all times
to, and only to the extent, if any, permitted under and in accordance with, laws
and regulations and other binding obligations or provisions applicable to the
Company, the Company may make, guarantee, or arrange for a loan or loans to a
Participant with respect to the exercise of any Non-qualified Stock Option or
other payment in connection with any Award, including the payment by a
Participant of any or all federal, state, or local income or other taxes due in
connection with any Award. Subject to such limitations, the Committee shall have
full authority to decide whether to make a loan or loans hereunder and to
determine the amount, terms, and provisions of

 

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any such loan or loans, including the interest rate, if any, to be charged in
respect of any such loan or loans, whether the loan or loans are to be with or
without recourse against the borrower, the terms on which the loan is to be
repaid and conditions, if any, under which the loan or loans may be forgiven.

 

8. Change in Control.

 

(a) Effect of “Change in Control” on Non-Performance Based Awards. In the event
of a “Change in Control,” the following provisions shall apply to
non-performance based Awards, including Awards as to which performance
conditions previously have been satisfied or are deemed satisfied under Section
8(b), unless otherwise provided by the Committee in the Award document:

 

(i) All deferral of settlement, forfeiture conditions and other restrictions
applicable to Awards granted under the Plan shall lapse and such Awards shall be
fully payable as of the time of the Change in Control without regard to deferral
and vesting conditions, except to the extent of any waiver by the Participant or
other express election to defer beyond a Change in Control and subject to
applicable restrictions set forth in Section 10(a);

 

(ii) Any Award carrying a right to exercise that was not previously exercisable
and vested shall become fully exercisable and vested as of the time of the
Change in Control and shall remain exercisable and vested for the balance of the
stated term of such Award without regard to any termination of employment or
service by the Participant other than a termination for “cause” (as defined in
any employment or severance agreement between the Company or a subsidiary or
affiliate and the Participant then in effect or, if none, as defined by the
Committee and in effect at the time of the Change in Control), subject only to
applicable restrictions set forth in Section 10(a); and

 

(iii) The Committee may, in its discretion, determine to extend to any
Participant who holds a Non-qualified Stock Option the right to elect, during
the 60-day period immediately following the Change in Control, in lieu of
acquiring the shares of Stock covered by such Non-qualified Stock Option, to
receive in cash the excess of the Change in Control Price over the exercise
price of such Non-qualified Stock Option, multiplied by the number of shares of
Stock covered by such Non-qualified Stock Option, and to extend to any
Participant who holds other types of Awards denominated in shares the right to
elect, during the 60-day period immediately following the Change in Control, in
lieu of receiving the shares of Stock covered by such Award, to receive in cash
the Change in Control Price multiplied by the number of shares of Stock covered
by such Award.

 

(b) Effect of “Change in Control” on Performance-Based Awards. In the event of a
“Change in Control,” with respect to an outstanding Award subject to achievement
of performance goals and conditions, such performance goals and conditions shall
be deemed to be met or exceeded if and to the extent so provided by the
Committee in the Award document governing such Award or other agreement with the
Participant.

 

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(c) Definition of “Change in Control.” A “Change in Control” shall be deemed to
have occurred if, after the Effective Date, there shall have occurred any of the
following:

 

(i) Any “person,” as such term is used in Section 13(d) and 14(d) of the
Exchange Act (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any company owned,
directly or indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company), acquires voting
securities of the Company and immediately thereafter is a “50% Beneficial
Owner.” For purposes of this provision, a “50% Beneficial Owner” shall mean a
person who is the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company’s then-outstanding
voting securities;

 

(ii) During any period of two consecutive years commencing on or after the
Effective Date, individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by a person (as
defined above) who has entered into an agreement with the Company to effect a
transaction described in subsections (i), (iii), (iv) or (v) of this definition)
whose election by the Board or nomination for election by the Company’s
shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved
(the “Continuing Directors”) cease for any reason to constitute at least a
majority thereof;

 

(iii) The shareholders of the Company have approved a merger, consolidation,
recapitalization, or reorganization of the Company, or a reverse stock split of
any class of voting securities of the Company, or the consummation of any such
transaction if shareholder approval is not obtained, other than any such
transaction which would result in at least 50% of the combined voting power of
the voting securities of the Company or the surviving entity outstanding
immediately after such transaction being beneficially owned by the persons who
were shareholders of the Company immediately prior to the transaction in
substantially the same proportion as their ownership of the voting power
immediately prior to the transaction; provided that, for purposes of this
Section 8(c)(iii), such continuity of ownership (and preservation of relative
voting power) shall be deemed to be satisfied if the failure to meet such 50%
threshold (or to substantially preserve such relative ownership of the voting
securities) is due solely to the acquisition of voting securities by an employee
benefit plan of the Company, such surviving entity or a subsidiary thereof; and
provided further, that, if consummation of the corporate transaction referred to
in this Section 8(c)(iii) is subject, at the time of such approval by
shareholders, to the consent of any government or governmental agency or
approval of the shareholders of another entity or other material contingency, no
Change in Control shall occur until such time as such consent and approval has
been obtained and any other material contingency has been satisfied;

 

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(iv) The shareholders of the Company accept shares in a share exchange in which
the shareholders of the Company immediately before such share exchange do not or
will not own directly or indirectly immediately following such share exchange
more than 50% of the combined voting power of the outstanding voting securities
of the corporation resulting from or surviving such share exchange in
substantially the same proportion as the ownership of the Voting Securities
outstanding immediately before such share exchange;

 

(v) The shareholders of the Company have approved a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company’s assets (or any transaction having a
similar effect); provided that, if consummation of the transaction referred to
in this Section 8(c)(v) is subject, at the time of such approval by
shareholders, to the consent of any government or governmental agency or
approval of the shareholders of another entity or other material contingency, no
Change in Control shall occur until such time as such consent and approval has
been obtained and any other material contingency has been satisfied; and

 

(vi) Any other event which the Board of Directors of the Company determines
shall constitute a Change in Control for purposes of this Plan.

 

(d) Definition of “Change in Control Price.” The “Change in Control Price” means
an amount in cash equal to the higher of (i) the amount of cash and fair market
value of property that is the highest price per share paid (including
extraordinary dividends) in any transaction triggering the Change in Control or
any liquidation of shares following a sale of substantially all assets of the
Company, or (ii) the highest Fair Market Value per share at any time during the
60-day period preceding and 60-day period following the Change in Control.

 

9. Additional Award Forfeiture Provisions.

 

(a) Events Triggering Forfeiture. Notwithstanding any other provision of this
Plan, the forfeitures specified in this Section 9(a) will be triggered if the
Participant’s employment or engagement is terminated by the Company and the
Board makes a determination that the Participant, at any time during the
Participant’s employment with or engagement by the Company or a subsidiary or
affiliate of the Company or at any time during the one-year period following
such employment or engagement (i) has engaged in any type of disloyalty to the
Company, including without limitation, insubordination, fraud, embezzlement,
theft or dishonesty in the course of his employment or engagement, or (ii) has
been convicted of a felony, or (iii) has disclosed any confidential or
proprietary information without the consent of the Company or (iv) has breached
the terms of any written confidentiality agreement or any non-competition
agreement with the Company in any material respect. In the event of a
termination and Board determination described in the preceding sentence, all
unexercised

 

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Non-qualified Stock Options and unexercised or otherwise unsettled Awards held
by the Participant shall terminate upon the earlier of the date of termination
of employment or engagement or the date of the Board’s determination.

 

(b) Committee Discretion. The Committee may, in its discretion, waive in whole
or in part the Company’s right to forfeiture under this Section, but no such
waiver shall be effective unless evidenced by a writing signed by a duly
authorized officer of the Company. In addition, the Committee may impose
additional conditions on Awards by inclusion of appropriate provisions in the
document evidencing or governing any such Award.

 

10. General Provisions.

 

(a) Compliance with Legal and Other Requirements. The Company may, to the extent
deemed necessary or advisable by the Committee, postpone the issuance or
delivery of Stock or payment of other benefits under any Award until completion
of such registration or qualification of such Stock or other required action
under any federal or state law, rule or regulation, listing or other required
action with respect to any stock exchange or automated quotation system upon
which the Stock or other securities of the Company are listed or quoted, or
compliance with any other obligation of the Company, as the Committee may
consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Stock or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other obligations. The
foregoing notwithstanding, in connection with a Change in Control, the Company
shall take or cause to be taken no action, and shall undertake or permit to
arise no legal or contractual obligation, that results or would result in any
postponement of the issuance or delivery of Stock or payment of benefits under
any Award or the imposition of any other conditions on such issuance, delivery
or payment, to the extent that such postponement or other condition would
represent a greater burden on a Participant than existed on the 90th day
preceding the Change in Control.

 

(b) Limits on Transferability; Beneficiaries. No Award or other right or
interest of a Participant under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party (other than the Company or a subsidiary or affiliate
thereof), or assigned or transferred by such Participant otherwise than by will
or the laws of descent and distribution or to a Beneficiary upon the death of a
Participant, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the Participant or his
or her guardian or legal representative, except that Awards and other rights may
be transferred to one or more transferees during the lifetime of the
Participant, and may be exercised by such transferees in accordance with the
terms of such Award, but only if and to the extent such transfers are permitted
by the Committee, subject to any terms and conditions which the Committee may
impose thereon (including limitations the Committee may deem appropriate in
order that offers and sales under the Plan will meet applicable requirements of
registration forms under the Securities Act of

 

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1933 specified by the Securities and Exchange Commission). A Beneficiary,
transferee, or other person claiming any rights under the Plan from or through
any Participant shall be subject to all terms and conditions of the Plan and any
Award document applicable to such Participant, except as otherwise determined by
the Committee, and to any additional terms and conditions deemed necessary or
appropriate by the Committee.

 

(c) Adjustments. In the event that any large, special and non-recurring dividend
or other distribution (whether in the form of cash or property other than
Stock), recapitalization, forward or reverse split, stock dividend,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate transaction or
event affects the Stock such that an adjustment is determined by the Committee
to be appropriate under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and kind of shares of
Stock which may be delivered in connection with Awards granted thereafter, (ii)
the number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iii) the exercise price, grant price or purchase price
relating to any Award or, if deemed appropriate, the Committee may make
provision for a payment of cash or property to the holder of an outstanding
Non-qualified Stock Option (subject to Section 10(k)). In addition, the
Committee is authorized to make adjustments in the terms and conditions of, and
the criteria included in, Awards (including Performance Awards and performance
goals and any hypothetical funding pool relating thereto) in recognition of
unusual or nonrecurring events (including, without limitation, events described
in the preceding sentence, as well as acquisitions and dispositions of
businesses and assets) affecting the Company, any subsidiary or affiliate or
other business unit, or the financial statements of the Company or any
subsidiary or affiliate, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations or business
conditions or in view of the Committee’s assessment of the business strategy of
the Company, any subsidiary or affiliate or business unit thereof, performance
of comparable organizations, economic and business conditions, personal
performance of a Participant, and any other circumstances deemed relevant.

 

(d) Tax Provisions.

 

(i) Withholding. The Company and any subsidiary or affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant’s withholding
obligations, either on a mandatory or elective basis in the discretion of the
Committee. Other provisions of the Plan notwithstanding, only the minimum amount
of Stock deliverable in connection with an Award necessary to satisfy statutory
withholding requirements will be withheld.

 

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(ii) Required Consent to and Notification of Code Section 83(b) Election. No
election under Section 83(b) of the Code (to include in gross income in the year
of transfer the amounts specified in Code Section 83(b)) or under a similar
provision of the laws of a jurisdiction outside the United States may be made
unless expressly permitted by the terms of the Award document or by action of
the Committee in writing prior to the making of such election. In any case in
which a Participant is permitted to make such an election in connection with an
Award, the Participant shall notify the Company of such election within ten days
of filing notice of the election with the Internal Revenue Service or other
governmental authority, in addition to any filing and notification required
pursuant to regulations issued under Code Section 83(b) or other applicable
provision.

 

(e) Changes to the Plan. The Board may amend, suspend or terminate the Plan or
the Committee’s authority to grant Awards under the Plan without the consent of
shareholders or Participants; provided, however, that any amendment to the Plan
shall be submitted to the Company’s shareholders for approval not later than the
earliest annual meeting for which the record date is after the date of such
Board action if such shareholder approval is required by any federal or state
law or regulation or the rules of any stock exchange or automated quotation
system on which the Stock may then be listed or quoted, and the Board may
otherwise, in its discretion, determine to submit other amendments to the Plan
to shareholders for approval; and provided further, that, without the consent of
an affected Participant, no such Board action may materially and adversely
affect the rights of such Participant under any outstanding Award. With regard
to other terms of Awards, the Committee shall have no authority to waive or
modify any such Award term after the Award has been granted to the extent the
waived or modified term would be mandatory under the Plan for any Award newly
granted at the date of the waiver or modification.

 

(f) Right of Setoff. The Company or any subsidiary or affiliate may, to the
extent permitted by applicable law, deduct from and set off against any amounts
the Company or a subsidiary or affiliate may owe to the Participant from time to
time, including amounts payable in connection with any Award, owed as wages,
fringe benefits, or other compensation owed to the Participant, such amounts as
may be owed by the Participant to the Company, including but not limited to
amounts owed under Section 10(a), although the Participant shall remain liable
for any part of the Participant’s payment obligation not satisfied through such
deduction and setoff. By accepting any Award granted hereunder, the Participant
agrees to any deduction or setoff under this Section 10(f).

 

(g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
constitute an “unfunded” plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or obligation to deliver
Stock pursuant to an Award, nothing contained in the Plan or any Award shall
give any such Participant any rights that are greater than those of a general
creditor of the Company; provided that the Committee may authorize the creation
of trusts and deposit therein cash, Stock, other Awards or other property, or
make other arrangements to meet the Company’s obligations under the Plan. Such
trusts or other arrangements shall be consistent with the “unfunded” status of
the Plan unless the Committee otherwise determines with the consent of each
affected Participant.

 

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(h) Nonexclusivity of the Plan. The adoption of the Plan by the Board shall not
be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements, apart from the
Plan, as it may deem desirable.

 

(i) Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise
determined by the Committee, in the event of a forfeiture of an Award with
respect to which a Participant paid cash consideration, the Participant shall be
repaid the amount of such cash consideration. No fractional shares of Stock
shall be issued or delivered pursuant to the Plan or any Award. The Committee
shall determine whether cash, other Awards or other property shall be issued or
paid in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.

 

(j) Certain Limitations Relating to Accounting Treatment of Awards. Other
provisions of the Plan notwithstanding, the Committee’s authority under the Plan
(including under Sections 7(c), 10(c) and 10(d)) is limited to the extent
necessary to ensure that any Non-qualified Stock Option or other Award of a type
that the Committee has intended to be subject to fixed accounting with a
measurement date at the date of grant or the date performance conditions are
satisfied under APB 25 shall not become subject to “variable” accounting solely
due to the existence of such authority.

 

(k) Governing Law. The validity, construction, and effect of the Plan, any rules
and regulations relating to the Plan and any Award document shall be determined
in accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflicts of laws, and applicable provisions of federal
law.

 

(l) Awards to Participants Outside the United States. The Committee may modify
the terms of any Award under the Plan made to or held by a Participant who is
then resident or primarily employed outside of the United States in any manner
deemed by the Committee to be necessary or appropriate in order that such Award
shall conform to laws, regulations, and customs of the country in which the
Participant is then resident or primarily employed, or so that the value and
other benefits of the Award to the Participant, as affected by foreign tax laws
and other restrictions applicable as a result of the Participant’s residence or
employment abroad shall be comparable to the value of such an Award to a
Participant who is resident or primarily employed in the United States.

 

(m) Limitation on Rights Conferred under Plan. Neither the Plan nor any action
taken hereunder shall be construed as (i) giving any Eligible Person or
Participant the right to continue to provide services to the Company or a
subsidiary or affiliate, (ii) interfering in any way with the right of the
Company or a subsidiary or affiliate to terminate the employment or engagement
of any Eligible Person at any time, (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the

 

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Plan or to be treated uniformly with other Participants, employees or service
providers, or (iv) conferring on a Participant any of the rights of a
shareholder of the Company unless and until the Participant is duly issued or
transferred shares of Stock in accordance with the terms of an Award or a
Non-qualified Stock Option is duly exercised. Except as expressly provided in
the Plan and an Award document, neither the Plan nor any Award document shall
confer on any person other than the Company and the Participant any rights or
remedies thereunder.

 

(n) Severability; Entire Agreement. If any of the provisions of this Plan or any
Award document is finally held to be invalid, illegal or unenforceable (whether
in whole or in part), such provision shall be deemed modified to the extent, but
only to the extent, of such invalidity, illegality or unenforceability, and the
remaining provisions shall not be affected thereby; provided, that, if any of
such provisions is finally held to be invalid, illegal, or unenforceable because
it exceeds the maximum scope determined to be acceptable to permit such
provision to be enforceable, such provision shall be deemed to be modified to
the minimum extent necessary to modify such scope in order to make such
provision enforceable hereunder. The Plan and any Award documents contain the
entire agreement of the parties with respect to the subject matter thereof and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations and warranties between them, whether written or
oral with respect to the subject matter thereof.

 

(o) References to Legal and Regulatory Provisions. References in this Plan to
any provision of law, including the Code and the Exchange Act, or rule or
regulation (including accounting principles and interpretations) shall include
subsequently adopted amendments and any successor provisions, rules or
regulations.

 

(p) Plan Effective Date and Termination. The Plan shall become effective upon
its adoption by the Board. Unless earlier terminated by action of the Board of
Directors, the Plan will remain in effect until such time as no Stock remains
available for delivery under the Plan and the Company has no further rights or
obligations under the Plan with respect to outstanding Awards under the Plan.

 

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