SECOND AMENDED AND RESTATED
HEALTHCARE SERVICES GROUP, INC.
2012 EQUITY INCENTIVE PLAN
1. Purpose.
The Healthcare Services Group, Inc. 2012 Equity Incentive Plan (the “Plan”) is
intended to provide an incentive to employees, non-employee directors and
advisors of Healthcare Services Group, Inc., a Pennsylvania corporation (the
“Company”), and its Subsidiaries to remain in the service of the Company and its
Subsidiaries and to align their interest in the success of the Company with the
interests of the Company’s stockholders. The Plan seeks to promote the highest
level of performance by providing an economic interest in the long-term success
of the Company.
2.     Definitions.
For purposes of the Plan, the following terms have the following meanings:
“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with, such Person.
For purposes of this definition, “control” (including with correlative meanings,
the terms “controlling,” “controlled by,” or “under common control with”), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.
“Agreement” means an agreement between the Company and an Eligible Person
providing for the grant of an Award hereunder.
“Award” means any Option, Stock Appreciation Right, Restricted Share, Bonus
Stock, Stock Unit, Performance Share, or other incentive payable in cash or in
shares of Common Stock as may be designated by the Committee from time to time
under the Plan.
“Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the 1934
Act.
“Beneficiary” or “Beneficiaries” means the person(s) designated by a Participant
or such Participant’s Permitted Transferee in writing to the Company to receive
payments or other distributions or rights pursuant to the Plan upon the death of
such Participant or such Participant’s Permitted Transferee. If no Beneficiary
is so designated or if no Beneficiary is living at the time a payment,
distribution, or right becomes payable or distributable pursuant to the Plan,
such payment, distribution, or right shall be made to the estate of the
Participant or a Permitted Transferee thereof. The Participant or Permitted
Transferee, as the case may be, shall have the right to change the designated
Beneficiaries from time to time by written instrument filed with the Committee
in accordance with such rules as may be specified by the Committee.
“Board of Directors” means the Board of Directors of the Company.
“Bonus Shares” mean an Award of shares of Common Stock granted under Section 9
that are fully vested when granted.
“Cashless Exercise” means an exercise of Vested Options outstanding under the
Plan through (a) the delivery of irrevocable instructions to a broker to make a
sale of a number of Option Shares that results in proceeds thereon in an amount
required to pay the aggregate exercise price for all the shares underlying such
Vested Options being so exercised (and any required withholding tax) and to
deliver such proceeds to the Company in satisfaction of such aggregate exercise
price (and any required withholding tax) or (b) any other surrender to the
Company of Option Shares or Vested Options outstanding under the Plan to satisfy
the applicable aggregate exercise price (and any withholding tax) required to be
paid upon such exercise.
“Cause” means, with respect to any Participant, (a) “cause” as defined in an
employment agreement or any other similar type of agreement applicable to the
Participant (so long as any act or omission constituting “cause” for such
purpose was willful), or (b) in the case of a Participant who does not have an
employment agreement or any other similar type of agreement or has an employment
agreement or any other similar type of agreement that does not define “cause”:
(i) any act or omission that constitutes a material breach by the Participant of
any of such Participant’s obligations under such Participant’s employment
agreement (if any) with the Company or any of its Subsidiaries, the applicable
Agreement or any other agreement with the Company or any of its Subsidiaries;
(ii) the willful and continued failure or refusal of the Participant
substantially to perform the duties required of such Participant as an employee
of the Company or any of its Subsidiaries, or performance significantly below
the level required or expected of the Participant, as determined by the
Committee; (iii) any willful violation by the Participant of any federal or
state law or regulation applicable to the business of the Company or any of its
Subsidiaries or Affiliates including, but not limited to, the rules and
regulations promulgated by the Securities and Exchange Commission as well as the
provisions of the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform
and Consumer Protection Act, or the Participant’s commission of any felony or
other crime involving moral turpitude, or any willful perpetration by the
Participant of a common law fraud; or (iv) any other misconduct by the
Participant that is materially injurious to the financial condition or business
reputation of, or is otherwise materially injurious to, the Company or any of
its Subsidiaries or Affiliates.
“Change in Control” means the occurrence of any one of the following:
(a)     a tender offer (or series of related offers) shall be made and
consummated for the ownership of 50% or more of the outstanding voting
securities of the Company, unless as a result of such tender offer more than 50%
of the outstanding voting securities of the surviving or resulting corporation
shall be owned in the aggregate by the stockholders of the Company (as of the
time immediately prior to the commencement of such offer), any employee benefit
plan of the Company or its Subsidiaries, and their affiliates;
(b)     the Company shall be merged or consolidated with another corporation,
unless as a result of such merger or consolidation more than 50% of the
outstanding voting securities of the surviving or resulting corporation shall be
owned in the aggregate by the stockholders of the Company (as of the time
immediately prior to such transaction), any employee benefit plan of the Company
or its Subsidiaries, and their affiliates;
(c)     the Company shall sell substantially all of its assets to another
corporation that is not wholly owned by the Company, unless as a result of such
sale more than 50% of such assets shall be owned in the aggregate by the
stockholders of the Company (as of the time immediately prior to such
transaction), any employee benefit plan of the Company or its Subsidiaries and
their affiliates; or
(d)     a Person (as defined below) shall acquire 50% or more of the outstanding
voting securities of the Company (whether directly, indirectly, beneficially or
of record), unless as a result of such acquisition more than 50% of the
outstanding voting securities of the surviving or resulting corporation shall be
owned in the aggregate by the stockholders of the Company (as of the time
immediately prior to the first acquisition of such securities by such Person),
any employee benefit plan of the Company or its Subsidiaries, and their
affiliates;
(e)     a majority of the members of the Board is replaced during any 12-month
period by directors whose appointment or election is not endorsed by a majority
of the members of the Board prior to the date of the appointment or election.
For purposes of this definition, ownership of voting securities shall take into
account and shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(I)(i) (as in effect on the date hereof) under the 1934 Act. In
addition, for such purposes, “Person” shall have the meaning given in
Section 3(a)(9) of the 1934 Act, as modified and used in Sections 13(d) and
14(d) thereof, however, a Person shall not include (A) the Company or any of its
Subsidiaries; (B) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Subsidiaries; (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities; or (D) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company.
“Code” means the Internal Revenue Code of 1986, as amended, including the rules
and regulations promulgated thereunder.
“Committee” means a Committee of the Board of Directors appointed to administer
the Plan.
“Common Stock” means shares of Common Stock, par value $0.01 per share, of the
Company.
“Competing Business” means a business or enterprise (other than the Company and
its direct or indirect Subsidiaries) that is engaged in the housekeeping,
laundry, linen, and/or dietary services business, in any form whatsoever, which
services healthcare and/or healthcare-related institutions in the continental
United States or Canada.
“Date of Grant” means the date of grant of an Award as set forth in the
applicable Agreement.
“Delay Period” shall have the meaning set forth in Section 24.
“Effective Date” shall have the meaning set forth in Section 25.
“Eligible Persons” means employees, non-employee directors and advisors of the
Company and its Subsidiaries.
“Fair Market Value” means, with respect to a share of Common Stock on any
relevant day, (a) if such Common Stock is traded on a national securities
exchange, the closing price at the end of the applicable business day on such
day, or if the Common Stock did not trade on such day, the closing price on the
most recent preceding day on which there was a trade, (b) if such Common Stock
is quoted on an automated quotation system, the closing price on such day, or if
the Common Stock did not trade on such day, the mean between the closing bid and
asked prices on such day, or (c) in all other cases, the “fair market value” as
determined by the Committee in good faith and using such financial sources as it
deems relevant and reliable (but in any event not less than fair market value
within the meaning of Code Section 409A).
“Good Reason” means, with respect to any Participant, (a) “good reason” as
defined in an employment agreement or any other similar type of agreement
applicable to such Participant, or (b) in the case of a Participant who does not
have an employment agreement or any other similar type of agreement that defines
“good reason,” a failure by the Company to pay material compensation due and
payable to the Participant in connection with such Participant’s employment.
“Incentive Stock Option” means an Option granted with the intention that it
qualify as an “incentive stock option” as that term is defined in Code
Section 422 or any successor provision.
“1933 Act” means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder.
“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission thereunder.
“Nonqualified Stock Option” means an Option other than an Incentive Stock
Option.
“Option” means a right to purchase Common Stock granted pursuant to Section 8.
“Option Price” means, with respect to any Option, the exercise price per share
of Common Stock to which it relates.
“Option Shares” means the shares of Common Stock acquired by a Participant upon
exercise of an Option.
“Outstanding,” with respect to any share of Common Stock, means, as of any date
of determination, all shares that have been issued on or prior to such date,
other than shares repurchased or otherwise reacquired by the Company or any
Affiliate thereof, on or prior to such date.
“Participant” means any Eligible Person who has been granted an Award.
“Performance Share” has the meaning set forth in Section 12.
“Permanent Disability,” with respect to any Participant who is an employee of
the Company or any of its Subsidiaries, shall mean a permanent and total
disability as defined in Code Section 22(e)(3).
“Permitted Transferee” means, (a) with respect to outstanding shares of Common
Stock held by any Participant, any Person with respect to which the Board of
Directors shall have adopted a resolution stating that the Board of Directors
has no objection if a transfer of shares is made to such Person, and (b) with
respect to Awards, or any other share of Common Stock issued as or pursuant to
any Award, held by any Participant, (i) any Person to whom such Awards or other
shares are transferred by will or the laws of descent and distribution or
(ii) the Company.
“Person” means an individual, a partnership, a joint venture, a corporation, an
association, a trust, an estate or other entity or organization, including a
government or any department or agency thereof.
“Qualifying Performance Criteria” has the meaning set forth in Section 14(a) of
the Plan.
“Restricted Shares” mean shares of Common Stock awarded to a Participant subject
to the terms and conditions of the Plan under Section 9, the rights of ownership
of which are subject to restrictions prescribed by the Committee.
“Retirement,” with respect to any Participant who is an employee of the Company
or any of its Subsidiaries, means resignation or termination of employment
(other than termination for Cause) upon the first to occur of the Participant’s
attaining (a) age 62 or (b) age 55 with 20 years of service with the Company or
a Subsidiary (including years of service granted by the Company or a Subsidiary
as a result of a merger, acquisition, or other transaction); further provided
that the Committee may determine in its sole discretion that a resignation or
termination of employment under other circumstances shall be considered
“Retirement” for purposes of the Plan.
“Stock Appreciation Right” means a right that entitles the Participant to
receive, in cash or Common Stock (as determined by the Committee in its sole
discretion) value equal to or otherwise based on the excess of (a) the Fair
Market Value of a specified number of shares of Common Stock at the time of
exercise over (b) the exercise price of the right, as established by the
Committee on the Date of Grant.
“Stock Unit” means an Award granted under Section 11 denominated in units of
Common Stock.
“Subsidiary” means any corporation in which more than 50% of the total combined
voting power of all classes of stock is owned, either directly or indirectly, by
the Company or another Subsidiary.
“Substitute Award” means any Award issued by the Company in connection with a
merger (in which the Company is the survivor), acquisition or other corporate
transaction.
“Vested Options” means, as of any date of determination, Options that by their
terms have vested and are exercisable on such date.
“Vested Restricted Shares” means, as of any date of determination, Restricted
Shares that by their terms have vested as of such date.
A “Wrongful Solicitation” shall be deemed to occur when a Participant or former
Participant directly or indirectly (except in the course of such Participant’s
employment with the Company), for the purpose of conducting or engaging in a
Competing Business, calls upon, solicits, advises or otherwise does, or attempts
to do, business with any Person who is, or was, during the then most recent
12-month period, a client of the Company or any of its Affiliates, or takes away
or interferes or attempts to take away or interfere with any custom, trade,
business, patronage or affairs of the Company or any of its Affiliates, or hires
or attempts to hire any Person who is, or was during the most recent 12-month
period, an employee, officer, representative or agent of the Company or any of
its Affiliates, or solicits, induces, or attempts to solicit or induce any
person who is an employee, officer, representative or agent of the Company or
any of its Affiliates to leave the employ of the Company or any of its
Affiliates, or violate the terms of their contract, or any employment agreement,
with it.
3.     Administration of the Plan.
(a)     Members of the Committee. The Plan shall be administered, and Awards
shall be granted hereunder, by the Committee.
(b)     Authority of the Committee. Subject to Section 3(a), the Committee shall
have full discretionary power and authority, subject to such resolutions not
inconsistent with the provisions of the Plan or applicable law as may from time
to time be adopted by the Board, to (a) interpret and administer the Plan and
any instrument or agreement entered into under the Plan, (b) establish such
rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan, and (c) make any determination and take
any other action that the Committee deems necessary or desirable for
administration of the Plan. All questions of interpretation, administration, and
application of the Plan shall be determined in good faith by a majority of the
members of the Committee then in office, except that the Committee may authorize
any one or more of its members, or any officer of the Company, to execute and
deliver documents on behalf of the Committee, and the determination of such
majority shall be final and binding in all matters relating to the Plan.
4.     Number of Shares Issuable in Connection with Awards.
(a)     Limit. The initial total aggregate number of shares of Common Stock for
which Awards may be made under the Plan shall not exceed 5% of the Company’s
issued and outstanding Common Stock on the date of the approval of this Plan by
the Company’s shareholders. Notwithstanding the foregoing, the number of shares
of Common Stock available for issuance under the Plan, including shares subject
to then outstanding Awards, shall automatically increase on the first trading
day of January of each calendar year during the term of the Plan, beginning with
calendar year 2013, by an amount equal to the lesser of (i) 5% of the positive
difference, if any, between the number of outstanding shares of Common Stock,
including shares subject to outstanding Awards, on the last trading day of the
immediately preceding calendar year and the number of outstanding shares of
Common Stock, including shares subject to outstanding Awards, on the first
trading day of such immediately preceding calendar year; or (ii) an amount
determined by the Board of Directors, in its discretion. No Incentive Stock
Options may be granted on the basis of the additional shares of Common Stock
resulting from such annual increases. The limitation established by this
Section 4(a) shall be subject to adjustment as provided in Section 16. In
addition, any shares that remain available for future grant in the Healthcare
Services Group, Inc. 2002 Stock Option Plan (the “Prior Plan”) as of the
Effective Date shall be added to the number of shares of Common Stock that may
be issued under the Plan. Upon the Effective Date, no further awards may be made
from the Prior Plan. Notwithstanding the foregoing, shares subject to a tandem
SAR (as described more fully in Section 10 hereof) shall be charged against the
authorized shares only once for the overall number of shares subject thereto and
not for both the number of shares subject to the tandem SAR portion of the Award
and the number of shares subject to the Option portion of the Award. The
provisions of the preceding sentence shall apply whether an exercised tandem SAR
is settled in cash or stock, or partly in both. Subject to the limitations
contained in Section 8 hereof with respect to Incentive Stock Options, the
maximum number of shares that may be granted as Stock Options or SARs under the
Plan to an employee who is a Participant during any calendar year shall not
exceed 50,000 shares.
(b)     Subject to the overall 5% limit, as adjusted, provided in Section 4(a),
the maximum aggregate number of shares of Common Stock for which Restricted
Shares may be awarded under the Plan shall not exceed 5% of the Company’s issued
and outstanding Common Stock on the date of the approval of this Plan by the
Company’s shareholders. The limitation established by the preceding sentence
shall be subject to adjustment as provided in Section 4(a) above and Section 16.
(c)     If any Option is exercised by tendering Common Stock, either actually or
by attestation, to the Company as full or partial payment in connection with the
exercise of such Option under the Plan, or if the tax withholding requirements
are satisfied through such tender, only the number of shares of Common Stock
issued net of the Common Stock tendered shall be deemed delivered for purposes
of determining the maximum number of shares available for Awards under the Plan.
(d)     Replenishment Provisions. Shares subject to any Awards that expire
without being exercised or that are forfeited (and shares subject to awards made
prior to the Effective Date under a Prior Plan that expire or are forfeited)
shall again be available for future grants of Awards, provided that shares
subject to a tandem SAR shall be replenished only once for the overall number of
shares subject thereto and not for both the number of shares subject to the
tandem SAR portion of the Award and the number of shares subject to the Option
portion of the Award. Shares subject to Awards that have been retained by the
Company in payment or satisfaction of the purchase price or tax withholding
obligation of an Award shall not count against the limit set forth in paragraph
(a) above. The Company shall not be under any obligation, however, to make any
such future Awards.
(e)     Substitute Awards. Substitute Awards shall not count against the
limitation set forth in paragraph (a) above.
(f)     Adjustments. The limits provided for in this Section 4 shall be subject
to adjustment as provided in Section 16(a).
5.     Eligible Persons.
Awards may be granted or offered only to Eligible Persons. The Committee shall
have the authority to select the individual Participants to whom Awards may be
granted from among such class of Eligible Persons and to determine the number
and form of Awards to be granted to each Participant.
6.     Agreement.
The terms and conditions of each grant or sale of Awards shall be embodied in an
Agreement in a form approved by the Committee, which shall contain terms and
conditions not inconsistent with the Plan and which shall incorporate the Plan
by reference. Each Agreement shall: (a) state the date as of which the Award was
granted or sold, and (i) in the case of Options and Stock Appreciation Rights,
set forth the number of Options and Stock Appreciation Rights being granted to
the Participant and the applicable Option Price and/or exercise price (for Stock
Appreciation Rights) and expiration date(s), and (ii) in the case of Restricted
Shares and other Awards, set forth the number of Restricted Shares or other
Awards being granted or offered to the Participant and, if applicable, the
purchase price or other consideration for such Restricted Shares or other
Awards; (b) set forth the vesting schedule (if any); (c) set forth any other
terms and conditions established by the Committee including any additional
covenants and promises that the Committee deems, in its discretion, are
necessary or desirable, which covenants and promises may include, but are not
limited to, covenants regarding confidential information and trade secrets,
covenants regarding company property, covenants not to compete, covenants not to
solicit clients or accounts, cross‑over employment covenants, and covenants not
to disparage the Company; (d) set forth any Qualifying Performance Criteria as
the Committee may determine in its discretion; (e) be signed by the recipient of
the Award and a person designated by the Committee; and (f) be delivered to the
recipient of the Award.
7.     Restrictions on Transfer.
(a)     Restrictions on Transfer. No Restricted Share, Bonus Stock, Performance
Share, or Option Share or other share of Common Stock issued as or pursuant to
any Award may be sold, transferred, assigned, pledged, or otherwise encumbered
or disposed of (or made the subject of any derivative transaction) to or with
any third party (other than a Permitted Transferee); provided, however, that any
such restriction on transfer shall terminate as to any such share when such
share is no longer subject to any term, condition or other restriction under the
Plan (other than Section 7(b)). No Option, Stock Appreciation Right, Stock Unit,
or other Award not in the form of a share of Common Stock may be sold,
transferred, assigned, pledged, or otherwise encumbered or disposed of (or made
the subject of any derivative transaction) to or with any third party other than
a Permitted Transferee. Each Permitted Transferee (other than the Company) by
will or the laws of descent and distribution or otherwise, of any Award (or
share issued in respect thereof) shall, as a condition to the transfer thereof
to such Permitted Transferee, execute an agreement pursuant to which it shall
become a party to the Agreement applicable to the transferor.
(b)     No Participant will, directly or indirectly, offer, sell, assign,
transfer, grant or sell a participation in, create any encumbrance on or
otherwise dispose of any Award or any Shares with respect thereto (or solicit
any offers to buy or otherwise acquire, or take a pledge of, any Award or any
Shares with respect thereto), in any manner that would conflict with or violate
the 1933 Act.
8.     Options.
(a)     Terms of Options Generally. The Committee may grant Options designated
as Incentive Stock Options or Nonqualified Stock Options. Options may be granted
to any Eligible Person. Each Option shall entitle the Participant to whom such
Option was granted to purchase, upon payment of the relevant Option Price, one
share of Common Stock. Options granted under the Plan shall comply with the
following terms and conditions:
(i)     Option Price.
A.     The Option Price for shares purchased under an Option shall be as
determined by the Committee, but shall not be less than the Fair Market Value of
the Common Stock as of the Date of Grant, except in the case of substitute
awards issued by the Company in connection with an acquisition or other
corporate transaction.
B.     The Option Price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option Price and the number of shares purchased, together with any amounts
required to be withheld for tax purposes under Section 17(c) of this Plan. Such
consideration must be paid before the Company will issue the shares being
purchased and must be in a form or a combination of forms acceptable to the
Committee for that purchase, which forms may (but are not required to) include:
(1)     cash;
(2)     check or wire transfer;
(3)     tendering (either actually or by attestation) shares of Common Stock
already owned by the Participant, provided that the shares have been held for
the minimum period required by applicable financial accounting rules to avoid a
charge to the Company’s earnings for financial reporting purposes;
(4)     to the extent permitted by applicable law, Cashless Exercise; or
(5)     such other consideration as the Committee may permit in its sole
discretion; provided, however, that any Participant may, at any time, exercise
any Vested Option (or portion thereof) owned by such Participant pursuant to a
Cashless Exercise without any prior approval or consent of the Committee.
(ii)     Vesting of Options. Each Option shall vest and become exercisable on
such terms and conditions as shall be prescribed by the Committee in the
applicable Award Agreement.
(iii)     Duration of Options. Subject to earlier termination in accordance with
the terms of the Plan and the instrument evidencing the Option, the maximum term
of an Option shall be as established for that Option by the Committee but in no
event shall be greater than ten years from the Date of Grant.
(iv)     Exercise Following Termination of Employment. Except as may be provided
in subsection (viii)(D) hereof, and unless otherwise determined by the Committee
in its sole discretion, upon termination of a Participant’s employment with the
Company and its Subsidiaries, the following terms and conditions shall apply:
A.     if the Participant’s employment is terminated by the Company other than
for Cause, or as a result of the Participant’s resignation for Good Reason, or
as a result of death, Permanent Disability or Retirement, the Participant (or,
in the case of the Participant’s death, such Participant’s Beneficiary) may
exercise any Options, to the extent vested as of the date of such termination,
at any time until the earlier of (I) three months following the date of such
termination of employment other than for Cause, or as a result of the
Participant’s resignation for Good Reason; (II) 12 months following the date of
such termination of employment due to Permanent Disability or death; (III) three
years (three months for an Incentive Stock Option) following the date of such
termination of employment due to Retirement; and (IV) the expiration of the
Option under the provisions of clause (iii) above; and
B.     if the Participant’s employment is terminated by the Company for Cause,
or as a result of the Participant’s resignation other than for Good Reason or
Retirement, all of the Participant’s Options (whether or not vested) shall
expire and be canceled without any payment therefor as of the date of such
termination.
Any Options not exercised within the applicable time period specified above
shall expire at the end of such period and be canceled without any payment
therefor.
With respect to a non-employee director or advisor who is a Participant in the
Plan, the references to termination of employment above shall be deemed to refer
to termination of service as a director or termination of service as an advisor,
as applicable, and as determined in the discretion of the Committee.
(v)     Certain Restrictions. Options granted hereunder shall be exercisable
during the Participant’s lifetime only by the Participant.
(vi)     Stockholder Rights; Option and Share Adjustments. A Participant shall
have no rights as a stockholder with respect to any shares of Common Stock
issuable upon exercise of an Option until a certificate or certificates
evidencing such shares shall have been issued to such Participant. Except as
otherwise provided by the Board of Directors, no adjustment (including an
adjustment of an Option’s exercise price) shall be made with respect to
(A) outstanding Options for dividends or other distributions, whether made with
respect to Common Stock or otherwise, or (B) dividends, distributions or other
rights in respect of any share of Common Stock for which the record date is
prior to the date upon which the Participant shall become the holder of record
thereof.
(vii)     Dividends and Distributions. Any shares of Common Stock or other
securities of the Company received by the Participant as a result of a stock
dividend or other distribution in respect of Option Shares shall be subject to
the same restrictions as such Option Shares.
(viii)     Incentive Stock Options. Incentive Stock Options granted under this
Plan shall be subject to the following additional conditions, limitations, and
restrictions:
A.     Incentive Stock Options may be granted only to employees of the Company
or a Subsidiary or parent corporation of the Company, within the meaning of Code
Section 424.
B.     No Incentive Stock Option may be granted under this Plan after the
10‑year anniversary of the date on which the Plan is adopted by the Board or, if
earlier, the date on which the Plan is approved by the Company’s stockholders.
C.     The aggregate Fair Market Value (as of the Date of Grant) of the Common
Stock with respect to which the Incentive Stock Options awarded to any
Participant first become exercisable during any calendar year may not exceed
$100,000. For purposes of the $100,000 limit, the Participant’s Incentive Stock
Options under this Plan and all other plans maintained by the Company and its
Subsidiaries will be aggregated. To the extent any Incentive Stock Option would
exceed the $100,000 limit, the Incentive Stock Option will thereafter be treated
as a Nonqualified Stock Option for all purposes. No Incentive Stock Option may
be granted to any individual who owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any
Subsidiary.
D.     If the Committee exercises its discretion to permit an Incentive Stock
Option to be exercised by a Participant more than three months after the
termination of a Participant’s employment for any reason or more than 12 months
if the Participant is Permanently Disabled, the Incentive Stock Option will
thereafter be treated as a Nonqualified Stock Option for all purposes. For
purposes of this subclause D, a Participant’s employment relationship will be
treated as continuing uninterrupted during any period that the Participant is on
military leave, sick leave or another Approved Leave of Absence if the period of
leave does not exceed 90 consecutive days, or a longer period to the extent that
the Participant’s right to reemployment with the Company or a Subsidiary is
guaranteed by statute or by contract. If the period of leave exceeds 90
consecutive days and the Participant’s right to reemployment is not guaranteed
by statute or contract, the employment relationship will be deemed to have
ceased on the 91st day of the leave.
(ix)     Additional Terms and Conditions. Each Option granted hereunder, and any
shares of Common Stock issued in connection with such Option, shall be subject
to such additional terms and conditions not inconsistent with the Plan as are
prescribed by the Committee and set forth in the applicable Agreement.
(b)     Unvested Options. Unless otherwise determined by the Committee in its
sole discretion, upon termination of a Participant’s employment or service with
the Company and its Subsidiaries, all Options granted to such Participant that
have not theretofore vested (and which do not vest by reason of such termination
of employment or service) shall terminate and be canceled without any payment
therefor.
9.     Restricted Shares and Bonus Shares.
(a)     Terms of Restricted Shares and Bonus Shares Generally. Restricted Shares
and Bonus Shares awarded by the Committee shall not require payment of any
consideration by Participants, except as otherwise determined by the Committee
in its sole discretion.
(b)     Restricted Shares and Bonus Shares shall comply with the following terms
and conditions:
(i)     Vesting. Any Awards of Restricted Shares shall vest in accordance with a
vesting schedule to be specified by the Committee. Except (A) with respect to
grants to the Company’s non-employee directors, or (B) as vesting may be
accelerated pursuant to the terms of the Plan, such restrictions shall not fully
terminate prior to three years after the Date of Grant. Bonus Shares shall be
fully vested when granted.
(ii)     Stockholder Rights. Unless otherwise determined by the Committee in its
sole discretion, a Participant shall have all rights of a stockholder as to the
Restricted Shares and Bonus Shares awarded to such Participant, including the
right to receive dividends and the right to vote in accordance with the
Company’s Certificate of Incorporation, subject to the restrictions set forth in
the Plan and the applicable Agreement.
(iii)     Dividends and Distributions. Any shares of Common Stock or other
securities of the Company received by a Participant as a result of a stock
distribution to holders of Restricted Shares or as a stock dividend on
Restricted Shares shall be subject to the same restrictions as such Restricted
Shares or Bonus Shares and all references to Restricted Shares or Bonus Shares
hereunder shall be deemed to include such shares of Common Stock or other
securities.
(iv)     Additional Terms and Conditions. Each Restricted Share and Bonus Share
granted or offered for sale hereunder shall be subject to such additional terms
and conditions not inconsistent with the Plan as are prescribed by the Committee
and set forth in the applicable Agreement.
(c)     Unvested Restricted Shares. Unless otherwise determined by the Committee
in its sole discretion, upon termination of a Participant’s employment or
service with the Company and its Subsidiaries, all Restricted Shares granted or
sold to such Participant that have not theretofore vested (and that do not vest
by reason of such termination of employment) shall terminate and be canceled
without any payment therefor.
10.     Stock Appreciation Rights.
Stock Appreciation Rights may be granted to Participants either alone
(“freestanding”) or in addition to or in tandem with other Awards granted under
the Plan and may, but need not, relate to a specific Option granted hereunder.
The provisions of Stock Appreciation Rights need not be the same with respect to
each grant or each recipient. Any Stock Appreciation Right granted in tandem
with an Option may be granted at the same time such Option is granted or at any
time thereafter before exercise or expiration of such Option. All Stock
Appreciation Rights granted under the Plan shall be granted subject to the same
terms and conditions applicable to Nonqualified Stock Options as set forth in
Section 8(a); provided, however, that Stock Appreciation Rights granted in
tandem with a previously granted Option shall have the same terms and conditions
as such Option. Subject to the provisions of Section 8, the Committee may impose
such other conditions or restrictions on any Stock Appreciation Right as it
shall deem appropriate. Stock Appreciation Rights may be settled in Common Stock
or cash as determined by the Committee in its sole discretion.
11.     Stock Units.
The Committee may also grant Awards of Stock Units under the Plan. With respect
to each grant of Stock Units, the Committee shall determine in its sole
discretion the period or periods, including any conditions for determining such
period or periods, during which any restrictions on full vesting shall apply,
provided that in no event, other than in connection with a termination of
employment, or with respect to grants to non-employee directors, shall such
period or periods be less than three years (the “Unit Restriction Period”). The
Committee may also make any Award of Stock Units subject to the satisfaction of
other conditions, including the attainment of performance goals, or
contingencies (“Unit Vesting Condition”), in order for a Participant to receive
payment of such Stock Unit Award, which shall be established by the Committee at
the Date of Grant thereof. Awards of Stock Units shall be payable in Common
Stock or cash as determined by the Committee in its sole discretion. The
Committee may permit a Participant to elect to defer receipt of payment of all
or part of any Award of Stock Units pursuant to rules and regulations adopted by
the Committee. Unless the Committee provides otherwise at the Date of Grant of
an Award of Stock Units, the provisions of Section 9 of this Plan relating to
the vesting of Restricted Shares shall apply during the Unit Restriction Period
or prior to the satisfaction of any Unit Vesting Condition for such Award.
12.     Performance Shares.
The Committee may grant Awards of Performance Shares and designate the
Participants to whom Performance Shares are to be awarded and determine the
number of Performance Shares, the length of the performance period and the other
terms and conditions of each such Award. Each Award of Performance Shares shall
entitle the Participant to a payment in the form of shares of Common Stock upon
the attainment of performance goals (which may be Qualifying Performance
Criteria) and other terms and conditions specified by the Committee.
Notwithstanding satisfaction of any performance goals, the number of shares
issued under an Award of Performance Shares may be adjusted on the basis of such
further considerations as the Committee shall determine, in its sole discretion.
However, the Committee may not, in any event, increase the number of shares
earned upon satisfaction of any performance goal by any Participant subject to
Code Section 162(m) to the extent such Section is applicable. The Committee, in
its sole discretion, may make a cash payment equal to the Fair Market Value of
the Common Stock otherwise required to be issued to a Participant pursuant to an
Award of Performance Shares.
13.     Other Stock-Based Awards.
In addition to the Awards described in Sections 8 through 12, and subject to the
terms of the Plan, the Committee may grant other Awards payable in shares of
Common Stock under the Plan as it determines to be in the best interests of the
Company and subject to such other terms and conditions as it deems appropriate.
14.     Performance‑Based Awards.
(a)     Qualifying Performance Criteria. Awards of Options, Restricted Shares,
Stock Units, Performance Shares, and other Awards made pursuant to the Plan may
be made subject to the attainment of performance goals relating to one or more
business criteria. For purposes of the Plan, such business criteria shall mean
any one or more of the following performance criteria, either individually,
alternatively or in any combination: (a) cash flow; (b) earnings (including,
without limitation, gross margin, earnings before interest and taxes, earnings
before taxes, earnings before interest, taxes, depreciation and amortization,
and net earnings); (c) earnings per share; (d) growth in earnings or earnings
per share; (e) stock price; (f) return on equity or average stockholders’
equity; (g) total stockholder return; (h) return on capital; (i) return on
assets or net assets; (j) return on investment; (k) sales, growth in sales or
return on sales; (l) income or net income; (m) operating income or net operating
income; (n) operating profit or net operating profit; (o) operating margin;
(p) return on operating revenue; (q) economic profit, (r) market share;
(s) overhead or other expense reduction; (t) growth in stockholder value
relative to various stock indices, (u) strategic plan development and
implementation, (v) net debt, (w) working capital (including components
thereof), and (x) during the “reliance period” (as defined in Treasury
Regulation section 1.162-27(f)(2)), any other similar objective financial
performance metric selected by the Committee in its sole discretion
(collectively, the “Qualifying Performance Criteria”). To the extent required by
or consistent with Code Section 162(m), the Committee may appropriately adjust
any evaluation of performance under a Qualifying Performance Criteria to exclude
any of the following events that occur during a performance period: (z) asset
write-downs or write-ups, (aa) litigation, claims, judgments or settlements,
(bb) the effect of changes in tax law, accounting principles or other such laws
or provisions affecting reported results, (cc) accruals for reorganization and
restructuring programs, and (dd) any extraordinary, unusual or non-recurring
items as described in Accounting Standards Codification (ASC) 225 and/or in
management’s discussion and analysis of financial condition and results of
operations appearing in the Company’s Annual Report to stockholders for the
applicable year.
(b)     Any Qualifying Performance Criteria may be used to measure the
performance of the Company as a whole or with respect to any business unit,
subsidiary or business segment of the Company, either individually,
alternatively or in any combination, and may be measured either annually or
cumulatively over a period of years, on an absolute basis or relative to a
pre‑established target, to previous period results or to a designated comparison
group, in each case as specified by the Committee in the Award. To the extent
required by Code Section 162(m), prior to the payment of any compensation under
an Award intended to qualify as “performance-based compensation” under Code
Section 162(m), the Committee shall certify the extent to which any such
Qualifying Performance Criteria and any other material terms under such Award
have been satisfied (other than in cases where such relate solely to the
increase in the value of the Common Stock). To the extent Code Section 162(m) is
applicable, the Committee may not in any event increase the amount of
compensation payable to a Participant subject to Code Section 162(m) upon the
satisfaction of any Qualifying Performance Criteria.
(c)     To the extent an Award is intended to qualify under Code Section 162(m),
any language in the Award Agreement, Committee resolutions, or other agreements
and actions in connection with the Award, to the extent inconsistent with
Section 162(m) shall be deemed interpreted and modified to the minimum extent
necessary so that such Awards are compliant with Code Section 162(m).
15.     Certain Forfeitures.
In the event (A) the Participant’s employment is terminated by the Company for
Cause or (B) a Participant or former Participant engages in a Competing Business
or in Wrongful Solicitation while in the employ of the Company or a Subsidiary,
or during the period of 13 months immediately following termination of such
employment, the following rules shall apply:
(a)     all Awards then held by the Participant (whether vested or not) shall be
forthwith forfeited without payment or other compensation of any kind; provided,
however, that the Company shall remit to the Participant the lesser of (i) the
amount (if any) such Participant paid for forfeited Awards and (ii) in the case
of Restricted Shares or Performance Shares, the Fair Market Value of such
Restricted Shares as of the date of termination;
(b)     notwithstanding subclause (a), in the event Vested Restricted Shares or
vested Performance Shares were disposed of (for or without receipt of value)
during the period commencing one year prior to the initial engagement in a
Competing Business or in Wrongful Solicitation through the 13-month anniversary
of the Participant’s termination of employment with the Company or a Subsidiary,
then, upon written demand by the Company, the Participant or former Participant,
as the case may be, shall forthwith remit to the Company the Fair Market Value
of such Vested Restricted Shares or vested Performance Shares, as determined on
the date of disposition, less the amount (if any) paid by the Participant for
such shares; and
(c)     in the event Option Shares, Shares obtained pursuant to the exercise of
a Stock Appreciation Right or other Shares obtained pursuant to Awards under the
Plan (and not described in subparagraph (b)) were disposed of (for or without
receipt of value) during the period commencing one year prior to the initial
engagement in a Competing Business or in Wrongful Solicitation through the
13-month anniversary of the Participant’s termination of employment with the
Company or a Subsidiary, then, upon written demand by the Company, the
Participant or former Participant, as the case may be, shall forthwith remit to
the Company the Fair Market Value of such Shares, as determined on the date of
disposition, less the Option Price or other amount (if any) paid therefor.
16.     Effect of Certain Corporate Changes and Changes in Control.
(a)     Dilution and Other Adjustments. If the Outstanding shares of Common
Stock or other securities of the Company, or both, for which the Award is then
exercisable or as to which the Award is to be settled shall at any time be
changed or exchanged by declaration of a stock dividend, stock split,
combination of shares, extraordinary dividend of cash and/or assets,
recapitalization, or reorganization, the Committee may, and if such event occurs
after a Change in Control, the Committee shall, appropriately and equitably
adjust the number and kind of shares of Common Stock or other securities that
are subject to the Plan or subject to any Awards theretofore granted, and the
exercise or settlement prices of such Awards, so as to maintain the
proportionate number of shares of Common Stock or other securities without
changing the aggregate exercise or settlement price.
(b)     Change in Control. In the event of a Change in Control,
(i)     any outstanding Award shall, upon the occurrence of such Change in
Control, be assumed and continued or an equivalent award substituted by the
Company’s successor or a parent or subsidiary of such successor; provided,
however that if a Participant, within two years after a Change in Control,
terminates employment for Good Reason, or is terminated by the Company without
Cause, Awards not previously vested shall immediately become vested, and
(ii)     provided, however, in the event that, upon the occurrence of such
Change in Control, such outstanding Awards are not assumed and continued or an
equivalent award is not substituted by the Company's successor or a parent or
subsidiary of such successor, then
A.     such Awards not previously vested shall immediately become vested; and
B.     any vested and outstanding Award shall, upon the occurrence of such
Change in Control, be cancelled in exchange for a payment in cash, stock or
other consideration paid to shareholders with respect to such Change in Control,
in an amount based on the Fair Market Value of the shares of Common Stock
subject to the Award, less any Option Price, which amount may be zero if
applicable, as the case may be.
17.     Miscellaneous.
(a)     No Rights to Grants or Continued Employment or Engagement. No
Participant shall have any claim or right to receive grants of Awards under the
Plan. Neither the Plan nor any action taken or omitted to be taken hereunder
shall be deemed to create or confer on any Participant any right to be retained
in the employ or as a director of the Company or any Subsidiary or other
Affiliate thereof, or to interfere with or to limit in any way the right of the
Company or any Subsidiary or other Affiliate thereof to terminate the employment
or other retention of such Participant at any time.
(b)     Right of Company to Assign Rights and Delegate Duties. The Company shall
have the right to assign any of its rights and delegate any of its duties
hereunder to any of its Affiliates. The terms and conditions of any Award under
the Plan shall be binding upon and shall inure to the benefit of the personal
representatives, heirs, legatees, and permitted successors and assigns of the
relevant Participant and the Company.
(c)     Tax Withholding. The Company and its Subsidiaries may require the
Participant to pay to the Company the amount of any taxes that the Company is
required by applicable federal, state, local or other law to withhold with
respect to the grant, vesting, or exercise of an Award. The Company shall not be
required to issue any shares of Common Stock under the Plan until such
obligations are satisfied in full. The Committee may in its sole discretion
permit or require a Participant to satisfy all or part of such Participant’s tax
withholding obligations by (1) paying cash to the Company, (2) having the
Company withhold a number of shares of Common Stock that would otherwise be
issued to the Participant (or become vested in the case of Restricted Shares),
having a Fair Market Value equal to the tax withholding obligations,
(3) surrendering a number of shares of Common Stock the Participant already
owns, having a Fair Market Value equal to the tax withholding obligations, or
(4) entering into such other arrangement as is acceptable to the Committee in
its sole discretion. The value of any shares withheld or surrendered may not
exceed the employer’s minimum tax withholding obligation and, to the extent such
shares were acquired by the Participant from the Company as compensation, the
shares must have been held for the minimum period required by applicable
accounting rules to avoid a charge to the Company’s earnings for financial
reporting purposes. The Company and its Subsidiaries shall also have the right
to deduct from any and all cash payments otherwise owed to a Participant any
federal, state, local or other taxes required to be withheld with respect to the
Participant’s participation in the Plan.
(d)     No Restriction on Right of Company to Effect Corporate Changes. The Plan
shall not affect in any way the right or power of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company’s capital structure or its
business, or any merger or consolidation of the Company, or any issue of stock
or of options, warrants or rights to purchase stock or of bonds, debentures,
preferred or prior preference stocks whose rights are superior to or affect the
Common Stock or the rights thereof or that are convertible into or exchangeable
for Common Stock, or the dissolution or liquidation of the Company, or any sale
or transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
(e)     1934 Act. Notwithstanding anything contained in the Plan or any
Agreement to the contrary, if the consummation of any transaction under the Plan
would result in the possible imposition of liability on a Participant pursuant
to Section 16(b) of the 1934 Act, the Committee shall have the right, in its
sole discretion, but shall not be obligated, to defer such transaction to the
extent necessary to avoid such liability.
(f)     Securities Laws. Notwithstanding any other provision of the Plan, the
Company shall have no obligation to issue or deliver any shares of Common Stock
under the Plan or make any other distribution of benefits under the Plan unless,
in the judgment of the Committee, such issuance, delivery or distribution would
comply with all applicable laws (including, without limitation, the requirements
of the 1933 Act and 1934 Act or the laws of any state or foreign jurisdiction)
and the applicable requirements of any securities exchange or similar entity.
(g)     Severability. If any provision of the Plan or any Award is determined to
be invalid, illegal or unenforceable in any jurisdiction, or as to any Person,
or would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Committee’s determination, materially altering the intent of the Plan or the
Award, such provision shall be stricken as to such jurisdiction, person or
Award, and the remainder of the Plan and any such Award shall remain in full
force and effect.
(h)     Vesting.
(i)     Notwithstanding anything to the contrary contained in the Plan, a
minimum period over which full-value, performance-based awards and full-value,
tenure-based awards granted under the Plan may entirely vest shall be set forth
in each Agreement, respectively; provided, however, that up to 10% of the shares
authorized under the Plan shall not be subject to such restrictions; and,
provided, further, that such restrictions shall not affect or otherwise limit
any acceleration of vesting pursuant to the Plan or set forth in the applicable
Agreement.
(ii)     Notwithstanding anything to the contrary contained in the Plan, but
subject to Section 15, unless otherwise provided in an applicable Agreement, in
the event of a Participant’s termination of employment or service by reason of
Retirement, Permanent Disability or death, such Participant’s then unvested
awards shall automatically become vested, and in the case of Options or SARs,
exercisable.
18.     Amendment.
The Board of Directors may at any time and from time to time alter, amend,
suspend, or terminate the Plan in whole or in part. No termination or amendment
of the Plan may, without the consent of the Participant to whom any Awards shall
previously have been granted, adversely affect the rights of such Participant in
such Awards. In addition, no amendment of the Plan shall, without the approval
of the stockholders of the Company:
(a)     change the class of individuals eligible for awards under the Plan;
(b)     increase the maximum number of shares of Common Stock for which Awards
may be granted under this Plan;
(c)     reduce the price at which Options may be granted below the price
provided for in Section 8(a) hereof;
(d)     reduce the Option Price of outstanding Options;
(e)     cancel an Option or Stock Appreciation Right in exchange for cash when
the exercise or grant price per share exceeds the Fair Market Value of one share
of Common Stock or take any action with respect to an Option or Stock
Appreciation Right that would be treated as a repricing under the rules and
regulations of the principal securities exchange on which the Common Stock is
traded; or
(f)     extend the term of this Plan.
19.     Termination of the Plan.
The Plan shall continue until terminated by the Board of Directors pursuant to
Section 18 or as otherwise set forth in this Plan, and no further Awards shall
be made hereunder after the date of such termination. Unless earlier terminated,
the Plan shall terminate ten (10) years after the Effective Date (provided the
awards granted before that date shall continue in accordance with their terms).
20.     Conditions to Issuance of Shares.
(a)     The Company shall be under no obligation to any Participant to register
for offering or resale or to qualify for exemption under the 1933 Act, or to
register or qualify under the laws of any state or foreign jurisdiction, any
shares of Common Stock, security or interest in a security paid or issued under,
or created by, the Plan, or to continue in effect any such registrations or
qualifications if made. The Company may issue certificates for shares with such
legends and subject to such restrictions on transfer and stop-transfer
instructions as the Committee deems necessary or desirable for compliance by the
Company with federal, state, and foreign securities laws. The Company may also
require such other action or agreement by the Participants as may from time to
time be necessary to comply with applicable securities laws.
(b)     To the extent the Plan or any instrument evidencing an Award provides
for issuance of stock certificates to reflect the issuance of shares of Common
Stock, the issuance may be effected on a noncertificated basis, to the extent
not prohibited by applicable law or the applicable rules of any stock exchange.
21.     Headings; Number; Gender.
The headings of sections and subsections herein are included solely for
convenience of reference and shall not affect the meaning of any of the
provisions of the Plan.
Words used herein in the singular form shall be construed as being used in the
plural form, as appropriate in the relevant context, and vice versa. Pronouns
used herein of one gender shall be construed as referring to either or both
genders, as appropriate in the relevant context.
22.     Limited Waiver.
The waiver by the Company of any of its rights under the Plan with respect to
any Participant, whether express or implied, shall not operate or be construed
as a waiver of any other rights the Company has with respect to such Participant
or of any of its rights with respect to any other Participant.
23.     Governing Law.
The Plan and all rights hereunder shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania without reference
to rules relating to conflicts of law.
24.     Compliance with Code Section 409A.
(a)     This Plan is intended to comply and shall be administered in a manner
that is intended to comply with Code Section 409A and shall be construed and
interpreted in accordance with such intent. To the extent that an Award or the
payment, settlement, or deferral thereof is subject to Code Section 409A, the
Award shall be granted, paid, settled, or deferred in a manner that will comply
with Code Section 409A, including regulations or other guidance issued with
respect thereto, except as otherwise determined by the Committee. Any provision
of this Plan that would cause the grant of an Award or the payment, settlement,
or deferral thereof to fail to satisfy Code Section 409A shall be amended to
comply with Code Section 409A on a timely basis, which may be made on a
retroactive basis, in accordance with regulations and other guidance issued
under Code Section 409A.
(b)     Notwithstanding anything in the Plan to the contrary, the receipt of any
benefits under this Plan, subject to Code Section 409A as a result of a
termination of employment, shall be subject to satisfaction of the condition
precedent that the Participant undergo a “separation from service” within the
meaning of Treas. Reg. § 1.409A-1(h) or any successor thereto. In addition, if a
Participant is deemed to be a “specified employee” within the meaning of that
term under Code Section 409A(a)(2)(B), then with regard to any payment or the
provisions of any benefit that is required to be delayed pursuant to Code
Section 409A(a)(2)(B), such payment or benefit shall not be made or provided
prior to the earlier of (i) the expiration of the six month period measured from
the date of the Participant's “separation from service” (as such term is defined
in Treas. Reg. § 1.409A-1(h)), or (ii) the date of the Participant's death (the
“Delay Period”). Within ten (10) days following the expiration of the Delay
Period, all payments and benefits delayed pursuant to this Section (whether they
would have otherwise been payable in a single sum or in installments in the
absence of such delay) shall be paid or reimbursed to the Participant in a lump
sum, and any remaining payments and benefits due under this Plan shall be paid
or provided in accordance with the normal payment dates specified for them
herein.
25.     Effective Date.
The Plan shall become effective (the “Effective Date”) upon approval by the
stockholders of the Company.

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