exv10w6



 





Exhibit 10.6






A.C. MOORE ARTS & CRAFTS, INC.




2007 STOCK INCENTIVE PLAN




1. Purpose




     The A.C. Moore Arts & Crafts, Inc. 2007 Stock Incentive Plan (the “Plan”) is intended to
provide incentives which will attract, retain, motivate and reward non-employee directors,
executive officers and other key employees of A.C. Moore Arts & Crafts, Inc. (the “Company”) or any
of its Affiliates, by providing them opportunities to acquire shares of the common stock, no par
value per share, of the Company (“Common Stock”) or to receive monetary payments based on the value
of such shares pursuant to Awards (as defined in Section 4 below) described herein. Affiliate, as
used herein, shall mean any corporation or other entity owning, directly or indirectly, 50% or more
of the outstanding stock of the Company, or in which the Company or any such corporation or other
entity owns, directly or indirectly, 50% or more of the outstanding capital stock (determined by
aggregate voting rights) or other voting interests. Furthermore, the Plan is intended to assist in
further aligning the interests of the Company’s non-employee directors, executive officers and
other key employees with those of its shareholders. The Plan has been adopted and approved by the
Board of Directors of the Company (the “Board”) and shall become effective as of the Effective
Date, as defined in Section 26 below.



2. Administration




     a. The Plan generally shall be administered by a committee (the “Committee”) which shall be
the Compensation Committee of the Board or another committee appointed by the Board from among its
members. Unless the Board determines otherwise, the Committee shall be comprised solely of not
less than two members who each shall qualify as a (i) “Non-Employee Director” within the meaning of
Rule 16b-3(b)(3) (or any successor rule) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and (ii) an “outside director” within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder. The
Committee is authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it deems necessary for the proper administration of the Plan and to make such
determinations and interpretations and to take such action in connection with the Plan and any
Awards granted hereunder as it deems necessary or advisable. All determinations and
interpretations made by the Committee shall be binding and conclusive on all Participants, as
defined below, and their legal representatives.



     b. No member of the Board, no member of the Committee and no agent of the Committee who is an
employee of the Company shall be liable for any act or failure to act hereunder, except in
circumstances involving his or her bad faith, gross negligence or willful misconduct, or for any
act or failure to act hereunder by any other member or employee or by any agent to whom duties in
connection with the administration of this Plan have been delegated. The Company shall indemnify
members of the Board, members of the Committee and any agent of the Committee who is an employee of
the Company against any and all liabilities or expenses to which they may be subjected by reason of
any act or failure to act with respect to their duties on behalf of the Plan, except in
circumstances involving such person’s bad faith, gross negligence or willful misconduct.



     c. The Committee shall have the authority to grant Awards to the Participants. The Committee
may delegate such of its powers and authority under the Plan as it deems appropriate to designated
officers or employees of the Company. In addition, the independent members of the full Board may
exercise any of the powers and authority of the Committee under the Plan. In the event of such



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delegation of authority or exercise of authority by the Board, references in the Plan to the
Committee shall be deemed to refer, as appropriate, to the agent of the Committee or the Board. The
selection of members of the Committee or any subcommittee thereof, and any delegation by the
Committee to designated officers or employees, under this Section 2(c) shall comply with Section
16(b) of the Exchange Act, the performance-based provisions of Section 162(m) of the Code, and the
regulations promulgated under each of such statutory provisions, or the respective successors to
such statutory provisions or regulations, as in effect from time to time, except to the extent that
the Board determines that such compliance is not necessary or desirable. The Committee may employ
such legal or other counsel, consultants and agents as it may deem desirable for the administration
of the Plan and may rely upon any opinion or computation received from any such counsel, consultant
or agent. Expenses incurred by the Committee in the engagement of such counsel, consultant or
agent shall be paid by the Company or any of its Affiliates whose employees have benefited from the
Plan, as determined by the Committee.



3. Participants




     Participants shall consist of such partners, members, non-employee directors, executive
officers and other key employees (individually, “Participant” and collectively, “Participants”) of
the Company or any of its Affiliates as the Committee in its sole discretion determines to be
significantly responsible for the success and future growth and profitability of the Company and
whom the Committee may designate from time to time to receive Awards under the Plan. Designation
of a Participant in any year shall not require the Committee to designate such person to receive an
Award in any other year or, once designated, to receive the same type or amount of Award as granted
to the Participant in any other year. The Committee shall consider such factors as it deems
pertinent in selecting Participants and in determining the type and amount of Awards.



4. Types of Awards and Vesting Restrictions




     Awards under the Plan may be granted in any one or a combination of (1) Stock Options, (2)
Stock Appreciation Rights, (3) Stock Awards, (4) Performance Awards, and (5) Stock Units (each as
described above an “Award,” and collectively, “Awards”).



     Stock Awards, Performance Awards and Stock Units may, as determined by the Committee, in its
discretion, constitute Performance-Based Awards, as described in Section 11 below. Awards granted
to Participants under the Plan may be subject to a graded vesting schedule with a minimum vesting
period of three years, unless otherwise determined by the Committee. Awards shall be evidenced by
Award agreements (which need not be identical) in such forms as the Committee may from time to time
approve; provided, however, that in the event of any conflict between the provisions of the Plan
and any such agreements, the provisions of the Plan shall prevail.



     Other forms of awards (“Other Awards”) valued in whole or in part by reference to, or
otherwise based on, Company Stock may be granted either alone or in addition to other Awards under
the Plan. Subject to the provisions of the Plan, the Committee shall have sole and complete
authority to determine the Participants to whom and the time or times at which such Other Awards
shall be granted, the number of shares of Company Stock to be granted pursuant to such Other Awards
or the manner in which such Other Awards shall be settled (in cash and/or in shares of Company
Stock), or the conditions to the vesting and/or payment of such Other Awards (which may include,
but not be limited to, achievement of performance goals) and all other terms and conditions of such
Other Awards.



5. Common Stock Available Under the Plan




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     a. Shares Available. The aggregate number of shares of Common Stock that may be
subject to Awards, including shares of Common Stock underlying Stock Options, granted under this
Plan shall be 1,000,000 shares of Common Stock, which may be authorized and unissued or treasury
shares, subject to any adjustments made in accordance with Section 12 below; provided, however,
that such share reserve shall be increased from time to time by a number of shares of Common Stock
equal to the number of shares of Common Stock that are issuable pursuant to option grants
(“Existing Options”) outstanding under the Company’s 1997 Employee, Director and Consultant Stock
Option Plan and the 2002 Stock Option Plan (collectively, the “Old Plans”) as of the Effective Date
that but for the suspension of the Old Plans, as described below, would otherwise have reverted to
the share reserve of the Old Plans pursuant to the terms thereof as a result of the expiration,
termination, cancellation or forfeiture of such Existing Options. As of the Effective Date, there
were 1,802,632 Existing Options outstanding. Starting from the Effective Date, no additional
grants shall be made under each of the Company’s Old Plans. Existing Options shall continue to be
governed by their respective terms under the Old Plans. The maximum number of shares of Common
Stock with respect to which Incentive Stock Options may be granted under this Plan shall be 100,000
shares of Common Stock.



     b. Limits on Shares of Common Stock with Respect to Which Awards May Be Granted or
Measured under the Plan. The maximum number of shares of Common Stock with respect to which
Awards may be granted or measured to any Participant under the Plan during any calendar year or
part thereof shall not exceed 300,000 shares, subject to adjustments made in accordance with
Section 12 below. The maximum number of such shares with respect to which Stock Options or Stock
Appreciation Rights may be granted under this Plan during any calendar year or part thereof shall
be 300,000 shares of Common Stock.



     c. Shares Underlying Awards That Again Become Available. The following shares of
Common Stock shall again become available for Awards: (1) any shares of Common Stock subject to an
Award that remain unissued upon the cancellation, surrender, exchange or termination of such Award
without having been exercised or settled; (2) any shares of Common Stock subject to an Award that
are retained by the Company as payment of the exercise price or tax withholding obligations with
respect to an Award; and (3) a number of shares of Common Stock equal to the number of previously
owned shares of Common Stock surrendered to the Company as payment of the exercise price of a Stock
Option or to satisfy tax withholding obligations with respect to an Award. In addition, (A) to the
extent an Award is paid or settled in cash, the number of shares of Common Stock with respect to
which such payment or settlement is made shall again be available for grants of Awards pursuant to
the Plan and (B) in the event of the exercise of a Stock Appreciation Right granted in relation to
a Stock Option, the excess of the number of shares of Common Stock subject to the Stock
Appreciation Right over the number of shares delivered upon the exercise of the Stock Appreciation
Right shall again be available for grants of Awards pursuant to the Plan.



6. Stock Options




     a. In General. The Committee is authorized to grant Stock Options and shall, in its
sole discretion, determine such Participants in the Plan who will receive Stock Options and the
number of shares of Common Stock underlying each Stock Option. Stock Options may be (i) incentive
stock options (“Incentive Stock Options”) within the meaning of Section 422 of the Code, or (ii)
Stock Options which do not qualify as Incentive Stock Options (“Non-Qualified Stock Options”). The
Committee may grant one or more Incentive Stock Options, Non-Qualified Stock Options, or both types
of Stock Options. Each Stock Option shall be subject to such terms and conditions consistent with
the Plan as shall be determined by the Committee and as set forth in the Award agreement. In
addition, each Stock Option shall be subject to the following limitations set forth in this Section
6.



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     b. Exercise Price. Each Stock Option granted hereunder shall have such per-share
exercise price as the Committee may determine on the date of grant; provided, however, subject to
Section 6(e) below, that the per-share exercise price shall not be less than 100 percent of the
Fair Market Value (as defined in Section 18 below) of Common Stock on the date the Stock Option is
granted.



     c. Payment of Exercise Price. The Stock Option exercise price may be paid in cash or,
in the discretion of the Committee, by the delivery of shares of Common Stock then owned by the
Participant for at least six months, by the withholding of shares of Common Stock for which a Stock
Option is exercisable, or by a combination of these methods. In the discretion of the Committee, a
payment may also be made by delivering a properly executed exercise notice to the Company together
with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount
of sale or loan proceeds to pay the exercise price with the requirement of the broker same day
reconciliation or as otherwise determined by the Company. To facilitate the foregoing, the Company
may enter into agreements for coordinated procedures with one or more brokerage firms. The
Committee may prescribe any other method of paying the exercise price that it determines to be
consistent with applicable law and the purpose of the Plan, including, without limitation, in lieu
of the exercise of a Stock Option by delivery of shares of Common Stock then owned by a Participant
for at least six months, providing the Company with a notarized statement attesting to the number
of shares owned, where upon verification by the Company, the Company would issue to the Participant
only the number of incremental shares to which the Participant is entitled upon exercise of the
Stock Option. In determining which methods a Participant may utilize to pay the exercise price,
the Committee may consider such factors as it determines are appropriate; provided, however, that
with respect to Incentive Stock Options, all such discretionary determinations shall be made at the
time of grant and specified in the Award agreement.



     d. Exercise Period. Stock Options granted under the Plan shall be exercisable at such
time or times as specified in the Plan and the Award agreement; provided, however, that no Stock
Option shall be exercisable later than ten years after the date it is granted.



     e. Limitations on Incentive Stock Options. Incentive Stock Options may be granted
only to Participants who are executive officers or other key employees of the Company or any
subsidiary corporation of the Company as that term is defined in Section 424 of the Code. The
aggregate market value (determined as of the time the Stock Option is granted) of Common Stock with
respect to which Incentive Stock Options (under all option plans of the Company) are exercisable
for the first time by a Participant during any calendar year shall not exceed $100,000. For
purposes of the preceding sentence, Incentive Stock Options shall be taken into account in the
order in which they are granted. Incentive Stock Options may not be granted to a Participant who,
at the time of grant, owns stock possessing (after the application of the attribution rules of
Section 424(d) of the Code) more than 10 percent of the total combined voting power of all
outstanding classes of stock of the Company or any subsidiary corporation of the Company as that
term is defined in Section 424 of the Code, unless the exercise price is fixed at not less than 110
percent of the Fair Market Value of Common Stock on the date of grant and the exercise of such
Incentive Stock Option is prohibited by its terms after the expiration of five years from the date
of grant of such Incentive Stock Option.



7. Stock Appreciation Rights




     The Committee is authorized to grant Stock Appreciation Rights and shall, in its sole
discretion, determine such Participants who will receive Stock Appreciation Rights and the number
of shares of Common Stock with respect to each Stock Appreciation Right. A “Stock Appreciation
Right” shall mean a right to receive a payment in cash, Common Stock or a combination thereof, in
an amount equal to the excess of (x) the Fair Market Value, or other specified valuation, of a
specified number of shares of Common Stock on the date the Stock Appreciation Right is exercised
over (y) the Fair Market Value, or



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other specified valuation (which shall be no less than the Fair Market Value), of such shares
of Common Stock on the date the Stock Appreciation Right is granted, all as determined by the
Committee. Each Stock Appreciation Right shall be subject to such terms and conditions consistent
with the Plan as shall be determined by the Committee and as set forth in the Award agreement. At
the time of grant of a Stock Appreciation Right, the Committee may impose such restrictions on or
conditions to the exercisability of the Stock Appreciation Right as it, in its absolute discretion,
deems appropriate, including, but not limited to, achievement of performance goals based on one or
more business criteria. The term of a Stock Appreciation Right shall not exceed ten years from the
date of grant.



8. Stock Awards




     The Committee is authorized to grant Stock Awards and shall, in its sole discretion, determine
such Participants in the Plan who will receive Stock Awards and the number of shares of Common
Stock underlying each Stock Award. Each Stock Award shall be subject to such terms and conditions
consistent with the Plan as shall be determined by the Committee and as set forth in the Award
agreement, including, without limitation, restrictions on the sale or other disposition of such
shares, and the right of the Company to reacquire such shares for no consideration upon termination
of the Participant’s employment within specified periods. The Committee may require the
Participant to deliver a duly signed stock power, endorsed in blank, relating to Common Stock
covered by such Stock Award and/or that the stock certificates evidencing such shares be held in
custody or bear restrictive legends until the restrictions thereon shall have lapsed. The Award
agreement shall specify whether the Participant shall have, with respect to the shares of Common
Stock subject to a Stock Award, all of the rights of a holder of shares of Common Stock, including
the right to receive dividends and to vote the shares.



9. Performance Awards




     a. In General. The Committee is authorized to grant Performance Awards and shall, in
its sole discretion, determine such Participants who will receive Performance Awards and the number
of shares of Common Stock or Stock Units (as described in Section 10 below) that may be subject to
each Performance Award. Each Performance Award shall be subject to such terms and conditions
consistent with the Plan as shall be determined by the Committee and as set forth in the Award
agreement. The Committee shall set performance targets at its discretion which, depending on the
extent to which they are met, will determine the number and/or value of Performance Awards that
will be paid out to the Participants, and may attach to such Performance Awards one or more
restrictions. Performance targets may be based upon, without limitation, Company-wide, divisional
and/or individual performance.



     b. Adjustment of Performance Targets. With respect to those Performance Awards that
are not intended to qualify as Performance-Based Awards (as described in Section 11 below), the
Committee shall have the authority at any time to make adjustments to performance targets for any
outstanding Performance Awards which the Committee deems necessary or desirable unless at the time
of establishment of goals the Committee shall have precluded its authority to make such
adjustments.



     c. Payout. Payment of earned Performance Awards may be made in shares of Common Stock
or in cash and shall be made in accordance with the terms and conditions prescribed or authorized
by the Committee. The Committee, in its sole discretion, may permit a Participant to elect to
defer the receipt of any Performance Award based upon a performance period of at least twelve (12)
months, provided that the Participant performed services continuously from a date no later than the
date upon which the performance criteria are established through a date no earlier than the date
upon which the Participant makes such deferral election. An election to defer the receipt of a
Performance Award must be made no later than the date that is six (6) months before the end of the
performance period, provided that in no event may an election to defer a Performance Award be made
after such Performance Award



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has become both substantially certain to be paid and readily ascertainable. Notwithstanding
the foregoing to the contrary, a Participant shall not be permitted to elect to defer the receipt
of a Performance Award unless such election complies with Code Section 409A and Treasury
Regulations, Rulings and Notices of Internal Revenue Service (“IRS”) issued thereunder.



10. Stock Units




     a. In General. The Committee is authorized to grant Stock Units and shall, in its
sole discretion, determine such Participants who will receive Stock Units and the number of shares
of Common Stock with respect to each Stock Unit. The Committee shall determine the criteria for
the vesting of Stock Units. A Stock Unit granted by the Committee shall provide payment in shares
of Common Stock at such time as the Award agreement shall specify. Shares of Common Stock issued
pursuant to this Section 10 may be issued with or without other payments therefor as may be
required by applicable law or such other consideration as may be determined by the Committee. The
Committee shall determine whether a Participant granted a Stock Unit shall be entitled to a
Dividend Equivalent Right (as defined below). Each Stock Unit shall be subject to such terms and
conditions consistent with the Plan as shall be determined by the Committee and as set forth in the
Award agreement.



     b. Payout. Upon vesting of a Stock Unit, unless the Committee has determined to defer
payment with respect to such unit or a Participant has elected to defer payment under Section 10(c)
below, shares of Common Stock representing the Stock Units shall be distributed to the Participant
unless the Committee, with the consent of the Participant, provides for the payment of the Stock
Units in cash or partly in cash and partly in shares of Common Stock equal to the value of the
shares of Common Stock which would otherwise be distributed to the Participant.



     c. Deferral. The Committee, in its sole discretion, may permit a Participant to elect
to defer the receipt of any Stock Unit that is subject to a vesting period of at least twelve (12)
months, provided such election is made on or before the thirtieth (30th) day after the
Participant is granted the Stock Unit and further provided that the election is made at least
twelve (12) months in advance of the earliest date on which the vesting period could expire.
Notwithstanding the foregoing to the contrary, a Participant shall not be permitted to elect to
defer the receipt of a Stock Unit unless such election complies with Code Section 409A and Treasury
Regulations, IRS Rulings and IRS Notices issued thereunder.



     d. Definitions. A “Stock Unit” shall mean a notional account representing one share
of Common Stock. A “Dividend Equivalent Right” shall mean the right to receive the amount of any
dividend paid on the share of Common Stock underlying a Stock Unit, which shall be payable in cash
or in the form of additional Stock Units.



11. Performance-Based Awards




     a. In General. All Stock Options and Stock Appreciation Rights granted under the
Plan, and certain Stock Awards, Performance Awards, and Stock Units granted under the Plan, and the
compensation attributable to such Awards, are intended to (i) qualify as Performance-Based Awards
(as defined in the next sentence) or (ii) be otherwise exempt from the deduction limitation imposed
by Section 162(m) of the Code. Certain Awards granted under the Plan may be granted in a manner
such that Awards qualify as “performance-based compensation” (as such term is used in Section
162(m) of the Code and the regulations thereunder) and thus be exempt from the deduction limitation
imposed by Section 162(m) of the Code (“Performance-Based Awards”). Awards may only qualify as
Performance-Based Awards if at the time of grant the Committee is comprised solely of two or more
“outside directors” (as such term is used in Section 162(m) of the Code and the regulations
thereunder).



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     b. Stock Options and Stock Appreciation Rights. Stock Options and Stock Appreciation
Rights granted under the Plan with an exercise price at or above the Fair Market Value of Common
Stock on the date of grant should qualify as Performance-Based Awards.



     c. Other Performance-Based Awards. Stock Awards, Performance Awards, and Stock Units
granted under the Plan should qualify as Performance-Based Awards if, as determined by the
Committee, in its discretion, either the granting or vesting of such Award is subject to the
achievement of a performance target or targets based on one or more of the performance measures
specified in Section 11(d) below. With respect to such Awards intended to qualify as
Performance-Based Awards:




	 	(1)	 	the Committee shall establish in writing (x) the objective
performance-based goals applicable to a given period and (y) the individual
employees or class of employees to which such performance-based goals apply no
later than 90 days after the commencement of such period (but in no event after
25 percent of such period has elapsed);
	 
	 	(2)	 	no Performance-Based Awards shall be payable to or vest with
respect to, as the case may be, any Participant for a given period until the
Committee certifies in writing that the objective performance goals (and any
other material terms) applicable to such period have been satisfied; and
	 
	 	(3)	 	after the establishment of a performance goal, the Committee
shall not revise such performance goal or increase the amount of compensation
payable thereunder (as determined in accordance with Section 162(m) of the
Code) upon the attainment of such performance goal.





     d. Performance Measures. The Committee may use the following performance measures
(either individually or in any combination) to set performance targets with respect to Awards
intended to qualify as Performance-Based Awards: net sales; pretax income before allocation of
corporate overhead and bonus; budget; earnings per share; net income; division, group or corporate
financial goals; return on shareholders’ equity; return on assets; return on net assets; return on
investment capital; gross margin return on investment; gross margin dollars or percent; sales per
square foot or per hour; payroll as a percentage of sales; inventory shrink; comparable store
sales; inventory turnover; employee turnover; sales, general and administrative expense; attainment
of strategic and operational initiatives; appreciation in and/or maintenance of the price of Common
Stock or any other publicly-traded securities of the Company, if any; market share; gross profits;
earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization;
economic value-added models; comparisons with various stock market indices; and/or reductions in
costs. The foregoing criteria shall have any reasonable definitions that the Committee may
specify, which may include or exclude any or all of the following items as the Committee may
specify: extraordinary, unusual or non-recurring items; effects of accounting changes; effects of
financing activities; expenses for restructuring or productivity initiatives; other non-operating
items; spending for acquisitions; effects of divestitures; and effects of litigation activities and
settlements. Any such performance criterion or combination of such criteria may apply to the
Participant’s Award opportunity in its entirety or to any designated portion or portions of the
Award opportunity, as the Committee may specify.



12. Adjustment Provisions




     If there shall be any change in Common Stock of the Company, through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, reverse stock split, split up,
spin-off, combination of shares, exchange of shares, dividend in kind or other like change in
capital structure or



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distribution (other than normal cash dividends) to shareholders of the Company, an adjustment
shall be made to each outstanding Stock Option and Stock Appreciation Right such that each such
Stock Option and Stock Appreciation Right shall thereafter be exercisable for such securities, cash
and/or other property as would have been received in respect of Common Stock subject to such Stock
Option or Stock Appreciation Right had such Stock Option or Stock Appreciation Right been exercised
in full immediately prior to such change or distribution, and such an adjustment shall be made
successively each time any such change shall occur. In addition, in the event of any such change
or distribution, in order to prevent dilution or enlargement of Participants’ rights under the
Plan, the Committee shall have the authority to adjust, in an equitable manner, the number and kind
of shares that may be issued under the Plan, the number and kind of shares subject to outstanding
Awards, the exercise price applicable to outstanding Awards, and the Fair Market Value of Common
Stock and other value determinations applicable to outstanding Awards. Appropriate adjustments may
also be made by the Committee in the terms of any Awards under the Plan to reflect such changes or
distributions and to modify any other terms of outstanding Awards on an equitable basis, including
modifications of performance targets and changes in the length of performance periods. In
addition, other than with respect to Stock Options, Stock Appreciation Rights and other Awards
intended to constitute Performance-Based Awards, the Committee is authorized to make adjustments to
the terms and conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events affecting the Company or any of its Affiliates or the financial statements of
the Company, or in response to changes in applicable laws, regulations, or accounting principles.
Notwithstanding the foregoing, (i) any adjustment with respect to an Incentive Stock Option shall
comply with the rules of Section 424(a) of the Code, and (ii) in no event shall any adjustment be
made which would render any Incentive Stock Option granted hereunder other than an incentive stock
option for purposes of Section 422 of the Code.



13. Change In Control




     a. Accelerated Vesting. Notwithstanding any other provision of this Plan, unless
otherwise provided in the applicable Award agreement, if there is a Change in Control of the
Company (as defined in Section 13(b) below), all unvested Awards granted under the Plan shall
become fully vested immediately upon the occurrence of the Change in Control and such vested Awards
shall be paid out or settled, as applicable, within 60 days upon the occurrence of the Change in
Control, subject to requirements of applicable laws and regulations. The Committee shall have full
discretion, notwithstanding anything herein or in an Award agreement to the contrary, with respect
to an outstanding Award, upon the merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company, to provide that the securities of another entity
may be substituted hereunder for the shares of Common Stock and to make equitable adjustment with
respect thereto.



     b. Definition. For purposes of this Section 13, (i) if there is an employment
agreement or at will offer letter between the Participant and the Company or any of its Affiliates
in effect, “Change in Control” shall have the same definition as the definition of “Change in
Control” contained in such employment agreement or at will offer letter; or (ii) if “Change in
Control” is not defined in such employment agreement or at will offer letter or if there is no
employment agreement or at will offer letter between the Participant and the Company or any of its
Affiliates in effect, “Change in Control” of the Company shall be deemed to have occurred upon any
of the following events:




	 	(1)	 	The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50%
of either (i) the then-outstanding shares of Common Stock (the “Outstanding
Company Common Stock”) or (ii) the combined voting power of the
then-outstanding




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	 	 	 	voting securities of the Company entitled to vote generally in the election
of directors (the “Outstanding Company Voting Securities”); provided,
however, that for purposes of this subsection (1), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(iv) any acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (3) of this Section
13(b); or
	 
	 	(2)	 	Individuals who, as of the Effective Date, constitute the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or nomination for election by
the Company’s shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or
	 
	 	(3)	 	Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a “Business Combination”), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then-outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, more than 50% of, respectively, the
then-outstanding shares of common stock of the corporation resulting from such
Business Combination, or the combined voting power of the then-outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for such Business Combination; or




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	 	(4)	 	Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.





     c. Cashout. The Committee, in its discretion, may determine that, upon the occurrence
of a Change in Control of the Company, each Stock Option and Stock Appreciation Right outstanding
hereunder shall terminate and such holder shall receive, within 60 days upon the occurrence of the
Change in Control, with respect to each share of Common Stock subject to such Stock Option or Stock
Appreciation Right, an amount equal to the excess of the Fair Market Value of such shares of Common
Stock immediately prior to the occurrence of such Change in Control over the exercise price per
share of such Stock Option or Stock Appreciation Right; such amount to be payable in cash, in one
or more kinds of property (including the property, if any, payable in the transaction) or in a
combination thereof, as the Committee, in its discretion, shall determine.



14. Termination of Employment




     a. Subject to any written agreement between the Participant and the Company or any of its
Affiliates, if a Participant’s employment is terminated due to death or Disability (as defined in
Section 14(f) below):




	 	(1)	 	all unvested Stock Awards and all unvested Stock Units held by
the Participant on the date of the Participant’s termination of employment due
to death or the date of the termination of his or her employment related to
Disability, as the case may be, shall immediately become vested as of such
date;
	 
	 	(2)	 	all unexercisable Stock Options and all unexercisable Stock
Appreciation Rights held by the Participant on the date of the Participant’s
termination of employment due to death or the date of the termination of his or
her employment related to Disability, as the case may be, shall immediately
become exercisable as of such date and shall remain exercisable until the
earlier of (i) the end of the one-year period following the date of the
Participant’s termination of employment due to death or the date of the
termination of his or her employment related to Disability, as the case may be,
or (ii) the date the Stock Option or Stock Appreciation Right would otherwise
expire;
	 
	 	(3)	 	all exercisable Stock Options and all exercisable Stock
Appreciation Rights held by the Participant on the date of the Participant’s
termination of employment due to death or the date of the termination of his or
her employment related to Disability, as the case may be, shall remain
exercisable until the earlier of (i) the end of the one-year period following
the date of the Participant’s termination of employment due to death or the
date of the termination of his or her employment related to Disability, as the
case may be, or (ii) the date the Stock Option or Stock Appreciation Right
would otherwise expire; and
	 
	 	(4)	 	all unearned and/or unvested Performance Awards held by the
Participant on the date of the Participant’s termination of employment due to
death or the date of the termination of his or her employment related to
Disability, as the case may be, shall immediately become earned or vested as of
such date and shall be paid out and/or settled based on the Company’s and/or
Participant’s performance immediately prior to the date of the Participant’s
termination of employment due to death or the date of the termination of his or
her employment related to




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	 	 	 	Disability on a pro-rated basis with a minimum of at least one year into a
performance period.





     b. Subject to any written agreement between the Participant and the Company or any of its
Affiliates, if a Participant’s employment is terminated by the Company for Cause (as defined in
Section 14(g) below), all Awards, whether or not vested, earned or exercisable, held by the
Participant on the date of the termination of his or her employment for Cause shall immediately be
forfeited by such Participant as of such date.



     c. Subject to any written agreement between the Participant and the Company or any of its
Affiliates, if a Participant’s employment is terminated for any reason, including, without
limitation, retirement, other than for Cause or other than due to death or Disability:




	 	(1)	 	all unvested, unearned or unexercisable Awards held by the
Participant on the date of the termination of his or her employment shall
immediately be forfeited by such Participant as of such date; and
	 
	 	(2)	 	all exercisable Stock Options and all exercisable Stock
Appreciation Rights held by the Participant on the date of the termination of
his or her employment shall remain exercisable until the earlier of (i) the end
of the 90-day period following the date of the termination of the Participant’s
employment, or (ii) the date the Stock Option or Stock Appreciation Right would
otherwise expire.





     d. Notwithstanding anything contained in the Plan to the contrary, the Committee may, in its
discretion, provide that:




	 	(1)	 	any or all unvested Stock Awards and/or any or all unvested
Stock Units held by the Participant on the date of the Participant’s death
and/or the date of the termination of the Participant’s employment shall
immediately become vested as of such date;
	 
	 	(2)	 	any or all unexercisable Stock Options and/or any or all
unexercisable Stock Appreciation Rights held by the Participant on the date of
the Participant’s death and/or the date of the termination of his or her
employment shall immediately become exercisable as of such date and shall
remain exercisable until a date that occurs on or prior to the date the Stock
Option or Stock Appreciation Right is scheduled to expire, provided, however,
that Incentive Stock Options shall remain exercisable not longer than the end
of the 90-day period following the date of the termination of the Participant’s
employment;
	 
	 	(3)	 	any or all exercisable Stock Options and/or any or all
exercisable Stock Appreciation Rights held by the Participant on the date of
the Participant’s death and/or the date of the termination of his or her
employment shall remain exercisable until a date that occurs on or prior to the
date the Stock Option or Stock Appreciation Right is scheduled to expire,
provided, however, that Incentive Stock Options shall remain exercisable not
longer than the end of the 90-day period following the date of the termination
of the Participant’s employment; and/or





     e. Notwithstanding anything contained in the Plan to the contrary, (i) the provisions
contained in this Section 14 shall be applied to an Incentive Stock Option only if the application
of such



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provision maintains the treatment of such Incentive Stock Option as an Incentive Stock Option
and (ii) the exercise period of an Incentive Stock Option in the event of a termination due to
Disability provided in Section 14(a)(3) above shall only apply if the Participant’s Disability
satisfies the requirement of “permanent and total disability” as defined in Section 22(e)(3) of the
Code.



     f. For the purposes of this Section 14, (i) if there is an employment agreement or at will
offer letter between the Participant and the Company or any of its Affiliates in effect,
“Disability” shall have the same definition as the definition of “Disability” contained in such
employment agreement or at will offer letter; or (ii) if “Disability” is not defined in such
employment agreement or at will offer letter or if there is no employment agreement or at will
offer letter between the Participant and the Company or any of its Affiliates in effect,
“Disability” shall mean either of the following, as may be further modified or supplemented by the
Committee in its sole discretion:




	 	(1)	 	the Participant’s inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than twelve months; or
	 
	 	(2)	 	the Participant’s receipt, by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not less than
twelve months, of income replacement benefits for a period of not less than
three months under an accident and health plan covering employees of the
Company.





     g. For purposes of this Section 14, (i) if there is an employment agreement or at will offer
letter between the Participant and the Company or any of its Affiliates in effect, “Cause” shall
have the same definition as the definition of “Cause” contained in such employment agreement or at
will offer letter; or (ii) if “Cause” is not defined in such employment agreement or at will offer
letter or if there is no employment agreement or at will offer letter between the Participant and
the Company or any of its Affiliates in effect, “Cause” shall include, but is not limited to the
following, as may be further modified or supplemented by the Committee in its sole discretion:




	 	(1)	 	any willful and continuous neglect of or refusal to perform the
employee’s duties or responsibilities with respect to the Company or any of its
Affiliates, insubordination, dishonesty, gross neglect or willful malfeasance
by the Participant in the performance of such duties and responsibilities, or
the willful taking of actions which materially impair the Participant’s ability
to perform such duties and responsibilities, or any serious violation of the
rules or regulations of the Company;
	 
	 	(2)	 	the violation of any local, state or federal criminal statute,
including, without limitation, an act of dishonesty such as embezzlement, theft
or larceny or conviction of, or entering a plea of guilty or nolo contendre to,
a felony;
	 
	 	(3)	 	intentional provision of services in competition with the
Company or any of its Affiliates, or intentional disclosure to a competitor of
the Company or any of its Affiliates of any confidential or proprietary
information of the Company or any of its Affiliates; or
	 
	 	(4)	 	any similar conduct, including, without limitation,
disparagement of the Company or any of its Affiliates, by the Participant with
respect to which the




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	 	 	 	Company determines in its discretion that the Participant has terminated
employment under circumstances such that the payment of any compensation
attributable to any Award granted under the Plan would not be in the best
interest of the Company or any of its Affiliates.





     For purposes of this Section 14, the Committee shall have the authority to determine whether
the “Cause” exists and whether subsequent actions on the part of the Participant have cured the
“Cause.”



15. Section 409A of the Code




     a. Awards under the Plan are intended either to be exempt from the rules of Section 409A of
the Code or to satisfy those rules and shall be construed accordingly. However, the Company shall
not be liable to any Participant or other holder of an Award with respect to any Award-related
adverse tax consequences arising under Section 409A or other provision of the Code.



     b. If any provision of the Plan or an Award agreement contravenes any regulations or Treasury
guidance promulgated under Code Section 409A or could cause an Award to be subject to the interest
and penalties under Code Section 409A, such provision of the Plan or Award shall be deemed
automatically modified to maintain, to the maximum extent practicable, the original intent of the
applicable provision without violating the provisions of Code Section 409A. Moreover, any
discretionary authority that the Administrator may have pursuant to the Plan shall not be
applicable to an Award that is subject to Code Section 409A to the extent such discretionary
authority will contravene Section 409A or the regulations or guidance promulgated thereunder.



     c. Notwithstanding any provisions of this Plan or any Award granted hereunder to the contrary,
no acceleration shall occur with respect to any Award to the extent such acceleration would cause
the Plan or an Award granted hereunder to fail to comply with Code Section 409A.



     d. Notwithstanding any provisions of this Plan or any applicable Award agreement to the
contrary, no payment shall be made with respect to any Award granted under this Plan to a
“specified employee” (as such term is defined for purposes of Code Section 409A) prior to the
six-month anniversary of the employee’s separation of service to the extent such six-month delay in
payment is required to comply with Code Section 409A.



16. Transferability




     Each Award granted under the Plan to a Participant shall not be transferable otherwise than by
will or the laws of descent and distribution and/or shall be exercisable, during the Participant’s
lifetime, only by the Participant. In the event of the death of a Participant, each Stock Option
or Stock Appreciation Right theretofore granted to him or her shall be exercisable in accordance
with Section 14 above and then only by the executor or administrator of the estate of the deceased
Participant or the person or persons to whom the deceased Participant’s rights under the Stock
Option or Stock Appreciation Right shall pass by will or the laws of descent and distribution.
Notwithstanding the foregoing, at the discretion of the Committee, an Award (other than an
Incentive Stock Option) may permit the transferability of such Award by a Participant solely to
members of the Participant’s immediate family or trusts or family partnerships for the benefit of
such persons, subject to any restriction included in the Award agreement.



17. Other Provisions




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     Awards granted under the Plan may also be subject to such other provisions (whether or not
applicable to the Award granted to any other Participant) as the Committee determines on the date
of grant to be appropriate, including, without limitation, for the installment purchase of Common
Stock under Stock Options, for the installment exercise of Stock Appreciation Rights, to assist the
Participant, excluding an executive officer or a non-employee director, in financing the
acquisition of Common Stock, for the forfeiture of, or restrictions on resale or other disposition
of, Common Stock acquired under any form of the Award, for the acceleration of exercisability or
vesting of Awards, or to comply with federal and state securities laws, or understandings or
conditions as to the Participant’s employment, in addition to those specifically provided for under
the Plan. The Committee shall have the authority to retract any Award granted under the Plan in
case of a material restatement of the financial statements of the Company or if it is otherwise
determined by the Committee that the previously granted Award was not earned by the Participant.



18. Fair Market Value




     For purposes of this Plan and any Awards granted hereunder, “Fair Market Value” shall mean, as
of any given date, the closing price of a share of Common Stock on The NASDAQ Stock Market LLC or
such other public trading market on which shares of Common Stock are listed or quoted on that date.
If there is no regular public trading market for shares of Common Stock, the Fair Market Value of
a share of Common Stock shall be determined by the Committee in good faith. In each case, the Fair
Market Value shall be determined without regard to whether shares of Common Stock are restricted or
represent a minority interest.



19. Withholding




     All payments or distributions of Awards made pursuant to the Plan shall be net of any amounts
required to be withheld pursuant to applicable federal, state and local tax withholding
requirements. If the Company proposes or is required to distribute Common Stock pursuant to the
Plan, it may require the Participant receiving such Common Stock to remit to it or to the Affiliate
that employs such Participant an amount sufficient to satisfy such tax withholding requirements
prior to the delivery of any certificates for such Common Stock. In lieu thereof, the Company or
the Affiliate employing the Participant shall have the right to withhold the amount of such taxes
from any other sums due or to become due from the Company or the Affiliate, as the case may be, to
the Participant receiving Common Stock, as the Committee shall prescribe. The Committee may, in
its discretion, and subject to such rules as the Committee may adopt (including any as may be
required to satisfy applicable tax and/or non-tax regulatory requirements), permit a Participant to
pay all or a portion of the federal, state and local withholding taxes arising in connection with
any Award consisting of shares of Common Stock by electing to have the Company withhold shares of
Common Stock having a Fair Market Value equal to the amount of tax to be withheld, such tax
calculated at rates required by statute or regulation.



20. Tenure




     A Participant’s right, if any, to continue to serve the Company as a non-employee director,
executive officer, other key employee, or otherwise shall not be enlarged or otherwise affected by
his or her designation as a Participant under the Plan.



21. Unfunded Plan




     Participants shall have no right, title, or interest whatsoever in or to any investments which
the Company may make to aid it in meeting its obligations under the Plan. Nothing contained in the
Plan, and no action taken pursuant to its provisions, shall create or be construed to create a
trust of any kind, or



14









 







a fiduciary relationship between the Company and any Participant, beneficiary, legal
representative or any other person. To the extent that any person acquires a right to receive
payments from the Company under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company. All payments to be made hereunder shall be paid from
the general funds of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as expressly set forth
in the Plan. The Plan is not intended to be subject to the Employee Retirement Income Security Act
of 1974, as amended.



22. No Fractional Shares




     No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any
Award. The Committee shall determine whether cash, or Awards, or other property shall be issued or
paid in lieu of fractional shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.



23. Duration, Amendment and Termination




     No Award shall be granted more than ten years after the Effective Date; provided, however,
that the terms and conditions applicable to any Award granted prior to such date may thereafter be
amended or modified by mutual agreement between the Company and the Participant or such other
persons as may then have an interest therein. The Board or the Committee may amend the Plan from
time to time or suspend or terminate the Plan at any time. However, no action authorized by this
Section 23 shall reduce the amount of any existing Award or change the terms and conditions thereof
without the Participant’s consent, except as otherwise provided for in Section 12. No amendment of
the Plan shall, without approval of the shareholders of the Company, (i) increase the total number
of shares which may be issued under the Plan or the maximum number of shares with respect to Stock
Options, Stock Appreciation Rights and other Awards that may be granted to any Participant under
the Plan; (ii) modify the requirements as to eligibility for Awards under the Plan; (iii) effect
the repricing of Stock Options or Stock Appreciation Rights, including the cancellation and
reissuing with other awards with a lower exercise price; or (iv) otherwise materially amend the
Plan as provided in NASDAQ Marketplace Rules or the rules of another public trading market on which
shares of Common Stock are then listed or quoted; provided, however, that no amendment may be made
without approval of the shareholders of the Company if the amendment will disqualify any Incentive
Stock Options granted hereunder.



24. Governing Law




     This Plan, Awards granted hereunder and actions taken in connection herewith shall be governed
and construed in accordance with the laws of the Commonwealth of Pennsylvania (regardless of the
law that might otherwise govern under applicable Pennsylvania principles of conflict of laws).



25. Severability




     In case any provision of this Plan shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.



26. Effective Date




     a. The Plan shall be effective as of the date on which the Plan is approved by the
shareholders of the Company at an annual meeting or any special meeting of shareholders of the
Company (the “Effective Date”) and such approval of shareholders shall be a condition to the right
of each Participant to receive Awards hereunder.



15









 





     b. This Plan shall terminate on the 10th anniversary of the Effective Date (unless sooner
terminated by the Board).




16