**Exhibit 10.2**

 

SUSQUEHANNA BANCSHARES, INC. 

EQUITY COMPENSATION PLAN 

(as amended May 25, 2001, July 16, 2003 and March 29, 2005) 

 

The purpose of the Susquehanna Bancshares, Inc. Equity Compensation Plan (the“Plan”) is to provide (i) designated officers (including officers who are also directors) and other employees of Susquehanna Bancshares, Inc. (the “Company”) and its subsidiaries, and (ii) non-employee members of the board ofdirectors of the Company (the “Board”), with the opportunity to receive grants of incentive stock options, nonqualified stock options, stock appreciation rights or phantom stock appreciation rights and restricted stock. The Companybelieves that the Plan will cause the participants to contribute materially to the growth of the Company, thereby benefiting the Company’s shareholders and will align the economic interests of the participants with those of the shareholders.

 

1. Administration

 

The Plan shall be administered and interpreted by a committee (the“Committee”), which shall consist of two or more persons appointed by the Board, all of whom shall be “disinterested persons” as defined under Rule 16b-3 under the Securities Exchange Act of 1934 (the “Exchange Act”)and “outside directors” as defined under section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) and related Treasury regulations. 

 

Except as provided in Section 6 hereof, the Committee shall have the sole authority to (i) determine the individuals to whomgrants shall be made under the Plan, (ii) determine the type, size and terms of the grants to be made to each such individual, (iii) determine the time when the grants will be made and the duration of any applicable exercise or restriction period,including the criteria for vesting and the acceleration of vesting and (iv) deal with any other matters arising under the Plan. 

 

The Committee may, in its discretion or in accordance with a directive from the Board, waive or amend any provisions of any Grant, provided such waiver oramendment is not inconsistent with the terms of this Plan as then in effect. The Committee may, if it so desires, base any of the foregoing determinations upon the recommendations of management of the Company. A majority of the Committee shallconstitute a quorum thereof, and the actions of a majority of the Committee at a meeting at which a quorum is present, or actions unanimously approved in writing by all members of the Committee, shall be actions of the Committee. 

 

The Committee shall have full power and authority to administer and interpretthe Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing the Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion. TheCommittee’s interpretations of the Plan and all determinations made by the Committee pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interests in the Plan or in any awards grantedhereunder. All powers of the Committee shall be executed in its sole discretion, in the best interest of the Company and in keeping with the objectives of the Plan and need not be uniform as to similarly situated individuals. 

 

2. Grants

 

Incentives under the Plan shall consist of grants of incentive stockoptions, nonqualified stock options, stock appreciation rights, phantom stock appreciation rights and restricted stock (hereinafter collectively referred to as “Grants”). All Grants shall be subject to the terms and conditions set forthherein and to those other terms and 

conditions consistent with this Plan as the Committee deems appropriate and as are specified in writing by the Committeeto the individual (the “Grant Instrument”). The Committee shall approve the form and provisions of each Grant Instrument. Grants under a particular section of the Plan need not be uniform as among the grantees. 

 

3. Shares Subject to the Plan

 

(a) Subject to the adjustment specified below, the aggregate number ofshares of the common stock of the Company, par value $2.00 per share (the “Company Stock”) that may be issued or transferred under the Plan is 2,462,500 shares. Notwithstanding anything in the Plan to the contrary, the maximum aggregatenumber of shares of Company Stock that shall be subject to Grants made under the Plan to any one individual during any calendar year shall be 450,000. The shares may be authorized but unissued shares of Company Stock or reacquired shares of CompanyStock, including shares purchased by the Company on the open market for purposes of the Plan. If and to the extent options granted under the Plan terminate, expire, or are cancelled, forfeited, exchanged or surrendered without having been exercisedor if any shares of restricted stock are forfeited, the shares subject to such Grants shall again be available for purposes of the Plan. 

 

(b) If there is any change in the number or kind of shares of Company Stock outstanding by reason of a stock dividend, a recapitalization, stock split, orcombination or exchange of shares, or merger, reorganization or consolidation in which the Company is the surviving corporation, reclassification or change in par value or by reason of any other extraordinary or unusual events affecting theoutstanding Company Stock as a class without the Company’s receipt of consideration, or if the value of outstanding shares of Company Stock is substantially reduced due to the Company’s payment of an extraordinary dividend or distribution,the maximum number of shares of Company Stock available for Grants, the maximum number of shares of Company Stock that may be subject to Grants to any one individual under the Plan in any calendar year, the number of shares covered by outstandingGrants, and the price per share or the applicable market value of such Grants shall be proportionately adjusted by the Committee to reflect any increase or decrease in the number or kind of issued shares of Company Stock to preclude the enlargementor dilution of rights and benefits under such Grants; provided, however, that any fractional shares resulting from such adjustment shall be eliminated by rounding any portion of a share equal to .500 or greater up, and any portion of a share equalto less than .500 down, in each case to the nearest whole number. For purposes of this Section 3(b), “shares of Company Stock” and “shares” include referenced shares with respect to SARs. The adjustments determined by theCommittee shall be final, binding and conclusive. Notwithstanding the foregoing, no adjustment shall be authorized or made pursuant to this Section to the extent that such authority or adjustment would cause any incentive stock option to fail tocomply with section 422 of the Code. 

 

4.Eligibility for Participation

 

All employees of theCompany and its subsidiaries (“Employees”), including Employees who are officers or members of the Board, shall be eligible to participate in the Plan. Members of the Board who are not employees of the Company or any of its subsidiaries(“Non-Employee Directors”) shall be eligible to participate in the Plan, but shall not be eligible to receive incentive stock options. 

 

The Board shall select the Employees and Non-Employee Directors to receive Grants and determine the number of shares of Company Stock subject to aparticular Grant in such manner as the Board determines. Employees and Non-Employee Directors who receive Grants under this Plan shall hereinafter be referred to as “Grantees”. 

 

Nothing contained in this Plan shall be construed to (i) limit the right of the Board to make Grants under this Plan inconnection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including options granted to employees thereof who become Employees of the Company, or forother proper corporate purpose, or (ii) limit the right of the Company to grant stock options or make other awards outside of this Plan. 

5. Granting of Options

 

(a) Number of Shares. The Committee, in its sole discretion, shall determine the number of shares of Company Stock that will be subject to eachGrant of stock options. 

 

(b) Type of Option and Price.The Committee may grant options intended to qualify as “incentive stock options” within the meaning of section 422 of the Code (“Incentive Stock Options”) or options which are not intended to so qualify (“Nonqualified StockOptions”) or any combination of Incentive Stock Options and Nonqualified Stock Options (hereinafter collectively the “Stock Options”), all in accordance with the terms and conditions set forth herein. 

 

The purchase price of Company Stock subject to a Stock Option shall bedetermined by the Committee and may be equal to, greater than, or less than the Fair Market Value (as defined below) of a share of such Stock on the date such Stock Option is granted; provided, however, that (i) the purchase price of Company Stocksubject to an Incentive Stock Option shall be equal to the Fair Market Value of a share of such Stock on the date such Stock Option is granted; and (ii) the purchase price of Company Stock subject to a Nonqualified Stock Option shall not be lessthan 100% of the Fair Market Value of a share of such stock on the date such Stock Option is Granted. 

 

If the Company Stock is traded in a public market, then the Fair Market Value per share shall be, if the principal trading market for the Company Stock isa national securities exchange or the National Market segment of The NASDAQ Stock Market, the last reported sale price thereof on the relevant date or (if there were no trades on that date) the latest preceding date upon which a sale was reported,or, if the Company Stock is not principally traded on such exchange or market, the mean between the last reported “bid” and “asked” prices thereof on the relevant date, as reported on NASDAQ or, if not so reported, as reported bythe National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Committee determines. If the Company Stock is not traded in a public market or subject to reported transactions or“bid” or “ask” quotations as set forth above, the Fair Market Value per share shall be as determined by the Committee. 

 

(c) Option Term. The Committee shall determine the term of each Stock Option. The term of any Stock Option shall not exceed ten years from the dateof grant. 

 

(d) Exercisability of Options. Stock Optionsshall become exercisable in accordance with the terms and conditions determined by the Committee, in its sole discretion, and specified in the Grant Instrument. The Committee, in its sole discretion, may accelerate the exercisability of any or alloutstanding Stock Options at any time for any reason. In addition, all outstanding Stock Options automatically shall become fully and immediately exercisable upon a Change of Control (as defined herein) in accordance with the provisions of Section11. 

 

(e) Vesting of Options and Restrictions on Shares.The vesting period for Stock Options shall commence on the date of grant and shall end on the date or dates, determined by the Committee, that shall be specified in the Grant Instrument. Notwithstanding any other provision of the Plan, except asotherwise provided by the Committee in the Grant Instrument, all outstanding Stock Options shall become immediately exercisable upon the earliest to occur of the following, if at such time the Grantee is an Employee of the Company or a parent orsubsidiary of the Company, or a Non-Employee Director in the case of a Nonqualified Stock Option: (i) the Grantee’s normal retirement date, (ii) five years from the date of the Grant, (iii) the Grantee’s death or Disability (as definedherein), or (iv) the occurrence of a Change of Control (as defined herein) of the Company. 

 

(f) Manner of Exercise. A Grantee may exercise a Stock Option which has become exercisable, in whole or in part, by delivering a duly completed notice of exercise to the Secretary of the Company, or such otherrepresentative of the Company as the Secretary shall appoint, specifying the number of shares as to which the Stock Option may be exercised and providing payment of such option price in accordance with Subsection (h) below. Such notice may instructthe Company to deliver shares of Common Stock to be issued upon payment of the option price to any registered broker or dealer designated by the Grantee (“Designated Broker”) in lieu of delivery to the Grantee. Such instructions mustdesignate the account into which the shares are to be deposited. The Grantee may tender a notice of exercise, which has been properly executed by the Grantee and the aforementioned delivery instructions to any Designated Broker. 

(g) Termination of Employment, Disability or Death. 

 

(i) Except as provided below, a Stock Option may only be exercised while theGrantee is employed by the Company as an Employee or Non-Employee Director. In the event that a Grantee ceases to be employed by the Company for any reason other than a “Disability” or death, any Stock Option which is otherwise exercisableby the Grantee shall terminate unless exercised within 90 days of the date on which the Grantee ceases to be employed by the Company (or within such other period of time as may be specified in the Grant Instrument), but in any event no later thanthe date of expiration of the option term. Any of the Grantee’s Stock Options which are not otherwise exercisable as of the date on which the Grantee ceases to be employed by the Company shall terminate as of such date. 

 

(ii) In the event the Grantee ceases to be employed by the Company becausethe Grantee is “disabled,” any Stock Option which is otherwise exercisable by the Grantee shall terminate unless exercised within one year of the date on which the Grantee ceases to employed by the Company (or within such other period oftime as may be specified in the Grant Instrument), but in any event no later than the date of expiration of the option term. Any of the Grantee’s Stock Options which are not otherwise exercisable as of the date on which the Grantee ceases to bean Employee shall terminate as of such date. 

 

(iii) If (a) theGrantee dies while employed by the Company, or (b) in the case of disability, during the period provided at Section 5(g)(ii) above, or (c) within 90 days after the date on which the Grantee ceases to be employed by the Company on account of atermination of employment specified in Section 5(g)(i) above (or within such other period of time as may be specified in the Grant Instrument), any Stock Option which is otherwise exercisable by the Grantee shall terminate unless exercised withinone year of the date of death (or within such other period of time as may be specified in the Grant Instrument), but in any event no later than the date of expiration of the option term. Any of the Grantee’s Stock Options which are nototherwise exercisable as of the date on which the Grantee ceases to be employed by the Company shall terminate as of such date. 

 

(iv) For purposes of this Section 5, the term “Company” shall include the Company’s subsidiaries and the term “Disability” or“Disabled” shall mean a Grantee’s becoming disabled within the meaning of section 22(e)(3) of the Code. 

 

(h) Satisfaction of Option Price. The Grantee shall pay the option price for a Stock Option as specified by the Committee (w) in cash, (x) with theapproval of the Committee, by delivering shares of Company Stock owned by the Grantee (including Company Stock acquired in connection with the exercise of a Stock Option, subject to such restrictions as the Committee deems appropriate) and having aFair Market Value on the date of exercise equal to the option price, (y) by delivery to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell asufficient portion of the shares and deliver the sale proceeds directly to the Company to pay the exercise price, or (z) by such other method as the Committee may approve. Shares of Common Stock used to exercise a Stock Option shall have been heldby the Grantee for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Stock Option. The Grantee shall pay the option price and the amount of withholding tax due, if any, at the time of payment ofthe option price. Notwithstanding the foregoing, the exercise price, plus any required federal income tax or other withholding amount, may be paid when the shares underlying the option are issued, or in such other manner as the Board of Directors ora committee of the Board may approve. 

 

(i) Election toWithhold Shares. To the extent permitted by the Committee, Grantees may make an election to satisfy the Company income tax withholding obligation with respect to a Stock Option by having shares withheld up to an amount that does not exceed theminimum applicable rate for federal (including FICA), state and local tax liabilities. Such election must be in the form and manner prescribed by the Committee. If the Grantee is a director or officer within the meaning of Rule 16a-1(f) promulgatedunder the Exchange Act, such election must be irrevocable and must be made six months prior to the date on which the Stock Option is exercised with respect to such shares. 

(j) Rule 16b-3 Restrictions. Unless a Grantee who is an “insider,” as defined underSection 16 of the Exchange Act, could otherwise transfer Company Stock issued pursuant to a Stock Option without incurring liability under Section 16(b) of the Exchange Act, at least six months must elapse from the date of acquisition of a StockOption by such a Grantee to the date of disposition of the Company Stock issued upon exercise of such option. 

 

(k) Limits on Incentive Stock Options. Each Incentive Stock Option shall provide that, to the extent that the aggregate Fair Market Value of theCompany Stock on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time by a Grantee during any calendar year under the Plan or any other stock option plan of the Company exceeds $100,000, then suchoption as to the excess shall be treated as a Nonqualified Stock Option. An Incentive Stock Option shall not be granted to any participant who is not an Employee of the Company or any “subsidiary” within the meaning of section 424(f) ofthe Code. An Incentive Stock Option shall not be granted to any Employee who, at the time of grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or any “parent” or“subsidiary” of the Company within the meaning of section 424(e) and (f) of the Code, unless the option price per share is not less than 110% of the Fair Market Value of Company Stock on the date of grant and the option exercise period isnot more than five years from the date of grant. 

 

6. [deleted] 

 

7. Restricted Stock Grants

 

The Committee may issue or transfer shares of Company Stock to an Employeeunder a Grant (a “Restricted Stock Grant”), upon such terms as the Committee deems appropriate. The following provisions are applicable to Restricted Stock Grants: 

 

(a) General Requirements. Shares of Company Stock issued pursuant to Restricted Stock Grants may be issued for cashconsideration or for no cash consideration, at the sole discretion of the Committee. The Committee shall establish conditions under which restrictions on the transfer of shares of Company Stock shall lapse over a period of time or according to suchother criteria as the Committee deems appropriate. The period of years during which the Restricted Stock Grant will remain subject to restrictions will be designated in the Grant Instrument as the “Restriction Period.” 

 

(b) Number of Shares. The Committee shall grant to each Grantee anumber of shares of Company Stock pursuant to a Restricted Stock Grant in such manner as the Committee determines. 

 

(c) Termination of Employment or Services. If the Grantee ceases to be employed by the Company (as an Employee or Non-Employee Director) during aperiod designated in the Grant Instrument as the Restriction Period, or if other specified conditions are not met, the Restricted Stock Grant shall terminate as to all shares covered by the Grant as to which restrictions on transfer have not lapsedand those shares of Company Stock must be immediately returned to the Company. The Committee may, however, provide for complete or partial exceptions to this requirement as it deems equitable. 

 

(d) Restrictions on Transfer and Legend on Stock Certificate. Duringthe Restriction Period, a Grantee may not sell, assign, transfer, pledge or otherwise dispose of the shares of Company Stock to which such Restriction Period applies except to a Successor Grantee under Section 10. Each certificate for a share issuedor transferred under a Restricted Stock Grant shall contain a legend giving appropriate notice of the restrictions in the Grant. The Grantee shall be entitled to have the legend removed from the stock certificate or certificates covering any of theshares subject to restrictions when all restrictions on such shares have lapsed. 

 

(e) Right to Vote and to Receive Cash Dividends. During the Restriction Period, unless the Committee determines otherwise, the Grantee shall have the right to vote shares subject to the Restricted Stock Grantand to receive any dividends or other distributions paid on such shares, subject to any restrictions deemed appropriate by the Committee. 

(f) Lapse of Restrictions. All restrictions imposed under the Restricted Stock Grant shall lapseupon the expiration of the applicable Restriction Period and the satisfaction of any conditions imposed by the Committee. The Committee may determine, as to any or all Restricted Stock Grants, that all the restrictions shall lapse without regard toany Restriction Period. All restrictions under all outstanding Restricted Stock Grants shall automatically and immediately lapse upon a Change of Control. 

 

(g) Election to Withhold Shares. To the extent permitted by the Committee, Grantees may make an election to satisfy the Company income taxwithholding obligation with respect to a Restricted Stock Grant by having shares withheld up to an amount that does not exceed the participant’s minimum applicable tax rate for federal (including FICA), state and local tax liabilities. Suchelection must be in the form and manner prescribed by the Committee. If the Grantee is a director or officer within the meaning of Rule 16a-1(f) promulgated under the Exchange Act, such election must be irrevocable and must be made six months priorto the date on which all restrictions lapse with respect to such shares. 

 

8.Stock Appreciation Rights

 

(a) GeneralRequirements. The Committee may grant stock appreciation rights (“SARs”) to any Grantee in tandem with any Stock Option, for all or a portion of the applicable Stock Option, either at the time the Stock Option is granted or at any timethereafter while the Stock Option remains outstanding; provided, however, that in the case of an Incentive Stock Option, such rights may be granted only at the time of the Grant of such Stock Option. Unless the Committee determines otherwise, thebase price of each SAR shall be equal to the greater of (i) the exercise price of the related Stock Option or (ii) the Fair Market Value of a share of Company Stock as of the date of Grant of such SAR. 

 

(b) Number of SARs. The number of SARs granted to a Grantee whichshall be exercisable during any given period of time shall not exceed the number of shares of Company Stock which the Grantee may purchase upon the exercise of the related Stock Option during such period of time. Upon the exercise of a Stock Option,the SARs relating to the Company Stock covered by such Stock Option shall terminate. Upon the exercise of SARs, the related Stock Option shall terminate to the extent of an equal number of shares of Company Stock. 

 

(c) Value of SARs. Upon a Grantee’s exercise of some or all ofthe Grantee’s SARs, the Grantee shall receive in settlement of such SARs an amount equal to the value of the stock appreciation for the number of SARs exercised, payable in cash, Company Stock or a combination thereof. The stock appreciationfor an SAR is the difference between the base price of the SAR as described in subsection (a) and the Fair Market Value of the underlying Company Stock on the date of exercise of such SAR. 

 

(d) Form of Payment. At the time of such exercise, the Grantee shallhave the right to elect the portion of the amount to be received that shall consist of cash and the portion that shall consist of Common Stock, which for purposes of calculating the number of shares of Company Stock to be received, shall be valuedat their Fair Market Value on the date of exercise of such SARs. The Committee shall have the right to disapprove a Grantee’s election to receive cash in full or partial settlement of the SARs exercised and to require that shares of CompanyStock be delivered in lieu of cash. If shares of Company Stock are to be received upon exercise of an SAR, cash shall be delivered in lieu of any fractional share. 

 

(e) Certain Restrictions. An SAR is exercisable only during the period when the Stock Option to which it is relatedis also exercisable. No SAR may be exercised for cash by an officer or director of the Company subject to Section 16 of the Exchange Act, in whole or in part, except in accordance with Rule 16b-3 under the Exchange Act. 

9. Phantom Stock Appreciation Rights

 

The Plan will include phantom stock appreciation rights under a program substantially similar to the Phantom StockAppreciation Plan (the “PSAP”) currently maintained by the Company. In connection with adoption of the Plan, at the time of shareholder approval of the Plan, the PSAP will be terminated as a separate plan but its provisions will beincorporated herein and become a part of the Plan. Any inconsistency between the terms of this Plan and the PSAP will be resolved in favor of the terms of this Plan. Interests previously awarded under the PSAP and outstanding at the time of adoptionof the Plan will be subject to conversion to cash and Company Stock in an equitable manner but subject to the PSAP participant’s acceptance. 

 

10. Transferability of Grants

 

Only the Grantee or his or her authorized representative may exercise rights under a Grant. Such persons may not transfer those rights except by will orby the laws of descent and distribution or, with respect to Grants other than Incentive Stock Options, if permitted under Rule 16b-3 of the Exchange Act and if permitted in any specific case by the Committee in its sole discretion, pursuant to aqualified domestic relations order as defined under the Code or Title I of ERISA or the regulations thereunder. When a Grantee dies, the representative or other person entitled to succeed to the rights of the Grantee (“Successor Grantee”)may exercise such rights. A Successor Grantee must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Grantee’s will or under the applicable laws of descent and distribution. Notwithstanding theforegoing, the Committee may provide, in a Grant Instrument, that a Grantee may transfer Nonqualified Stock Options to his or her children, grandchildren or spouse or to one or more trusts for the benefit of such family members or to partnerships inwhich such family members are the only partners (a “Family Transfer”), provided that the Grantee receives no consideration for a Family Transfer and the Grant Instruments relating to Nonqualified Stock Options transferred in a FamilyTransfer continue to be subject to the same terms and conditions that were applicable to such Nonqualified Stock Options immediately prior to the Family Transfer. 

 

11. Change of Control of the Company

 

As used herein, a “Change of Control” shall be deemed to have occurred if: 

 

(a) A liquidation or dissolution of the Company (excluding transfers to subsidiaries) or the sale of all or substantiallyall of the Company’s assets occurs; 

 

(b) As a result of atender offer, stock purchase, other stock acquisition, merger, consolidation, recapitalization, reverse split or sale or transfer of assets, any person or group (as such terms are used in and under Section 13(d)(3) or 14(d)(2) of the Exchange Act)becomes the beneficial owner (as defined in Rule 13-d under the Exchange Act), directly or indirectly, of securities of the Company representing more than 20% of the common stock of the Company or the combined voting power of the Company’s thenoutstanding securities; provided, however, that for purposes of this subsection 11(b), a person or group shall not include the Company or any subsidiary or any employee benefit plan (or related trust) sponsored or maintained by the Company or anysubsidiary; 

 

(c) If at least a majority of the Board at anytime does not consist of individuals who were elected, or nominated for election, by directors in office at the time of such election or nomination; or 

 

(d) The Company merges or consolidates with any other corporation (other than a wholly owned subsidiary) and is not the surviving corporation (or survivesonly as a subsidiary of another corporation). 

 

12. Consequences of a Changeof Control

 

(a) Notice. 

 

(i) If a Change of Control described in Section 11(a), (b) or (d) will occur,then, not later than 10 days after the approval by the stockholders of the Company (or approval by the Board, if stockholder action is not required) of such Change of Control, the Company shall give each Grantee with any outstanding Stock Options,Phantom Stock Appreciation Rights or SARs written notice of such proposed Change of Control. 

 

 

(ii) If a Change of Control described in Section 11(b) may occur without approval by the shareholders (orapproval by the Board) and does so occur, or if a Change of Control described in Section 11(c) occurs, then, not later than 10 days after such Change of Control, the Company shall give each Optionee with any outstanding Stock Options, Phantom StockAppreciation Rights or SARs written notice of the Change of Control. 

 

(b) Election Period. In connection with the Change of Control and effective only upon such Change of Control, each Grantee shall thereupon have the right, within 10 days after such written notice is sent by the Company (the“Election Period”), to make an election as described in Subsection (c) with respect to all of his or her outstanding Stock Options, Phantom Stock Appreciation Rights or SARs (whether the right to exercise such Stock Options, Phantom StockAppreciation Rights or SARs has then accrued or the right to exercise such Stock Options, Phantom Stock Appreciation Rights or SARs will occur or has occurred upon the Change of Control). 

 

(c) Election Right. During the Election Period, each Grantee shall have the right to elect to exercise in full anyinstallments of such Stock Options, Phantom Stock Appreciation Rights or SARs not previously exercised; provided, however, that in the case of an SAR or Phantom Stock Appreciation Right held by a Grantee who is subject to Section 16(b) of theExchange Act, any such surrender or payment shall be made on such date as the Committee shall determine consistent with Rule 16b-3 under the Exchange Act. 

 

(d) Termination of Stock Options. If a Grantee does not make a timely election in accordance with Subsection (c) in connection with a Change ofControl where the Company is not the surviving corporation (or survives only as a subsidiary of another corporation), the Grantee’s Stock Options, Phantom Stock Appreciation Rights or SARs shall terminate as of the Change of Control.Notwithstanding the foregoing, a Stock Option, Phantom Stock Appreciation Right or SAR will not terminate if assumed by the surviving or acquiring corporation, or its parent, upon a merger or consolidation and, with respect to an Incentive StockOption, the assumption of the Stock Option occurs under circumstances which are not deemed a modification of the Stock Option within the meaning of sections 424(a) and 424(h)(3)(A) of the Code. 

 

(e) Accounting and Tax Limitations. Notwithstanding the foregoing,

 

(i) if the right described in Subsection (c) in connectionwith SARs or Phantom Stock Appreciation Rights would make the applicable Change of Control ineligible for pooling of interest accounting treatment under APB No. 16 or make such Change of Control ineligible for desired tax treatment with respect tosuch Change of Control and, but for those provisions, the Change of Control would otherwise qualify for such treatment, the Grantee shall receive shares of Company Stock with a Fair Market Value equal to the cash that would otherwise be payablepursuant to Subsection (c) in substitution for the cash, and 

 

(ii) if the termination of the Stock Options described in Subsection (d) would make the applicable Change of Control ineligible for pooling of interest accounting treatment under APB No. 16 and, but for such provision, the Change of Controlwould otherwise qualify for such treatment, each affected Grantee shall receive a replacement or substitute stock option issued by the surviving or acquiring corporation. 

 

13. Amendment and Termination of the Plan

 

(a) Amendment. The Board may amend or terminate the Plan at any time; provided, however, that any amendment that increases the aggregate number(or individual limit for any single Grantee) of shares of Company Stock that may be issued or transferred under the Plan (other than by operation of Section 3(b)), or modifies the requirements as to eligibility for participation in the Plan, shallbe subject to approval by the shareholders of the Company and provided, further, that the Board shall not amend the Plan without shareholder approval if such approval is required by Rule 16b-3 of the Exchange Act or Section 162(m) of the Code.

 

(b) Termination of Plan. The Plan shall terminate onthe day immediately preceding the tenth anniversary of its effective date unless terminated earlier by the Board or unless extended by the Board with the approval of the shareholders. 

(c) Termination and Amendment of Outstanding Grants. A termination or amendment of the Plan thatoccurs after a Grant is made shall not materially impair the rights of a Grantee unless the Grantee consents or unless the Committee acts under Section 20(b) hereof. The termination of the Plan shall not impair the power and authority of theCommittee with respect to an outstanding Grant. Whether or not the Plan has terminated, an outstanding Grant may be terminated or amended under Section 20(b) hereof or may be amended by agreement of the Company and the Grantee consistent with thePlan. 

 

(d) Governing Document. The Plan shall be thecontrolling document. No other statements, representations, explanatory materials or examples, oral or written, may amend the Plan in any manner. The Plan shall be binding upon and enforceable against the Company and its successors and assigns.

 

14. Funding of the Plan

 

This Plan shall be unfunded. The Company shall not be required to establishany special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. In no event shall interest be paid or accrued on any Grant, including unpaid installments of Grants. 

 

15. Rights of Participants

 

Nothing in this Plan shall entitle any Employee or Non-Employee Director orother person to any claim or right to be granted a Grant under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employ of the Company or any otheremployment rights. 

 

16. No Fractional Shares

 

No fractional shares of Company Stock shall be issued or delivered pursuantto the Plan or any Grant. 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 otherwiseeliminated. 

 

17. Withholding of Taxes

 

The Company shall have the right to deduct from all Grants paid in cash, orfrom other wages paid to an employee of the Company, any federal, state or local taxes required by law to be withheld with respect to such cash awards and, in the case of Grants paid in Company Stock, the Grantee or other person receiving suchshares shall be required to pay to the Company the amount of any such taxes which the Company is required to withhold with respect to such Grants or the Company shall have the right to deduct from other wages paid to the employee by the Company theamount of any withholding due with respect to such Grants. 

 

18. Requirementsfor Issuance of Shares

 

No Company Stock shall be issuedor transferred in connection with any Grant hereunder unless and until all legal requirements applicable to the issuance or transfer of such Company Stock have been complied with to the satisfaction of the Committee. The Committee shall have theright to condition any Grant made to any Grantee hereunder on such Grantee’s undertaking in writing to comply with such restrictions on his or her subsequent disposition of such shares of Company Stock as the Committee shall deem necessary oradvisable as a result of any applicable law, regulation or official interpretation thereof and certificates representing such shares may be legended to reflect any such restrictions. Certificates representing shares of Company Stock issued under thePlan will be subject to such stop-transfer orders and other restrictions as may be applicable under such laws, regulations and other obligations of the Company, including any requirement that a legend or legends be placed thereon. 

 

19. Headings

 

Section headings are for reference only. In the event of a conflict between a title and the content of a Section, thecontent of the Section shall control. 

20. Miscellaneous

 

(a) Substitute Grants. The Committee may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporatemerger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company or any of its subsidiaries in substitution for a stock option or restricted stock grant made by such corporation (“Substituted StockIncentives”). The terms and conditions of the substitute grant may vary from the terms and conditions required by the Plan and from those of the Substituted Stock Incentives. The Committee shall prescribe the provisions of the substitutegrants. 

 

(b) Compliance with Law. The Plan, the exerciseof Stock Options and the obligations of the Company to issue or transfer shares of Company Stock under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect topersons subject to Section 16 of the Exchange Act, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. The Committee mayrevoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation. The Committee may also adopt rules regarding the withholding of taxes on payments to Grantees. The Committeemay, in its sole discretion, agree to limit its authority under this Section. 

 

(c) Ownership of Stock. A Grantee or Successor Grantee shall have no rights as a shareholder with respect to any shares of Company Stock covered by a Grant until the shares are issued or transferred to theGrantee or Successor Grantee on the stock transfer records of the Company. 

 

(d) Governing Law. The validity, construction, interpretation and effect of the Plan and Grant Instruments issued under the Plan shall exclusively be governed by and determined in accordance with the law of theCommonwealth of Pennsylvania. 

 

21. Effective Date of the Plan. The Planshall be effective as of the date of the approval by the Company’s shareholders of the Plan.