EXHIBIT 10.3


 


GRAYSTONE FINANCIAL CORP.


2007 STOCK INCENTIVE PLAN


 


The
purpose of the Graystone Financial Corp. 2007 Stock Incentive Plan (the “Plan”)
is to provide (i) designated officers (including officers who are also
directors) and other designated employees of Graystone Financial Corp., a
Pennsylvania corporation (the “Company”), and its subsidiaries, and (ii) non-employee
members of the board of directors of the Company and its subsidiaries, with
additional incentive to further the success of the Company.  The Company believes that the Plan will cause
the designated 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.


 


Article 1.               Administration


 


1.1           The Committee.  The Plan shall be administered and
interpreted by a committee (the “Committee”), which shall consist of (i) either
the board of directors of the Company (the “Board”) or (ii) two or more
directors appointed by the Board, all of whom (unless the Board determines
otherwise) shall be “non-employee directors” of the Board 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.  The Board, in its discretion, may appoint
separate committees to administer the Plan with respect to a designated portion
of participants (e.g., participants subject to Section 16 of the Exchange
Act or Section 162(m) of the Code). 
If the Board does not appoint a committee to administer all or any
portion of the Plan, then the Board shall be the Committee.


 


1.2           Determinations with respect
to Grants.  The
Committee shall have the sole authority to (i) determine the individuals
to whom Grants (as defined in Section 2.1) 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, (iv) accelerate the vesting of any Grants and
reduce or waive any restrictions on the exercise or vesting of any Grants, and (v) deal
with any other matters arising under the Plan. 
The Committee may, if it so desires, base any of the foregoing
determinations upon the recommendations of management of the Company.


 


1.3           Action by the Committee.  A majority of the Committee shall constitute
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.


 

















 


1.4           Delegation.  The Committee may appoint one of its members
to be chairman and any person, whether or not a member of the Committee, to be
its secretary or agent.  Furthermore, the
Committee may delegate any ministerial duties in connection with the Plan to
one or more officers of the Company.


 


1.5           Interpretation of Plan.  The Committee shall have full power and
authority to administer and interpret the 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, to waive requirements relating to formalities or other matters
that do not modify the substance of rights of Grantees (as defined in Section 4.2)
or constitute a material amendment of the Plan, to correct any defect or supply
any omission of the Plan or any Grant Instrument (as defined in Section 2.2)
and to reconcile any inconsistencies in the Plan or any Grant Instrument.  The Committee’s interpretations of the Plan
and all determinations made or actions taken 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 granted hereunder.  All powers of the Committee shall be
exercised 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.


 


1.6           No Liability.  No member of the Committee shall be liable
for any act or omission (whether or not negligent) taken or omitted in good
faith, or for the good faith exercise of any authority or discretion granted in
the Plan to the Committee, or for any act or omission of any other member of
the Committee.


 


1.7           Costs.  All costs incurred in connection with the
administration and operation of the Plan shall be paid by the Company.  Except for the express obligations of the
Company under the Plan and under Grants (as defined in Section 2.1) in
accordance with the provisions of the Plan, the Company shall have no liability
with respect to any Grant, or to any Grantee or any transferee of shares of
Company Stock from any Grantee, including, but not limited to, any tax
liability, capital losses, or other costs or losses incurred by any Grantee, or
any such transferee.


 


Article 2.               Grants


 


2.1           Type of Grants.  Incentives under the Plan shall consist of
grants of incentive stock options, nonqualified stock options, stock
appreciation rights, restricted stock, deferred stock and performance awards
(hereinafter collectively referred to as “Grants”).


 


2.2           Grant Instruments.  All Grants shall be subject to the terms and
conditions set forth herein and to those other terms and conditions consistent
with the Plan as the Committee deems appropriate.  Each Grant shall be evidenced by a written
instrument (the “Grant Instrument”) specifying the number of shares of Company
Stock to which it relates and containing such other terms and conditions as the
Committee shall approve that are not inconsistent with the Plan.  Grants under a particular section of the Plan
need not be uniform as among the grantees. 
The Committee shall have the authority to waive any condition of an
outstanding Grant or amend an outstanding Grant, provided that an amendment of
an existing


 

















 


Grant
may not be made without the consent of the Grantee if such amendment would have
an adverse effect on the rights of the Grantee.


 


Article 3.               Shares Subject to the Plan


 


3.1           Number of Shares.  Subject to the adjustment specified below,
the aggregate number of shares of the common stock of the Company, no par value
per share (the “Company Stock”), that may be issued or transferred under the
Plan is 400,000 shares. Notwithstanding anything in the Plan to the contrary,
the maximum aggregate number 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 100,000.  The shares may be
authorized but unissued shares of Company Stock or reacquired shares of Company
Stock, including shares purchased by the Company on the open market for
purposes of the Plan.  If and to the
extent Grants under the Plan terminate, expire, or are cancelled, forfeited,
exchanged or surrendered without Company Stock being delivered pursuant
thereto, or if any shares of Restricted Stock are forfeited, the shares subject
to such Grants, including forfeited shares, shall again be available for
purposes of the Plan.


 


3.2           Anti-Dilution Adjustments.  If there is any change in the number or kind
of shares of Company Stock outstanding by reason of a stock dividend,
recapitalization, stock split, or combination or exchange of shares, or a
merger, reorganization or consolidation in which the Company is the surviving
corporation, or a reclassification or by reason of any other extraordinary or
unusual events affecting the outstanding 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 kind of shares, 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 outstanding Grants,
and the price per share or the applicable fair market value of such Grants
shall be equitably adjusted by the Committee to reflect any increase or
decrease in the number or kind of issued shares of Company Stock to preclude
the enlargement or 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 equal to or less than .500 down, in each case to the
nearest whole number. For purposes of this Section 3.2, “shares of Company
Stock” and “shares” include referenced shares with respect to SARs.  The adjustments determined by the Committee
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 to comply with Section 422 of the Code.


 

















 


Article 4.               Eligibility for Participation


 


4.1           Eligible Participants.


 


4.1.1        All employees
of the Company and its present or future subsidiaries (“Employees”), including
Employees who are officers or members of the Board, shall be eligible to
participate in the Plan.


 


4.1.2        Members of the
board of directors of the Company or members of the board of directors of any
subsidiary of the Company, who are not employees of the Company or any of its
subsidiaries (“Non-Employee Directors”) also shall be eligible to participate
in the Plan and may receive grants in the discretion of the Committee; provided,
however, that only Employees shall be eligible to receive Incentive Stock
Options (as defined in Section 5.1.1).


 


4.1.3        For purposes of
the Plan the term “subsidiary” shall mean an entity controlled by the Company
directly, or indirectly through one or more intermediaries.


 


4.2           Selection of Grantees.  The Committee shall select the individuals to
receive Grants and determine the number of shares of Company Stock subject to a
particular Grant in such manner as the Committee determines.  Any individuals who receive Grants under this
Plan shall hereinafter be referred to as “Grantees”.


 


Article 5.               Granting of Options


 


5.1           Type of Option and Price.


 


5.1.1        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 Stock Options”) 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.


 


5.1.2        The purchase price of
Company Stock subject to a Stock Option shall be determined by the Committee
and shall not be less than 100% of the Fair Market Value (determined in
accordance with Section 5.2.3) of a share of such Stock on the date such
Stock Option is granted.


 


5.1.3        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 is a national securities
exchange or 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 an exchange or market which reports last sale price data,
then the average of the mean between the last reported “bid” and “ask” prices
each day over the five trading days preceding the relevant date, as reported on


 

















 


NASDAQ
or, if not so reported, as reported by the applicable customary reporting
service or market (including the Over the Counter Bulletin Board or the Pink
Sheets).  If the Company Stock is not
traded in a public market or subject to reported transactions or quotations as
set forth above, the Fair Market Value per share shall be as determined by the
Committee; provided, however, that no determination of Fair
Market Value with respect to an Incentive Stock Option shall be inconsistent
with Section 422 of the Code or the regulations thereunder.


 


5.2           Option Term.  The Committee shall determine the term of
each Stock Option; provided, however, that the term of a Stock
Option shall not exceed ten years from the date of grant.


 


5.3           Exercisability of Options.  Stock Options shall become exercisable in
accordance with the terms and conditions determined by the Committee, in its
sole discretion.  The Committee, in its
sole discretion, may accelerate, in whole or in part, the exercisability of any
or all outstanding 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 in Section 9.1).


 


5.4           Vesting of Options and
Restrictions on Shares.


 


5.4.1        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.


 


5.4.2        Notwithstanding any other
provision of the Plan, except as otherwise 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 or a Non-Employee Director:  (i) the Grantee’s Retirement (as defined
in Section 5.6.4), (ii) the Grantee’s death or Disability (as defined
in Section 5.6.4), or (iii) the occurrence of a Change of Control (as
defined in Section 9.1).


 


5.5           Manner of Exercise.


 


5.5.1        A Grantee may exercise a
Stock Option which has become exercisable, in whole or in part, by delivering a
duly completed notice of exercise, in such form as is acceptable to the
Committee, to the Secretary or other officer of the Company designated by the
Committee, with accompanying payment of the option price in accordance with Section 5.7
below.


 


5.5.2        Unless otherwise provided by
the Committee, such notice may instruct the Company to deliver shares of
Company Stock due upon the exercise of the Stock Option to any registered
broker or dealer previously approved or designated by the Committee (“Designated
Broker”) in lieu of delivery to the Grantee. 
The Committee may suspend the ability of a Grantee to exercise a Stock
Option through a Designated Broker at any time that the Committee, in its sole
discretion, determines appropriate.


 

















 


5.6           Termination of Employment or
Service.


 


5.6.1        General.  Except as provided below, a Stock Option may
only be exercised while the Grantee is employed by the Company or a subsidiary
of the Company or is serving as a Non-Employee Director of the Company or a
subsidiary of the Company.


 


5.6.2        Nonqualified Stock Options.  In the event of a Grantee’s termination of
employment or service for any reason other than death, Disability or Retirement
(as such terms are defined in Section 5.6.4) or following a Change of
Control, the Nonqualified Stock Options shall be exercisable only as to those
shares that were immediately purchasable on the date of termination and only
for a period of three (3) months following termination or for such other
period as the Committee shall establish in its sole discretion.  If the Grantee’s termination of employment or
service is due to death, Disability or Retirement or following a Change of
Control, all Nonqualified Stock Options held by the Grantee shall vest and
become immediately exercisable upon such event and shall be thereafter
exercisable by the Grantee or the Grantee’s legal representative or
beneficiaries, as applicable, for a period of two (2) years following the
date of such event, provided that in no circumstance shall the period
extend beyond the expiration of the Nonqualified Stock Option term set forth in
the Grant Instrument.


 


5.6.3        Incentive Stock Options.  In the event of a Grantee’s termination of
employment for any reason other than death, Disability, Retirement, or
following a Change of Control, the Grantee’s Incentive Stock Options shall be
exercisable only as to those shares that were immediately purchasable by such
Grantee at the date of termination and only for a period of three (3) months
following termination.  In the event of a
termination of a Grantee’s employment due to death, Disability, Retirement or
following a Change of Control, all Incentive Stock Options held by such Grantee
shall vest and become immediately exercisable and shall thereafter be
exercisable by the Grantee or the Grantee’s legal representative or
beneficiaries, as applicable, for a period of two (2) years following the
date of such cessation of employment, provided, however, that any
such Option shall not be eligible for treatment as an Incentive Stock Option in
the event such Option is exercised more than three (3) months following
the date of Grantee’s Retirement or termination of employment following a
Change of Control; and provided  further, that no Option shall be
eligible for treatment as an Incentive Stock Option in the event such Option is
exercised more than one (1) year following termination of employment due
to Disability; and provided  further, in order to obtain Incentive
Stock Option treatment for Options exercised by heirs or devisees of a deceased
Grantee, the Grantee’s death must have occurred while employed or within three (3) months
of termination of employment. 
Notwithstanding anything herein to the contrary, in no event shall the
period within which an Incentive Stock Option may be exercised extend beyond
the expiration of the Option term set forth in the Grant Instrument.


 


5.6.4        Definitions.  For purposes of the Plan: (i) the term “Company”
shall include the Company’s subsidiaries; (ii) the term “Disability” or “Disabled”
shall mean any physical or mental impairment which qualifies an individual for
disability benefits under the applicable long-term disability plan maintained
by the Company, or, if no such plan applies, which would qualify such
individual for disability benefits under the long-term disability plan maintained
by the Company, if such individual were covered by that plan, or, if no such
plan


 

















 


exists,
as determined in good faith by the Committee; and (iii) “Retirement” or “Retired”
shall mean a termination of employment which constitutes a “retirement”, whether
normal or otherwise, under any applicable qualified pension benefit plan
maintained by the Company, or, if no such plan is applicable, which would
constitute “retirement”, as determined by the Committee, in its sole
discretion, or, in the case of a Non-Employee Director, the Grantee ceases to
be such after attaining the age of 65 or such other age as shall be established
by the Committee.


 


5.7           Payment of Option Price.  The Grantee shall pay the option price
specified in the Grant Instrument in cash, including through the broker
assisted cashless exercise procedure described in Section 5.5.2  With the approval of the Committee, the
Grantee also may pay the option price specified in the Grant Instrument 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 a Fair Market
Value on the date of exercise equal to the option price or through a combination
of cash and shares of Company Common Stock owned by the Grantee.  Unless permitted by the Committee, no
tendered shares of Company Stock which were acquired by the Grantee pursuant
to, or upon the previous exercise of, a Grant under the Plan, or an award under
any other award plan of the Company or its subsidiaries, shall be accepted in
payment unless the Grantee has held such shares (without restriction imposed by
the applicable plan or award) for at least six months prior to delivery in
payment.  Subject to Article 13, the
Grantee shall pay the option price and the amount of withholding tax due, if
any, at the time of exercise.  Shares of
Company Stock shall not be issued or transferred upon exercise of a Stock
Option until the option price is fully paid and any required withholding
obligations are satisfied.


 


5.8           Limits on Incentive Stock
Options.


 


5.8.1        Each Incentive Stock Option
shall provide that, to the extent that the aggregate Fair Market Value of the
Company 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 such option as to the excess shall be treated as a Nonqualified
Stock Option.


 


5.8.2        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) of the
Code.


 


5.8.3        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 is
not more than five years from the date of grant.


 

















 


5.8.4        No Incentive Stock Option
granted under this Plan is transferable expect by will or the laws of descent
and distribution and is exercisable during the Grantee’s lifetime only by the
Grantee.


 


5.9           Notice of Disposition;
Withholding; Escrow.  A Grantee
of an Incentive Stock Option shall immediately notify the Company in writing of
any sale, transfer, assignment or other disposition (or action constituting a
disqualifying disposition within the meaning of Section 421 of the Code)
of any shares of Company Stock acquired through exercise of an Incentive Stock
Option, within two (2) years after the grant of such Incentive Stock
Option or within one (1) year after the acquisition of such shares,
setting forth the date and manner of disposition, the number of shares disposed
of and the price at which such shares were disposed of.  The Company shall be entitled to withhold
from any compensation or other payments then or thereafter due to the Grantee
such amounts as may be necessary to satisfy any withholding requirements of
Federal (including payroll taxes) or state law or regulation and, further, to
collect from the Grantee any additional amounts which may be required for such
purpose.  The Committee may, in its sole
discretion, require shares of Company Stock acquired by an Optionee upon
exercise of an Incentive Stock Option to be held in an escrow arrangement for
the purpose of enabling compliance with the provisions of this Section 5.9.


 


5.10         No ISO Warranty.  The Company makes no warranty that Stock
Options granted under this Plan that are intended to qualify as Incentive Stock
Options will, in fact, so qualify or that any qualification will not be lost in
the future, including by acts or omissions of the Company or the Committee or
by other cause.  If a Stock Option
granted hereunder for any reason fails for whatever reason to comply with the
provisions of Section 422 of the Code, and such failure is not or cannot
be cured, such Option shall be a Nonqualified Stock Option.


 


Article 6.               Stock Appreciation Rights


 


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


 


6.2           Exercise.


 


6.2.1        No SAR shall be exercisable
more than 10 years after the date of its grant.


 


6.2.2        An SAR not granted in tandem
with a Stock Option will become exercisable at such time or times, and on such
terms and conditions, as the Committee shall specify.  Unless the Committee provides otherwise in
the Grant Instrument, the provisions of


 
















 


Article 5 applicable
to Nonqualified Stock Options, including, without limitation, those related to
exercise upon termination of employment or service, shall be applicable to
non-tandem SARs; provided, however, that all such SARs shall
become immediately exercisable upon the occurrence of a Change of Control of
the Company.


 


6.2.3                        An SAR granted
in tandem with a Stock Option will be exercisable only at such time or times,
and to the extent, that the related Stock Option is exercisable and will be
exercisable only in accordance with the exercise procedure for the related
Stock Option.  Upon the exercise of a
Stock Option, the SARs relating to the Company Stock covered by the related
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.


 


6.3                                 Value of SARs.  Upon a Grantee’s exercise of some or all of
the 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
appreciation for an SAR is the difference between the base price of the SAR as
described in Section 6.1 and the Fair Market Value of the underlying
Company Stock on the date of exercise of such SAR.


 


6.4                                 Form of
Payment.  Upon exercise of an SAR,
payment shall be made in the form of shares of Company Stock, valued at their
Fair Market Value on the date of exercise, in cash, or in a combination
thereof, as the Committee, in its sole discretion, shall determine.  Payment by the Company of SARs shall be
subject to withholding of applicable taxes in accordance with Article 13.


 


Article 7.                                            Restricted and Deferred Stock Grants


 


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


 


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


 


7.1.2                        If the Grantee
ceases to be employed by the Company or, in the case of a Non-Employee
Director, to serve or be engaged as such, during a period 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 lapsed and
those shares of Company Stock must be immediately returned to the Company.  The Committee may, however, in its sole
discretion, provide for complete or partial


 

















 


exceptions
to this requirement as it deems appropriate, including, without limitation,
upon death, Disability or Retirement (as defined in Section 5.6.4).


 


7.1.3                        During the
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 Article 8.  Each certificate for a share issued or
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
Restricted Stock legend pursuant to this Section 7.1 removed from the
stock certificate or certificates covering any of the shares subject to
restrictions when all restrictions on such shares have lapsed.


 


7.1.4                        During the
Restriction Period, unless the Committee determines otherwise, the Grantee
shall have the right to vote shares subject to the Restricted Stock Grant and
to receive any dividends or other distributions paid on such shares, subject to
any restrictions deemed appropriate by the Committee.


 


7.1.5                        Except as
provided by Article 14, all restrictions imposed under the Restricted
Stock Grant shall lapse upon 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
to any Restriction Period.  All
restrictions under all outstanding Restricted Stock Grants shall automatically
and immediately lapse upon a Change of Control.


 


7.2                                 Deferred Stock.


 


7.2.1                        The Committee
may grant a participant the right to receive shares of Company Stock to be
delivered in the future (a “Deferred Stock Grant”).  Delivery of the Company Stock pursuant to a
Deferred Stock Grant will take place at such time or times, and on such terms
and conditions, as the Committee may determine. 
The Committee may provide at the time of the Deferred Stock Grant that
the stock to be delivered will be restricted stock pursuant to Section 7.1.  The Committee may at any time accelerate the
time at which delivery of all or any part of the Company Stock will take place;
provided, however, that unless otherwise provided by the
Committee at the time of grant, the time of delivery of the deferred stock will
automatically accelerate to the date of a Change of Control.


 


7.2.2                        During any
deferral period, the Grantee shall not have any rights as a shareholder with
respect to the deferred shares.


 


7.3                                 Tax
Withholdings.  Delivery of
stock pursuant to this Article 7 shall be subject to withholding of
applicable taxes in accordance with Article 13.


 


Article 8.                                            Transferability of Grants


 


8.1                                 Limitation.  During a Grantee’s lifetime, only the Grantee
may exercise rights under a Grant and Grants may not be transferred, assigned,
pledged or hypothecated in any


 

















 


manner,
by operation of law or otherwise, except by will or by the laws of descent and
distribution or, with respect to Grants other than Incentive Stock Options, if
permitted in any specific case by the Committee, in its sole discretion.


 


8.2                                 Successor
Grantee.  When a Grantee dies, the
representative or other person entitled to succeed to the rights of the 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.


 


Article 9.                                            Change of Control of the Company


 


9.1                                 Definitions.  As used herein, a “Change of Control” shall
mean any of the following:  (i) the
occurrence of, or execution of an agreement providing for a merger, consolidation,
division or other fundamental transaction involving the Company, a sale,
exchange, transfer or other disposition of substantially all of the assets of
the Company, or a purchase by the Company of substantially all of the assets of
another entity, unless (a) such merger, consolidation, division, sale,
exchange, transfer, purchase, disposition or other transaction is approved in
advance by eighty percent (80%) or more of the members of the Board of
Directors of the Company who are not interested in the transaction and (b) a
majority of the members of the Board of Directors of the legal entity resulting
from or existing after any such transaction and a majority of the members of
the Board of Directors of such entity’s parent corporation, if any, are former
members of the Board of Directors of the Company; or (ii) any “person” (as
such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the “Act”)), other than the Company or any “person” who
on the date hereof is a director or officer of the Company is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Act), directly or indirectly,
of securities of the Company representing twenty (20%) percent or more of the
combined voting power of the Company’s then outstanding securities; or (iii) individuals
who at the Effective Date of this Plan constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority thereof, unless
the election of each director who was not a director at the beginning of such
period has been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the Effective
Date; or (iv) any other change in control of the Company similar in effect
to any of the foregoing.


 


9.2                                 Business
Combination Transaction.  Any
agreement to which the Company or any of its subsidiaries is a party which
provides for any merger, consolidation, share exchange, or similar transaction
of the Company with or into another corporation or other association whereby
the Company is not to be the surviving or parent corporation shall provide,
without limitation, for the assumption of any outstanding Grants by the
surviving corporation or association or its parent and all outstanding Grants
shall be subject to such agreement.  In
any case where Grants are assumed by another corporation, appropriate equitable
adjustments as to the number and kind of shares or other securities and the
purchase or exercise price(s) shall be made.


 

















 


Article 10.                                     Amendment and Termination of the Plan


 


10.1                           Amendment.  The Board may amend, suspend or terminate the
Plan at any time, in its discretion, subject to any required shareholder
approval or any shareholder approval which the Board deems advisable for any
reason, such as for the purpose of obtaining or retaining any statutory or
regulatory benefits under tax, securities or other laws or satisfying any stock
listing requirement.


 


10.2                           Termination of
Plan.  The Plan shall terminate on
the 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.


 


10.3                           Termination and
Amendment of Outstanding Grants.  A termination, suspension or amendment of the
Plan that occurs 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 16.2
hereof.  The termination of the Plan
shall not impair the power and authority of the Committee with respect to an
outstanding Grant.  Whether or not the
Plan has terminated, an outstanding Grant may be terminated or amended under Section 16.2
hereof or may be amended by agreement of the Company and the Grantee consistent
with the Plan.


 


10.4                           Plan Provisions
Binding.  The Plan shall be the
controlling 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.  In the event of any conflict between the Plan
and any Grant Instrument, the Plan shall control.


 


Article 11.                                     Funding of the Plan


 


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


 


Article 12.                                     Rights of Participants


 


12.1                           No Right to
Grant.  Nothing in this Plan shall
entitle any Grantee or other person to any claim or right to receive a Grant
under the Plan.


 


12.2                           No Right to
Employment or Retention. 
Neither the 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 subsidiary of the Company or any other employment or retention
rights.


 

















 


12.3                           No Restriction
on Company.  Nothing
contained in the Plan shall be construed to (i) limit the right of the
Company to make Grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees of the Company or any subsidiary of the Company, or for
other proper corporate purpose, or (ii) limit the right of the Company to
grant stock options or make other awards outside of the Plan.


 


Article 13.                                     Withholding of Taxes


 


13.1                           Right to
Withhold.  The Company
shall have the right to deduct from all Grants paid in cash, or from 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
such shares 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 the amount of any withholding due with respect to such
Grants.  The Company also may withhold or
collect amounts with respect to a disqualifying disposition of shares of
Company Stock acquired pursuant to exercise of an Incentive Stock Option.


 


13.2                           Withholding Rules and
Procedures.  The
Committee is authorized to adopt rules, regulations or procedures related to
tax withholding, including provision for the satisfaction of a tax withholding
obligation, by the retention of shares of Stock to which the Grantee would
otherwise be entitled pursuant to a Grant or by the Grantee’s delivery of
previously owned shares of Company Stock or other property.


 


Article 14.                                     Requirements for Issuance of Shares


 


14.1                           Compliance with
Law.  The obligations of the Company
to offer, sell, issue, deliver or transfer Common Stock under the Plan shall be
subject to all applicable laws, regulations, rules and approvals,
including, but not by way of limitation, the effectiveness of any registration
statement under applicable securities laws if deemed necessary or appropriate
by the Company.  The Company’s obligation
to offer, sell, issue, deliver or transfer its shares under the Plan is further
subject to the approval of any governmental authority required in connection
therewith and is further subject to the Company receiving, should it determine
to do so, the advice of its counsel that all applicable laws and regulations
have been complied with.  Certificates
for shares of Common Stock issued hereunder may be legended as the Committee
shall deem appropriate.


 


14.2                           Restrictions on
Grants.  The Committee shall have the
right 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 or advisable 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.


 


14.3                           Share
Certificates. 
Certificates representing shares of Company Stock issued under the Plan
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.


 


14.4                           No Fractional
Shares.  No fractional shares of
Company Stock shall be issued or delivered pursuant to 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 otherwise eliminated.


 


Article 15.                                     Forfeiture


 


15.1                           Misconduct.  Notwithstanding anything to the contrary in
the Plan, if the Committee finds, after consideration of the facts presented on
behalf of the Company and the involved Grantee, that the Grantee has been
engaged in fraud, embezzlement, theft, commission of a felony, or dishonesty in
the course of the Grantee’s employment by or service with the Company or any
subsidiary, or that the Grantee has disclosed trade secrets of the Company or
its affiliates, or that the Grantee has intentionally failed to perform the
individual’s stated duties, and that such actions have damaged the Company or
any subsidiary in any significant manner, in the discretion of the Committee,
then the Grantee shall forfeit all rights under and to all unexercised Grants,
and under and to all Grants to the Grantee with respect to which the Company
has not yet delivered payment or certificates for shares of Stock (as the case
may be), all of which Grants and rights shall be automatically canceled.


 


15.2                           Finality of
Committee Decision.  The
decision of the Committee as to the cause of the Grantee’s discharge from
employment with the Company and any subsidiary shall be final for purposes of
the Plan, but shall not affect the finality of the Grantee’s discharge by the
Company of subsidiary for any other purposes. 
The preceding provisions of this Section 15 shall not apply to any
Incentive Stock Option to the extent such application would result in
disqualification of the stock option as an incentive stock option under
Sections 421 and 422 of he Code.


 


Article 16.                                     Miscellaneous


 


16.1                           Substitute
Grants.  The Committee may make a Grant
to an employee of another corporation who becomes an Employee by reason of a
corporate merger, 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 Stock Incentives”). 
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 substitute grants.


 

















 


16.2                           Section 16
Limitations.  With respect
to persons 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, as it deems
advisable, may revoke any Grant if it is contrary to law or modify a Grant to
bring it into compliance with any valid and mandatory government regulation.


 


16.3                           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 the
Grantee or successor Grantee on the stock transfer records of the Company.


 


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


 


16.5                           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 the
Commonwealth of Pennsylvania.


 


Article 17.                                     Effective Date of the Plan


 


17.1                           The Plan shall
be effective as of the date of the approval of the Plan by the Company’s
shareholders.