Document:

EXHIBIT
10.2

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT is made as of this 3rd day of October, 2007, between GRAYSTONE FINANCIAL CORP., a Pennsylvania
business corporation (the “Corporation”), and GRAYSTONE
BANK (“Bank”), a Pennsylvania chartered bank and JEFFREY RENNINGER, an adult individual (“Executive”).

 

WITNESSETH:

 

WHEREAS, the Bank and Executive have been
parties to an employment agreement dated November 14, 2005 relating to the
employment of the Executive by the Bank (the “Original Agreement”); and

 

WHEREAS, the Corporation and the Bank desire to
continue to employ Executive to serve in the capacity of Executive Vice
President of the Corporation and the Bank on the terms and conditions set forth
herein; and

 

WHEREAS, the Corporation, the Bank
and the Executive desire to amend and restate the Original Agreement as set
forth herein.

 

AGREEMENT

 

NOW, THEREFORE, the parties hereto,
intending to be legally bound, agree as follows:

 

1.             Employment.  The
Corporation and the Bank each hereby employs Executive and Executive hereby
accepts employment with Corporation and the Bank, on the terms and conditions
set forth in this Agreement.

 

2.             Duties of Employee.  Executive shall serve as an Executive Vice
President of the Corporation and the Bank, reporting to the Chief Executive
Officer and shall have such responsibilities, powers and duties as may from
time to time be prescribed by the Chief Executive Officer and/or the Board of
Directors of the Corporation and the Bank, provided such powers and duties are
consistent with the Executive’s position. 
Executive shall devote his full time, attention and energies to the
business of the Corporation and the Bank during the Employment Period (as
defined in Section 3 of this Agreement); provided, however, that this Section 2
shall not be construed as preventing Executive from (a) engaging in
activities incident or necessary to personal investments, (b) acting as a
member of the board of directors of any non-profit association or corporation,
or (c) being involved in any other activity with the prior approval of the
Chief Executive Officer.  The Executive
shall not engage in any business or commercial activities, duties or pursuits
which compete with the business or commercial 

 

 

activities of the Corporation or the Bank,
nor may the Executive serve as a director or officer or in any other capacity
in a company which competes with the Corporation or the Bank.

 

3.             Term of Agreement.

 

(a)            Employment
Period.  This Agreement shall be for a
two (2) year period (the “Employment Period”) beginning on the date first
mentioned above, and if not previously terminated pursuant to the terms of this
Agreement, the Employment Period shall end two (2) years later; provided
however, that the Employment Period shall be automatically renewed one year
later on the first anniversary date of the commencement of the Employment
Period (the “Renewal Date”) for a period ending two (2) years from the
Renewal Date unless either party shall give written notice of non-renewal to
the other party at least ninety (90) days prior to the Renewal Date, in which
event this Agreement shall terminate at the end of the Employment Period.  If this Agreement is renewed on the Renewal
Date, it will be automatically renewed on the first anniversary date of the
Renewal Date and each subsequent year (the “Annual Renewal Date”) for a period
ending two (2) years from each Annual Renewal Date, unless either party
gives written notice of non-renewal to the other party at least ninety (90)
days prior to the Annual Renewal Date, in which case this Agreement will
continue in effect for a term ending two (2) years from the Annual Renewal
Date immediately following such notice.

 

(b)           Termination for Cause.  Notwithstanding the provisions of Section 3(a) of
this Agreement, this Agreement may be terminated by the Corporation or the Bank
for Cause (as defined herein) upon written notice from the Board of Directors
of the Corporation to Executive.  As used
in this Agreement, “Cause” shall mean any of the following:

 

(i)            Executive’s
conviction of or plea of guilty or nolo contendere to a felony, a crime of
falsehood or a crime involving moral turpitude, or the actual incarceration of
Executive for a period of thirty (30) consecutive days or more;

 

(ii)           Executive’s
willful continuing failure to follow the lawful instructions of the Chief
Executive Officer or the Board of Directors of the Corporation or the Bank
(which instructions must be consistent with the terms of this Agreement), after
the Executive’s receipt of written notice of such instructions, other than a
failure resulting form Executive’s incapacity because of physical or mental
illness;

 

(iii)          A government
regulatory agency recommends or orders in writing that the Corporation or the
Bank terminate the employment of the Executive with the Corporation or the Bank
or relieve him of his duties as such relate to the Corporation or the Bank; or

 

(iv)          Executive’s
violation of the covenant not to compete contained in Section 8 or the
confidentiality provisions of Section 9.

 

If
this Agreement is terminated for Cause, all of Executive’s rights under this
Agreement shall cease as of the effective date of such termination, except
that:

 

 

(i)             the Bank shall
pay to Executive the unpaid portion, if any, of his Annual Base Salary through
the date of termination; and

 

(ii)            the Bank shall
provide to Employee such post-employment benefits, if any, as may be provided
for under the terms of the employee benefit plans of the Bank then in effect.

 

(c)           Termination for
Good Reason.  Notwithstanding
the provisions of Section 3(a) of this Agreement, this Agreement
shall terminate automatically upon Executive’s termination of employment for
Good Reason.  The term “Good Reason”
shall mean (i) a reduction in salary or material reduction in benefits,
including any incentive compensation plan, except in cases of a national
financial depression or emergency when such reduction has been implemented
generally by the Board of Directors for the Corporation’s senior management, (ii) a
reassignment which assigns full-time employment duties to Executive at a
location more than fifty (50) miles from the Corporation’s principal executive
office and from the office at which the Employee spends the majority of his
time, in either case on the date of this Agreement, (iii) any other
material breach or default by the Corporation or the Bank under any term or
provision of this Agreement, including any reduction, in any material respect
and without Executive’s consent, of the authority, duties or other terms and
conditions of Executive’s employment hereunder, or (iv) any delivery by
the Corporation or the Bank to the Executive of a written notice of non-renewal
pursuant to Section 3(a) above, in all cases after notice from the
Executive to the Corporation within ninety (90) days after the initial
existence of any such condition that the condition constitutes Good Reason and
the failure of the Corporation and the Bank to cure such situation within
thirty (30) days after said notice.  If
such termination occurs for Good Reason, then Bank shall pay Executive such
benefits as are set forth in Section 7 of this Agreement.

 

(d)           Death.  Notwithstanding the provisions of Section 3(a) of
this Agreement, this Agreement shall terminate automatically upon Executive’s
death and Executive’s rights under this Agreement shall cease as of the date of
such termination, except that (i) the Bank shall pay to Executive’s
spouse, personal representative, or estate the unpaid portion, if any, of his
Annual Base Salary through date of death and the balance of the payments (if
any) owing pursuant to Section 15(b) below, and (ii) the Bank
shall provide to Executive’s dependents any benefits due under the Bank’s
employee benefit plans.

 

(e)           Disability.  Executive, the Corporation and the Bank agree
that if Executive becomes eligible for employer-provided short-term and/or
long-term disability benefits, or worker’s compensation benefits, then the Bank’s
obligation to pay Executive his base salary shall be reduced by the amount of
the disability or worker’s compensation benefits received by Executive.

 

Executive, the Corporation and the Bank agree that
if, in the judgment of the Corporation’s Board of Directors, the Executive is
unable, as a result of illness or injury, to perform the essential functions of
his position on a full-time basis with or without a reasonable accommodation
and without posing a direct threat to himself or others for a period of six
months, the Corporation and the Bank will suffer an undue hardship in 

 

 

continuing the Executive’s
employment as set forth in this agreement. 
Accordingly, this Agreement shall terminate at the end of the six-month
period, and all of Executive’s rights under this Agreement shall cease, with
the exception of those rights which Executive may have under the Bank’s benefit
plans.

 

4.             Employment Period Compensation, Benefits and Expenses.

 

(a)           Annual Base Salary.  For services performed by Executive under
this Agreement, Bank shall pay Executive an Annual Base Salary during the
Employment Period at the rate of One Hundred Forty-five Thousand, Six Hundred
dollars ($145,600) per year, minus applicable withholdings and deductions,
payable at the same times as salaries are payable to other executive employees
of the Bank.  The Annual Base Salary
shall be reviewed annually by the Board of Directors and the Board may, from
time to time, increase Executive’s Annual Base Salary, and any and all such
increases shall be deemed to constitute amendments to this Section 4(a) to
reflect the increased amounts, effective as of the date established for such
increases by the Board.  In reviewing
adjustments to Annual Base Salary, the Board of Directors shall consider
relevant market data regarding executive salaries at peer financial institutions
and the performance of the Corporation and the Bank under the Executive’s
leadership.

 

(b)           Bonus.  The Board of Directors of the Corporation and
the Bank may provide for the payment of an annual bonus to the Executive as it
deems appropriate to provide incentive to the Executive and to reward the
Executive for his performance.  Such
bonus may, but need not be, determined in accordance with any incentive bonus
programs for executive officers as approved by the Board of Directors.  The payment of any such bonuses will not
reduce or otherwise affect any other obligation of the Bank to the Executive
provided for in this Agreement.

 

(c)           Vacations, Holidays, etc.  During the term of this Agreement, Executive
shall be entitled to be paid annual vacation in accordance with the policies as
established from time to time by the Board of Directors of the Bank.  However, Executive shall not be entitled to
receive any additional compensation from Bank for failure to take a vacation,
nor shall Executive be able to accumulate unused vacation time from one year to
the next, except to the extent authorized by the Board of Directors of
Bank.  The Executive shall also be
entitled to all paid holidays, sick days and personal days provided by the Bank
to its regular full-time employees and senior executive officers.

 

(d)           Automobile.  During the term of this Agreement, the Bank
shall provide the Executive with exclusive use of an automobile mutually agreed
upon by Executive and Bank.  This
automobile shall be a mid-size car or comparable sports utility vehicle.  The Bank shall be responsible and shall pay
for all costs associated with the operation and maintenance of such automobile,
including, without limitation, insurance coverage, repairs, maintenance and
other operating and incidental expenses, including registration, fuel and oil.

 

(e)           Country Club Membership Fees.  The Bank shall pay for Executive’s membership
dues, capital fund assessments and similar items necessary or appropriate to 

 

 

maintain a membership at a
country club within the Bank’s market area as mutually agreed upon by Bank and
Executive.

 

(f)            Stock Based Incentives.  During the term of this Agreement, Executive
shall be entitled to such stock based incentives as may be granted from time to
time by the Corporation’s Board of Directors under the Corporation’s stock
based incentive plans and as are consistent with the Executive’s
responsibilities and performance.

 

(g)           Employee Benefit Plans.  During the term of this Agreement, Executive
shall be entitled to participate in or receive the benefits of any employee
benefit plan currently in effect at the Bank, subject to the terms of said
plan, until such time that the Board of Directors authorizes a change in such
benefits.

 

(h)           Business Expenses.  During the term of this Agreement, Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by him, which are properly accounted for, in accordance with the
policies and procedures established by the Board of Directors of the
Corporation or the Bank for its executive officers.

 

5.             Termination of Employment Following Change in Control.

 

(a)           If a Change in
Control (as defined in Section 5(b) of this Agreement) shall occur at
any time during the term of this Agreement, Executive may terminate his
employment for any reason or no reason by delivering a notice in writing (the “Notice
of Termination”) to the Corporation within thirty (30) days of the Change in
Control which termination shall be effective immediately upon delivery of such
Notice of Termination.

 

(b)           As used in this
Agreement, “Change in Control” shall mean the occurrence immediately of any of
the following:

 

(A)          the
consummation of (i) a merger, consolidation, division or other fundamental
transaction involving the Corporation or the Bank, (ii) a sale, exchange,
transfer or other disposition of substantially all of the assets of the
Corporation or the Bank to any entity which is not a direct or indirect
subsidiary of the Corporation, or (iii) a purchase by the Corporation or
the Bank of substantially all of the assets of another entity; unless (y) such
merger, consolidation, division, sale, exchange, transfer, purchase,
disposition or other transaction is approved in advance by eighty percent (80%)
or more of the members of the Board of Directors of the Corporation who are not
interested in the transaction and (z) a majority of the members of the
Board of Directors of the legal entity resulting from or existing after any
such transaction and a majority of the Board of Directors of such entity’s
parent corporation, if any, are former members of the Board of Directors of the
Corporation; or

 

(B)           any “person”
(as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the “Exchange Act”)), other than the Corporation, a
direct or indirect subsidiary of the Corporation, or a person who is the
beneficial owner of more than twenty-five percent (25%) of the Corporation’s 

 

 

outstanding
securities on the date of this Agreement becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing twenty-five percent (25%) or more of
the combined voting power of Corporation’s then outstanding securities; or

 

(C)           during any
period of two (2) consecutive years during the term of Executive’s
employment under this Agreement, individuals who at the beginning of such
period constitute the Board of Directors of the Corporation cease for any
reason to constitute at least a majority thereof, unless the election of each
director who was not a director at the beginning of such period has been
approved in advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning of the period; or

 

(D)          any other
change in control of the Corporation or the Bank similar in effect to any of
the foregoing.

 

6.             Rights in Event of Change in Control.

 

(a)            In the event
that Executive delivers a Notice of Termination (as defined in Section 5(a) of
this Agreement) to the Corporation, Executive shall be entitled to receive the
compensation and benefits set forth below:

 

(i)            Executive shall
be paid, within twenty (20) days following termination, a lump sum cash payment
equal to two times the sum of (1) the highest Annual Base Salary as
defined in Section 4(a) during the immediately preceding three
calendar years, (2) the highest cash bonus and other cash incentive
compensation earned by him with respect to one of the three calendar years
immediately preceding the year of termination and (3) the highest value of
stock options and other stock based incentives awarded to the Executive with
respect to one of the three calendar years immediately preceding the year of
termination, which value shall be based upon the grant-date fair value of the
award determined in accordance with SFAS 123(R) (“Share-Based Payments”).  The amount shall be subject to federal,
state, and local tax withholdings. 
Notwithstanding the foregoing, the value of restricted stock awarded to
Executive under the Bank’s 2006 Restricted Stock Plan shall not be included
under §6(a)(i)(3) above for purposes of calculating the compensation
payable to Executive.

 

(ii)           In addition,
for a period of twenty-four (24) months from the date of termination of
employment, Executive shall be permitted to continue participation in and the
Bank shall maintain the same level of contribution for Executive’s
participation in the Bank’s life, disability, medical/health insurance and
other health and welfare benefits in effect with respect to Executive during the
one (1) year prior to his termination of employment, or, if Bank is not
permitted by the insurance carriers to provide such benefits because Executive
is no longer an employee, a dollar amount equal to the cost to Executive of
obtaining such benefits (or substantially similar benefits).

 

 

(b)           Executive shall
not be required to mitigate the amount of any payment provided for in this Section 6
by seeking other employment or otherwise, nor shall the amount of payment or
the benefit provided for in this Section 6 be reduced by any compensation
earned by Executive as the result of employment by another employer or by
reason of Executive’s receipt of or right to receive any retirement or other
benefits after the date of termination of employment or otherwise.

 

(c)           Should the
total of all amounts or benefits payable hereunder, together with any other
payments which Executive has a right to receive from the Corporation, the Bank,
any affiliates or subsidiaries of the Corporation or the Bank, or any
successors of any of the foregoing, result in the imposition of an excise tax
under Internal Revenue Code Section 4999 (or any successor thereto),
Executive shall be entitled to an additional “excise tax” adjustment payment in
an amount such that, after the payment of all federal and state income and
excise taxes, Executive will be in the same after-tax position as if no excise
tax had been imposed.  Any payment or
benefit which is required to be included under Internal Revenue Code Sections
280G or 4999 (or any successor provisions thereto) for purposes of determining
whether an excise tax is payable shall be deemed a payment “made to Executive”
or a payment “which Executive has a right to receive” for purposes of this
provision.  The Corporation or the Bank
(or its successor) shall be responsible for the costs of calculation of the
deductibility of payments and benefits and the excise tax by the Corporation’s
independent certified accountant and tax counsel and shall notify Executive of
the amount of excise tax prior to the time such excise tax is due.  If at any time it is determined that the
additional “excise tax” adjustment payment previously made to Executive was
insufficient to cover the effect of the excise tax, the gross-up payment
pursuant to this provision shall be increased to make Executive whole,
including an amount to cover the payment of any penalties resulting from any
incorrect or late payment of the excise tax resulting from the prior
calculation.  All such amounts required
to be paid hereunder shall be paid at the time any withholdings may be required
(or, if earlier, the time Executive shall be required to pay such amounts)
under applicable law, and any additional amounts to which Executive may be
entitled shall be paid or reimbursed no later than fifteen (15) days following
confirmation of such amount by the Corporation’s independent accountants;
provided however, that any payments to be made under this Section 6(c) shall
in all events be made no later than the end of the Executive’s taxable year
next following the taxable year in which the Executive remits such excise tax
payments.  In the event any amounts paid
hereunder are subsequently determined to be in error because estimates were
required or otherwise, the parties agree to reimburse each other to correct
such error, as appropriate, and to pay interest thereon at the applicable
federal rate (as determined under Internal Revenue Code Section 1274 for
the period of time such erroneous amount remained outstanding and
unreimbursed).  The parties recognize
that the actual implementation of the provisions of this subsection are complex
and agree to deal with each other in good faith to resolve any questions or
disagreements arising hereunder.

 

7.             Rights in Event of Termination
of Employment Absent Change in Control.

 

(a)           If Executive’s employment is involuntarily
terminated by the Corporation or the Bank without Cause or is terminated by
Executive for Good Reason pursuant to 

 

 

Section 3(c),
then Bank shall pay (or cause to be paid) to Executive, within twenty (20) days
following termination, a lump sum cash payment equal to two times the sum of (1) the
highest Annual Base Salary as defined in Section 4(a) during the
immediately preceding three calendar years, (2) the highest cash bonus and
other cash incentive compensation earned by him with respect to one of the
three calendar years immediately preceding the year of termination and (3) the
highest value of stock options and other stock based incentives awarded to the
Executive with respect to one of the three calendar years immediately preceding
the year of termination, which value shall be based upon the grant-date fair
value of the award determined in accordance with SFAS 123(R) (“Share-Based
Payments”).  The amount shall be subject
to federal, state and local tax withholdings. 
In addition, for a period of two (2) years from the date of
termination of employment, Executive shall be permitted to continue
participation in, and the Bank shall maintain the same level of contribution
for, Executive’s participation in the Bank’s life, disability, medical/health
insurance and other health and welfare benefits in effect with respect to
Executive during the one (1) year prior to his termination of employment,
or, if Bank cannot provide such benefits because Executive is no longer an
employee, a dollar amount equal to the cost of Executive of obtaining such
benefits (or substantially similar benefits). 
In addition, if permitted pursuant to the terms of the plan, Executive
shall receive additional retirement benefits to which he would have been
entitled had his employment continued through the then remaining term of the
Agreement.  Notwithstanding the
foregoing, the value of restricted stock awarded to Executive under the Bank’s
2006 Restricted Stock Plan shall not be included under §7(a)(3) above for
purposes of calculating the compensation payable to Executive.

 

(b)           Executive shall not be required to mitigate the
amount of any payment provided for in this Section 7 by seeking other
employment or otherwise, nor shall the amount of payment or the benefit
provided for in this Section 7 be reduced by any compensation earned by
Executive as the result of employment by another employer or by reason of
Executive’s receipt of or right to receive any retirement or other benefits
after the date of termination of employment or otherwise.

 

(c)           In the event
that amounts or benefits payable hereunder, together with any other payments
which Executive has a right to receive from the Corporation, the Bank, any
affiliates or subsidiaries of the Corporation or the Bank, or any successors of
any of the foregoing, result in the imposition of an excise tax under Internal
Revenue Code Section 4999 (or any successor thereto), Executive shall be
entitled to an additional “excise tax” adjustment payment in an amount such
that, after the payment of all federal and state income and excise taxes,
Executive will be in the same after-tax position as if no excise tax had been
imposed.  Any payment or benefit which is
required to be included under Internal Revenue Code Sections 280G or 4999 (or
any successor provisions thereto) for purposes of determining whether an excise
tax is payable shall be deemed a payment “made to Executive” or a payment “which
Executive has a right to receive” for purposes of this provision.  The Bank (or its successor) shall be
responsible for the costs of calculation of the deductibility of payments end
benefits and the excise tax by the Bank’s independent certified accountant and
tax counsel and shall notify Executive of the amount of excise tax due prior to
the time such excise tax is due.  If at 

 

 

any
time it is determined that the additional “excise tax” adjustment payment
previously made to Executive was insufficient to cover the effect of the excise
tax, the gross-up payment pursuant to this provision shall be increased to make
Executive whole, including an amount to cover the payment of any penalties
resulting from any incorrect or late payment of the excise tax resulting from
the prior calculation.  All such amounts required
to be paid hereunder shall be paid at the time any withholdings may be required
(or, if earlier, the time Executive shall be required to pay such amounts)
under applicable law, and any additional amounts to which Executive may be
entitled shall be paid or reimbursed no later than fifteen (15) days following
confirmation of such amount by the Corporation’s independent accountants;
provided however, that any payments to be made under this Section 6(c) shall
in all events be made no later than the end of the Executive’s taxable year
next following the taxable year in which the Executive remits such excise tax
payments.  In the event any amounts paid
hereunder are subsequently determined to be in error because estimates were
required or otherwise, the parties agree to reimburse each other to correct
such error, as appropriate, and to pay interest thereon at the applicable
federal rate (as determined under Code Section 1274 for the period of time
such erroneous amount remained outstanding and unreimbursed).  The parties recognize that the actual
implementation of the provisions of this subsection are complex and agree to
deal with each other in good faith to resolve any questions or disagreements
arising hereunder.

 

8.             Covenant Not to Compete.

 

(a)           Executive
hereby acknowledges and recognizes the highly competitive nature of the
business of the Corporation and the Bank and accordingly agrees that, during
and for the applicable period set forth in Section 8(c) hereof,
Executive shall not:

 

(i)             enter into or be
engaged (other than by the Corporation or the Bank), directly or indirectly,
either for his own account or as agent, consultant, employee, partner, officer,
director, proprietor, investor (except as an investor owning less than 5% of
the stock of a publicly owned company) or otherwise of any person, firm,
corporation or enterprise engaged in (1) the banking (including bank
holding company) or financial services industry, (2) starting a new bank
or (3) any other activity in which the Corporation, Bank or any of its
subsidiaries are engaged during the Employment Period, in either case within a
fifty (50) mile radius of the legal or principal executive office of the
Corporation or the Bank and the office at which the Executive spent the
majority of his time (the “Non-Competition Area”); or

 

(ii)            solicit,
directly or indirectly, current or former customers of the Corporation or the
Bank or any of their respective subsidiaries to divert their business from the
Corporation and/or the Bank; or

 

(iii)           solicit, directly
or indirectly, any person who is employed by the Corporation or the Bank or any
of their respective subsidiaries to leave the employ of the Corporation or the
Bank.

 

 

(b)           It is expressly understood
and agreed that, although the parties consider the restrictions contained in Section 8(a) hereof
reasonable for the purpose of preserving for the Corporation, the Bank and its
subsidiaries their goodwill and other proprietary rights, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in this Section 8(a) hereof is an
unreasonable or otherwise unenforceable restriction against Executive, the provisions
of Section 8(a) hereof shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such other extent
as such court may judicially determine or indicate to be reasonable.

 

(c)           The provisions of this Section 8
shall be applicable commencing on the date of this Agreement and continuing for
twelve (12) months after the effective date of the termination of Executive’s
employment. Notwithstanding the above provisions, if the Executive violates the
provisions of this Section 8 and the Bank must seek enforcement of the
provisions of Section 8 and is successful in enforcing the provisions,
either pursuant to a settlement agreement, or pursuant to court order, the
covenant not to compete will remain in effect for one full year following the
date of the settlement agreement or court order.

 

(d)           Executive hereby agrees that
the provisions of this Section 8 are fully assignable by the Corporation
and the Bank to any successor.  Executive
also acknowledges that the terms and conditions of this Section 8 will not
be affected by the circumstances surrounding his termination of employment.

 

(e)           The Executive acknowledges
and agrees that any breach of the restrictions set forth in this Section 8
will result in irreparable injury to the Corporation and the Bank for which it
shall have no meaningful remedy at law, and the Corporation and the Bank shall
be entitled to injunctive relief in order to enforce provisions hereof.  Upon obtaining any such final and
nonappealable injunction, the Corporation and the Bank shall be entitled to
pursue reimbursement from the Executive and/or the Executive’s employer of
attorney’s fees and costs reasonably incurred in obtaining such final and
nonappealable injunction.  In addition,
the Corporation and the Bank shall be entitled to pursue reimbursement from the
Executive and/or the Executive’s employer of costs reasonably incurred in
securing a qualified replacement for any employee enticed away from the
Corporation and the Bank by Executive. 
Further, the Corporation and the Bank shall be entitled to set off
against or obtain reimbursement from Executive of any payments owed or made to
the Executive hereunder.

 

9.            Unauthorized Disclosure.  During the term of his employment hereunder,
or at any later time, the Executive shall not, without the written consent of
the Board of Directors of the Corporation and the Bank or a person authorized
thereby (except as may be required pursuant to a subpoena or other legal
process), knowingly disclose to any person, other than an employee of the
Corporation and the Bank or a person to whom disclosure is reasonably necessary
or appropriate in connection with the performance by the executive of his
duties as an executive of the Corporation and the Bank, any material
confidential information obtained by him while in the employ of the Corporation
and the Bank with respect to any of the Corporation and the Bank’s services,
products, improvements, formulas, designs or styles, processes, customers, 

 

 

methods of business or any business practices
the disclosure of which could be or will be damaging to the Corporation and the
Bank; provided, however, that confidential information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by the Executive or any person with the assistance,
consent or direction of the Executive) or any information of a type not other
considered confidential by persons engaged in the same business or a business
similar to that conducted by the Corporation and the Bank or any information
that must be disclosed as required by law.

 

10.          Indemnification;
Liability Insurance.  The
Corporation and the Bank shall indemnify the Executive, to the fullest extent
permitted by Pennsylvania law, with respect to any threatened, pending or
contemplated action, suit or proceeding brought against him by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation and the Bank or is or was serving at the written request of the
Corporation as a director, officer, employee or agent of another person or
entity.  The Executive’s right to
indemnification provided herein is not exclusive of any other rights to which
Executive may be entitled under any bylaw, agreement, vote of shareholders or
otherwise, and shall continue beyond the term of this Agreement.

 

11.          Notices.  Except as otherwise provided in this
Agreement, any notice required or permitted to be given under this Agreement
shall be deemed properly given if in writing and if mailed by registered or
certified mail, postage prepaid with return receipt requested, to Executive’s
address, in the case of notices to Executive, and to the principal executive
office of the Corporation, in the case of notice to the Corporation or the
Bank.

 

12.          Waiver.  No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by Executive and an executive officer
specifically designated by the Board of Directors of the Corporation.  No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time.

 

13.           Assignment.  This Agreement shall not be assignable by any
party, except by Bank and the Corporation to any successor in interest to its
business.

 

14.            Entire Agreement.  This Agreement contains the entire agreement
of the parties relating to the subject matter of this Agreement and supersedes
and replaces any prior written or oral agreements between them respecting the
within subject matter, including, without limitation, the Original Agreement.

 

15.                               Successors;
Binding Agreement.

 

(a)            The Corporation and the Bank will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business and/or assets of the
Corporation and/or the Bank to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation and
the Bank would be required to perform it if no such succession had taken place.  As used in this Agreement, “Corporation” and “Bank”
shall mean the 

 

 

Corporation
and the Bank, as defined previously and any successor to its respective
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law or otherwise.

 

(b)           This Agreement
shall inure to the benefit of and be enforceable by Executive’s personal or
legal representatives, executors, administrators, heirs, distributees, devisees
or legatees.  If Executive should die
after a notice of termination pursuant to Section 3(c) or 5(a) is
delivered by Executive, or following termination of Executive’s employment
without Cause, and any amounts would be payable to Executive under this
Agreement if Executive had continued to live, all such amounts shall be paid in
accordance with the terms of this Agreement to Executive’s devisee, legatee, or
other designee, or, if there is no such designee, to Executive’s estate.

 

16.            Arbitration.  The Corporation, the Bank and Executive
recognize that in the event a dispute should arise between them concerning the
interpretation or implementation of this Agreement, lengthy and expensive
litigation will not afford a practical resolution of the issues within a
reasonable period of time.  Consequently,
with the exception of the covenant not to compete provisions in Section 8,
which the Corporation and/or the Bank may seek to enforce in any court of
competent jurisdiction, each party agrees that all disputes, disagreements and
questions of interpretation concerning this Agreement are to be submitted to
resolution, in Harrisburg, Pennsylvania, to the American Arbitration
Association (the “Association”) in accordance with the Association’s National Rules for
the Resolution of Employment Disputes or other applicable rules then in effect
(“Rules”).  The Corporation, the Bank or
Executive may initiate an arbitration proceeding at any time by giving notice
to the other in accordance with the Rules. The Corporation, the Bank and
Executive may, as a matter or right, mutually agree on the appointment of a
particular arbitrator from the Association’s pool.  The arbitrator shall not be bound by the rules of
evidence and procedure of the courts of the Commonwealth of Pennsylvania but
shall be bound by the substantive law applicable to this Agreement.  The decision of the arbitrator, absent fraud,
duress, incompetence or gross and obvious error of act, shall be final and
binding upon the parties and shall be enforceable in courts of proper
jurisdiction.  Following written notice
of a request for arbitration, the Corporation, Bank and Executive shall be
entitled to an injunction restraining all further proceedings in any pending or
subsequently filed litigation concerning this Agreement, except as otherwise
provided herein.

 

17.            Legal Expenses.  Bank will pay to the Executive all reasonable
legal fees and expenses when incurred by the Executive in seeking to obtain or
enforce any right or benefit provided by this Agreement, provided he brings the
action in good faith and is successful on the merits.

 

18.            Validity.  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

 

19.            Applicable Law.  This Agreement shall be governed by and
construed in accordance with the domestic, internal laws of the Commonwealth of
Pennsylvania, without regard to its conflicts of laws principles.

 

 

20.           Headings.  The section headings of this Agreement are
for convenience only and shall not control or affect the meaning or
construction or limit the scope or intent of any of the provisions of this
Agreement.

 

21.            409A Safe
Harbor.  The parties
hereto intend that any and all post-employment compensation under this
Agreement satisfy the requirements of Section 409A of the Internal Revenue
Code of 1986, as amended, and any regulations or guidance promulgated
thereunder (“Section 409A”) or an exception or exclusion therefrom to
avoid the imposition of any accelerated or additional taxes pursuant to Section 409A.  Accordingly, notwithstanding anything in this
Agreement to the contrary, in no event shall the Corporation or the Bank be
obligated to commence payment or distribution to the Executive of any amount
that constitutes deferred compensation within the meaning of Section 409A
earlier than the earliest permissible date under Section 409A that such
amount could be paid without any accelerated or additional taxes or interest
being imposed under Section 409A.  
The Corporation, the Bank and the Executive agree that they will execute
any and all amendments to this Agreement as they mutually agree in good faith
may be necessary to ensure compliance with the distribution provisions of Section 409A
and to cause any and all amounts due under this Agreement, the payment or
distribution of which is delayed pursuant to Section 409A, to be paid or
distributed in a single sum payment at the earliest permissible date under Section 409A.

 

IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.

 

	
  ATTEST:

  	
   

  	
  GRAYSTONE FINANCIAL CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s Carl D. Lundblad

  	
   

  	
  By: 

  	
  /s/ Andrew Samuel

  
	
  Secretary

  	
   

  	
   

  	
  Andrew Samuel, President & CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  GRAYSTONE BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s Carl D. Lundblad

  	
   

  	
  By: 

  	
  /s/ Andrew Samuel

  
	
  Secretary

  	
   

  	
   

  	
  Andrew Samuel, President & CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WITNESS:

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/
  Janak Amin

  	
   

  	
  /s/
  Jeffrey Renninger

  

 

 

FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

THIS FIRST AMENDMENT (this “Amendment”) is made
as of November 12, 2008, by and among GRAYSTONE FINANCIAL CORP.,
a Pennsylvania business corporation (hereinafter referred to as the “Corporation”),
GRAYSTONE BANK, a Pennsylvania state
chartered bank (hereinafter referred to as the “Bank”), and JEFFREY RENNINGER (hereinafter referred to as “Executive”).

 

W I T N E S S E T H:

 

WHEREAS, Executive is now serving as Executive Vice
President of the Corporation and the Bank; and

 

WHEREAS, the Corporation, the Bank and Executive are
parties to that certain Amended and Restated Employment Agreement dated as of October 3,
2007 (the “Employment Agreement”) pursuant to which, among other things,
Executive would be entitled to certain benefits if he terminated his employment
for any reason within 30 days after a “Change in Control” as defined therein;
and

 

WHEREAS, the Corporation and Tower Bancorp, Inc., a
Pennsylvania corporation having its principal office in Greencastle,
Pennsylvania (“Tower”), are parties to that certain Agreement and Plan of
Merger dated as of November 12, 2008 (the “Merger Agreement”) pursuant to
which the Corporation will merge with and into Tower, with Tower as the
surviving corporation (the “Merger”) and, upon the completion of the Merger,
Greencastle will merge with and into the Bank and the Bank will become a wholly-owned
subsidiary of Tower;

 

WHEREAS, the Merger will constitute a “Change in Control”
of the Corporation and the Bank under the Change in Control Agreement;

 

WHEREAS, the Corporation and the Bank consider the
continued services of Executive to be in the best interests of the Corporation
and the Bank; and

 

WHEREAS, upon consummation of the Merger, Executive is to
be employed as Executive Vice President and Chief Operating Officer of the
Corporation and the Bank; and

 

WHEREAS, the Corporation, the Bank and Executive desire to
enter into this Amendment in light of the pending Merger and to ensure that the
Agreement complies with the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended.

 

NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, intending to be legally bound hereby, Executive, the Corporation
and the Bank agree as follows:

 

1.             Upon consummation of the
Merger, Executive shall be employed as Executive Vice President and Chief
Operating Officer of the Corporation and the Bank.

 

 

2.             Executive hereby agrees that
he shall not exercise his right pursuant to Section 5(a) of the
Employment Agreement to terminate his employment with the Bank within thirty
(30) days of the Merger.  Executive
hereby irrevocably waives any entitlement to benefits under the Employment
Agreement as a result of any such voluntary termination should he breach his
agreement in the foregoing sentence.

 

3.             Effective on the date
hereof, Section 3(e) of the Employment Agreement is amended in its
entirety, to read as follows:

 

(e)            Disability.  Executive, Corporation and Bank agree that if
Executive becomes Disabled, within the meaning of Section 409A of
the Internal Revenue Code of 1986, and the regulations thereunder, and becomes
eligible for employer-provided short-term and/or long-term disability benefits,
or worker’s compensation benefits, then Graystone Bank’s obligation to pay
Executive his Annual Base Salary shall be reduced by the amount of the
disability or worker’s compensation benefits received by Executive.

 

Executive, Corporation and Bank agree that if, in
the judgment of the Corporation’s Board of Directors, the Executive is unable,
as a result of illness or injury, to perform the essential functions of his
position on a full-time basis with or without a reasonable accommodation and
without posing a direct threat to himself or others for a period of six months,
the Corporation and the Bank will suffer an undue hardship in continuing the
Executive’s employment as set forth in this agreement.  Accordingly, this Agreement shall terminate
at the end of the six-month period, and all of Executive’s rights under this
Agreement shall cease, with the exception of those rights which Executive may
have under the Bank’s benefit plans.

 

4.             Effective on the date
hereof, Section 5(b) of the Employment Agreement defining the term “Change
in Control” is amended in its entirety, to redefine “Change in Control”, to
read as follows:

 

(b)           As used in this Agreement, “Change in Control” of
the Corporation or the Bank shall mean a change in the ownership or effective
control applicable to the Corporation or the Bank as
described in Section 409A(a)(2)(A)(v) of the Internal Revenue Code of
1986, as amended (or any successor provision thereto) and the regulations
thereunder.

 

5.             Effective on the date
hereof, the Employment Agreement is hereby amended to add a new Section 22
to read as follows:

 

22.           Specified Employee Status.  Notwithstanding anything in this Agreement to
the contrary, in the event Executive is determined to be a Specified Employee,
as that term is defined in Section 409A, payments to such Specified
Employee under paragraphs 6 or 7, other than payments qualifying as short term
deferrals or an exempt separation pay arrangement under Section 409A,
shall not begin earlier than the first day of the seventh month after the date
of termination.

 

 

For purposes of the foregoing, the date upon which a
determination is made as to the Specified Employee status of the Executive, the
Identification Date (as defined in Section 409A) shall be December 31.

 

6.             Effective with the
consummation of the Merger, the Employment Agreement is hereby amended so that
all references therein to the Corporation shall be deemed references to Tower,
and Tower, as successor to Graystone Financial Corp., shall be responsible for
all of the obligations of the Corporation to Executive under the Employment
Agreement as specifically provided in Section 15(a) of the Employment
Agreement.

 

7.             Effective upon consummation
of the Merger, Section 8(a)(i) of the Employment Agreement is hereby
amended and restated in its entirety to revise the Non-Competition Area as
follows:

 

(i)            enter into or
be engaged (other than by the Corporation or the Bank), directly or indirectly,
either for his own account or as agent, consultant, employee, partner, officer,
director, proprietor, investor (except as an investor owning less than 5% of
the stock of a publicly owned company) or otherwise of any person, firm,
corporation or enterprise engaged in (1) the banking (including bank
holding company) or financial services industry, or (2) any other activity
in which Corporation or Bank or any of their subsidiaries are engaged during the
Employment Period, in any county in which, at the date of termination of
the Executive’s employment, a branch location, office, loan production office,
or trust or asset and wealth management office
of Corporation, Bank, or any of their subsidiaries are located (“Non-Competition
Area”); or

 

8.             Except as amended by this
Amendment, the Employment Agreement shall continue in full force and effect and
shall continue after consummation of the Merger.  This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.

 

9.             This Amendment shall be
binding upon and inure to the benefit of the parties hereto, their respective
heirs, executors, administrators, successors and, to the extent permitted
hereunder, assigns.

 

[signatures follow on next page]

 

 

IN WITNESS WHEREOF, the parties have executed
this First Amendment to Amended and Restated Employment Agreement as of the day
and year first above written.

 

	
  ATTEST:

  	
   

  	
  GRAYSTONE
  FINANCIAL CORP.

  
	
   

  	
   

  	
   

  
	
  /s/
  Carl D. Lundblad

  	
   

  	
  By:
  

  	
  /s/
  Andrew Samuel

  
	
  Secretary

  	
   

  	
   

  	
  Andrew
  Samuel, President and CEO

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  GRAYSTONE
  BANK

  
	
   

  	
   

  	
   

  
	
  /s/
  Carl D. Lundblad

  	
   

  	
  By:
  

  	
  /s/
  Andrew Samuel

  
	
  Secretary

  	
   

  	
   

  	
  Andrew
  Samuel, President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WITNESS:

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
  /s/
  Carl D. Lundblad

  	
   

  	
  /s/
  Jeffrey Renninger

  
	
   

  	
   

  	
  Jeffrey
  Renninger

  

 

Consent and Acknowledgement

 

Tower
Bancorp, Inc. (“Tower”), intending to be legally bound, hereby consents,
as of the day and year first above written, to the foregoing amendment of the
employment agreement referenced therein (the “Agreement”) and hereby agrees
that, upon consummation of the merger of Graystone Financial Corp. with and
into Tower, with Tower as the surviving corporation, Tower shall become the successor
to Graystone Financial Corp. by operation of law and shall assume and
thereafter perform all of the obligations of Graystone Financial Corp. under
the Agreement as amended to the same extent as Graystone Financial Corp. would
be required to perform it if no such succession had taken place.

 

 

	
  ATTEST:

  	
   

  	
  TOWER
  BANCORP, INC.

  
	
   

  	
   

  	
   

  
	
  /s/
  John H. McDowell, Sr.

  	
   

  	
  By:
  

  	
  /s/
  Jeffrey B. Shank

  
	
  Secretary

  	
   

  	
   

  	
  President
  and CEOEXHIBIT 10.3

 

GRAYSTONE FINANCIAL CORP.

2007 STOCK INCENTIVE PLAN

 

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

 

Article 1.               Administration

 

1.1           The Committee.  The Plan shall be administered and
interpreted by a committee (the “Committee”), which shall consist of (i) either
the board of directors of the Company (the “Board”) or (ii) two or more
directors appointed by the Board, all of whom (unless the Board determines
otherwise) shall be “non-employee directors” of the Board as defined under Rule 16b-3
under the Securities Exchange Act of 1934 (the “Exchange Act”) and “outside
directors” as defined under section 162 (m) of the Internal Revenue Code
of 1986, as amended (the “Code”) and related Treasury regulations.  The Board, in its discretion, may appoint
separate committees to administer the Plan with respect to a designated portion
of participants (e.g., participants subject to Section 16 of the Exchange
Act or Section 162(m) of the Code). 
If the Board does not appoint a committee to administer all or any
portion of the Plan, then the Board shall be the Committee.

 

1.2           Determinations with respect
to Grants.  The
Committee shall have the sole authority to (i) determine the individuals
to whom Grants (as defined in Section 2.1) shall be made under the Plan, (ii) determine
the type, size and terms of the Grants to be made to each such individual, (iii) determine
the time when the Grants will be made and the duration of any applicable
exercise or restriction period, including the criteria for vesting and the
acceleration of vesting, (iv) accelerate the vesting of any Grants and
reduce or waive any restrictions on the exercise or vesting of any Grants, and (v) deal
with any other matters arising under the Plan. 
The Committee may, if it so desires, base any of the foregoing
determinations upon the recommendations of management of the Company.

 

1.3           Action by the Committee.  A majority of the Committee shall constitute
a quorum thereof, and the actions of a majority of the Committee at a meeting
at which a quorum is present, or actions unanimously approved in writing by all
members of the Committee, shall be actions of the Committee.

 

 

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

 

1.5           Interpretation of Plan.  The Committee shall have full power and
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, to waive requirements relating to formalities or other matters
that do not modify the substance of rights of Grantees (as defined in Section 4.2)
or constitute a material amendment of the Plan, to correct any defect or supply
any omission of the Plan or any Grant Instrument (as defined in Section 2.2)
and to reconcile any inconsistencies in the Plan or any Grant Instrument.  The Committee’s interpretations of the Plan
and all determinations made or actions taken by the Committee pursuant to the
powers vested in it hereunder shall be conclusive and binding on all persons
having any interests in the Plan or in any awards granted hereunder.  All powers of the Committee shall be
exercised in its sole discretion, in the best interest of the Company and in
keeping with the objectives of the Plan and need not be uniform as to similarly
situated individuals.

 

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

 

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

 

Article 2.               Grants

 

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

 

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

 

 

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

 

Article 3.               Shares Subject to the Plan

 

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

 

3.2           Anti-Dilution Adjustments.  If there is any change in the number or kind
of shares of Company Stock outstanding by reason of a stock dividend,
recapitalization, stock split, or combination or exchange of shares, or a
merger, reorganization or consolidation in which the Company is the surviving
corporation, or a reclassification or by reason of any other extraordinary or
unusual events affecting the outstanding Company Stock as a class without the
Company’s receipt of consideration, or if the value of outstanding shares of
Company Stock is substantially reduced due to the Company’s payment of an
extraordinary dividend or distribution, the kind of shares, the maximum number
of shares of Company Stock available for Grants, the maximum number of shares
of Company Stock that may be subject to Grants to any one individual under the
Plan in any calendar year, the number of shares covered by outstanding Grants,
and the price per share or the applicable fair market value of such Grants
shall be equitably adjusted by the Committee to reflect any increase or
decrease in the number or kind of issued shares of Company Stock to preclude
the enlargement or dilution of rights and benefits under such Grants; provided,
however, that any fractional shares resulting from such adjustment shall
be eliminated by rounding any portion of a share equal to .500 or greater up,
and any portion of a share equal to or less than .500 down, in each case to the
nearest whole number. For purposes of this Section 3.2, “shares of Company
Stock” and “shares” include referenced shares with respect to SARs.  The adjustments determined by the Committee
shall be final, binding and conclusive. Notwithstanding the foregoing, no
adjustment shall be authorized or made pursuant to this Section to the
extent that such authority or adjustment would cause any incentive stock option
to fail to comply with Section 422 of the Code.

 

 

Article 4.               Eligibility for Participation

 

4.1           Eligible Participants.

 

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

 

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

 

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

 

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

 

Article 5.               Granting of Options

 

5.1           Type of Option and Price.

 

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

 

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

 

5.1.3        If the Company Stock is
traded in a public market, then the Fair Market Value per share shall be, if
the principal trading market for the Company Stock is a national securities
exchange or The NASDAQ Stock Market, the last reported sale price thereof on
the relevant date or (if there were no trades on that date) the latest
preceding date upon which a sale was reported, or, if the Company Stock is not
principally traded on an exchange or market which reports last sale price data,
then the average of the mean between the last reported “bid” and “ask” prices
each day over the five trading days preceding the relevant date, as reported on

 

 

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

 

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

 

5.3           Exercisability of Options.  Stock Options shall become exercisable in
accordance with the terms and conditions determined by the Committee, in its
sole discretion.  The Committee, in its
sole discretion, may accelerate, in whole or in part, the exercisability of any
or all outstanding Stock Options at any time for any reason.  In addition, all outstanding Stock Options
automatically shall become fully and immediately exercisable upon a Change of
Control (as defined in Section 9.1).

 

5.4           Vesting of Options and
Restrictions on Shares.

 

5.4.1        The vesting period for Stock
Options shall commence on the date of grant and shall end on the date or dates,
determined by the Committee, that shall be specified in the Grant Instrument.

 

5.4.2        Notwithstanding any other
provision of the Plan, except as otherwise provided by the Committee in the
Grant Instrument, all outstanding Stock Options shall become immediately
exercisable upon the earliest to occur of the following, if at such time the
Grantee is an Employee or a Non-Employee Director:  (i) the Grantee’s Retirement (as defined
in Section 5.6.4), (ii) the Grantee’s death or Disability (as defined
in Section 5.6.4), or (iii) the occurrence of a Change of Control (as
defined in Section 9.1).

 

5.5           Manner of Exercise.

 

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

 

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

 

 

5.6           Termination of Employment or
Service.

 

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

 

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

 

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

 

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

 

 

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

 

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

 

5.8           Limits on Incentive Stock
Options.

 

5.8.1        Each Incentive Stock Option
shall provide that, to the extent that the aggregate Fair Market Value of the
Company Stock on the date of the grant with respect to which Incentive Stock
Options are exercisable for the first time by a Grantee during any calendar
year under the Plan or any other stock option plan of the Company exceeds
$100,000, then such option as to the excess shall be treated as a Nonqualified
Stock Option.

 

5.8.2        An Incentive Stock Option
shall not be granted to any participant who is not an Employee of the Company
or any “subsidiary” within the meaning of Section 424 (f) of the
Code.

 

5.8.3        An Incentive Stock Option
shall not be granted to any Employee who, at the time of grant, owns stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or any “parent” or “subsidiary” of the Company
within the meaning of Section 424 (e) and (f) of the Code,
unless the option price per share is not less than 110% of the Fair Market
Value of Company Stock on the date of grant and the option exercise period is
not more than five years from the date of grant.

 

 

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

 

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

 

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

 

Article 6.               Stock Appreciation Rights

 

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

 

6.2           Exercise.

 

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

 

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

 

 

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

 

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

 

6.3                                 Value of SARs.  Upon a Grantee’s exercise of some or all of
the Grantee’s SARs, the Grantee shall receive in settlement of such SARs an
amount equal to the value of the stock appreciation for the number of SARs
exercised, payable in cash, Company Stock or a combination thereof. The stock
appreciation for an SAR is the difference between the base price of the SAR as
described in Section 6.1 and the Fair Market Value of the underlying
Company Stock on the date of exercise of such SAR.

 

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

 

Article 7.                                            Restricted and Deferred Stock Grants

 

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

 

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

 

7.1.2                        If the Grantee
ceases to be employed by the Company or, in the case of a Non-Employee
Director, to serve or be engaged as such, during a period designated in the
Grant Instrument as the Restriction Period, or if other specified conditions
are not met, the Restricted Stock Grant shall terminate as to all shares
covered by the Grant as to which restrictions on transfer have not lapsed and
those shares of Company Stock must be immediately returned to the Company.  The Committee may, however, in its sole
discretion, provide for complete or partial

 

 

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

 

7.1.3                        During the
Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Company Stock to which such Restriction
Period applies except to a Successor Grantee under Article 8.  Each certificate for a share issued or
transferred under a Restricted Stock Grant shall contain a legend giving
appropriate notice of the restrictions in the Grant.  The Grantee shall be entitled to have the
Restricted Stock legend pursuant to this Section 7.1 removed from the
stock certificate or certificates covering any of the shares subject to
restrictions when all restrictions on such shares have lapsed.

 

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

 

7.1.5                        Except as
provided by Article 14, all restrictions imposed under the Restricted
Stock Grant shall lapse upon the expiration of the applicable Restriction
Period and the satisfaction of any conditions imposed by the Committee.  The Committee may determine, as to any or all
Restricted Stock Grants, that all the restrictions shall lapse without regard
to any Restriction Period.  All
restrictions under all outstanding Restricted Stock Grants shall automatically
and immediately lapse upon a Change of Control.

 

7.2                                 Deferred Stock.

 

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

 

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

 

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

 

Article 8.                                            Transferability of Grants

 

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

 

 

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

 

8.2                                 Successor
Grantee.  When a Grantee dies, the
representative or other person entitled to succeed to the rights of the Grantee
may exercise such rights.  A successor
Grantee must furnish proof satisfactory to the Company of his or her right to
receive the Grant under the Grantee’s will or under the applicable laws of
descent and distribution.

 

Article 9.                                            Change of Control of the Company

 

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

 

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

 

 

Article 10.                                     Amendment and Termination of the Plan

 

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

 

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

 

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

 

10.4                           Plan Provisions
Binding.  The Plan shall be the
controlling document. No other statements, representations, explanatory
materials or examples, oral or written, may amend the Plan in any manner.  The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.  In the event of any conflict between the Plan
and any Grant Instrument, the Plan shall control.

 

Article 11.                                     Funding of the Plan

 

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

 

Article 12.                                     Rights of Participants

 

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

 

12.2                           No Right to
Employment or Retention. 
Neither the Plan nor any action taken hereunder shall be construed as
giving any individual any rights to be retained by or in the employ of the
Company or any subsidiary of the Company or any other employment or retention
rights.

 

 

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

 

Article 13.                                     Withholding of Taxes

 

13.1                           Right to
Withhold.  The Company
shall have the right to deduct from all Grants paid in cash, or from other
wages paid to an employee of the Company, any federal, state or local taxes
required by law to be withheld with respect to such cash awards and, in the
case of Grants paid in Company Stock, the Grantee or other person receiving
such shares shall be required to pay to the Company the amount of any such
taxes which the Company is required to withhold with respect to such Grants or
the Company shall have the right to deduct from other wages paid to the
employee by the Company the amount of any withholding due with respect to such
Grants.  The Company also may withhold or
collect amounts with respect to a disqualifying disposition of shares of
Company Stock acquired pursuant to exercise of an Incentive Stock Option.

 

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

 

Article 14.                                     Requirements for Issuance of Shares

 

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

 

14.2                           Restrictions on
Grants.  The Committee shall have the
right to condition any Grant made to any Grantee hereunder on such Grantee’s
undertaking in writing to comply with such restrictions on his or her
subsequent disposition of such shares of Company Stock as the Committee shall
deem necessary or advisable as a result of any applicable law, regulation or

 

 

official
interpretation thereof and certificates representing such shares may be
legended to reflect any such restrictions.

 

14.3                           Share
Certificates. 
Certificates representing shares of Company Stock issued under the Plan
will be subject to such stop-transfer orders and other restrictions as may be
applicable under such laws, regulations and other obligations of the Company,
including any requirement that a legend or legends be placed thereon.

 

14.4                           No Fractional
Shares.  No fractional shares of
Company Stock shall be issued or delivered pursuant to the Plan or any
Grant.  The Committee shall determine
whether cash, other awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.

 

Article 15.                                     Forfeiture

 

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

 

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

 

Article 16.                                     Miscellaneous

 

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

 

 

16.2                           Section 16
Limitations.  With respect
to persons subject to Section 16 of the Exchange Act, it is the intent of
the Company that the Plan and all transactions under the Plan comply with all
applicable provisions of Rule 16b-3 or its successors under the Exchange
Act.  The Committee, as it deems
advisable, may revoke any Grant if it is contrary to law or modify a Grant to
bring it into compliance with any valid and mandatory government regulation.

 

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

 

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

 

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

 

Article 17.                                     Effective Date of the Plan

 

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

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