Document:

ramseynotice.htm

    Exhibit
10.6

    Delta
Natural Gas Company, Inc.

    Notice
of Performance Shares Award

    

    To:           Brian
Ramsey

     

    At its meeting on August 13, 2010, the
Corporate Governance and Compensation Committee (the “Committee”) of Delta
Natural Gas Company, Inc. (the “Company”), authorized
and directed the Company, on the Date of Award set forth below, to issue and
make an award to you of Performance Shares entitling you to receive shares of
the Company’s common stock under the terms and conditions of the Incentive
Compensation Plan (the “Plan”) of the Company
and this Notice of Performance Shares Award.   Such award of
Performance Shares was subsequently ratified by the Board of
Directors.   A copy of the Plan is attached as Exhibit
A.  Capitalized terms that are not defined have the meanings
given them in the Plan.

    

    Date of
Award:                                August
31, 2010

     

    Award:  Subject
to the Performance Period, Performance Criteria and other restrictions set forth
herein, you may receive between 1,000 to 2,000
Performance Shares which will entitle you to receive one share of the Company’s
common stock (“Share”) for each
Performance Share.

     

    Performance
Period:  The period from
July 1, 2010 – June 30, 2011.

     

    Restriction
Period(s):

     

         Restriction
Period 1 (covers 1/3 of Performance Shares paid):  July 1, 2011 -
August 31, 2011

     

         Restriction
Period 2 (covers 1/3 of Performance Shares paid):  July 1, 2011 -
August 31, 2012

     

         Restriction
Period 3 (covers 1/3 of Performance Shares paid):  July 1, 2011 -
August 31, 2013

     

    Performance
Criteria:  The performance
objective of this award is based upon on the Company’s 2011 audited earnings per
share, before any cash bonuses or stock awards, for the year ending June 30,
2011 (“2011 Audited
EPS”).

     

    
      	
               
      

            	
              Minimum Performance
      Objective:   $1.80 per
  share

            

    

    
      	
               
      

            	
              Targeted Performance
      Objective:    $1.90 per
  share

            

    

    
      	
               
      

            	
              Maximum Performance
      Objective:   $2.00 per
  share

            

    

    

    Minimum Performance Objective Not
Met.  If the Minimum Performance Objective is not met, i.e., if the Company does not
achieve a 2011 Audited EPS of at least $1.80, the number of Performance Shares
will not be determined and none will vest and you will not be entitled to any
Performance Shares hereunder.

    

    Minimum Performance Objective Met or
Exceeded.  If the Minimum Performance Objective and all other
conditions, including the Conditions to Payment set out below, are met or
exceeded, then you shall receive the following number of Performance Shares
based upon the actual 2011 Audited EPS:

    

    
      	
              $1.80
      – $1.89

              2011 Audited EPS

            	
              $1.90
      – $1.99

              2011 Audited EPS

            	
              $2.00
      and over

              2011 Audited EPS

            
	
              1,000
      shares

            	
              1,500
      shares

            	
              2,000
      shares

            

    

    Restrictions and
Vesting:  Except as provided in Paragraph 2 under Conditions to
Payment, all Performance Shares paid hereunder shall be in the form of
Restricted Stock, which shall vest in 1/3 increments as described below under
Conditions on Restrictions.

    

    Conditions to
Payment:

    

    1.           Payment of
Shares.  Except as provided in Paragraph 2, your Performance
Shares will be paid in Shares of Restricted Stock, subject to the restrictions
and vesting set forth below, as soon as administratively feasible after the end
of the Performance Period, but no later than September 13 of the same
year.  Payment will be made in the form of whole shares of Restricted
Stock in a lump sum payment.  You will only receive such number of
Shares as are established under the Performance Criteria.

    

    2.           Death, Disability or
Retirement before end of Performance Period and Payment.  For
purposes of this Paragraph 2 only, the Performance Shares awarded as provided in
subsections 2(a), (b), (c) or (d) shall be in the form of shares of the
Company’s common stock and will not be subject to the Conditions on Restrictions
in this Notice of Performance Shares Award.

    

    (a)           In
the event of your Disability or Retirement before the Performance Period has
ended, the number of Performance Shares to which you shall be entitled to, if
any, shall equal (i) the number of Performance Shares, if any, you would
otherwise be entitled to had you been an active Employee at the end of the
Performance Period (i.e., as adjusted or
forfeited based on the actual Performance Criteria) multiplied by (ii) the
portion of the Performance Period during which you were an active Employee
multiplied by (iii) one-third, and such Performance Shares shall be distributed
as soon as administratively feasible after the end of the Performance Period,
but no later than September 13 of the same year; or

    

    (b)           In
the event of your death while an Employee before the Performance Period has
ended, the Company will be assumed to have achieved a Targeted Performance
Objective for the Performance Period in which death occurs, and the number of
Shares your beneficiary shall be entitled to, if any, shall equal the number of
Shares you would otherwise be entitled to had you been an active Employee at the
end of the Performance Period without any further adjustment, and such
Performance Shares shall be distributed within a reasonable period following
death; or

    

    (c)           In
the event of your Disability or Retirement after the end of the Performance
Period, but before the date the Performance Shares are distributed, the number
of Performance Shares you shall be entitled to, if any, shall be (i) based on
the actual Performance Criteria for the entire Performance Period multiplied by
(ii) one-third; or

     
 

    (d)           In
the event of your death after the end of the Performance Period, but before the
date the Performance Shares are distributed, the number of Performance Shares
you shall be entitled to, if any, shall be based on the actual Performance
Criteria for the entire Performance Period without any further
adjustment.

    

    3.           Other
Termination.

    

    (a)           You
shall have no right to receive payment in respect of Performance Shares if you
resign or are otherwise terminated from the Company before the end of the
Performance Period for reasons other than your death, Disability, or Retirement
or following a Change in Control.

    

    (b)           You
shall have no right to receive payment in respect of Performance Shares if you
resign or are otherwise terminated from the Company after the end of the
Performance Period but before any Performance Shares have vested if you resign
or are otherwise terminated from the Company for reasons other than your death,
Disability, or Retirement or following a Change in Control.

    

    4.           Short-Term Disability; Other
Authorized Leaves of Absence. If you are absent from employment during a
Performance Period and you are entitled to (a) reemployment rights following
military service under the Uniformed Services Employment and Reemployment Rights
Act (USERRA) (or any other similar applicable federal or state law) or (b)
sickness allowance and/or short-term disability benefits under the Company’s
employee benefit plans, then your absence shall not affect your award of
Performance Shares, if any. In the event you are absent from employment during a
Performance Period due to an authorized leave of absence not described in the
immediately preceding sentence, the amount or number of Performance Shares to
which you shall be entitled to, if any, shall equal (i) the amount or
number of Performance Shares, if any, to which you would otherwise be entitled
had you been an active Employee during the entire Performance Period (i.e., as adjusted or
forfeited based on the Performance Criteria) multiplied by (ii) the portion
of the Performance Period during which you were an active Employee (i.e., excluding the period of
the authorized leave of absence) and such Performance Shares shall be
distributed and vest following the end of the Performance Period as set forth in
Section 1
above.

    

    5.           Adjustment of Award Due to
Demotion or Promotion. The Committee, in its discretion, may reduce the
number of Performance Shares (if the Performance Criteria are met) in the event
you are demoted during a Performance Period, or grant additional Performance
Shares (if the Performance Criteria are met) in the event you are promoted
during a Performance Period.

    

    6.           Restriction on Payment of
Awards. No distributions in respect of Performance Shares shall be made,
and such distribution shall be forfeited, if at the time a distribution would
otherwise have been made:

    

    (a)           The
regular quarterly dividend on any outstanding common or preferred shares of the
Company has been omitted and not subsequently paid prior to or on September 15,
2011; or

    

    (b)           The
consolidated net income of the Company for the fiscal year ending June 30, 2011
is less than the sum of (i) the aggregate amount to be distributed plus
(ii) dividends on all outstanding preferred and common shares of the
Company applicable to such twelve-month period (either paid, declared or accrued
at the most recently paid rate).

    

    Conditions on
Restrictions:

    

    7.           Restricted
Stock.  Except as provided in Paragraph 2 under Conditions to
Payment, Performance Shares paid hereunder shall be in the form of Restricted
Stock which will vest and the restrictions thereon will lapse in 1/3 increments
each year beginning on August 31, 2011, and annually each August 31 thereafter
until fully vested as long as the Recipient is an Employee throughout each such
Restriction Period.  If the Performance Criteria is not met, you will
not receive any Restricted Stock.

    

    8.           Restrictions.  Except
as otherwise provided in this Agreement, the Shares of Restricted Stock granted
hereunder may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the termination of the applicable Restriction
Period. Except as otherwise provided herein and subject to the Plan, if you
resign, are otherwise terminated from the Company, prior to the end of the
Restriction Period, you will forfeit all interests in the applicable Restricted
Stock. All rights with respect to the Restricted Stock granted to you shall be
exercisable during your lifetime only by you or your guardian or legal
representative.

    

    9.           Removal of
Restrictions.  Restricted Stock paid hereunder shall become
freely transferable by you after the last day of the applicable Restriction
Period.

    

    10.           Voting Rights. During
the Restriction Period, you may exercise full voting rights with respect to the
Restricted Stock subject thereto.

    

    11.           Dividends and Other
Distributions. During the Restriction Period, you shall be entitled to
receive all dividends and other distributions paid with respect to the
applicable Restricted Stock. If any such dividends or distributions are paid in
Shares, the Shares shall be subject to the same restrictions on transferability
and forfeitability as the Restricted Stock with respect to which they were
distributed.

    

    12.           Death, Disability or
Retirement after Payment but before end of Restriction Period. Except as
otherwise provided in this Notice, in the event of your death, Disability, or
Retirement while an Employee, the following shall apply:

    

    (a) In
the event of your Disability or Retirement before the Restriction Period has
ended, the restrictions on the Shares shall be removed upon expiration of the
Restriction Period, and the number of Shares you shall be entitled to, if any,
shall equal (i) the number of Shares, if any, you would otherwise be
entitled to had you been an active Employee at the end of the Restriction Period
multiplied by (ii) the portion of the Restriction Period you were an active
Employee; or

    

    (b) In
the event of your death before the Restriction Period has ended, the
restrictions on the Shares shall be removed upon your date of death, and the
number of Shares the Participant shall be entitled to, if any, shall equal the
number of Shares contingently granted to you, without any further
adjustment.

    

    Change of
Control:

    

    13.           Change in
Control.  Upon a Change in Control Performance Shares
previously granted shall be immediately vested and not subject to forfeiture due
to any subsequent termination from employment.  Upon a change in
Control, Restrictions on Restricted Stock shall be eliminated as of such
event.  If the Change in Control occurs before the end of the
Performance Period, the amount of the Performance Shares shall be determined
assuming the Company has achieved the Targeted Performance Objective and, the
amount shall then be multiplied by the portion of the Performance Period for
which you were an active Employee hereunder. If the Change in Control occurs
after the end of the Performance Period but before the Performance Shares are
paid, the amount payable shall be determined based on the actual performance
objective achieved. In either case payment of the Performance Shares shall be
made as soon as practicable following the Change in Control but no later than
the close of the seventy five (75) day period following the earlier of the end
of the Performance Period or the Change in Control.

    

    Definitions:

    

    14.           Definitions.  The
following terms used in this Notice of Performance Shares Award will have the
meanings indicated:

    

    (a)           “Change in Control”
shall have the same meaning as such term or similar term is defined by your
individual agreement with the Company which relates to your compensation and
benefits upon the occurrence of a change in ownership of the Participating
Company or similar event.

    

    In the
event there is no such agreement, “Change in Control”
shall mean:

    

    (i) The
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty percent (20%) or more of either (A) the then
outstanding shares of Common Stock of the Company (the “Outstanding Company
Common Stock”) or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however, that
the following acquisitions shall not constitute an acquisition of control: any
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), any acquisition by the Company, any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or any
acquisition by any corporation pursuant to a reorganization, merger, share
exchange or consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (A), (B) and (C) of
subsection (iii) of this section are satisfied; or

    

    (ii) Individuals who, as of the
Effective Date, constitute the Board of Directors (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a director subsequent
to the date hereof 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 either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or

    

    (iii) Consummation of a
reorganization, merger, share exchange or consolidation, in each case, unless,
following such reorganization, merger, share exchange or consolidation,
(A) more than fifty percent (50%) of, respectively, the then outstanding
shares of common stock of the corporation resulting from such reorganization,
merger, share exchange or consolidation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by 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 reorganization,
merger, share exchange or consolidation in substantially the same proportions as
their ownership, immediately prior to such reorganization, merger, share
exchange or consolidation, of the Outstanding Company Stock and Outstanding
Company Voting Securities, as the case may be, (B) no Person (excluding the
Company, any employee benefit plan or related trust of the Company, or such
corporation resulting from such reorganization, merger, share exchange or
consolidation and any Person beneficially owning, immediately prior to such
reorganization, merger, share exchange or consolidation, directly or indirectly,
twenty percent (20%) or more of the Outstanding Company Common Stock or
Outstanding Voting Securities, as the case may be) beneficially owns, directly
or indirectly, twenty percent (20%) or more of, respectively, the then
outstanding  shares of common stock of the corporation resulting from such
reorganization, merger, share exchange or consolidation or the combined voting
power of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (C) at least a majority of
the members of the board of directors of the corporation resulting from such
reorganization, merger, share exchange or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement providing
for such reorganization, merger, share exchange or consolidation;
or

    

    (iv) Approval by the shareholders
of the Company and consummation of (A) a complete liquidation or
dissolution of the Company or (B) the sale or other disposition of all or
substantially all of the assets of the Company, other than to a corporation,
with respect to which following such sale or other disposition (1) more
than fifty percent (50%) of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by 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 sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (2) no Person
(excluding the Company and any employee benefit plan or related trust of the
Company, or such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, twenty percent
(20%) or more of the Outstanding Company Common Stock or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, twenty percent (20%) or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (3) at least a majority of the
members of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition of assets of the
Company; or

    

    (v) The closing, as defined in the
documents relating to, or as evidenced by a certificate of any state or federal
governmental authority in connection with, a transaction approval of which by
the shareholders of the Company would constitute a “Change in Control” under
subsection (iii) or (iv) of this Section.

    

    Notwithstanding
(a) above, if your employment is terminated before a Change in Control as
defined in this Section and you reasonably demonstrate that such termination
(i) was at the request of a third party who has indicated an intention or
taken steps reasonably calculated to effect a “Change in Control” and who
effectuates a “Change in Control” or (ii) otherwise occurred in connection
with, or in anticipation of, a “Change in Control” which actually occurs, then
for all purposes of this Notice of Performance Shares Award, the date of a
“Change in Control” with respect to you shall mean the date immediately prior to
the date of such termination of  your employment.

    

    (b)           “Disability” shall
mean (a) your  mental or physical disability that is defined as
“Disability” under the terms of the long-term disability plan sponsored by the
Company and in which you are covered, as amended from time to time in accordance
with the provisions of such plan; or (b) a determination by the Committee,
in its sole discretion, of total disability (based on medical evidence) that
precludes you from engaging in a full-time position at the Company for wage or
profit for at least twelve months and appears to be permanent. All decisions by
the Committee relating to your Disability (including a decision that you are not
disabled), shall be final and binding on all parties.

    

    (c)           “Retirement” shall
mean the termination of your employment consistent with the provisions for early
or normal retirement under the defined benefit pension plan sponsored by the
Company.  Notwithstanding the foregoing, “Retirement” before you are
eligible for normal retirement under such plan shall require prior approval by
the Committee.

    

    15.           Conflicts.  If
there is a conflict between the terms of this Notice of Performance Shares Award
and the Plan, the Plan shall control.

    

    DELTA NATURAL GAS COMPANY,
INC.

    

    

    By:  ________________________________Its:  ________________________________

    

    005522.135297/3913750.1

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Exhibit
A

    

    DELTA
NATURAL GAS COMPANY, INC.

    INCENTIVE
COMPENSATION PLAN

    

    Effective
January 1, 2010

    

    TABLE
OF CONTENTS

    

    
      	
              ARTICLE
      I

            	
              PURPOSE

            	 
      	 
      
	 
      	 
      	 
      	 
      
	
              1.1

            	
              Purpose
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . .  . . . . . . . . .

            	 
      	
              1

            
	 
      	 
      	 
      	 
      
	
              ARTICLE
      II

            	
              DEFINITIONS

            	 
      	 
      
	 
      	 
      	 
      	 
      
	
              2.1

            	
              “Agreement”
      or “Award Agreement”.  . . . . . . . . . . . . . . . .. . . . .
      . . . . . . .

            	 
      	
              1

            
	
              2.2

            	
              “Award".
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . .  . . . . . . . . .

            	 
      	
              1

            
	
              2.3

            	
              “Award
      Date” or “Grant Date” . . . . . . . . . . . . . . . . . . . . . . .. . . .
      . . . . . . .

            	 
      	
              1

            
	
              2.4

            	
              “Board”
      or “Board of Directors”  . . . . . . . . . . . . . . . . . . . .
      .. . . . . . . . . . .

            	 
      	
              1

            
	
              2.5

            	
              “Change
      in Control” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      .. . . . . . . . . .

            	 
      	
              1

            
	
              2.6

            	
              “Code”.
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . .. . . . . . . . .

            	 
      	
              1

            
	
              2.7

            	
              “Committee”
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . .. . . . . . . . .

            	 
      	
              1

            
	
              2.8

            	
              “Common
      Stock” or “Stock” . . . . . . . . . . . . . . . . . . . . . . . . . 
      . . . . . . . . .

            	 
      	
              1

            
	
              2.9

            	
              “Company”
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . .  . . . . . . . .

            	 
      	
              1

            
	
              2.10

            	
              “Covered
      Participant”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      .. . . . . . . . .

            	 
      	
              1

            
	
              2.11

            	
              “Designated
      Beneficiary” . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
      . . . . . . . . .

            	 
      	
              2

            
	
              2.12

            	
              “Disability”
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . .. . . . . . . .

            	 
      	
              2

            
	
              2.13

            	
              “Effective
      Date” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . .. . . . . . . .

            	 
      	
              2

            
	
              2.14

            	
              “Eligible
      Employee” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . .. . . . . . . .

            	 
      	
              2

            
	
              2.15

            	
              “Employee”.
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . .  . . . . . . .

            	 
      	
              2

            
	
              2.16

            	
              “Exchange
      Act”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . .. . . . . . . .

            	 
      	
              2

            
	
              2.17

            	
              “Fair
      Market Value” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . .  . . . . . . .

            	 
      	
              2

            
	
              2.18

            	
              “Outside
      Director”  . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . .. . . . . . . .

            	 
      	
              2

            
	
              2.19

            	
              “Participant”
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . .. . . . . . .

            	 
      	
              2

            
	
              2.20

            	
              “Participating
      Company” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
      . . . . . . .

            	 
      	
              2

            
	
              2.21

            	
              “Performance
      Award”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
      . . . . . .

            	 
      	
              2

            
	
              2.22

            	
              “Performance
      Criteria” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      .  . . . . . .

            	 
      	
              2

            
	
              2.23

            	
              “Performance
      Period” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      .  . . . . . .

            	 
      	
              3

            
	
              2.24

            	
              “Performance
      Share”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . .. . . . . .

            	 
      	
              3

            
	
              2.25

            	
              “Person”.
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . .  . . . . .

            	 
      	
              3

            
	
              2.26

            	
              “Plan”  .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . .. . . . .

            	 
      	
              3

            
	
              2.27

            	
              “Restricted
      Stock” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . .. . . . . .

            	 
      	
              3

            
	
              2.28

            	
              “Restricted
      Period” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . .  . . . . .

            	 
      	
              3

            
	
              2.29

            	
              “Retirement”
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . .  . . . .

            	 
      	
              3

            
	
              2.30

            	
              “Rule
      16b-3”   . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . .. . . .

            	 
      	
              3

            
	
              2.31

            	
              “Section
      162(m)”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . .. . . .

            	 
      	
              3

            
	
              2.32

            	
              “Securities
      Act” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . .. . . . .

            	 
      	
              3

            
	
              2.33

            	
              “Shares”
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . .  . . . .

            	 
      	
              3

            
	
              2.34

            	
              “Stock
      Bonus Award” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . .. . . . .

            	 
      	
              3

            
	
              2.35

            	
              “Subsidiary”  .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . .. . . .

            	 
      	
              3

            
	 
      	 
      	 
      	 
      
	
              ARTICLE
      III

            	
              ELIGIBILITY

            	 
      	 
      
	 
      	 
      	 
      	 
      
	
              3.1

            	
              Eligibility.
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . .  . .

            	 
      	
              3

            
	 
      	 
      	 
      	 
      
	
              ARTICLE
      IV

            	
              SHARES
      SUBJECT TO THE PLAN

            	 
      	 
      
	 
      	 
      	 
      	 
      
	
              4.1

            	
              Number
      of Shares  . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . .. . . .

            	 
      	
              4

            
	
              4.2

            	
              Forfeited
      Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . .. . . .

            	 
      	
              4

            
	
              4.3

            	
              Capital
      Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . .. . . .

            	 
      	
              4

            
	 
      	 
      	 
      	 
      
	
              ARTICLE
      V

            	
              RESTRICTED
      STOCK

            	 
      	 
      
	 
      	 
      	 
      	 
      
	
              5.1

            	
              Grant
      of Restricted Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . .. . . .

            	 
      	
              4

            
	
              5.2

            	
              Restricted
      Stock Award Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .
      . .

            	 
      	
              4

            
	
              5.3

            	
              Restriction
      Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . .  . . .

            	 
      	
              4

            
	
              5.4

            	
              Removal
      of Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . .  . . .

            	 
      	
              5

            
	
              5.5

            	
              Voting
      Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . .  . .

            	 
      	
              5

            
	
              5.6

            	
              Dividends
      and Other Distributions. . . . . . . . . . . . . . . . . . . . . . . . . .
      .  . . . .

            	 
      	
              5

            
	
              5.7

            	
              Death,
      Disability or Retirement . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . .  . . .

            	 
      	
              5

            
	 
      	 
      	 
      	 
      
	
              ARTICLE
      VI

            	
              PERFORMANCE
      SHARES

            	 
      	 
      
	 
      	 
      	 
      	 
      
	
              6.1

            	
              Grant
      of Performance Shares. . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . .  . .

            	 
      	
              5

            
	
              6.2

            	
              Performance
      Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . .  . .

            	 
      	
              5

            
	 
      	 
      	 
      	 
      
	
              ARTICLE
      VII

            	
              STOCK
      BONUS AWARDS

            	 
      	 
      
	 
      	 
      	 
      	 
      
	
              7.1

            	
              Awards
      of Stock Bonus Shares . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . .. . .

            	 
      	
              7

            
	
              7.2

            	
              Form
      and Time of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . .. .

            	 
      	
              7

            
	 
      	 
      	 
      	 
      
	
              ARTICLE
      VIII

            	
              SPECIAL
      PROVISIONS APPLICABLE TO COVERED PARTICIPANTS

            	 
      	 
      
	 
      	 
      	 
      	 
      
	
              8.1

            	
              Special
      Provisions Applicable to Covered Participants. . . . . . . . . . .  .
      . . .

            	 
      	
              8

            
	 
      	 
      	 
      	 
      
	
              ARTICLE
      IX

            	
              CHANGE
      IN CONTROL

            	 
      	 
      
	 
      	 
      	 
      	 
      
	
              9.1

            	
              Change
      in Control Agreements . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . .  . .

            	 
      	
              8

            
	
              9.2

            	
              Change
      in Control Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . .  .

            	 
      	
              9

            
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
              ARTICLE
      X

            	
              ADMINISTRATION

            	 
      	 
      
	 
      	 
      	 
      	 
      
	
              10.1

            	
              The
      Committee  . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . 

            	 
      	
              11

            
	
              10.2

            	
              Committee
      Decisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . 

            	 
      	
              11

            
	
              10.3

            	
              Rule
      16b-3, Section 162(m) and Section 409A Requirements . . . . . .
      . 

            	 
      	
              11

            
	 
      	 
      	 
      	 
      
	
              ARTICLE
      XI

            	
              GENERAL
      PROVISIONS

            	 
      	 
      
	 
      	 
      	 
      	 
      
	
              11.1

            	
              Withholding
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . .  . . . . . . .

            	 
      	
              11

            
	
              11.2

            	
              Terms
      of Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . .

            	 
      	
              11

            
	
              11.3

            	
              Guidelines
      Applicable to All Awards . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . .

            	 
      	
              12

            
	
              11.4

            	
              Non-transferability.
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . .

            	 
      	
              12

            
	
              11.5

            	
              No
      Right to Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . .

            	 
      	
              12

            
	
              11.6

            	
              Rights
      as Shareholder  . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . .

            	 
      	
              12

            
	
              11.7

            	
              Construction
      of the Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . .

            	 
      	
              12

            
	
              11.8

            	
              Amendment
      of Plan or Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . .

            	 
      	
              12

            
	
              11.9

            	
              Exemption
      from Computation of Compensation for Other Purposes . . . .
    .

            	 
      	
              12

            
	
               11.10

            	
              Legend
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . .

            	 
      	
              13

            
	
               11.11

            	
              Special
      Provisions for Certain participants . . . . . . . . . . . . . . . . . . .
      . . . . . . .

            	 
      	
              13

            
	
               11.12

            	
              Unfunded
      Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . .

            	 
      	
              13

            
	
               11.13

            	
              Conflict
      with Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . .

            	 
      	
              13

            
	
               11.14

            	
              Gender
      and Number  . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . .

            	 
      	
              13

            
	
               11.15

            	
              Severability
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . .

            	 
      	
              13

            
	
               11.16

            	
              Effect
      of Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . .

            	 
      	
              13

            
	
               11.17

            	
              No
      Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . .

            	 
      	
              13

            

    

     

    
       

      
        
          

        

      

       

    

    

    DELTA
NATURAL GAS COMPANY, INC.

     INCENTIVE
COMPENSATION PLAN

    

    Effective
January 1, 2010

    As
Approved by the Shareholders on November 19, 2009

    

    ARTICLE
I

     PURPOSE

    

    1.1 Purpose. Delta Natural Gas Company,
Inc. (“Company”), a Kentucky corporation, hereby establishes the Delta Natural
Gas Company, Inc. Incentive Compensation Plan (“Delta Incentive Compensation
Plan”) to promote the interests of the Company and its shareholders through
(a) the attraction and retention of Participants essential to the success
of the Company; (b) the motivation of Participants using
performance-related incentives linked to performance goals and the interests of
Company shareholders; and (c) enabling such individuals to share in the
growth and success of the Company and its Subsidiaries. The Plan permits the
grant of  Performance Shares, Restricted Stock, and Stock Bonus Awards
as the Committee, in its sole and complete discretion, may determine to be
appropriate in carrying out the intent and purposes of this Plan.

    

    ARTICLE
II

     DEFINITIONS

    

    2.1 “Agreement” or “Award Agreement”
shall mean a written agreement between the Company and a Participant
implementing an Award, and setting forth the particular terms, conditions and
restrictions of the Award.

    

    2.2 “Award” shall mean an award or
grant made to a Participant under Article V, VI or VII.

    

    2.3 “Award Date” or “Grant Date” shall
mean the date on which an Award is made by the Committee under the
Plan.

    

    2.4 “Board” or “Board of Directors”
shall mean the Board of Directors of the Company.

    

    2.5 “Change in Control” shall be
defined in Section 9.2.

    

    2.6 “Code” shall mean the Internal
Revenue Code of 1986 and the rules and regulations promulgated thereunder or any
successor law, as amended from time to time.

    

    2.7 “Committee” shall mean the
Corporate Governance and Compensation Committee of the Board or such other
committee appointed by the Board to administer the Plan in accordance with
Article X.

    

    2.8 “Common Stock” or “Stock” shall
mean the Common Stock of the Company without par value, or such other security
or right or instrument into which such Common Stock may be changed or converted
in the future.

    

    2.9 “Company” shall mean Delta Natural
Gas Company, Inc., a Kentucky corporation, or any successor
thereto.

    

    2.10 “Covered Participant” shall mean a
Participant who is a “covered employee” as defined in Code Section 162(m)
(3).

    

    2.11 “Designated Beneficiary” shall
mean the beneficiary designated by the Participant, pursuant to procedures
established by the Committee, to receive amounts due to the Participant in the
event of the Participant’s death. If the Participant does not make an effective
designation, then the Designated Beneficiary will be deemed to be the
Participant’s estate.

    

    2.12 “Disability” shall mean
(a) the mental or physical disability of the Participant defined as
“Disability” under the terms of the long-term disability plan sponsored by the
Company and in which the Participant is covered, as amended from time to time in
accordance with the provisions of such plan; or (b) a determination by the
Committee, in its sole discretion, of total disability (based on medical
evidence) that precludes the Participant from engaging in their full-time
position at the Company for wage or profit for at least twelve months and
appears to be permanent. All decisions by the Committee relating to a
Participant’s Disability (including a decision that a Participant is not
disabled), shall be final and binding on all parties.

    

    2.13 “Effective Date” shall mean
January 1, 2010.

    

    2.14 “Eligible Employee” shall mean an
Employee who is an officer or other management or highly compensated employee of
a Participating Company as designated by the Committee to be eligible to
participate in the Plan.

    

    2.15 “Employee” shall mean an
individual who is employed by a Participating Company in a customary
employer-employee relationship and designated as such in accordance with the
Company’s standard employment practices.

    

    2.16 “Exchange Act” shall mean the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder or any successor law, as amended from time to time.

    

    2.17 “Fair Market Value” shall mean, on
any given date, the closing price of Common Stock as reported on the composite
tape of the primary stock exchange in which the Common Stock is listed on such
day or, if no Shares were traded on such stock exchange on such day, then on the
next preceding day that Stock was traded on such exchange, all as reported by
The Wall Street Journal or such other source as the Committee may
select.

    

    2.18 “Outside Director” shall mean a
member of the Board who is not an Employee.

    

    2.19 “Participant” shall mean an
Eligible Employee or Outside Director who has been selected from time to time
under Article III to receive an Award under the Plan.

    

    2.20 “Participating Company” shall mean
the Company and such other Subsidiaries as the Board authorizes to participate
herein.

    

    2.21 “Performance Award” shall mean a
performance-based Award made under Section 6.2, which may be in the form of
Performance Shares.

    

    2.22 “Performance Criteria” shall mean
objectives established by the Committee for a Performance Period for the purpose
of determining when an Award subject to such objectives has been earned, and may
include alternative and multiple Performance Criteria, including operating and
maintenance expense targets, customer satisfaction, safety, and financial goals
including absolute or relative (i.e., in relation to a peer group of companies)
total shareholder return, revenues, sales, net income, EBITDA, return on assets,
earnings per share and/or growth thereof, or net worth of the Company, any of
its Subsidiaries, divisions, business units or other areas of the
Company.

    

    2.23 “Performance Period” shall mean
the time period designated by the Committee during which Performance Criteria
must be met in order for a Participant to obtain a performance-based
award.

    

    2.24 “Performance Share” shall mean an
Award, designated as a Performance Share, granted to a Participant pursuant to
Section 6.2, the value of which is equal to a share of Company Stock and
which is determined, in whole or in part, by the attainment of pre-established
Performance Criteria as deemed appropriate by the Committee and described in the
Agreement.

    

    2.25 “Person” shall have the meaning
ascribed to such term in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a “group” as defined in Section
13(d) thereof.

    

    2.26 “Plan” shall mean the Delta
Incentive Compensation Plan, as herein established and as hereafter amended from
time to time.

    

    2.27 “Restricted Stock” shall mean an
Award of Stock to a Participant pursuant to Article V herein.

    

    2.28 “Restriction Period” shall mean
the period during which the transfer of Shares of Restricted Stock is restricted
and is subject to a risk of forfeiture, pursuant to Article V.

    

    2.29 “Retirement” shall mean the
termination of employment for a Participant consistent with the provisions for
early or normal retirement under the defined benefit pension plan sponsored by
the Company.  Notwithstanding the foregoing, “Retirement” before the
Participant is eligible for normal retirement under such plan shall require
prior approval by the Committee. With respect to a Participant who is an Outside
Director, “Retirement” shall mean the end of the director’s term of office upon
attaining the mandatory retirement age for directors.

    

    2.30 “Rule 16b-3” shall mean
Rule 16b-3 under Section 16(b) of the Exchange Act as adopted in Exchange
Act Release No. 34-37260 (May 30, 1996), or any successor rule as
amended from time to time.

    

    2.31 “Section 162(m)” shall mean
Section 162(m) of the Code, or any successor section under the Code, as amended
from time to time.

    

    2.32 “Securities Act” shall mean the
Securities Act of 1933 and the rules and regulations promulgated thereunder or
any successor law, as amended from time to time.

    

    2.33 “Shares” shall mean shares of
Common Stock of the Company.

    

    2.34 “Stock Bonus Award” shall mean a
bonus, in the form of Stock, under Article VII.

    

    2.35 “Subsidiary” shall mean any entity
with respect to which Delta owns, either directly or indirectly, at least 50% of
the total combined voting power of all classes of stock or other ownership
interest.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE
III

    ELIGIBILITY

    

    3.1 Eligibility. The Committee shall
have sole and complete discretion in determining the Eligible Employees and
Outside Directors who shall be eligible to participate in the
Plan.  An Eligible Employee or Outside Director of the Company
designated by the Committee as eligible hereunder shall be considered a
Participant upon receiving an Award under the Plan.

    

    ARTICLE
IV

    SHARES
SUBJECT TO THE PLAN

    

    4.1 Number of Shares. Subject to
adjustment as provided for in Section 4.3 below, the maximum aggregate number of
Shares that may be issued pursuant to Awards made under the Plan shall not
exceed 500,000 Shares, which shall be in a combination of Restricted Stock,
Performance Shares and Stock Bonus Awards as described in Articles V, VI
and  VII. Shares of Common Stock issued pursuant to Awards under the Plan
may be authorized but unissued Shares, Shares issued and reacquired by the
Company or Shares purchased in the open market for purposes of the Plan. Except
as provided in Sections 4.2 herein, the issuance of Shares in connection
with the exercise of, or as other payment for, Awards under the Plan shall
reduce the number of Shares available for future Awards under the
Plan.

    

    4.2 Forfeited Shares. In the event that
shares issued pursuant to the Awards are cancelled or forfeited for any reason,
the Shares subject to such Award shall thereafter be again available for grant
of an Award under the Plan.

    

    4.3 Capital Adjustments. In the event
of a reorganization, recapitalization, stock split, stock dividend, combination
of shares, merger, consolidation, rights offering, or any other change in the
corporate structure, capitalization or Shares of the Company, the Committee
shall make such adjustments as are appropriate in the maximum number and kind of
Shares that may be issued under the Plan and to any Participant, and in the
number and kind of Shares covered by any Awards granted before such
change.  Such adjustments shall be intended to put the Participant in
the same position as he or she was in immediately before such event. Any
adjustments will comply with Code Section 409A to the extent required to avoid
penalties.

    

    

    ARTICLE
V

     RESTRICTED
STOCK

    

    5.1 Grant of Restricted Stock. Subject
to the limitations set forth in Section 4.1 and the other terms and
provisions of the Plan and applicable law, the Committee, at any time, and, from
time to time, may grant shares of Restricted Stock under the Plan to such
Participants, and in such amounts and for such duration and/or consideration as
it shall determine.

    

    5.2 Restricted Stock Award Agreement.
Each share of Restricted Stock granted hereunder shall be evidenced by an Award
Agreement that shall specify the Restriction Period, the conditions which must
be satisfied prior to removal of the restriction, the forfeiture of such Shares
in the event such conditions are not satisfied, the number of Shares of
Restricted Stock granted, and such other provisions as the Committee shall
determine. The Committee may specify, but is not limited to, the following types
of conditions in the Award Agreement: (a) conditions for acceleration or
achievement of the end of the Restriction Period based on any Performance
Criteria and (b) any other conditions or restrictions which the Committee
may deem advisable, including requirements established pursuant to the
Securities Act, the Exchange Act, the Code and any securities trading system or
stock exchange upon which such Shares under the Plan are listed.

    

    5.3 Restriction Period. Except as
otherwise provided in this Article, the Shares of Restricted
Stock  granted under the Plan may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the termination of the
applicable Restriction Period or upon earlier satisfaction of other conditions
as specified by the Committee in its sole discretion and set forth in the
applicable Award Agreement. Subject to Section 5.7 and Article IX, if
a Participant resigns, is otherwise terminated from the Company or, in the case
of an Outside Director is not re-elected to the Board or otherwise resigns as a
member of the Board, prior to the end of the Restriction Period, he or she will
forfeit all interests in the Award. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be exercisable during his or
her lifetime only by such Participant or his or her guardian or legal
representative.

    

    5.4 Removal of
Restrictions.  Except as otherwise provided in this Article V,
Restricted Stock  covered by each Award made under the Plan shall
become freely transferable by the Participant after the last day of the
Restriction Period and/or upon the satisfaction of other conditions as
determined by the Committee and set forth in the applicable Award
Agreement.

    

    5.5 Voting Rights. During the
Restriction Period, Participants in whose name Restricted Stock is granted under
the Plan may exercise full voting rights with respect to those
Shares.

    

    5.6 Dividends and Other Distributions.
During the Restriction Period, Participants in whose name Restricted Stock is
granted under the Plan shall be entitled to receive all dividends and other
distributions paid with respect to those Shares. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Restricted Stock with
respect to which they were distributed.

    

    5.7 Death, Disability or Retirement.
Except as otherwise provided in a Participant’s Award Agreement, in the event of
the Participant’s death, Disability, or Retirement while an Employee or an
Outside Director, the following shall apply:

    

    (a) In
the event of the Participant’s Disability or Retirement before the Restriction
Period has ended, the restrictions on the Shares awarded to the Participant
shall be removed upon expiration of the Restriction Period, and the number of
Shares the Participant shall be entitled to, if any, shall equal (i) the
number of Shares, if any, the Participant would otherwise be entitled to had the
individual been an active Participant at the end of the Restriction Period
(i.e., as adjusted or forfeited based on the Performance Criteria) multiplied by
(ii) the portion of the Restriction Period the Participant was an active
Participant hereunder; or

    

    (b) In
the event of the Participant’s death before the Restriction Period has ended,
the restrictions on the Shares awarded to the Participant shall be removed upon
the Participant’s date of death, and the number of Shares the Participant shall
be entitled to, if any, shall equal the number of Shares contingently granted to
the Participant, without any further adjustment.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE
VI

     PERFORMANCE
SHARES

    

    6.1 Grant of Performance Shares.
Subject to the limitations set forth in Section 4.1 and the other terms and
provisions of the Plan and applicable law,  the Committee may, at any
time and from time to time, issue to Participants, either alone or in addition
to other Awards made under the Plan, Performance Awards as described in
Section 6.2. Any such Awards shall be governed by the terms of an
Agreement, and the Committee may impose such terms and conditions, similar to
those described in Section 5.2  and not inconsistent with the
terms of this Plan, as it deems appropriate on such Award.

    

    6.2 Performance Awards.

    

    (a) Grant
of Performance Awards. Performance Awards granted hereunder may be issued in the
form of Performance Shares to Participants subject to the Performance Criteria,
Performance Period and other considerations or restrictions as the Committee
shall determine. The Committee shall have complete discretion in determining the
number and value of Performance Shares granted to each Participant.

    

    (b) Value
of Performance Awards. The Committee shall determine the number and value of
Performance Shares granted to each Participant as a Performance Award. The
Committee shall set Performance Criteria in its discretion for each Participant
who is granted a Performance Award. The extent to which such Performance
Criteria are met will determine the value of the Performance Share to the
Participant.

    

    (c) Settlement
of Performance Awards. After a Performance Period has ended, the holder of a
Performance Share shall be entitled to receive the value thereof based on the
degree to which the Performance Criteria established by the Committee and set
forth in the Award Agreement have been satisfied.

    

    (d) Form
and Time of Payment. Payment of the amount to which a Participant shall be
entitled upon the settlement of the Performance Award shall be made in Shares.
However, if any payment in the form of Shares results in a fractional share,
such payment for the fractional share shall be made in cash. Payment of the
Stock as well as any cash for a fractional share shall be made at such times as
may be determined by the Committee following the end of the Performance Period
to which it relates, but not later than the last day of the seventy five (75)
day period following the end of the Performance Period.

    

    (e)
Death, Disability or Retirement. Unless otherwise provided in a Participant’s
Award Agreement:

    

    (1) In
the event of a Participant’s Disability or Retirement before the Performance
Period has ended, the number of Shares the Participant shall be entitled to, if
any, shall equal (i) the number of Shares, if any, the Participant would
otherwise be entitled to had the individual been an active Participant at the
end of the Performance Period (i.e., as adjusted or forfeited based on the
actual Performance Criteria) multiplied by (ii) the portion of the
Performance Period during which the Participant was an active Participant, and
such Shares shall be distributed following the end of the Performance Period as
set forth in Subsection 6.2(d) above; or

    

    (2) In
the event of a Participant’s death while an Employee or Outside Director before
the Performance Period has ended, the Company will be assumed to have achieved a
target performance level for the Performance Period in which death occurs, and
the number of Shares the Participant’s beneficiary shall be entitled to, if any,
shall equal the number of Shares the Participant would otherwise be entitled to
had the Participant been an active Participant at the end of the Performance
Period, and such Shares shall be distributed within a reasonable period
following death; or

    

    (3) In
the event of a Participant’s Disability, Retirement or death after the end of
the Performance Period, but before the date the Shares are distributed, the
number of Shares the Participant shall be entitled to, if any, shall be based on
the actual Performance Criteria for the entire Performance Period.

    

    (f) Other
Termination. No Participant shall have a right to receive payment in respect of
an Award for a Performance Period if the Participant resigns or is otherwise
terminated from the Company or, in the case of an Outside Director, is not
re-elected (i) before the end of the Performance Period, or (ii) after the end
of the Performance period but before the Performance Award is paid, for reasons
other than the Participant’s death, Disability, or Retirement or following a
Change in Control.

    

    (g) Short-Term
Disability; Other Authorized Leaves of Absence. Absence of a Participant from
employment during a Performance Period and entitling the Participant to (i)
reemployment rights following military service under the Uniformed Services
Employment and Reemployment Rights Act (USERRA) (or any other similar applicable
federal or state law) or (ii) sickness allowance and/or short-term disability
benefits under the Company’s employee benefit plans, shall not affect any Award.
In the event a Participant is absent from employment during a Performance Period
due to an authorized leave of absence not described in the immediately preceding
sentence, the amount or number of Shares the Participant shall be entitled to,
if any, under any Award shall equal (i) the amount or number of Shares, if
any, to which the Participant would otherwise be entitled had the individual
been an active Participant during the entire Performance Period ( i.e. , as
adjusted or forfeited based on the Performance Criteria) multiplied by
(ii) the portion of the Performance Period during which the Participant was
an active Participant (i.e., excluding the period of the authorized leave of
absence) and such Shares shall be distributed following the end of the
Performance Period as set forth in Subsection 6.2(d) above.

    

    (h) Adjustment
of Award Due to Demotion or Promotion. The Committee, in its discretion, may
reduce an Award in the event of a Participant’s demotion during a Performance
Period, or grant an additional Award in the event of a Participant’s promotion
during a Performance Period.

    

    (i) Restriction
on Payment of Awards. No distributions in respect of Performance Shares shall be
made, and such distribution shall be forfeited, if at the time a distribution
would otherwise have been made:

    

    (1)           The
regular quarterly dividend on any outstanding common or preferred shares of the
Company has been omitted and not subsequently paid; or

    

    (2) The
estimated consolidated net income of the Company for the immediately preceding
twelve-month period is less than the sum of (i) the aggregate amount to be
distributed plus (ii) dividends on all outstanding preferred and common
shares of the Company applicable to such twelve-month period (either paid,
declared or accrued at the most recently paid rate).

    

    ARTICLE
VII

    STOCK
BONUS AWARDS

    

    7.1 Awards of Stock Bonus
Shares.  A “Stock Bonus” for purposes of this Article VII is an award
of Shares of the Company’s Stock for services rendered to the Company or any
Participating Company. Subject to the limitations set forth in Section 4.1 and
the other terms and conditions of the Plan and applicable law, the Committee may
award to any Employee and/or Outside Director Shares as a Stock Bonus for past
service rendered to the Company or any Participating Company as the Committee,
in its sole discretion, may from time to time determine. The Committee will
determine the number of Shares to be awarded to Employees and Outside Directors.
Stock Bonuses may vary among Employees and/or Outside Directors and between
groups of Employees and/or Outside Directors, and may be based upon the
achievement of the Company or any Participating Company and/or individual
performance or such other criteria as the Committee may determine.

    

    7.2 Form and Time of
Payment.  Any Stock Bonus awarded by the Committee will be paid as
soon as administratively feasible after the close of the fiscal year for which
the Stock Bonus is awarded, but no later than the last day of the seventy five
(75) day period following the end of the fiscal year. Payment will be made in
the form of whole Shares in a lump sum payment. If an Employee’s employment or
an Outside Director’s term is terminated due to Disability, Retirement or death
after the award of a Stock Bonus but before the payment of the Shares, the
Employee and/or Outside Director or their respective  beneficiaries,
as applicable, shall receive payment of the Shares within the time period
referenced herein. If an Employee’s employment or an Outside Director’s term is
terminated for any other reason after the award of a Stock Bonus but before the
payment of the Shares, the payment shall be forfeited.

    

    ARTICLE
VIII

    SPECIAL
PROVISIONS APPLICABLE TO COVERED PARTICIPANTS

    

    8.1 Special Provisions Applicable to
Covered Participants. Awards to Covered Participants shall be governed by the
conditions of this Article in addition to the requirements of Articles V, VI and
VII above. Should conditions set forth under this Article conflict with the
requirements of Articles V, VI and VII above, the conditions of this Article
shall prevail:

    

    (a) All
Performance Criteria relating to Covered Participants for a relevant Performance
Period shall be established by the Committee in writing prior to the beginning
of the Performance Period, or by such other later date for the Performance
Period as may be permitted under Section 162(m) of the Code.

    

    (b) The
Performance Criteria must be objective and must satisfy third party
“objectivity” standards under Code Section 162(m).

    

    (c) The
Performance Criteria shall not allow for any discretion by the Committee as to
an increase in any Award, but discretion to lower an Award is
permissible.

    

    (d) The
Award and payment of any Award under this Plan to a Covered Participant with
respect to a relevant Performance Period shall be contingent upon the attainment
of the Performance Criteria that are applicable to such Award. The Committee
shall certify in writing prior to payment of any such Award that such applicable
Performance Criteria have been satisfied. Resolutions adopted by the Committee
may be used for this purpose.

    

    (e) The
aggregate maximum number of Shares subject to Awards that may be granted to any
Covered Participant under Articles V, VI and VII  during any fiscal
year of the Company shall be 50,000 Shares.

    

    (f) All
Awards under this Plan to Covered Participants or to other Participants who may
become Covered Participants at a relevant future date shall be further subject
to such other conditions, restrictions, and requirements as the Committee may
determine to be necessary to carry out the purposes of this Article, which is to
avoid the loss of deductions by the Company under Code section
162(m).

    

    ARTICLE
IX

    CHANGE IN
CONTROL

    

    9.1 Change in Control Agreements. The
provision of this Section regarding the terms and conditions of an Award
Agreement upon a Change in Control shall apply notwithstanding any Plan
provision to the contrary, and notwithstanding any agreement between the
Participating Company and such Participant which relate to the terms of the
Awards hereunder, upon a Change in Control. Upon a Change in Control, the
following shall apply:

    

    (a) The
Awards previously granted shall be immediately vested and not subject to
forfeiture due to any subsequent termination from employment or removal or
resignation from the Board, subject to Subsection (d) hereunder.

    

    (b) Restrictions
on any Restricted Stock shall be eliminated as of such event.

    

    (c) If
the Change in Control occurs before the end of the Performance Period, no
further adjustment shall be made to the number of Shares of Restricted Stock
contingently granted based on the Performance Criteria.

    

    (d) Performance
Shares shall be considered earned and shall not be subject to forfeiture due to
any subsequent termination from employment. If the Change in Control occurs
before the end of the Performance Period, the amount of the Performance Shares
shall be determined assuming the Company has achieved a target performance level
and, the amount shall then be multiplied by the portion of the Performance
Period the individual was an active Participant hereunder. If the Change in
Control occurs after the end of the Performance Period but before the
Performance Shares are paid, the amount payable shall be determined based on the
actual performance level. In either case payment of the Performance Shares shall
be made as soon as practicable following the Change in Control but no later than
the close of the seventy five (75) day period following the earlier of the end
of the Performance Period or the Change in Control.

    

    9.2 Change in Control Defined. For
purposes of this Article, “Change in Control” shall have the same meaning as
such term or similar term is defined in a Participant’s individual agreement
with the Company which relates to such Participant’s compensation and benefits
upon the occurrence of a change in ownership of the Participating Company or
similar event.

    

    (a) In
the event there is no such agreement, “Change in Control” shall
mean:

    

    (i) The
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty percent (20%) or more of either (A) the then
outstanding shares of Common Stock of the Company (the “Outstanding Company
Common Stock”) or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however, that
the following acquisitions shall not constitute an acquisition of control: any
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), any acquisition by the Company, any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or any
acquisition by any corporation pursuant to a reorganization, merger, share
exchange or consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (A), (B) and (C) of
subsection (iii) of this section are satisfied; or

    

    (ii) Individuals who, as of the
Effective Date, constitute the Board of Directors (the “Incumbent Board”) cease
for any reason to constitute at least a majority of the Board of Directors;
provided, however, that any individual becoming a director subsequent to the
date hereof 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 either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or

    

    (iii) Consummation of a
reorganization, merger, share exchange or consolidation, in each case, unless,
following such reorganization, merger, share exchange or consolidation,
(A) more than fifty percent (50%) of, respectively, the then outstanding
shares of common stock of the corporation resulting from such reorganization,
merger, share exchange or consolidation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by 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 reorganization,
merger, share exchange or consolidation in substantially the same proportions as
their ownership, immediately prior to such reorganization, merger, share
exchange or consolidation, of the Outstanding Company Stock and Outstanding
Company Voting Securities, as the case may be, (B) no Person (excluding the
Company, any employee benefit plan or related trust of the Company, or such
corporation resulting from such reorganization, merger, share exchange or
consolidation and any Person beneficially owning, immediately prior to such
reorganization, merger, share exchange or consolidation, directly or indirectly,
twenty percent (20%) or more of the Outstanding Company Common Stock or
Outstanding Voting Securities, as the case may be) beneficially owns, directly
or indirectly, twenty percent (20%) or more of, respectively, the then
outstanding  shares of common stock of the corporation resulting from such
reorganization, merger, share exchange or consolidation or the combined voting
power of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (C) at least a majority of
the members of the board of directors of the corporation resulting from such
reorganization, merger, share exchange or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement providing
for such reorganization, merger, share exchange or consolidation;
or

    

    (iv) Approval by the shareholders
of the Company and consummation of (A) a complete liquidation or
dissolution of the Company or (B) the sale or other disposition of all or
substantially all of the assets of the Company, other than to a corporation,
with respect to which following such sale or other disposition (1) more
than fifty percent (50%) of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by 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 sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (2) no Person
(excluding the Company and any employee benefit plan or related trust of the
Company, or such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, twenty percent
(20%) or more of the Outstanding Company Common Stock or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, twenty percent (20%) or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (3) at least a majority of the
members of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition of assets of the
Company; or

    

    (v) The closing, as defined in the
documents relating to, or as evidenced by a certificate of any state or federal
governmental authority in connection with, a transaction approval of which by
the shareholders of the Company would constitute a “Change in Control” under
subsection (iii) or (iv) of this Section.

    

    (b) Notwithstanding
(a) above, if the Participant’s employment is terminated before a Change in
Control as defined in this Section and the Participant reasonably demonstrates
that such termination (i) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated to effect a “Change
in Control” and who effectuates a “Change in Control” or (ii) otherwise
occurred in connection with, or in anticipation of, a “Change in Control” which
actually occurs, then for all purposes of this Agreement, the date of a “Change
in Control” with respect to the Participant shall mean the date immediately
prior to the date of such termination of the Participant’s
employment.

    

    ARTICLE
X

    ADMINISTRATION

    

    10.1 The Committee. The Plan shall be
administered and interpreted by the Committee which shall have full authority,
discretion and power necessary or desirable for such administration and
interpretation. The express grant in this Plan of any specific power to the
Committee shall not be construed as limiting any power or authority of the
Committee. In its sole and complete discretion the Committee may adopt, alter,
suspend and repeal any such administrative rules, regulations, guidelines, and
practices governing the operation of the Plan as it shall from time to time deem
advisable. In addition to any other powers and, subject to the provisions of the
Plan, the Committee shall have the following specific powers: (a) to
determine the terms and conditions upon which Awards may be made; (b) to
determine the Participants to whom Awards shall be made; (c) to determine
all terms and provisions of each Agreement, which need not be identical for
types of Awards nor for the same type of Award to different Participants;
(d) to construe and interpret all terms, conditions and provisions of the
Plan and all Agreements; (e) to establish, amend, or waive rules or
regulations for the Plan’s administration; (f) to accelerate the length of
a Performance Period or the termination of any Period of Restriction; and
(g) to make all other determinations and take all other actions necessary
or advisable for the administration or interpretation of the Plan. The Committee
may seek the assistance or advice of any persons it deems necessary to the
proper administration of the Plan.

    

    10.2 Committee Decisions. Unless
strictly and expressly prohibited by law, all determinations and decisions made
by the Committee pursuant to the provisions of this Plan shall be final,
conclusive, and binding upon all persons, including Participants, Designated
Beneficiaries, the Company, its shareholders and employees.

    

    10.3 Rule 16b-3, Section 162(m)
and Section 409A Requirements. Notwithstanding any other provision of the Plan,
the Committee may impose such conditions on any Award as it may deem to be
advisable or required to satisfy the requirements of Rule 16b-3,
Section 162(m) or Section 409A, if applicable.

    

     

    ARTICLE
XI

     GENERAL
PROVISIONS

    

    11.1 Withholding. The Company shall
have the right to deduct or withhold, or require a Participant to remit to the
Company, any taxes, subject to the statutory minimum, required by law to be
withheld from Awards made under this Plan. In the event an Award is paid in the
form of Common Stock, the Participant may remit to the Company the amount of any
taxes required to be withheld from such payment in cash, or, in lieu thereof,
the Company may withhold (or the Participant may be provided the opportunity to
elect to tender) the number of shares of Common Stock equal in Fair Market Value
to the amount required to be withheld.

    

    11.2 Terms of Awards. Each Award
granted under the Plan shall be evidenced in a corresponding Award Agreement
provided in writing to the Participant, which shall specify the terms,
conditions and any rules applicable to the Award, including but not limited to
the effect of death, Disability, or other termination of employment of the
Participant on the Award.

    

    11.3 Guidelines Applicable to all
Awards. All Awards awarded to a Participant under the Plan and not previously
paid shall be immediately forfeited and canceled in their entirety if the
Participant, without the prior written consent of the Company, and while
employed by the Company, becomes associated with, employed by, renders services
to, consults with, acquires ownership of more than five percent of any class of
stock of, or acquires beneficial ownership of more than five percent of the
earnings or profits of any corporation, partnership, proprietorship, trust, or
other entity which, in the  Committee’s judgment, competes directly or
indirectly with the Company or any subsidiary in any of their lines of
business.

    

    11.4 Non-transferability. No Award
granted under the Plan may be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, except by will or the laws of descent and
distribution. Further, no lien, obligation, or liability of the Participant may
be assigned to any right or interest of the Participant in an Award under this
Plan.

    

    11.5 No Right to Employment. Neither
the Plan, nor any Award made, or any other action taken, hereunder shall be
construed as giving any Participant or other person any right of employment or
continued employment with the Participating Company.

    

    11.6 Rights as Shareholder. Subject to
the terms and conditions of each particular Award, no Participant or Designated
Beneficiary shall be deemed a shareholder of the Company nor have any rights as
such with respect to any shares of Common Stock to be provided under the Plan
until he or she has become the holder of such shares.

    

    11.7 Construction of the Plan. Except
to the extent superseded by the laws of the United States, the Plan and all
Agreements shall be governed, construed, interpreted and administered in
accordance with the laws of the Commonwealth of Kentucky. In the event any
provision of the Plan or any Agreement shall be held invalid, illegal or
unenforceable, in whole or in part, for any reason, such determination shall not
affect the validity, legality or enforceability of any remaining provision,
portion of provision or the Plan overall, which shall remain in full force and
effect as if the Plan had been absent the invalid, illegal or unenforceable
provision or portion thereof.

    

    11.8 Amendment of Plan or Awards. The
Committee or the Board of Directors may amend, suspend, or terminate the Plan or
any portion thereof at any time, provided such amendment is made with
shareholder approval if and to the extent such approval is necessary to comply
with any legal requirement, including for these purposes any approval
requirement which is a requirement for the performance-based compensation
exception under Code Section 162(m). In no event shall the Committee
increase the amount payable pursuant to an Award after it has been granted. In
addition, no amendment shall be made to an outstanding Award without written
consent of the affected Participant. Notwithstanding the preceding, the
Committee may amend or modify the Plan or any outstanding Award to the extent
necessary to cause the Plan or such Award to comply with the requirements of
Section 409A of the Code, the Listed Company Manual of the New York Stock
Exchange or Listing Standard 4350 (C) (i) (A) of NASDAQ.

    

    11.9 Exemption from Computation of
Compensation for Other Purposes. By acceptance of an applicable Award under this
Plan, subject to the conditions of such Award, each Participant shall be
considered in agreement that all shares of Stock awarded under this Plan shall
be considered extraordinary, special incentive compensation and will not be
included as “earnings,” “wages,” “salary” or “compensation” in any pension,
welfare, life insurance, or other employee benefit arrangement of the Company
except as otherwise specifically provided in such arrangement.

    

    11.10 Legend. In its sole and complete
discretion, the Committee may elect to legend certificates representing Shares
sold or awarded under the Plan and to make appropriate references to the
restrictions imposed on such Shares.

    

    11.11 Special Provisions for Certain
Participants. All Award Agreements for Participants subject to Section 16(b) of
the Exchange Act shall be deemed to include any such additional terms,
conditions, limitations and provisions as Rule 16b-3 requires, unless the
Committee in its discretion determines that any such Award should not be
governed by Rule 16b-3. All performance-based Awards to Covered
Participants shall be deemed to include any such additional terms, conditions,
limitations and provisions as are necessary to comply with the performance-based
compensation exemption of Code Section 162(m), unless the Committee, in its
discretion, determines that any such Award is not intended to qualify for the
exemption for performance-based compensation under Code
Section 162(m).

    

    11.12 Unfunded Plan. The Plan shall be
unfunded and the Company shall not be required to segregate any assets in
connection with any Awards under the Plan. Any liability of the Company to any
person with respect to any Award under the Plan or any Award Agreement shall be
based solely upon the contractual obligations that may be created as a result of
the Plan or any such award or agreement. No such obligation of the Company shall
be deemed to be secured by any pledge of, encumbrance on, or other interest in,
any property or asset of the Company or any Subsidiary. Nothing contained in the
Plan or any Award Agreement shall be construed as creating in respect of any
Participant (or beneficiary thereof or any other person) any equity or other
interest of any kind in any assets of the Company or any Subsidiary or creating
a trust of any kind or a fiduciary relationship of any kind between the Company,
any Subsidiary and/or any such Participant, any beneficiary thereof or any other
person.

    

    11.13 Conflict with Employment
Agreement. Except as specified in Article IX or otherwise restricted under
Section 11.10, to the extent any provision of this Plan conflicts with any
provision of a written employment agreement between an Employee and the Company,
the material terms of which have been approved by the Board, the provisions of
the employment agreement shall control.

    

    11.14 Gender and Number. Where the
context admits, words in the masculine gender shall include the feminine gender,
the plural shall include the singular and the singular shall include the
plural.

    

    11.15 Severability. In the event any
provision of this Plan shall be held to be illegal or invalid for any reason,
such illegality or invalidity shall not affect the remaining parts of this Plan,
and this Plan shall be construed and endorsed as if such illegal or invalid
provision had never been contained in this Plan.

    

    11.16 Effect of Headings. The
descriptive headings of the Articles and Sections of this Plan are inserted for
convenience of reference and identification only and do not constitute a part of
this Plan for purposes of interpretation.

    

    11.17 No Liability. No member of the
Board or the Committee or any officer or Employee shall be personally liable for
any action, omission or determination made in good faith in connection with this
Plan. To the full extent permitted by law, the Company shall indemnify and hold
harmless the members of the Committee, the Board and the officers and Employees,
and each of them, from and against any and all loss which results from liability
to which any of them may be subjected by reason of any act or conduct in their
official capacities in connection with the administration of this Plan,
including all expenses reasonably incurred in their defense, in case the Company
fails to provide such defense. By participating in this Plan, each Employee
agrees to release and hold harmless the Company and its Subsidiaries (and their
respective directors, officers and employees), the Board and the Committee, from
and against any tax or other liability, including without limitation, interest
and penalties, incurred by the Employee in connection with his participation in
this Plan.

    

     

    IN
WITNESS WHEREOF, the Company has caused this instrument to be executed by the
authorized officers as of this 1st day
of January, 2010.

    

    DELTA NATURAL GAS COMPANY,
INC

    

    

    BY:    /s/ Glenn
R.
Jennings                                                      

    TITLE: Chairman of the Board,
President and

      Chief
Executive Officer

    

    ATTEST:

    

    

    BY:    /s/
John B.
Brown                                                                           

    TITLE: Chief Financial Officer,
Treasurer and Secretaryexhibit101.htm

Exhibit 10.1

 

 

OMNIBUS STOCK AND INCENTIVE PLAN

 

(As Amended and Restated May 19, 2010)

  

  

  

 

Table of Contents

	  	  	  	  	  
	  	  	  	
  

	
Page

	
 

SECTION 1. ESTABLISHMENT, PURPOSE, AND EFFECTIVE DATE OF PLAN

	
  

	
7

	  	  	  
	
 

1.1

	  	
Establishment

	
  

	
7

	
 

1.2

	  	
Purpose

	
  

	
7

	
 

1.3

	  	
Effective Date

	
  

	
7

	  	  
	
 

SECTION 2. DEFINITIONS

	
  

	
7

	  	  	  
	
 

2.1

	  	
Definitions

	
  

	
7, 8 & 9

	
 

2.2

	  	
Gender and Number

	
  

	
9

	  	  
	
 

SECTION 3. ELIGIBILITY AND PARTICIPATION

	
  

	
9

	  	  	  
	
 

3.1

	  	
Eligibility and Participation

	
  

	
9

	  	  
	
 

SECTION 4. ADMINISTRATION

	
  

	
9

	  	  	  
	
 

4.1

	  	
Administration

	
  

	
9 & 10

	
 

4.2

	  	
Delegation of Authority

	
  

	
10

	
 

4.3

	  	
Award Agreements

	
  

	
10

	  	  
	
 

SECTION 5. STOCK SUBJECT TO PLAN

	
  

	
10

	  	  	  
	
 

5.1

	  	
Number of Shares Available for Awards

	
  

	
10

	
 

5.2

	  	
Reuse

	
  

	
10

  

  

  

	
 

5.3

	  	
 

Limitations on Awards to a Single Participant

	
  

	
 

10 & 11

	
 

5.4

	  	
Adjustment in Capitalization

	
  

	
11

	
 

5.5

	  	
 

No Repricing Without Stockholder Approval

	
  

	
 

11

	  	  
	
 

SECTION 6. DURATION OF PLAN

	
  

	
11

	  	  	  
	
 

6.1

	  	
Duration of Plan

	
  

	
11

	  	  
	
 

SECTION 7. STOCK OPTIONS

	
  

	
11

	  	  	  
	
 

7.1

	  	
Grant of Options

	
  

	
11

	
 

7.2

	  	
Option Price

	
  

	
11

	
 

7.3

	  	
Exercise of Options

	
  

	
11 & 12

	
 

7.4

	  	
Payment

	
  

	
12

	
 

7.5

	  	
Limitations on ISOs

	
  

	
12 & 13

	
 

7.6

	  	
Restrictions on Stock Transferability

	
  

	
13

	
 

7.7

	  	
Termination of Employment Due to Death, Disability, Retirement

	
  

	
13

	
 

7.8

	  	
 

Termination of Employment other than Due to Death, Disability, Retirement or for Cause; Termination for Cause

	
  

	
13

	
 

7.9

	  	
Nontransferability of Options

	
  

	
14

	  	  	  
	
 

SECTION 8.

	  	
STOCK APPRECIATION RIGHTS

	
  

	
14

	  	  	  
	
 

8.1

	  	
Grant of Stock Appreciation Rights

	
  

	
14

	
 

8.2

	  	
Exercise of SARs in Lieu of Options

	
  

	
14 & 15

 

  

  

  

Table of Contents

(continued)

	  	  	  	  	  
	  	  	  	
  

	
Page

	  	  	  
	
8.3

	  	
Exercise of SARs in Addition to Options

	
  

	
15

	  	  	  	  	  
	
8.4

	  	
Exercise of SARs Independent of Options

	
  

	
15

	  	  	  	  	  
	
8.5

	  	
Exercise of SARs Upon Lapse of Options

	
  

	
15

	  	  	  	  	  
	
8.6

	  	
Payment of SAR Amount

	
  

	
15

	  	  	  	  	  
	
8.7

	  	
Form and Timing of Payment

	
  

	
15

	  	  	  	  	  
	
8.8

	  	
Limit of Appreciation

	
  

	
15

	  	  	  	  	  
	
8.9

	  	
Term of SAR

	
  

	
15

	  	  	  	  	  
	
8.10

	  	
Termination of Employment

	
  

	
15

	  	  	  	  	  
	
8.11

	  	
Nontransferability of SARs

	
  

	
15

	  	  
	
 

SECTION 9. RESTRICTED STOCK AND RESTRICTED STOCK UNITS

	
  

	
16

	  	  	  
	
9.1

	  	
Grant of Restricted Stock or Restricted Stock Units

	
  

	
16

	  	  	  	  	  
	
9.2

	  	
Transferability

	
  

	
16

	  	  	  	  	  
	
9.3

	  	
Other Restrictions

	
  

	
16

	  	  	  	  	  
	
9.4

	  	
Voting Rights

	
  

	
16

	  	  	  	  	  
	
9.5

	  	
Dividends and Other Distributions

	
  

	
16

	  	  	  	  	  
	
9.6

	  	
Termination of Employment Due to Retirement

	
  

	
16

	  	  	  	  	  
	
9.7

	  	
Termination of Employment Due to Death or Disability

	
  

	
17

	  	  	  	  	  
	
9.8

	  	
Termination of Employment for Reasons other than Death, Disability, or Retirement

	
  

	
17

	
 

9.9

	  	
Nontransferability

	
  

	
17

  

  

  

	  	  	  	  	  
	
Table of Contents

(continued)

 

	  
	
 

SECTION 10. PERFORMANCE UNITS AND PERFORMANCE SHARES

	
  

	
17

	  	  	  
	
10.1

	  	
Grant of Performance Units or Performance Shares

	
  

	
17

	  	  	  	  	  
	
10.2

	  	
Value of Performance Units and Performance Shares

	
  

	
17

	  	  	  	  	  
	
10.3

	  	
Payment of Performance Units and Performance Shares

	
  

	
17

	  	  	  	  	  
	
10.4

	  	
Form and Timing of Payment

	
  

	
18

	  	  	  	  	  
	
10.5

	  	
Termination of Employment Due to Death, Disability, or Retirement

	
  

	
18

	  	  	  	  	  
	
10.6

	  	
Termination of Employment for Other Reasons

	
  

	
18

	  	  	  	  	  
	
10.7

	  	
Nontransferability

	
  

	
18

	  	  	  	  	  
	
10.8

	  	
Performance Goals

	
  

	
18

	  	  	  	  	  
	  	  
	
SECTION 11. OTHER AWARDS

	
  

	
18

	  	  	  
	  	  	  
	
11.1

	  	
Grant of Other Awards

	
  

	
18

	  	  	  	  	  
	
11.2

	  	
Terms of Other Awards

	
  

	
19

	  	  	  	  	  
	  	  
	
SECTION 12. BENEFICIARY DESIGNATION

	
  

	
19

	  	  	  
	  	  	  
	
12.1

	  	
Beneficiary Designation

	
  

	
19

	  	  	  	  	  
	  	  	  
	
SECTION 13.

	  	
 RIGHTS OF EMPLOYEES

	
  

	
19

	  	  	  	  	  
	  	  	  
	
13.1

	  	
Employment

	
  

	
19

	  	  	  	  	  
	
13.2

	  	
Participation

	
  

	
19

 

  

  

  

Table of Contents

(continued)

 

	  	  	  	  	  
	  	  	  	  	
Page

	  	  
	
SECTION 14. CHANGE-IN-CONTROL

	
  

	
19

	  	  	  
	  	  	  
	
14.1

	  	
In General

	
  

	
19

	  	  	  	  	  
	
14.2

	  	
Definition

	
  

	
19 & 20

	  	  	  	  	  
	  	  
	
SECTION 15. AMENDMENT, MODIFICATION AND TERMINATION OF PLAN

	
  

	
21

	  	  	  
	  	  	  
	
15.1

	  	
Amendment, Modification, Suspension and Termination of Plan

	
  

	
21

	  	  	  	  	  
	  	  
	
SECTION 16. TAX WITHHOLDING

	
  

	
21

	  	  	  
	  	  	  
	
16.1

	  	
Tax Withholding

	
  

	
21

	
 

16.2

	  	
Share Withholding

	
  

	
21

	  	  
	
 

SECTION 17. INDEMNIFICATION

	
  

	
21

	  	  	  
	
 

17.1

	  	
Indemnification

	
  

	
21

	  	  	  
	
 

SECTION 18.

	  	
 REQUIREMENTS OF LAW

	
  

	
22

	  	  	  
	
 

18.1

	  	
Requirements of Law

	
  

	
22

	
 

18.2

	  	
Governing Law

	
  

	
22

	
 

18.3

	  	
Code Section 409A

	
  

	
22

	
 

18.4

	  	
TARP/Capital Purchase Program

	
  

	
22

 

  

  

  

Section 1.    Establishment, Purpose, and Effective Date of Plan

 

1.1 Establishment. First Midwest Bancorp, Inc., a Delaware corporation, hereby amends and restates the “FIRST MIDWEST BANCORP, INC. OMNIBUS STOCK AND INCENTIVE PLAN.”

 

1.2 Purpose. The purpose of the Plan is to advance the interests of the Company by providing to employees additional incentives and motivation toward superior performance of the Company and its subsidiaries, and by enabling the Company and its subsidiaries to attract and retain the services of employees upon whose judgment, interest, and special effort the successful conduct of its operations is largely dependent.

 

1.3 Effective Date. The Plan, as amended and restated, shall become effective immediately upon its adoption by the Board of Directors of the Company on May 19, 2010 subject to approval of the stockholders at the Company’s 2010 Annual Meeting of Stockholders.

 

Section 2.    Definitions

 

2.1 Definitions. Whenever used herein, the following terms shall have their respective meanings set forth below:

 

(a) “Award” means any Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Unit, Performance Share or Other Award granted under this Plan.

 

(b) “Award Agreement” means the agreement that sets forth the terms, conditions and limitations applicable to an Award.

 

(c) “Board” means the Board of Directors of the Company.

 

(d) “Cause” shall mean any one of the following:

 

(i) gross misconduct in, or the continued and willful refusal by the Participant after written notice by the Company to make himself available for the performance of the Participant’s duties for the Company or a subsidiary; or

 

(ii) conviction for a felony for a matter related to the Company or a subsidiary; or

 

(iii) suspension due to the direction of any authorized bank regulatory agency that the Participant be relieved of his duties and responsibilities to the Company or a subsidiary.

 

(e) “Code” means the Internal Revenue Code of 1986, as amended.

 

(f) “Committee” means the Compensation Committee of the Board of Directors or such other committee appointed from time to time by the Board of Directors to administer this Plan. The Committee shall consist of two or more members, each of whom shall qualify as a “nonemployee director,” as the term (or similar or successor term) is defined by Rule 16b-3, and as an “outside director” within the meaning of Code Section 162(m) and regulations thereunder.

 

(g) “Company” means First Midwest Bancorp, Inc., a Delaware corporation.

  

  

  

 

 

(h) “Disability” means totally and permanently disabled as from time to time defined under the First Midwest Bancorp Consolidated Pension Plan.

 

(i) “Employee” means a regular salaried employee (including officers and directors who are also employees) of the Company or its Subsidiaries, or any branch or division thereof. A regular salaried employee who, with the approval of the Board of Directors or the Committee enters into a “Continuing Participant Agreement” with the Company or its Subsidiaries effective upon such person ceasing to be a regular salaried employee, shall continue to be an Employee for purposes of this Plan and shall not be deemed to incur a termination of employment during the term of such Continuing Participant Agreement.

 

(j) “Fair Market Value” means the average of the highest and lowest prices of the Stock as reported by the consolidated tape of the Nasdaq National Market System on a particular date. In the event that there are no Stock transactions on such date, the Fair Market Value shall be determined as of the immediately preceding date on which there were Stock transactions.

 

(k) “Option” means the right to purchase Stock at a stated price for a specified period of time. For purposes of the Plan an Option may be either (i) an “Incentive Stock Option,” or “ISO” within the meaning of Section 422 of the Code, (ii) a “Nonstatutory (Nonqualified) Stock Option,” or “NSO,” or (iii) any other type of option encompassed by the Code.

 

(l) “Other Award” means an Award, other than a Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Unit or Performance Share granted under this Plan, including the right to receive Stock or a fixed or variable share denominated unit granted under this Plan or any deferred compensation plan established from time to time by the Company.

 

(m) “Participant” means any Employee designated by the Committee to participate in the Plan.

 

(n) “Performance Unit” means a right to receive a payment equal to the value of a Performance Unit as determined by the Committee based upon performance and pursuant to Section 10 of the Plan.

 

(o) “Performance Share” means a right to receive a payment equal to the value of a Performance Share as determined by the Committee based on performance and pursuant to Section 10 of the Plan.

 

(p) “Period of Restriction” means the period during which the transfer of shares of Restricted Stock is restricted pursuant to Section 9.2 of the Plan.

 

(q) “Plan” means the First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan as set forth herein and any amendments hereto.

 

(r) “Previously-Acquired Share” means a share of Stock acquired by the Participant or any beneficiary of Participant other than pursuant to an Award under this Plan or the predecessor to this Plan, or if so acquired, such share of Stock has been held for a period of not less than six months, or such shorter period as the Committee may prescribe.

  

  

  

 

 

(s) “Restricted Stock” means Stock granted to a Participant pursuant to Section 9 of the Plan.

 

(t) “Restricted Stock Unit” means a right to receive a payment equal to the value of a share of Stock, pursuant to Section 9 of the Plan.

 

(u) “Retirement” means termination of employment other than for Cause, at or after the Participant’s (a) age 65 (“Normal Retirement Date”) or (b) age 55 (but prior to age 65), with fifteen or more years of service, or such other date prior to age 65 which constitutes an Early Retirement Date (“Early Retirement Date”) as defined from time to time under the First Midwest Bancorp Consolidated Pension Plan. Years of service shall be determined in accordance with said Pension Plan.

 

(v) “Rule 16b-3” means Rule 16b-3 or any successor or comparable rule or rules applicable to Awards granted under the Plan promulgated by the Securities and Exchange Commission under Section 16(b) of the Securities Exchange Act of 1934, as amended.

 

(w) “Stock” means the Common Stock, without par value, of the Company.

 

(x) “Stock Appreciation Right” and “SAR” mean the right to receive a payment from the Company equal to the excess of the Fair Market Value of a share of stock at the date of exercise over a specified price fixed by the Committee, which shall not be less than 100% of the Fair Market Value of the Stock on the date of grant. In the case of a Stock Appreciation Right which is granted in conjunction with an Option, the specified price shall be the Option exercise price.

2.2 Gender and Number. Except when otherwise indicated by the context, words in the masculine gender when used in the Plan shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular.

 

Section 3.    Eligibility and Participation

 

3.1 Eligibility and Participation. Participants in the Plan shall be selected by the Committee from among those Employees who, in the opinion of the Committee, are Employees in a position to contribute to the Company’s continued growth and development and to its long-term financial success.

 

Section 4.    Administration

 

4.1 Administration. The Committee shall be responsible for the administration of the Plan. The Committee, by majority action thereof (whether taken during a meeting or by written consent), shall determine the type or types of Awards to be made under the Plan and shall designate from time to time the Employees who are to be recipients of such Awards. The Committee is authorized to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, to provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company, and to make all other determinations necessary or advisable for the administration of the Plan, but only to the extent not contrary to the express provisions of the Plan. Determinations, interpretations, or other actions made or taken by the Committee pursuant to the provisions of the Plan shall be final and binding and conclusive for all

  

  

  

 

purposes and upon all persons whomsoever. To the extent deemed necessary or advisable for purposes of Rule 16b-3 or otherwise, the Board may act as the Committee hereunder.

 

4.2 Delegation of Authority. To the extent provided by resolution of the Board, the Committee may authorize the Chief Executive Officer of the Corporation and other senior officers of the Company to designate officers and employees to be recipients of Awards, to determine the terms, conditions, form and amount of any such Awards, and to take such other actions which the Committee is authorized to take under this Plan, provided that the Committee may not delegate to any person the authority to grant Awards to, or take other action with respect to, Participants who at the time of such Awards or action are subject to Section 16 of the Exchange Act or are “covered employees” as defined in Section 162(m) of the Code.

 

4.3 Award Agreements. Each Award shall be embodied in an Award Agreement, which shall contain such terms, conditions and limitations as shall be determined by the Committee. The Award Agreement shall be delivered to, and, to the extent required by the Committee, signed by the Participant.

 

Section 5.    Stock Subject to Plan

 

5.1 Number of Shares Available for Awards. The total number of shares of Stock which may be issued pursuant to Awards under the Plan may not exceed 8,631,641 (inclusive of shares issued prior to May 19, 2010, the date this amended and restated Plan was approved by stockholders and the Board). Such number of shares shall be subject to adjustment upon occurrence of any of the events indicated in Section 5.4. The shares to be delivered under the Plan may consist, in whole or in part, of authorized but unissued Stock or treasury Stock, not reserved for any other purpose.

 

5.2 Reuse. If, and to the extent:

 

(a) An Option shall expire or terminate for any reason without having been exercised in full (including, without limitation, cancellation and re-grant), or in the event that an Option is exercised or settled in a manner such that some or all of the shares of Stock related to the Option are not issued to the Participant (or beneficiary) (including as the result of a share-for-share exercise or the use of shares for withholding taxes), the shares of Stock subject thereto which have not become outstanding shall (unless the Plan shall have terminated) remain available for issuance under the Plan; or

 

(b) Any Awards under the Plan are forfeited for any reason, or settled in cash in lieu of Stock or in a manner such that some or all of the shares of Stock related to the Award are not issued to the Participant (or beneficiary) (including as a result of the use of shares for tax withholding), such shares of Stock shall (unless the Plan shall have terminated) remain available for issuance under the Plan, except as provided in Section 8.2 which relates to the exercise of SARs in lieu of Options.

 

5.3 Limitations on Awards to a Single Participant. Notwithstanding anything to the contrary contained in this Plan, the following limitations shall apply to Awards made hereunder:

 

(a) No Participant may be granted, during any calendar year period, Awards consisting of Options or SARs that are exercisable for more than 250,000 shares of Stock (500,000 in the

  

  

  

 

Participant’s initial calendar year as an Employee), subject to adjustment pursuant to the provisions of Section 5.4;

 

(b) No Participant may be granted, during any calendar period, Awards consisting of shares of Common Stock or units denominated in such shares (other than any Awards consisting of Options or SARs) covering or relating to more than 250,000 shares of Common Stock (500,000 in the Participant’s initial calendar year as an Employee), subject to adjustment pursuant to the provisions of paragraph 5.4 hereof; and

 

5.4 Adjustment in Capitalization. In the event of any change in the outstanding shares of Stock that occurs after ratification of the Plan by the stockholders of the Company by reason of a Stock dividend or split, recapitalization, merger, consolidation, combination, exchange of shares, or other similar corporate change, the aggregate number of shares of Stock available for issuance under Section 5.1, subject to each outstanding Award and the other terms thereof, and the limitations set forth in Section 5.3, shall be adjusted appropriately by the number of shares the Committee, whose determination shall be conclusive; provided, however, that fractional shares shall be rounded to the nearest whole share.

 

5.5 No Repricing Without Stockholder Approval. Notwithstanding anything in the Plan to the contrary, the Committee may not reprice Options granted under the Plan, nor may the Board amend the Plan to permit repricing of Options granted under the Plan, unless the stockholders of the Company provide prior approval for such repricing. Adjustments pursuant to Section 5.4 shall not be considered a repricing.

 

Section 6.    Duration of Plan

 

6.1 Duration of Plan. This Plan shall remain in effect, subject to the Board’s right to earlier terminate the Plan pursuant to Section 15 hereof, until all Stock subject to it shall have been purchased or acquired pursuant to the provisions hereof. Notwithstanding the foregoing, no Award may be granted under the Plan on or after February 21, 2021.

 

Section 7.    Stock Options

 

7.1 Grant of Options. Subject to the provisions of Section 5 and 6, Options may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Options granted to each Participant. The Committee may grant any type of Option to purchase Stock that is permitted by law at the time of grant.

 

7.2 Option Price. No Option granted pursuant to the Plan shall have an Option price that is less than the Fair Market Value of the Stock on the date the Option is granted.

 

7.3 Exercise of Options. Options awarded under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall approve, either at the time of grant of such Options or pursuant to a general determination, and which need not be the same for all Participants, provided that, to the extent required to comply with Rule 16b-3, no Option shall be exercisable within the first six months of its term, unless death or Disability of the Participant occurs during such period. Each Option which is intended to qualify as an Incentive Stock Option pursuant to Section 422 of the Code, and each Option which is intended

  

  

  

 

to qualify as another type of ISO which may subsequently be authorized by law, shall comply with the applicable provisions of the Code pertaining to such Options.

 

7.4 Payment. Options shall be exercised by the delivery of a written notice of exercise to the Company, setting forth the number of shares of Stock with respect to which the Option is to be exercised, accompanied by full payment for the Stock. The Option Price upon exercise of any Option shall be payable to the Company in full either:

 

(a) in cash or its equivalent (including, for this purpose, the proceeds from a cashless exercise as permitted under Federal Reserve Board’s Regulation),

 

(b) by tendering Previously-Acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option price (including, for this purpose, Stock deemed tendered by affirmation of ownership),

 

(c) by any other means which the Committee determines to be consistent with the Plan’s purpose and applicable law, or

 

(d) by a combination of (a), (b), and (c).

 

The exercise of an Option shall cancel any related SAR to the extent of the number of shares as to which the Option is exercised. As soon as practicable after receipt of each notice and full payment, the Company shall deliver to the Participant a certificate or certificates representing the acquired shares of Stock. Notwithstanding the foregoing, the Option price payable with respect to the exercise of any Options by a Participant who has a deferral election in effect under the Company’s Nonqualified Stock Option—Gain Deferral Plan (the “Gain Deferral Plan”) shall be made solely be tendering previously-acquired Stock in accordance with paragraph (b) above. As soon as practicable after receipt of notice of exercise and payment, the Company shall deliver to the trustee of the trust established under the Gain Deferral Plan, a certificate or certificates representing such number of shares of Stock determined by dividing (i) the excess of (A) the Fair Market Value of the shares of Stock purchased pursuant to such Option exercise, over (B) the aggregate exercise price of the shares of Stock purchased, by (ii) the Fair Market Value of one share of Stock. In addition, as soon as practicable after receipt of such notice and payment of the Option price (other than payment by affirmation of ownership), the Company shall deliver to the Participant a certificate or certificates representing shares with a Fair Market Value equal to the aggregate option exercise price paid, net of any tax withholding pursuant to Section 16.2. For purposes of the foregoing, Fair Market Value shall be determined on the date of Option exercise.

 

7.5 Limitations on ISOs. All shares authorized for issuance under this Plan may be issued pursuant to Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, to the extent required from time to time by the Code, the following additional provisions shall apply to the grant of Options which are intended to qualify as Incentive Stock Options (as such term is defined in Section 422 of the Code):

 

(a) The aggregate Fair Market Value (determined as of the date the Option is granted) of the shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company) shall not exceed $100,000 or such other amount as may subsequently be specified by the Code;

  

  

  

 

 provided that, to the extent that such limitation is exceeded, any excess Options (as determined under the Code) shall be deemed to be Nonstatutory (Nonqualified) Stock Options.

 

(b) Any Incentive Stock Option authorized under the Plan shall contain such other provisions as the Committee shall deem advisable, but shall in all events be consistent with and contain or be deemed to contain all provisions required in order to qualify the Options as Incentive Stock Options.

 

(c) All Incentive Stock Options must be granted within ten years from the earlier of the date on which this Plan was adopted by the Board of Directors or the date this Plan was approved by the stockholders.

 

(d) Unless exercised, terminated, or cancelled sooner, all Incentive Stock Options shall expire no later than ten years after the date of grant.

 

7.6 Restrictions on Stock Transferability. The Committee shall impose such restrictions on any shares of Stock acquired pursuant to the exercise of an Option under the Plan as it may deem advisable, including, without limitation, restrictions under the applicable Federal securities law, under the requirements of any stock exchange upon which such shares of Stock are then listed and under any blue sky or state securities laws applicable to such shares.

 

7.7 Termination of Employment Due to Death, Disability, Retirement. In the event the employment of a Participant is terminated by reason of death, Disability, or Retirement, any outstanding Options then exercisable may be exercised at any time prior to the expiration date of the Options or within three (3) years after such date of termination of employment, whichever period is the shorter. For purposes of the preceding sentence, in the event such termination is due to death or Disability, then any outstanding Options shall vest 100% and be deemed exercisable in full as of such termination. However, in the case of Incentive Stock Options, the favorable tax treatment prescribed under Section 422 of the Code shall not be available if such options are not exercised within three (3) months after date of termination, or twelve (12) months in the case of Disability, provided such Disability constitutes total and permanent disability as defined in Section 22(e)(3) of the Code. If an Incentive Stock Option is not exercised within three (3) months of termination due to Retirement, it shall be treated as a Nonstatutory (Nonqualified) Stock Option for the remainder of its allowable exercise period.

 

7.8 Termination of Employment other than Due to Death, Disability, Retirement or for Cause; Termination for Cause. If the employment of the Participant shall terminate for any reason other then death, Disability, Retirement, or involuntarily for Cause, the rights under any then outstanding Option granted pursuant to the Plan shall terminate upon the expiration date of the Option or one month after such date of termination of employment, whichever first occurs; provided, however, that in the event such termination of employment occurs after a Change-in-Control (as defined in Section 14.2 of the Plan), the rights under any then outstanding Option granted pursuant to the Plan shall terminate upon the expiration date of the Option or three years after such date of termination of employment, whichever first occurs. Where termination of employment is involuntarily for Cause, rights under all Options shall terminate immediately upon termination of employment.

  

  

  

 

7.9 Nontransferability of Options. Except as provided below, no Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution. Further, all Options granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant. Notwithstanding the foregoing, the Committee may, in its discretion, authorize all or a portion of the Options (other than Incentive Stock Options) granted to a Participant to be on terms which permit transfer by such Participant to:

 

(a) the spouse, children or grandchildren of the Participant (“Immediate Family Members”);

 

(b) a trust or trusts for the exclusive benefit of such Immediate Family Members, or;

 

(c) a partnership in which such Immediate Family Members are the only partners, provided that:

 

(i) there may be no consideration for any such transfer;

 

(ii) the Award Agreement pursuant to which such Options are granted expressly provides for transferability in a manner consistent with this Section 7.9; and

 

(iii) subsequent transfers of transferred Options shall be prohibited except those in accordance with Section 12. Following transfer, any such Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Section 12 hereof the term “Participant” shall be deemed to refer to the transferee. The provisions of Sections 7 and 14 relating to the period of exercisability and expiration of the Option shall continue to be applied with respect to the original Participant, and the Options shall be exercisable by the transferee only to the extent, and for the periods, set forth in said Sections 7 and 14.

 

Section 8.    Stock Appreciation Rights

 

8.1 Grant of Stock Appreciation Rights. Subject to the provisions of Sections 5 and 6, Stock Appreciation Rights (“SARs”) may be granted to Participants at any time and from time to time as shall be determined by the Committee. An SAR may be granted at the discretion of the Committee in any of the following forms:

 

(a) In lieu of Options,

 

(b) In addition to Options,

 

(c) Upon lapse of Options,

 

(d) Independent of Options,

 

(e) Each of the above in connection with previously awarded Options.

 

8.2 Exercise of SARs in Lieu of Options. SARs granted in lieu of Options may be exercised for all or part of the shares of Stock subject to the related Option upon the surrender of the right to exercise an equivalent number of Options. The SAR may be exercised only with respect to the

  

  

  

 

shares of Stock for which its related Option is then exercisable. Option shares with respect to which the SAR shall have been exercised may not be subject again to an Award under this Plan. SARs granted pursuant to this Section 8.2 with respect to which the Option shares have been exercised will immediately lapse upon such exercise.

 

8.3 Exercise of SARs in Addition to Options. SARs granted in addition to Options shall be deemed to be exercised upon the exercise of the related Options.

 

8.4 Exercise of SARs Independent of Options. SARs granted independent of Options may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon the SARs.

 

8.5 Exercise of SARs Upon Lapse of Options. SARs granted upon lapse of Options shall be deemed to have been exercised upon the lapse of the related Options as to the number of shares of Stock subject to the Options. Notwithstanding Section 5.2 above, cancelled Options in an amount equal to the related SARs shall not be available again for Awards under the Plan.

 

8.6 Payment of SAR Amount. Upon exercise of the SAR, the holder shall be entitled to receive payment of an amount (subject to Section 8.8 below) determined by multiplying:

 

(a) The difference between the Fair Market Value of a share of Stock at the date of exercise over the price fixed by the Committee at the date of grant, by

 

(b) The number of shares with respect to which the Stock Appreciation Right is exercised.

 

8.7 Form and Timing of Payment. At the discretion of the Committee, payment for SARs may be made in cash or Stock, or in a combination thereof.

 

8.8 Limit of Appreciation. At the time of grant, the Committee may establish in its sole discretion, a maximum amount per share which will be payable upon exercise of an SAR.

 

8.9 Term of SAR. The term of an SAR granted under the Plan shall not exceed ten years and one day.

 

8.10 Termination of Employment. In the event the employment of a Participant is terminated by reason of death, Disability, Retirement, or any other reason, any SARs outstanding shall terminate in the same manner as specified for Options under Sections 7.7 and 7.8 herein.

 

8.11 Nontransferability of SARs. No SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution. Further, all SARs granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant.

  

  

  

 

Section 9.    Restricted Stock and Restricted Stock Units

 

9.1 Grant of Restricted Stock or Restricted Stock Units. Subject to the provisions of Sections 5 and 6, the Committee, at any time and from time to time, may grant shares of Restricted Stock or Restricted Stock Units under the Plan to such Participants and in such amounts as it shall determine. Each grant of Restricted Stock or Restricted Stock Units shall be in writing. The Committee, in its discretion, may permit a Participant to defer receipt of any Restricted Stock Units beyond the expiration of any applicable Period of Restriction.

9.2 Transferability. Except as provided in Sections 9.8 and 9.9 hereof, the shares of Restricted Stock and Restricted Stock Units granted hereunder may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated for such period of time as shall be determined by the Committee and shall be specified in the Restricted Stock grant or the Restricted Stock Unit grant, or upon earlier satisfaction of other conditions (which may include the attainment of performance goals as defined in Section 10.8 hereof), as specified by the Committee in its sole discretion and set forth in the Restricted Stock grant or the Restricted Stock Unit grant.

 

9.3 Other Restrictions. The Committee shall impose such other restrictions on any shares of Restricted Stock or Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation, restrictions under applicable Federal or state securities laws, and may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions.

 

9.4 Voting Rights. Participants holding shares of Restricted Stock or Restricted Stock Units granted hereunder may exercise full voting rights with respect to those shares during the Period of Restriction.

 

9.5 Dividends and Other Distributions. During the Period of Restriction, Participants holding shares of Restricted Stock or Restricted Stock Units granted hereunder shall be entitled to receive all dividends and other distributions paid with respect to those shares or units while they are so held. If any such dividends or distributions are paid in shares of Stock, the shares shall be subject to the same restrictions on transferability as the shares of Restricted Stock or Restricted Stock Units with respect to which they were paid.

 

9.6 Termination of Employment Due to Retirement. In the event a Participant’s employment terminates on or after his Normal Retirement Date, the Period of Restriction applicable to the Restricted Stock or the Restricted Stock Units pursuant to Subsection 9.2 hereof shall automatically terminate and, except as otherwise provided in Subsection 9.3, the shares of Restricted Stock shall thereby be free of restrictions and freely transferable. In the event a Participant terminates employment on or after his Early Retirement Date but prior to Normal Retirement Date, any shares of Restricted Stock and any Restricted Stock Units still subject to restrictions at the date of such termination automatically shall be forfeited and returned to the Company; provided, however, that the Committee in its sole discretion may waive the restrictions remaining on any or all shares of Restricted Stock or any and all Restricted Stock Units, or add such new restrictions to those shares of Restricted Stock or Restricted Stock Units as it deems appropriate.

  

  

  

 

9.7 Termination of Employment Due to Death or Disability. In the event a Participant terminates his employment with the Company because of death or Disability during the Period of Restriction, the restrictions applicable to the shares of Restricted Stock or to the Restricted Stock Units pursuant to Section 9.2 hereof shall automatically terminate and, except as otherwise provided in Subsection 9.3, the shares of Restricted Stock shall thereby be free of restrictions and freely transferable.

 

9.8 Termination of Employment for Reasons other than Death, Disability, or Retirement. In the event that a Participant terminates his employment with the Company for any reason other than those set forth in Sections 9.6 and 9.7 hereof during the Period of Restriction, then any shares of Restricted Stock and any Restricted Stock Units still subject to restrictions at the date of such termination automatically shall be forfeited and returned to the Company; provided, however, that, in the event of an involuntary termination of the employment of a Participant by the Company other than for Cause, the Committee in its sole discretion may waive the automatic forfeiture of any or all such shares or units, and/or may add such new restrictions to such shares of Restricted Stock or Restricted Stock Units as it deems appropriate.

 

9.9 Nontransferability. No shares of Restricted Stock or Restricted Stock Units granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution until the termination of the applicable Period of Restriction. All rights with respect to Restricted Stock or Restricted Stock Units granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant.

 

Section 10.    Performance Units and Performance Shares

 

10.1 Grant of Performance Units or Performance Shares. Subject to the provisions of Sections 5 and 6, Performance Units or Performance Shares may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Performance Units or Performance Shares granted to each Participant.

 

10.2 Value of Performance Units and Performance Shares. Each Performance Unit shall have an initial value of one hundred dollars ($100) and each Performance Share initially shall represent one share of Stock. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the ultimate value of the Performance Unit or Performance Share to the Participant. The time period during which the performance goals must be met shall be called a performance period, and also is to be determined by the Committee.

 

10.3 Payment of Performance Units and Performance Shares. After a performance period has ended, the holder of a Performance Unit or Performance Share shall be entitled to receive the value thereof as determined by the extent to which performance goals discussed in Section 10.2 have been met.

  

  

  

 

10.4 Form and Timing of Payment. Payment in Section 10.3 above shall be made in cash, stock, or a combination thereof as determined by the Committee. Payment may be made in a lump sum or installments as prescribed by the Committee. If any payment is to be made on a deferred basis, the Committee may provide for the payment of dividend equivalents or interest during the deferral period.

 

10.5 Termination of Employment Due to Death, Disability, or Retirement. In the case of death, Disability, or Retirement, the holder of a Performance Unit or Performance Share shall receive prorata payment based on the number of months’ service during the performance period but based on the achievement of performance goals during the entire performance period. Payment shall be made at the time payments are made to Participants who did not terminate service during the performance period.

 

10.6 Termination of Employment for Other Reasons. In the event that a Participant terminates employment with the Company for any reason other than death, Disability or Retirement, all Performance Units and Performance Shares shall be forfeited; provided, however, that in the event of an involuntary termination of the employment of the Participant by the Company other than for Cause, the Committee in its sole discretion may waive the automatic forfeiture provisions and pay out on a prorata basis.

 

10.7 Nontransferability. Units or Performance Shares granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution until the termination of the applicable performance period. All rights with respect to Performance Units and Performance Shares granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant.

 

10.8 Performance Goals. For purposes of Sections 9.2 and 10.2 hereof, “performance goals” shall mean the criteria and objectives, determined by the Committee pursuant to the Plan, which shall be satisfied or met during the applicable restriction period or performance period, as the case may be, as a condition to the Participant’s receipt, in the case of a grant of the Restricted Stock or a grant of Performance Shares, of the shares of Stock subject to such grant, or in the case of a Performance Unit Award, of payment with respect to such Award. Such criteria and objectives may include, but are not limited to, return on assets, return on equity, growth in net earnings, growth in earnings per share, growth in the Fair Market Value of the Stock, or any combination of the foregoing or any other criteria and objectives determined by the Committee. Upon completion of the restricted period or the performance period, as the case may be, the Committee shall certify the level of the performance goals attained and the amount of the Award payable as a result thereof.

 

Section 11.    Other Awards

 

11.1 Grant of Other Awards. Subject to the provisions of Section 5 and 6, Other Awards may be granted to Participants at any time and from time to time as shall be determined by the Committee.

  

  

  

 

11.2 Terms of Other Awards. Other Awards may be made in contribution or in tandem, with, in replacement of, or as alternatives to Awards under Section 7, 8, 9 or 10 of this Plan or of any other incentive or employee benefit plan of the Company or any of its subsidiaries. An Other Award may provide for payment in cash or in Stock or a combination thereof.

Section 12.    Beneficiary Designation

 

12.1 Beneficiary Designation. Each Participant under the Plan may name, from time to time, any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his death before he receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Committee during his lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to his estate.

 

Section 13.    Rights of Employees

 

13.1 Employment. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant’s employment at any time, nor confer upon any Participant any right to continue in the employ of the Company.

 

13.2 Participation. No employee shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant.

 

Section 14.    Change-in-Control

 

14.1 In General. Except as expressly provided, otherwise in an Award Agreement, in the event of a Change-in-Control of the Company as defined in Section 14.2 below, all Awards under the Plan shall vest 100%, whereupon all Options shall become exercisable in full, the restrictions applicable to Restricted Stock shall terminate, and Performance Units and Performance Shares shall be paid out based upon the extent to which performance goals during the performance period have been met up to the date of the Change-in-Control, or at target, whichever is higher, and all Other Awards shall be paid out based on the terms thereof.

 

14.2 Definition. For purposes of the Plan, a “Change-in-Control” shall mean any of the following events:

 

(a) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than (i) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a subsidiary, or (ii) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 25% or more of the total voting power of the then outstanding shares of capital stock of the Company entitled to vote generally in the election of directors (the “Voting Stock”), provided, however, that the following shall not constitute a Change-in-Control: (A) such person becomes a beneficial owner of 25% of more of the Voting Stock as the result of an acquisition of such stock directly from the Company, or (B) such person becomes a beneficial owner of 25% or

  

  

  

 

more of the Voting Stock as a result of the decrease in the number of outstanding shares caused by the repurchase of shares by the Company, or (C) such person becomes a beneficial owner of 25% or more of the Voting Stock without any plan or intention to seek or affect control of the Company, if such person promptly enters into an irrevocable commitment promptly to divest, and thereafter promptly divests, such shares of Voting Stock so that such person ceases to beneficially own 25% or more of the Voting Stock; provided, further, that in the event a person described in clause (A) or (B) shall thereafter increase (other than in circumstances described in clause (A) or (B)) beneficial ownership of stock representing more than 1% of the Voting Stock, such person shall then be deemed to become a beneficial owner of 25% or more of the Voting Stock for purposes of this paragraph (a), provided such person continues to beneficially own 25% or more of the Voting Stock after such subsequent increase in beneficial ownership, or

 

(b) during any period of two consecutive years, individuals, who at the beginning of such period constitute the Board of Directors of the Company, and any new director, whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or

(c) the consummation of, a reorganization, merger or consolidation, the sale or other disposition of all or substantially all of the assets, or a similar transaction or series of transactions involving the Company (a “Business Combination”) in each case, unless (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Voting Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the total voting power represented by the voting securities entitled to vote generally in the election of directors of the Company or the corporation resulting from the Business Combination (including, without limitation, a corporation which as a result of the Business Combination 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 the Business Combination of the Voting Stock of the Company, and (2) at least a majority of the members of the board of directors of the Company or such corporation resulting from the Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or action of the Incumbent Board, providing for such Business Combination; or

 

(d) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company.

 

The Board has final authority to determine the exact date on which a Change-in-Control has been deemed to have occurred under (a), (b), (c) and (d) above.

  

  

  

 

Section 15.    Amendment, Modification and Termination of Plan

 

15.1 Amendment, Modification, Suspension and Termination of Plan. The Board may amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that no amendment or alteration that would adversely affect the rights of any Participant under any Award previously granted to such Participant shall be made without the consent of such Participant.

 

Section 16.    Tax Withholding

 

16.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of the Plan.

 

16.2 Share Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of awards granted hereunder, Participants may elect to satisfy the withholding requirement, in whole or in part, by having the Company withhold shares of Stock having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which would be imposed on the transaction; provided, however, that in the event a deferral election is in effect with respect to the shares deliverable upon exercise of an Option, then the Participant may only elect to have such withholding made from the Stock tendered to exercise such Option. All such elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

 

Section 17.    Indemnification

 

17.1 Indemnification. Each Person who is or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Company’s approval, or paid by him in satisfaction of any judgment in any such action, suit, or proceeding against him, provided he shall give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

  

  

  

Section 18.    Requirements of Law

 

18.1 Requirements of Law. The granting of Awards and the issuance of shares of Stock upon the exercise of an Option shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

18.2 Governing Law. The Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Delaware.

 

18.3 Code Section 409A. Anything under the Plan or an Award Agreement to the contrary notwithstanding, to the extent applicable, it is intended that any Awards under the Plan which provide for a “deferral of compensation” subject to Section 409A of the Code and rules, regulation and guidance issued thereunder (collectively, Code Section 409A) shall comply with the provisions of Code Section 409A and the Plan and all applicable Awards shall be construed and applied in a manner consistent with this intent. In furtherance thereof, any amount constituting a “deferral of compensation” under Treasury Regulation Section 1.409A-1(b) that is payable to a Participant upon a separation from service of the Participant (within the meaning of Treasury Regulation Section 1.409A-1(h)) (other than due to the Participant’s death), occurring while the Participant shall be a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)) of the Corporation or applicable Subsidiary, shall not be paid until the earlier of (x) the date that is six months following such separation from service or (y) the date of the Participant’s death following such separation from service.

 

18.4 TARP/Capital Purchase Program. Anything in this Plan or an Award Agreement to the contrary notwithstanding, it is intended that this Plan and Awards granted hereunder comply with the requirements of the Emergency Economic Stabilization Act of 2008 (“EESA”) and/or requirements of the TARP Capital Purchase Program (“CPP”) (and the guidance or regulations issued thereunder by the United States Treasury Department at 31 CFR Part 30, effective October 20, 2008 (the “CPP Guidance”) applicable to the Company, including, but not limited to, provisions limiting payment of “golden parachute payments,” requiring that the Company may recover (“claw-back”) bonus and incentive compensation to in certain circumstances, and precluding bonus and incentive arrangements that encourage unnecessary or excessive risks that threaten the value of Company, in each case within the meaning of EESA and the CPP Guidance and only to the extent applicable to Company and a Participant. The application of this Section 18.4 is intended to, and shall be interpreted, administered and construed to, comply with Section 111 of EESA and the CPP Guidance and, to the maximum extent consistent with this Paragraph 18.4 and such statute and regulations, to permit the operation of the Plan and each Award in accordance with the terms and provision thereof before giving effect to the provisions of this Section 18.4, EESA or the CPP Guidance.

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