exv10w1






Exhibit 10.1




PENN MILLERS

STOCK INCENTIVE PLAN




 









 








PENN MILLERS

STOCK INCENTIVE PLAN




TABLE OF CONTENTS




	 	 	 	 	 
	ARTICLE	 	PAGE	 
	 
	 	 	 	 
	ARTICLE 1. PURPOSE OF THE PLAN; TYPES OF AWARDS
	 	 	1	 
	 
	 	 	 	 
	ARTICLE 2. DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	ARTICLE 3. ADMINISTRATION
	 	 	5	 
	 
	 	 	 	 
	ARTICLE 4. COMMON STOCK SUBJECT TO THE PLAN
	 	 	6	 
	 
	 	 	 	 
	ARTICLE 5. ELIGIBILITY
	 	 	7	 
	 
	 	 	 	 
	ARTICLE 6. STOCK OPTIONS IN GENERAL
	 	 	8	 
	 
	 	 	 	 
	ARTICLE 7. TERM, VESTING AND EXERCISE OF OPTIONS
	 	 	9	 
	 
	 	 	 	 
	ARTICLE 8. EXERCISE OF OPTIONS FOLLOWING TERMINATION OF EMPLOYMENT OR SERVICE
	 	 	10	 
	 
	 	 	 	 
	ARTICLE 9. RESTRICTED STOCK
	 	 	11	 
	 
	 	 	 	 
	ARTICLE 10. RESTRICTED STOCK UNITS
	 	 	13	 
	 
	 	 	 	 
	ARTICLE 11. ADJUSTMENT PROVISIONS
	 	 	14	 
	 
	 	 	 	 
	ARTICLE 12. GENERAL PROVISIONS
	 	 	14	 







 









 








ARTICLE 1. PURPOSE OF THE PLAN; TYPES OF AWARDS




     1.1 Purpose. The Penn Millers Stock Incentive Plan, effective as of
                                        , 2009, is intended to provide selected employees and non-employee directors
of Penn Millers Holding Corporation (the “Corporation”) and its Subsidiaries (as hereinafter
defined) with an opportunity to acquire Common Stock of the Corporation. The Plan is designed to
help the Corporation attract, retain, and motivate employees and non-employee directors to make
substantial contributions to the success of the Corporation’s business and the businesses of its
Subsidiaries. Awards made under the Plan are based upon, among other things, a participant’s level
of responsibility and performance within the Corporation and its Subsidiaries.



     1.2 Authorized Plan Awards. Incentive Stock Options, Nonqualified Stock Options,
Restricted Stock and Restricted Stock Units may be awarded within the limitations of the Plan
herein described.



ARTICLE 2. DEFINITIONS




     2.1 “Agreement.” A written or electronic agreement between the Corporation and a
Participant evidencing an Award. A Participant may be issued one or more Agreements from time to
time, reflecting one or more Awards.



     2.2 “Award.” The award of a Stock Option, Restricted Stock, or Restricted Stock
Unit.



     2.3 “Board.” The Board of Directors of the Corporation.



     2.4 “Change in Control.” Except as otherwise provided in an Agreement, the first to
occur of any of the following events:



          (a) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
except for any of the Corporation’s employee benefit plans, or any entity holding the Corporation’s
voting securities for, or pursuant to, the terms of any such plan (or any trust forming a part
thereof) (the “Benefit Plan(s)”), is or becomes the beneficial owner, directly or indirectly, of
the Corporation’s securities representing 25% or more of the combined voting power of the
Corporation’s then outstanding securities other than pursuant to a transaction excepted in Clause
(b);




          (b) the shareholders of the Corporation approve a merger, consolidation, or other
reorganization of the Corporation, unless:





          (i) under the terms of the agreement providing for such merger, consolidation, or
reorganization, the shareholders of the Corporation immediately before such merger,
consolidation, or reorganization, will own, directly or indirectly immediately following
such merger, consolidation, or reorganization, at least 60% of the combined voting power of
the outstanding voting securities of the Corporation resulting from such merger,
consolidation, or reorganization (the “Surviving Corporation”) in substantially the same proportion as their ownership of the voting securities
immediately before such merger, consolidation, or reorganization;



1









 






          (ii) under the terms of the agreement providing for such merger, consolidation, or
reorganization, the individuals who were members of the Board immediately prior to the
execution of such agreement will constitute at least a majority of the members of the board
of directors of the Surviving Corporation after such merger, consolidation, or
reorganization; and




          (iii) based on the terms of the agreement providing for such merger, consolidation, or
reorganization, no Person (other than (A) the Corporation or any Subsidiary of the
Corporation, (B) any Benefit Plan, (C) the Surviving Corporation or any Subsidiary of the
Surviving Corporation, or (D) any Person who, immediately prior to such merger,
consolidation, or reorganization had beneficial ownership of 25% or more of the then
outstanding voting securities) will have beneficial ownership of 25% or more of the combined
voting power of the Surviving Corporation’s then outstanding voting securities;



          (c) a plan of liquidation or dissolution of the Corporation, other than pursuant to
bankruptcy or insolvency laws, is adopted; or




          (d) during any period of two consecutive years, individuals, who at the beginning of such
period, constituted the Board cease for any reason to constitute at least a majority of the Board
unless the election, or the nomination for election by the Corporation’s shareholders, of each new
director was approved by a vote of at least two-thirds of the directors then still in office who
were directors at the beginning of the period.




     Notwithstanding Clause (a), a Change in Control shall not be deemed to have occurred if a
Person becomes the beneficial owner, directly or indirectly, of the Corporation’s securities
representing 25% or more of the combined voting power of the Corporation’s then outstanding
securities solely as a result of an acquisition by the Corporation of its voting securities which,
by reducing the number of shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 25% or more of the combined voting power of the Corporation’s
then outstanding securities; provided, however, that if a Person becomes a beneficial owner of 25%
or more of the combined voting power of the Corporation’s then outstanding securities by reason of
share purchases by the Corporation and shall, after such share purchases by the Corporation, become
the beneficial owner, directly or indirectly, of any additional voting securities of the
Corporation (other than as a result of a stock split, stock dividend or similar transaction), then
a Change in Control of the Corporation shall be deemed to have occurred with respect to such Person
under Clause (a). In no event shall a Change in Control of the Corporation be deemed to occur
under Clause (a) by virtue of the acquisition of the Corporation’s securities by Benefit Plans.



     2.5 “Code.” The Internal Revenue Code of 1986, as amended.



     2.6 “Code of Conduct.” The policies and procedures related to employment of
employees by the Corporation or a Subsidiary set forth in the Corporation’s employee handbook
or any similar document. The Code of Conduct may be amended and updated at any time. The
term “Code of Conduct” shall also include any other policy or procedure that may be adopted by the
Corporation or a Subsidiary and communicated to Employees and Non-Employee Directors.



2









 





     2.7 “Committee.” The Compensation Committee of the Board which Committee shall be
composed of two or more members of the Board, all of whom are (a) “non-employee directors” as such
term is defined under the rules and regulations adopted from time to time by the Securities and
Exchange Commission pursuant to Section 16(b) of the Exchange Act, (b) “outside directors” within
the meaning of Code Section 162(m), and (c) independent under any applicable stock listing
agreement with, or rules of, any exchange or electronic trading system. The Board may from time to
time remove members from, or add members to, the Committee. Vacancies on the Committee, however
caused, shall be filled by the Board.



     2.8 “Common Stock.” The common stock of the Corporation (par value $0.01 per share)
as described in the Corporation’s Articles of Incorporation, or such other stock as shall be
substituted therefor.



     2.9 “Corporation.” Penn Millers Holding Corporation, a Pennsylvania corporation.



     2.10 “Disability.” “Permanent and total disability” (as defined in Code Section
22(e)(3)).



     2.11 “Employee.” Any common law employee of the Corporation or a Subsidiary. An
Employee does not include any individual who: (i) does not receive payment for services directly
from the Corporation’s or a Subsidiary’s payroll; (ii) is employed by an employment agency that is
not a Subsidiary; or (iii) who renders services pursuant to a written arrangement that expressly
provides that the service provider is not eligible for participation in the Plan, regardless if
such person is later determined by the Internal Revenue Service or a court of law to be a common
law employee.



     2.12 “Exchange Act.” The Securities Exchange Act of 1934, as amended.



     2.13 “Incentive Stock Option.” A Stock Option intended to satisfy the requirements
of Code Section 422(b).



     2.14 “Non-Employee Director.” A member of the Board or the board of directors of a
Subsidiary who is not an Employee.



     2.15 “Nonqualified Stock Option.” A Stock Option which does not satisfy the
requirements of Code Section 422(b).



     2.16 “Optionee.” A Participant who is awarded a Stock Option pursuant to the
provisions of the Plan.



     2.17 “Participant.” An Employee or Non-Employee Director to whom an Award has been
made and remains outstanding.



     2.18 “Performance Criteria.” Any objective determination based on one or more of the
following areas of performance of the Corporation, a Subsidiary, or any division, department or
group of either which includes, but is not limited to: (a) earnings, (b) cash flow, (c) revenue,
(d) financial ratios, (e) market performance, (f) shareholder return, (g) operating income or
profits (including earnings before interest, taxes, depreciation and amortization), (h) earnings
per share, (i) return on assets, (j) return on equity, (k) return on investment, (l) stock price,



3









 







(m) expense reduction, (n) systems conversion, (o) special projects as determined by the Committee,
(p) increases in book value, and (q) acquisition integration initiatives. Performance Criteria
shall be established by the Committee prior to the issuance of a Performance Award.



     2.19 “Performance Goal.” One or more goals established by the Committee, with
respect to an Award intended to constitute a Performance Award, that relate to one or more
Performance Criteria. A Performance Goal shall relate to such period of time as may be specified
by the Committee and set forth in an applicable Agreement at the time a Performance Award is made.



     2.20 “Performance Award.” An Award, the vesting or receipt without restriction of
which is conditioned on the satisfaction of one or more Performance Goals.



     2.21 “Plan.” The Penn Millers Stock Incentive Plan.



     2.22 “Restricted Stock.” An Award of Common Stock pursuant to the provisions of the
Plan, which award is subject to such restrictions and other conditions, as may be specified by the
Committee at the time of such award and set forth in an applicable Agreement.



     2.23 “Restricted Stock Unit.” An Award of a right to receive, in Common Stock, the
market value of one share of Common Stock, the vesting of which right is subject to such terms and
conditions as may be provided by the Committee at the time of such award and set forth in an
applicable Agreement. A Restricted Stock Unit Award may be payable in Common Stock or in cash as
determined by the Committee in its sole discretion.



     2.24 “Securities Act.” The Securities Act of 1933, as amended.



     2.25 “Stock Option” or “Option.” An Award of a right to purchase Common
Stock pursuant to the provisions of the Plan.



     2.26 “Subsidiary.” A subsidiary corporation, as defined in Code Section 424(f), that
is a subsidiary of a relevant corporation.



     2.27 “Termination or Dismissal For Cause.” Termination of an Employee by the
Corporation or a Subsidiary or dismissal of a Non-Employee Director after:



          (a) any government regulatory agency recommends or orders in writing that the Corporation or
a Subsidiary terminate the employment of such Employee or relieve him or her of his or her duties;




          (b) such Employee or Non-Employee Director is convicted of or enters a plea of guilty or
nolo contendere to a felony, a crime of falsehood, or a crime involving fraud or
moral turpitude, or the actual incarceration of the Employee or Non-Employee Director for a period
of 45 consecutive days;




          (c) a determination by the Committee that such Employee willfully failed to follow the lawful
instructions of the Board or any officer of the Corporation or a Subsidiary after such Employee’s
receipt of written notice of such instructions, other than a failure resulting from the Employee’s
incapacity because of physical or mental illness;




4









 








          (d) a determination by the Committee that the willful or continued failure by such Employee
or Non-Employee Director to substantially and satisfactorily perform his duties with the
Corporation or a Subsidiary (other than any such failure resulting from the Employee’s or
Non-Employee Director’s Disability), within a reasonable period of time after a demand for
substantial performance or notice of lack of substantial or satisfactory performance is delivered
to the Employee or Non-Employee Director, which demand identifies the manner in which the Employee
or Non-Employee Director has not substantially or satisfactorily performed his or her duties; or




          (e) a determination by the Committee that such Employee or Non-Employee Director has failed
to conform to an applicable Code of Conduct.




     For purposes of the Plan, no act, or failure to act, on an Employee’s or Non-Employee
Director’s part shall be deemed “willful” unless done, or omitted to be done, by such Employee or
Non-Employee Director not in good faith and without reasonable belief that such Employee’s or
Non-Employee Director’s action or omission was in the best interest of the Corporation or a
Subsidiary.



ARTICLE 3. ADMINISTRATION




     3.1 The Committee. The Plan shall be administered by the Committee.



     3.2 Powers of the Committee.



          (a) The Committee shall be vested with full authority to make such rules and regulations as
it deems necessary or desirable to administer the Plan and to interpret the provisions of the Plan,
unless otherwise determined by a majority of the disinterested members of the Board. Any
determination, decision, or action of the Committee in connection with the construction,
interpretation, administration, or application of the Plan shall be final, conclusive, and binding
upon all Participants and any person claiming under or through a Participant, unless otherwise
determined by a majority of the disinterested members of the Board.




          (b) Subject to the terms, provisions and conditions of the Plan and subject to review and
approval by a majority of the disinterested members of the Board, the Committee shall have
exclusive jurisdiction to:





          (i) determine and select the Employees and Non-Employee Directors to receive Awards
(it being understood that more than one Award may be made to the same person);




          (ii) determine the number of shares subject to each Award;




          (iii) determine the date or dates when the Awards will be made;




          (iv) determine the exercise price of shares subject to an Option in accordance with
Article 6;



5









 






          (v) determine the date or dates when an Option may be exercised within the term of the
Option specified pursuant to Article 7;




          (vi) determine whether an Option constitutes an Incentive Stock Option or a
Nonqualified Stock Option;




          (vii) determine the Performance Criteria and establish Performance Goals with respect
thereto, to be applied to an Award; and




          (viii) prescribe the form, which shall be consistent with the Plan document, of the
Agreement evidencing any Awards made under the Plan.



     3.3 Liability. No member of the Board or the Committee shall be liable for any
action or determination made in good faith by the Board or the Committee with respect to this Plan
or any Awards made under this Plan.



     3.4 Establishment and Certification of Performance Goals. The Committee shall
establish, prior to award, Performance Goals with respect to each Award intended to constitute a
Performance Award. Except as may otherwise be provided in Articles 6 and 7 hereof, as applicable,
no Option that is intended to constitute a Performance Award may be exercised until the Performance
Goal or Goals applicable thereto is or are satisfied, nor shall any Restricted Stock Unit Award
that is intended to constitute a Performance Award be released to a Participant until the
Performance Goal or Goals applicable thereto is or are satisfied.



     3.5 No Waiver of Performance Goals. The Committee or the Board shall not waive any
Performance Goals with respect to any Award hereunder.



     3.6 Performance Awards Not Mandatory. Nothing herein shall be construed as requiring
that any Award be made a Performance Award.



ARTICLE 4. COMMON STOCK SUBJECT TO THE PLAN




     4.1 Common Stock Authorized.



          (a) The total aggregate number of shares of Common Stock that Awards may be made under the
Plan shall not exceed
                    
shares. The limitation established by the preceding sentence
shall be subject to adjustment as provided in Article 11 and Section 4.1(f).




          (b) The maximum aggregate number of shares of Common Stock that may be issued under the Plan
pursuant to the vesting of Awards of Restricted Stock or Restricted Stock
Units shall not exceed
                     shares. The limitation established by the preceding sentence
shall be subject to adjustment as provided in Article 11 and Section 4.1(f).




          (c) The maximum aggregate number of shares of Common Stock that may be awarded under the Plan
as Options shall not exceed                     . The limitation established by the preceding sentence
shall be subject to adjustment as provided in Article 11 and Section 4.1(f).




6









 








          (d) The maximum aggregate number of shares of Common Stock for which Awards may be made under
the Plan to non-employee directors shall not exceed ___% of the number of shares authorized under
the Plan (as adjusted as provided in Article 11 and Section 4.1(f)).




          (e) If any Option is exercised by tendering Common Stock, either actually or by attestation,
to the Corporation 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.




          (f) The number of shares of Common Stock for which Awards may be made under the Plan shall
automatically increase on the first trading day of January of each calendar year during the term of
the Plan, beginning with calendar year 2010, by an amount equal to one percent of the shares of
Common Stock outstanding on the last trading day in December of the immediately preceding calendar
year. Awards from shares of Common Stock available under the Plan as a result of the operation of
this Section 4.1(f) may be awarded as either Nonqualified Stock Options, Restricted Stock, or
Restricted Stock Units (but not as Incentive Stock Options), subject to the limitations of Sections
4.1(b), (c), and (d).




     4.2 Shares Available. The Common Stock to be issued under the Plan shall be the
Corporation’s Common Stock, which shall be made available at the discretion of the Board, either
from authorized but unissued Common Stock, treasury shares, or shares acquired by the Corporation,
including shares purchased on the open market. In the event that any outstanding Award under the
Plan for any reason expires, terminates, or is forfeited, the shares of Common Stock allocable to
such expiration, termination, or forfeiture may thereafter again be made subject to an Award under
the Plan.



ARTICLE 5. ELIGIBILITY




     5.1 Participation. Awards shall be made by the Committee only to persons who are
Employees or Non-Employee Directors.



     5.2 Incentive Stock Option Eligibility. Incentive Stock Option Awards may only be
made to Employees of the Corporation. Notwithstanding any other provision of the Plan to the
contrary, an individual who owns more than ten percent of the total combined voting power of all
classes of outstanding stock of the Corporation shall not be eligible for the award of an Incentive
Stock Option, unless the special requirements set forth in Sections 6.1 and 7.1 are satisfied. For
purposes of this section, in determining stock ownership, an individual shall be
considered as owning the stock owned, directly or indirectly, by or for his brothers and
sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. Stock
owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be
considered as being owned proportionately by or for its shareholders, partners, or beneficiaries.
“Outstanding stock” shall include all stock actually issued and outstanding immediately before the
award of the Option. “Outstanding stock” shall not include shares authorized for issue under
outstanding Options held by the Optionee or by any other person.



7









 





ARTICLE 6. STOCK OPTIONS IN GENERAL




     6.1 Exercise Price. The exercise price of an Option to purchase a share of Common
Stock shall be, in the case of an Incentive Stock Option, not less than 100% of the fair market
value of a share of Common Stock on the date the Option is awarded, except that the exercise price
shall be not less than 110% of such fair market value in the case of an Incentive Stock Option
awarded to any individual described in the second sentence of Section 5.2. The exercise price of
an Option to purchase a share of Common Stock shall be, in the case of a Nonqualified Stock Option,
not less than 100% of the fair market value of a share of Common Stock on the date the Option is
awarded. The exercise price shall be subject to adjustment pursuant to the limited circumstances
set forth in Article 11.



     6.2 Limitation on Incentive Stock Options. The aggregate fair market value
(determined as of the date an Option is awarded) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any individual in any calendar year
(under the Plan and all other plans maintained by the Corporation and Subsidiaries) shall not
exceed $100,000.



     6.3 Determination of Fair Market Value.



          (a) If the Common Stock is not listed on an established stock exchange or exchanges but is
listed on Nasdaq, the fair market value per share shall be the closing sale price for the Common
Stock on the relevant day. If no sale of Common Stock has occurred on that day, the fair market
value shall be determined by reference to such price for the next preceding day on which a sale
occurred.




          (b) If the Common Stock is not listed on an established stock exchange or on Nasdaq, fair
market value per share shall be the mean between the closing dealer “bid” and “asked” prices for
the Common Stock for the day an Option is awarded, and if no “bid” and “asked” prices are quoted
for the day an Option is awarded, the fair market value shall be determined by reference to such
prices on the next preceding day on which such prices were quoted.




          (c) If the Common Stock is listed on an established stock exchange or exchanges, the fair
market value shall be deemed to be the closing price of Common Stock on such stock exchange or
exchanges on the day an Option is awarded. If no sale of Common Stock has been made on any stock
exchange on that day, the fair market value shall be determined by reference to such price for the
next preceding day on which a sale occurred.




          (d) In the event that the Common Stock is not traded on an established stock exchange or on
Nasdaq, and no closing dealer “bid” and “asked” prices are available on the day an Option is
awarded, then fair market value will be the price established by the Committee in good faith
through the reasonable application of a reasonable valuation method and as required by Code Section
409A.




     In connection with determining the fair market value of a share of Common Stock on any
relevant day, the Committee may use any source deemed reliable; and its determination shall be
final and binding on all affected persons, absent clear error.



8









 





     6.4 Limitation on Option Awards. Stock Option Awards under this Plan (and any other
plan of the Corporation or a Subsidiary providing for stock option awards) to any individual shall
not exceed, in the aggregate, Options to acquire
                     shares of Common Stock during any period
of 12 consecutive months. Such limitation shall be subject to adjustment in the manner described
in Article 11.



     6.5 Transferability of Options.



          (a) Except as provided in Subsection (b), an Option awarded hereunder shall not be
transferable other than by will or the laws of descent and distribution, and such Option shall be
exercisable, during the Optionee’s lifetime, only by him or her.




          (b) An Optionee may, with the prior approval of the Committee, transfer a Nonqualified Stock
Option for no consideration to or for the benefit of one or more members of the Optionee’s
“immediate family” (including a trust, partnership, or limited liability company for the benefit of
one or more of such members), subject to such limits as the Committee may impose, and the
transferee shall remain subject to all terms and conditions applicable to the Option prior to its
transfer. The term “immediate family” shall mean an Optionee’s spouse, parents, children,
stepchildren, adoptive relationships, sisters, brothers, and grandchildren (and, for this purpose,
shall also include the Optionee).




ARTICLE 7. TERM, VESTING AND EXERCISE OF OPTIONS




     7.1 Term and Vesting. Each Option awarded under the Plan shall terminate on the date
determined by the Committee, and specified in the Agreement; provided, however, that (i) each
intended Incentive Stock Option awarded to an individual described in the second sentence of
Section 5.2 shall terminate not later than five years after the date of the Award, (ii) each other
intended Incentive Stock Option shall terminate not later than ten years after the date of the
Award, and (iii) each Option awarded under the Plan which is intended to be a Nonqualified Stock
Option shall terminate not later than ten years and one month after the date of the Award. Each
Option awarded under the Plan shall be subject to such terms and conditions as may be provided by
the Committee and set forth in the Agreement issued to a Optionee to evidence such Option;
provided, however, that, unless otherwise provided by the Committee and set forth in an applicable
Agreement, each Option shall be fully exercisable (i.e., become 100% vested) after the earlier of
the date on which, (i) a Change in Control occurs or (ii) the Optionee terminates employment or
service by reason of death or Disability). Except as provided in Article 8, an
Option may be exercised only during the continuance of the Optionee’s employment or service
with the Corporation or a Subsidiary.



     7.2 Exercise.



          (a) A person electing to exercise an Option shall give notice to the Corporation of such
election and of the number of shares he or she has elected to purchase and shall at the time of
exercise tender the full exercise price of the shares he or she has elected to purchase. The
exercise notice shall be delivered to the Corporation in person, by certified mail, or by such
other method (including electronic transmission) and in such form as determined by the Committee.
The exercise price shall be paid in full, in cash, upon the exercise of the Option; provided,




9









 







however, that in lieu of cash, with the approval of the Committee at or prior to exercise, an
Optionee may exercise an Option by tendering to the Corporation shares of Common Stock owned by him
or her and having a fair market value equal to the cash exercise price applicable to the Option
(with the fair market value of such stock to be determined in the manner provided in Section 6.3)
or by delivering such combination of cash and such shares as the Committee in its sole discretion
may approve; further provided, however, that no such manner of exercise shall be permitted if such
exercise would violate Section 402 of the Sarbanes-Oxley Act of 2002. Notwithstanding the
foregoing, Common Stock acquired pursuant to the exercise of an Incentive Stock Option may not be
tendered as payment unless the holding period requirements of Code Section 422(a)(1) have been
satisfied, and Common Stock not acquired pursuant to the exercise of an Incentive Stock Option may
not be tendered as payment unless it has been held, beneficially and of record, for at least six
months (or such longer time as may be required by applicable securities law or accounting
principles to avoid adverse consequences to the Corporation or a Participant).




          (b) At the request of the Participant and to the extent permitted by applicable law, the
Committee may, in its sole discretion, selectively approve an arrangement whereby the Participant
irrevocably authorizes a third party to sell shares of Common Stock (or a sufficient portion of the
shares) acquired upon the exercise of an Option and to remit to the Corporation a sufficient
portion of the sales proceeds to pay the entire exercise price and any tax withholding required as
a result of such exercise.




          (c) At the request of the Participant and to the extent permitted by applicable law, the
Committee may, in its sole discretion, selectively approve a “net exercise” arrangement whereby the
Corporation will reduce the number of shares of Common Stock issued upon exercise of a Nonqualified
Stock Option by the largest whole number of shares of Common Stock with a fair market value that
does not exceed the exercise price of the Option; provided, however, that the Optionee provide cash
to the Corporation to the extent of any remaining balance of the exercise price. Shares of Common
Stock will no longer be subject to such Option and such Option will no longer be exercisable
thereafter to the extent of the number of shares used to pay the exercise price pursuant to the net
exercise, the number of shares delivered to the Optionee as a result of such net exercise and the
number of shares, if any withheld to satisfy any tax withholding obligations.




          (d) A person holding more than one Option at any relevant time may, in accordance with the
provisions of the Plan, elect to exercise such Options in any order.




ARTICLE 8. EXERCISE OF OPTIONS FOLLOWING TERMINATION

OF EMPLOYMENT OR SERVICE




     8.1 Other Termination by Corporation or Subsidiary; Change in Control. In the event
of an Optionee’s termination of employment or service (i) by the Corporation or a Subsidiary other
than Termination for Cause or (ii) due to a Change in Control, such Optionee’s Option shall lapse
at the earlier of the expiration of the term of such Option or:



          (a) in the case of an Incentive Stock Option, three months from the date of such termination
of employment; and




10









 








          (b) in the case of a Nonqualified Stock Option, 12 months from the date of such termination
of employment or service.




     8.2 Death or Total Disability. In the event of an Optionee’s termination of
employment or service by reason of death or Disability, such Optionee’s Option shall lapse at the
earlier of the expiration of the term of such Option or:



          (a) in the case of an Incentive Stock Option, one year from the date of such termination of
employment; and




          (b) in the case of a Nonqualified Stock Option, 12 months from the date of such termination
of employment or service.




     8.3 Termination or Dismissal For Cause; Other Termination by Optionee. In the event
of an Optionee’s Termination or Dismissal For Cause, or in the event of termination of employment
at the election of an Optionee, such Optionee’s Option shall lapse upon such termination.



     8.4 Special Termination Provisions for Options.



          (a) In the event that an Optionee’s employment or service is terminated and the Committee
deems it equitable to do so, the Committee may, in its discretion and subject to the approval of a
majority of the disinterested members of the Board, waive any continuous service requirement for
vesting (but not any Performance Goal or Goals) specified in an applicable Agreement pursuant to
Section 7.1 and permit exercise of an Option held by such Optionee prior to the satisfaction of
such continuous service requirement. Any such waiver may be made with retroactive effect, provided
it is made within 60 days following the Optionee’s termination of employment or service.




          (b) In the event the Committee waives the continuous service requirement with respect to an
Option as set forth in Section 8.4(a) above and the circumstance of an Optionee’s termination of
employment or service is described in Section 8.1, the affected Option will lapse as otherwise
provided in the relevant section.




          (c) In the event the Committee waives the continuous service requirement with respect to an
Option as set forth in Section 8.4(a) above, such Option shall lapse at the earlier of the
expiration of the term of such Option or:





          (i) in the case of an Incentive Stock Option, three months from the date of
termination of employment; and




          (ii) in the case of a Nonqualified Stock Option, 12 months from the date of
termination of employment or service.



ARTICLE 9. RESTRICTED STOCK




     9.1 In General. Each Restricted Stock Award shall be subject to such terms and
conditions as may be specified in the Agreement issued to a Participant to evidence such Award.



11









 







Subject to Section 3.6, a Restricted Stock Award shall be subject to a vesting schedule or
Performance Goals, or both.



     9.2 Vesting. Each Restricted Stock Award shall vest under such terms and conditions
as may be provided by the Committee and set forth in an applicable Agreement; provided, however,
that, unless otherwise provided by the Committee and set forth in an applicable Agreement, each
Restricted Stock Award shall become fully vested upon the earlier of the date on which: (i) a
Change in Control occurs; or (ii) the Participant terminates employment or service by reason of
death or Disability.



     9.3 Waiver of Vesting Period for Certain Restricted Stock Awards. In the event that
a Participant’s employment or service is terminated and the Committee deems it equitable to do so,
the Committee may, in its discretion and subject to the approval of a majority of the disinterested
members of the Board, waive any minimum vesting or holding period (but not any Performance Goal or
Goals) or forfeiture provision with respect to a Restricted Stock Award held by such Participant.
Any such waiver may be made with retroactive effect, provided it is made within 60 days following
such Participant’s termination of employment or service.



     9.4 Issuance and Retention of Share Certificates By Corporation. One or more share
certificates shall be issued upon the award of Restricted Stock; but until such time as the
Restricted Stock shall vest or otherwise become distributable by reason of satisfaction of one or
more Performance Goals, the Corporation shall retain such share certificates.



     9.5 Stock Powers. At the time of the award of Restricted Stock, the Participant to
whom the award is made shall deliver such stock powers, endorsed in blank, as may be requested by
the Corporation.



     9.6 Release of Shares. Within 30 days following the date on which a Participant
becomes entitled under an Agreement to receive shares of previously Restricted Stock, the
Corporation shall deliver to him or her a certificate evidencing the ownership of such shares.



     9.7 Forfeiture of Restricted Stock Awards. In the event of the forfeiture of a
Restricted Stock Award, by reason of a Participant’s termination of employment or termination of
service (including termination of service as a director emeritus) prior to vesting, the failure to
achieve a Performance Goal or otherwise, the Corporation shall take such steps as may be necessary
to cancel the affected shares and return the same to its treasury.



     9.8 Assignment, Transfer, Etc. of Restricted Stock Rights. The potential rights of a
Participant to shares of Restricted Stock may not be assigned, transferred, sold, pledged,
hypothecated, or otherwise encumbered or disposed of until such time as the Participant receives
unrestricted certificates for such shares.



     9.9 Shareholder Rights. Unless otherwise provided by the Committee and set forth in
an applicable Agreement, Participants who have been awarded shares of Restricted Stock shall not
have voting or dividend rights until such time as the Participant receives unrestricted
certificates for such shares.



12









 





     9.10 Additional Holding Periods. Nothing in this Article 9 shall preclude the
Committee from providing additional (a) restrictions on the transfer or assignment of Common Stock
acquired by reason of the vesting of a Restricted Stock Award or (b) forfeiture provisions with
respect to Common Stock acquired by reason of the vesting of a Restricted Stock Award.



ARTICLE 10. RESTRICTED STOCK UNITS




     10.1 In General. Each Restricted Stock Unit Award shall be subject to such terms and
conditions as may be provided by the Committee and set forth in the Agreement issued to a
Participant to evidence such Award. Subject to Section 3.6, a Restricted Stock Unit Award shall be
subject to a vesting schedule or Performance Goals, or both.



     10.2 Vesting. Each Restricted Stock Unit Award shall vest under such terms and
conditions as may be provided by the Committee and set forth in an applicable Agreement; provided,
however, that, unless otherwise provided by the Committee and set forth in an applicable Agreement,
each Restricted Stock Unit Award shall become fully vested upon the earlier of the date on which:
(i) a Change in Control occurs; or (ii) the Participant terminates employment or service by reason
of death or Disability.



     10.3 Waiver of Vesting Period for Certain Restricted Stock Unit Awards. In the event
that a Participant’s employment or service is terminated and the Committee deems it equitable to do
so, the Committee may, in its discretion and subject to the approval of a majority of the
disinterested members of the Board, waive any minimum vesting or holding period (but not any
Performance Goal or Goals) or forfeiture provision specified in the applicable Agreement with
respect to a Restricted Stock Unit Award held by such Participant. Any such waiver may be made
with retroactive effect, provided it is made within 60 days following such Participant’s
termination of employment or service.



     10.4 Release of Shares. Within 30 days following the date on which a Participant
becomes entitled under an Agreement to receive shares of Common Stock pursuant to the vesting of a
Restricted Stock Unit Award, the Corporation shall deliver to him or her a certificate evidencing
the ownership of such shares of Common Stock.



     10.5 Assignment, Transfer, Etc. of Restricted Stock Unit Rights. The potential
rights of a Participant to shares of Common Stock or cash pursuant to a Restricted Stock Unit Award
may not be assigned, transferred, sold, pledged, hypothecated, or otherwise encumbered or disposed
of until such time as until such time as the Participant receives, with respect to such Award, cash
or an unrestricted certificate for such Common Stock, as applicable.



     10.6 Shareholder Rights. A Participant who receives a Restricted Stock Unit Award
that is paid in shares of Common Stock shall not have voting or, unless otherwise provided by the
Committee and set forth in an applicable Agreement, dividend rights until such time as the
Participant receives an unrestricted certificate for such shares.



     10.7 Additional Holding Periods. Nothing in this Article 10 shall preclude the
Committee from providing additional (a) restrictions on the transfer or assignment of Common Stock
acquired by reason of the vesting of a Restricted Stock Unit Award or (b) forfeiture provisions



13









 







with respect to Common Stock acquired by reason of the vesting of a Restricted Stock Unit Award.



ARTICLE 11. ADJUSTMENT PROVISIONS




     11.1 Share Adjustments.



          (a) In the event that the shares of Common Stock of the Corporation, as presently
constituted, shall be changed into or exchanged for a different number or kind of shares of stock
or other securities of the Corporation, or if the number of such shares of Common Stock shall be
changed through the payment of a stock dividend, stock split or reverse stock split, then (i) the
shares of Common Stock authorized hereunder to be made the subject of Awards, (ii) the shares of
Common Stock then subject to outstanding Awards and the exercise price thereof (where relevant),
(iii) the maximum number of Awards that may be made within a 12-month period and (iv) the nature
and terms of the shares of stock or securities subject to Awards hereunder shall be increased,
decreased or otherwise changed to such extent and in such manner as may be necessary or appropriate
to reflect any of the foregoing events, provided that any such adjustment shall be made in a manner
to avoid adverse tax consequences to any Participant under Code Section 409A.




          (b) An Award pursuant to the Plan shall not affect in any way the right or power of the
Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or
business structure, to merge, to consolidate, to dissolve, to liquidate, or to sell or transfer all
or any part of its business or assets.




     11.2 Corporate Changes. A liquidation or dissolution of the Corporation, a merger or
consolidation in which the Corporation is not the surviving Corporation or a sale of all or
substantially all of the Corporation’s assets, shall cause each outstanding Award to terminate,
except to the extent that another corporation may and does, in the transaction, assume, and
continue the Award or substitute its own awards.



     11.3 Fractional Shares. Fractional shares resulting from any adjustment in Awards
pursuant to this article may be settled as the Committee shall determine.



     11.4 Binding Determination. To the extent that the foregoing adjustments relate to
stock or securities of the Corporation, such adjustments shall be made by a majority of the
disinterested members of the Board, whose determination in that respect shall be final, binding,
and conclusive. Notice of any adjustment shall be given by the Corporation to each holder of an
Award which shall have been so adjusted.



ARTICLE 12. GENERAL PROVISIONS




     12.1 Effective Date. The Plan shall become effective upon the adoption of the Plan
by the Board, provided that any Award made hereunder shall be subject to the approval of the Plan
by the shareholders of the Corporation within 12 months of adoption of the Plan by the Board.



14









 





     12.2 Termination of the Plan. Unless previously terminated by the Board, the Plan
shall terminate on, and no Award shall be made after, the day immediately preceding the tenth
anniversary of its adoption by the Board.



     12.3 Limitation on Termination, Amendment, or Modification.



          (a) The Board may at any time terminate, amend, modify or suspend the Plan, provided that,
without the approval of the shareholders of the Corporation, no amendment or modification shall be
made solely by the Board which:





          (i) increases the maximum number of shares of Common Stock subject to Awards under the
Plan (except as provided in Section 11.1);




          (ii) changes the class of eligible Participants; or




          (iii) otherwise requires the approval of shareholders under applicable state law or
under applicable federal law to avoid potential liability or adverse consequences to the
Corporation or a Participant.



          (b) No amendment, modification, suspension, or termination of the Plan shall in any manner
adversely affect any Award theretofore made under the Plan without the consent of the Participant.
Notwithstanding the foregoing, the Committee may, in its sole and absolute discretion and without
the consent of such Participant, amend, modify, suspend, or terminate the Plan or any Agreement
hereunder, to take effect retroactively or otherwise, as the Committee deems necessary or advisable
for the purpose of conforming the Plan or such Agreement to any present or future law, regulation,
or rule applicable to the Plan, including, but not limited to, Code Section 409A.




     12.4 No Right to an Award or Continued Employment or Service. Nothing contained in
this Plan or otherwise shall be construed to (a) require that an Award be made to an individual who
qualifies as an Employee or Non-Employee Director, or (b) confer upon a Participant any right to
continue in the employ or service of the Corporation or any Subsidiary or limit in any respect the
right of the Corporation or of any Subsidiary to terminate the Participant’s employment or service
at any time and for any reason.



     12.5 No Obligation. No exercise of discretion under this Plan with respect to an
event or person shall create an obligation to exercise such discretion in any similar or same
circumstance, except as otherwise provided or required by law.



     12.6 Withholding Taxes.



          (a) Subject to the provisions of Subsection (b), the Corporation will require, where
sufficient funds are not otherwise available, that a Participant who is an Employee pay or
reimburse to it any withholding taxes when withholding is required by law.




          (b) With the permission of the Committee, a Participant who is an Employee may satisfy the
withholding obligation described in Subsection (a), in whole or in part, by electing to have the
Corporation withhold shares of Common Stock (otherwise issuable to him or her)


15









 







having a fair market value equal to the amount required to be withheld. An election by a Participant who is an Employee
to have shares withheld for this purpose shall be subject to such conditions as may then be imposed
thereon by any applicable securities law.




     12.7 Listing and Registration of Shares.



          (a) No Option awarded pursuant to the Plan shall be exercisable in whole or in part, and no
share certificate with respect to any Award shall be delivered, if at any relevant time the
Committee determines in its discretion that the listing, registration, or qualification of the
shares of Common Stock subject to an Award on any securities exchange or under any applicable law,
or the consent or approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, such Award, until such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any conditions not acceptable to
the Committee.




          (b) If a registration statement under the Securities Act with respect to the shares issuable
under the Plan is not in effect at any relevant time, as a condition of the issuance of the shares,
a Participant (or any person claiming through a Participant) shall give the Committee a written or
electronic statement, satisfactory in form and substance to the Committee, that he or she is
acquiring the shares for his or her own account for investment and not with a view to their
distribution. The Corporation may place upon any stock certificate for shares issued under the
Plan the following legend or such other legend as the Committee may prescribe to prevent
disposition of the shares in violation of the Securities Act or other applicable law:





‘THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (“ACT”) AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION OF
COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED.’



     12.8 Disinterested Director. For purposes of this Plan, a director shall be deemed
“disinterested” if such person could qualify as a member of the Committee under Section 3.1.



     12.9 Gender; Number. Words of one gender, wherever used herein, shall be construed
to include each other gender, as the context requires. Words used herein in the singular form
shall include the plural form, as the context requires, and vice versa.



     12.10 Applicable Law. Except to the extent preempted by federal law, this Plan
document, and the Agreements issued pursuant hereto, shall be construed, administered, and enforced
in accordance with the domestic internal law of the Commonwealth of Pennsylvania.



     12.11 Headings. The headings of the several articles and sections of this Plan
document have been inserted for convenience of reference only and shall not be used in the
construction of the same.




16