Document:

Exhibit 10.1

 

November 6, 2003

 

 

Kathy Vrabeck

11 Via Emilia

Newport Coast, CA  92657

 

 

Dear Kathy:

 

This letter
(the “Agreement”) confirms the terms of your employment by Activision
Publishing, Inc. (“Employer”), on the terms and conditions set forth below.  This Agreement supercedes the terms of the
employment agreement dated April 1, 2001, as amended March 19, 2003 (including
all addendums thereto, the “2001 Employment Agreement”) previously entered into
between you and Employer.

 

1.             Term

 

The term of your
employment under this Agreement shall commence on November 1, 2003 (the
“Effective Date”) and terminate on April 1, 2006 (the “Expiration Date”). For
purposes of this Agreement, the period of time from the Effective Date through
the Expiration Date shall be defined as the “Employment Period”.  Notwithstanding anything contained herein to
the contrary, your employment pursuant to the terms of this Agreement is
subject to termination pursuant to Paragraph 9 below.

 

2.             Salary

 

(a)           In full consideration
for all rights and services provided by you under this Agreement, you shall
receive an annual base salary (the “Base Salary”) during the Employment
Period.  Commencing on the Effective
Date, your Base Salary for the fiscal year ending March 31, 2004 shall be $450,000.  Thereafter, on April 1 of each year of the
Employment Period, beginning on April 1, 2004, your Base Salary shall be
reviewed on an annual basis as described below, to determine if an increase is
warranted, subject to the following annual minimum Base Salary:

 

i.                  From April 1, 2004 through March 31,
2005 your Base Salary shall be no less than $475,000;

 

ii.               From April 1, 2005 through March 31,
2006 your Base Salary shall be no less than $515,000.

 

(b)           Each Base Salary
referred to in Paragraph 2(a) shall constitute your minimum base salary during
the applicable period, and your Base Salary may be increased above the minimum
if Employer’s Board of Directors (or the Compensation Committee of such Board
of Directors), in its sole and absolute discretion, elects to do so.  In the event of an increase in your Base
Salary beyond the applicable minimum Base Salary for a particular period
indicated above, such increased Base Salary shall then constitute your minimum
Base Salary for all subsequent periods under this Agreement.

 

(c)           The Base Salary shall
be paid in accordance with the then prevailing payroll practices of Employer at
regular intervals as Employer may establish from time to time for its senior
executive officers. Employer may withhold from any amounts payable under this
Agreement all applicable tax, Social Security and other legally required
withholding pursuant to any law or regulation (the “Withholding”).  Any period of less than a full fiscal year
for which the Base Salary is calculated shall be pro rata.

 

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(d)            In addition to your Base Salary, you may be
eligible to receive an annual discretionary bonus (the “Annual Bonus”).  Your target Annual Bonus during the
Employment Period shall be 75% of the then applicable Base Salary, provided
that the actual amount of the Annual Bonus, if any, is within the sole and
absolute discretion of the Employer’s Board of Directors (or the Compensation
Committee of the Board of Directors) and is designed to encourage you to remain
employed by Employer and to continue any favorable performance during such
continued employment.  The Annual Bonus
shall be based upon (i) the achievement by Employer of its financial and business
objectives and goals and your achievement of certain mutually agreed objectives
and goals and/or your contribution to the success of Employer’s financial and
business objectives and goals, for the fiscal year with respect to which the
Annual Bonus is calculated, such determination to be made by Employer’s Board
of Directors (or the Compensation Committee of the Board of Directors) in its
sole discretion.  Employer’s overall
financial performance may also be considered by Employer’s Board of Directors (or
the Compensation Committee of the Board of Directors) in determining whether
any of the Annual Bonus is awarded and, if so, the amount.  You acknowledge that Employer retains the
right to modify, at any time, any and all of the criteria used to determine
whether the Executive is eligible for a bonus and, if so, the amount of any
such bonus. The Annual Bonus may take the form of, without limitation, cash,
shares of common stock of the Company and/or Options (as defined herein), as
the case may be. Any Annual Bonus shall be subject to Withholding

 

(e)           You
are also being granted non-qualified stock options (“Options”) under the
existing or modified Board-approved stock option plans established by
Activision, to purchase shares of common stock of Activision. The Options will
have an exercise price that is the market low of such common stock on the date
of grant. The Options are being granted to you strictly subject in all respects
to the terms and conditions of Activision’s stock option plan pursuant to which
the Options are issued and the applicable stock option agreement(s) thereunder,
including, generally and without limitation, as follows

 

i.                  Options
to purchase 150,000 shares of Activision common stock which will vest and
become exercisable ratably over five years so long as you remain employed with
Employer at all times on a continuous basis, in increments of options to
purchase 30,000 on each of November 1, 2004, November 1, 2005, November 1,
2006, November 1, 2006 and November 1, 2005 respectively;

 

ii.               
Options to purchase 100,000 shares of Activision common stock, with all of such
Options vesting and become exercisable, so long as you remain employed with
Employer at all times on a continuous basis on November 1, 2008.  Notwithstanding the foregoing, the vesting
and exercisability of a 50% portion of the Options granted under this Paragraph
2(e)(ii) will accelerate and such accelerated Options will vest in equal
increments of 25,000 Options on April 1, 2005, and April 1, 2006, respectively,
subject to the achievement of certain acceleration criteria applicable to each
specific acceleration even/date and related option increment, as well as to
your remaining employed with Employer on a continuous basis. All applicable
acceleration criteria must be agreed in good faith by you and Employer.

 

In the event of termination of your employment, disposition of the
Options will be governed by the provisions of Paragraph 9(e) of this Agreement,
the terms and conditions of Activision’s stock option plan pursuant to which
the Options are issued and the applicable stock option agreement(s)
thereunder.  The Options issued pursuant
to this paragraph are in addition to the stock options previously granted to
you (the “Existing Options”). Except as otherwise set forth in Section 9(e) of
this Agreement, the terms of any Existing Options granted to you,

 

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whether pursuant to the 2001
Employment Agreement or otherwise, shall not be affected by the execution of
this Agreement and shall remain subject to the terms of stock option plans and
agreements pursuant to which such Existing Options were granted.

 

(f)                You
will be eligible for such additional grants of stock options commensurate with
your position with Employer as the Board of Directors (or Compensation
Committee of the Board of Directors), in its sole discretion, may award to you
from time to time. Terms of such options when granted, if any, shall be at all
times strictly subject to the terms of this Agreement, the terms and conditions
of Activision’s stock option plan pursuant to which the options are issued and
the applicable stock option agreement(s) thereunder.

 

3.             Title

 

You are being
employed under this Agreement in the position of President of Activision
Publishing, a division of Employer.

 

4.             Duties

 

You shall personally and diligently
perform, on a full-time and exclusive basis, such services as Employer or any
of its related or affiliated entities or divisions may reasonably require. You
are also required to read, review and observe all of Employer’s existing
policies, procedures, rules and regulations as well as those adopted by
Employer during the term of your employment. 
You will at all times perform all of the duties and obligations required
by you under this Agreement in a loyal and conscientious manner and to the best
of your ability and experience.

 

5.             Expenses

 

To the extent
you incur necessary and reasonable business expenses in the course of your
employment, you shall be reimbursed for such expenses, subject to Employer’s
then current policies regarding reimbursement of such business expenses.

 

6.             Other Benefits

 

You shall be
entitled to those benefits, which are standard for persons in similar positions
with Employer, including coverage under Employer’s health, life insurance and
disability plans, and eligibility to participate in Employer’s 401(k)
plan.  In addition, during the
Employment Period, Employer will maintain a term insurance policy or policies
for a period of ten (10) years, covering your life in an amount of $2,000,000
and naming your estate or any other person designated by you as beneficiary of
such policy or policies. Nothing paid to you under any such plans and
arrangements (nor any bonus or stock options which Employer’s Board of
Directors (or the Compensation Committee of such Board of Directors), in its
sole and absolute discretion, shall provide to you)) shall be deemed in lieu,
or paid on account, of your Base Salary. 
Except as otherwise specifically provided in this Agreement, you
expressly agree and acknowledge that after the expiration or early termination
of the term of your employment under this Agreement for any reason, you are
entitled to no additional benefits, except as specifically provided under the
benefit plans referred to above and those benefit plans in which you subsequently
may become a participant, and subject in each case to the terms and conditions
of each such plan.  Notwithstanding
anything to the contrary set forth above, you shall be entitled to receive
those benefits provided by COBRA upon the expiration or earlier termination of
this Agreement.

 

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7.             Vacation and Paid Holidays

 

(a)           You will be entitled to
paid vacation days in accordance with the normal vacation policies of Employer
in effect from time to time, provided that in no event shall you be entitled to
less than twenty (20) days of paid vacation per year.

 

(b)           You shall be entitled
to all paid holidays given by Employer to its full-time employees.

 

8.             Protection of Employer’s Interests

 

(a)           Duty of Loyalty.  During the Employment Period, you
will not compete in any manner, whether directly or indirectly, as a principal,
employee, agent or owner, with Employer, or any affiliate of Employer, except
that the foregoing will not prevent you from holding at any time less than five
percent (5%) of the outstanding capital stock of any company whose stock is
publicly traded.

 

(b)           Property of Employer.  All rights worldwide with respect to any and
all intellectual or other property of any nature produced, created or suggested
by you during the term of your employment or resulting from your services which
(i) relate in any manner at the time of conception or reduction to practice to
the actual or demonstrably anticipated business of Employer, (ii) result from
or are suggested by any task assigned to you or any work performed by you on
behalf of Employer, or (iii) are based on any property owned or idea conceived
by Employer, shall be deemed to be a work made for hire and shall be the sole
and exclusive property of Employer.  You
agree to execute, acknowledge and deliver to Employer, at Employer’s request,
such further documents, including copyright and patent assignments, as Employer
finds appropriate to evidence Employer’s rights in such property.

 

(c)           Confidentiality.  Any confidential and/or proprietary
information of Employer or any affiliate of Employer shall not be used by you
or disclosed or made available by you to any person except as required in the
course of your employment, and upon expiration or earlier termination of the
term of your employment, you shall return to Employer all such information
which exists in written or other physical form (and all copies thereof) under
your control.  Without limiting the
generality of the foregoing, you acknowledge signing and delivering to Employer
the Activision Employee Proprietary Information Agreement and you agree that
all terms and conditions contained in such agreement, and all of your
obligations and commitments provided for in such agreement, shall be deemed, and
hereby are, incorporated into this Agreement as if set forth in full
herein.  The provisions of this
paragraph shall survive the expiration or earlier termination of this
Agreement.

 

(d)           Covenant Not to Solicit.  After the expiration of the Employment Period
of this Agreement or earlier termination of your employment pursuant to
Paragraphs 9(a), (b) or (c) of this Agreement for any reason whatsoever, you
shall not, either alone or jointly, with or on behalf of others, directly or
indirectly, whether as principal, partner, agent, shareholder, director,
employee, consultant or otherwise, at any time during a period of two (2) years
following such expiration or termination, offer employment to, or directly or
indirectly solicit the employment or engagement of, or otherwise entice away
from the employment of Employer or any affiliated entity, either for your own
account or for any other person firm or company, any person who was employed by
Employer or any such affiliated entity during the term of your employment,
whether or not such person would commit any breach of his or her contract of
employment by reason of his or her leaving the service of Employer or any
affiliated entity.

 

4

 

9.             Termination

 

(a)           By Employer. 
At any time during the Employment Period, Employer may terminate your
employment under this Agreement for Cause defined as your (i) willful, reckless
or gross misconduct or fraud, (ii) gross negligent performance of job
responsibilities, and (iii) conviction of or pleading no contest to a felony or
crime involving dishonesty or moral turpitude.. In addition, Employer will have the right to terminate your employment
without Cause and such termination shall not be deemed to constitute a
wrongful discharge of Employee or a wrongful termination of Employee’s
employment by Employer or a breach by
Employer of any term of this Agreement and/or any other duty or obligation,
expressed or implied, which Employer may owe to Employee pursuant to any
principle or provision of law.

 

(b)           By Employee. 
You may terminate your employment under this Agreement only: (i) upon
Employer’s material breach of Section 2, or (ii) upon any relocation without
your consent of the place at which you primarily are performing your services
to Employer to a location which is outside Los Angeles County.

 

(c)           Death or Disability.  In the event of your death during the term
of this Agreement, this Agreement shall terminate and Employer only shall be
obligated to pay your estate or legal representative only the amounts set forth
in Paragraph 9(d)(i) below.  In the
event you are unable, with or without reasonable accommodation, to perform the
services required of your position as a result of any physical (excluding
pregnancy) or mental condition (“disability”), then Employer shall have the
right, at its option, to terminate your employment under this Agreement, and
Employer shall be obligated to pay you only the amounts set forth in Paragraph
9(d)(ii) below.  You acknowledge and
agree that your ability to continuously perform your duties for Employer is an
essential part of your position and that any inability to perform such duties
during the term of this Agreement for a period of 60 or more consecutive days
or an aggregate of 90 or more days during any 12-month period would create an
undue hardship for Employer and the operation of its business.  Unless and until so terminated, during any
period of disability during which you are unable, with or without reasonable
accommodation, to perform the services required of you under this Agreement,
your Base Salary shall be payable to the extent of, and subject to, Employer’s
policies and practices then in effect with regard to sick leave and disability
benefits.

 

(d)           Termination of Obligations.  In the event of the termination of your
employment under this Agreement pursuant to Paragraphs 9(a), 9(b) or 9(c), all
obligations of Employer to you under this Agreement shall immediately terminate
except as follows:

 

i.                  Compensation
upon Death.  In the event of this
Agreement is terminated as a result of your death, your heirs, successors or
legal representatives shall receive: (i) the Base Salary through the date of
termination of this Agreement; (ii) any unpaid Annual Bonus for any
previously completed fiscal year if such Annual Bonus is awarded to you
pursuant to the terms of Paragraph 2(d) of this Agreement by the Board of
Directors (or the Compensation Committee of such Board of Directors) and remain
not paid; (iii) the pro rata portion of the Annual Bonus for the fiscal year in
which your termination occurs to the extent such Annual Bonus is awarded to you
pursuant to the terms of Paragraph 2(d) of this Agreement by the Board of
Directors (or the Compensation Committee of such Board of Directors); (iv) an amount
equal to two hundred (200%) percent of the dollar amount of the Base Salary
paid or payable to you for Employer’s most recent fiscal year immediately prior
to your date of death; (v) reimbursement of expenses due to you pursuant to
Paragraph 5; (vi) your then current spouse and minor children, if any, shall
receive the same level of health/medical insurance or coverage that was
provided to you immediately prior to your death for an eighteen month period,
with the cost of such continued insurance or coverage 

 

 

5

 

being borne by Employer.  All
such payments shall be in addition to any payments your widow, beneficiaries or
estate may be entitled to receive pursuant to any pension or employee benefit
plan or life insurance policy maintained by Employer.

 

ii.               Compensation
upon Disability.  In the event this
Agreement is terminated as a result of your disability, you shall receive: (i)
the Base Salary through the date of your termination; (ii) any unpaid Annual
Bonus for any previously completed fiscal year if such Annual Bonus is actually
awarded to you pursuant to the terms of Paragraph 2(d) of this Agreement by the
Board of Directors (or the Compensation Committee of such Board of Directors)
and remain not paid in whole or in part; (iii) the pro rata portion of the
Annual Bonus for the fiscal year in which your termination occurs to the extent
such Annual Bonus is awarded pursuant to the terms of Paragraph 2(d) of this
Agreement by the Board of Directors (or the Compensation Committee of such
Board of Directors); (iv) reimbursement of expenses due to you pursuant to
Paragraph 5; (v) an amount equal to two hundred (200%) percent of the dollar
amount of the Base Salary paid or payable to you for Employer’s most recent
fiscal year immediately prior to your disability termination, less the amount,
if any, of any payments received by you from any Employer-funded disability
insurance plan; and (vi) you and your then current spouse and minor children,
if any, shall receive the same level of health/medical insurance or coverage
provided immediately prior to such disability termination for an eighteen month
period, with the cost of such continued insurance or coverage being borne by
Employer.

 

iii.            Compensation
upon Termination Without Cause.  In
the event your employment under this Agreement is terminated by Employer
without Cause, then you shall receive: (i) the Base Salary through the
date of your termination; (ii) any unpaid Annual Bonus for any previously
completed fiscal year if such Annual Bonus is then awarded to you pursuant to
the terms of this Agreement; (iii) the pro rata portion of the Annual Bonus for
the fiscal year in which your termination occurs to the extent such Annual
Bonus is awarded pursuant to the terms of this Agreement ; (iv) payment of 50%
of your target Annual Bonus not otherwise covered in sub-paragraphs 9(d)(iii)ii
and iii above, calculated using the rate referenced in Paragraph 2(d), for the
remaining balance of the term of this agreement; (v) reimbursement of expenses
due you pursuant to Paragraph 5; (vi) 100% of the Base Salary payable to you
through the Expiration Date had your employment not been terminated, such Base
Salary to be determined in accordance with the terms of Paragraph 2(a) of this
Agreement; and (vii) you and your then current spouse and minor children, if
any, shall receive the same level of health/medical insurance or coverage
provided immediately prior to such termination for an eighteen month period,
with the cost of such continued insurance or coverage being borne by Employer.

 

(e)           Disposition of Stock Options Upon Termination.  Upon termination of your employment for any
reason, the following terms shall apply to all of the Options and the Existing
Options issued to you:

 

6

 

(i)                                     In
the event of termination of your employment for Cause, or by your breach of
this Agreement, all such stock options, whether or not vested, shall expire
immediately on the date of termination of your employment and all such stock
options shall immediately be cancelled and no longer continue vest or be
exercisable as of the date of termination of your employment.

 

(ii)                                  In
the event of your termination of employment by reason of your death or
disability, all such stock options shall cease to vest immediately as of the
date of such termination of your employment, all unvested stock options shall
be cancelled and only vested stock options shall continue to be exercisable
until the earlier of (a) the end of the 30th day after the date of such
termination of your employment, or (b) the expiration of such stock option
pursuant to the terms of the stock option agreement for such stock option; and
upon the expiration of such period, all stock options then remaining
unexercised shall be cancelled.

 

(iii)                               In
the event of termination of your employment by Employer without Cause, all such
stock options shall cease to vest immediately as of the date of such
termination of your employment, all unvested stock options shall be cancelled
and only vested stock options shall continue to be exercisable until the
earlier of (a) the end of the 30th day after the date of such termination of
your employment, or (b) the expiration of such stock option pursuant to the
terms of the stock option agreement for such stock option; and upon the
expiration of such period, all stock options then remaining unexercised shall
be cancelled.

 

(iv)                              In
the event of termination of your employment for any reason not otherwise
described in Paragraphs 9(e)(i)-(iii), all such stock options shall cease to
vest immediately as of the date of such termination of your employment, all
unvested stock options shall be cancelled and only vested stock options shall
continue to be exercisable until the earlier of (a) the end of the 30th day
after the date of such termination of your employment, or (b) the expiration of
such stock option pursuant to the terms of the stock option agreement for such
stock option; and upon the expiration of such period, all stock options then
remaining unexercised shall be cancelled.

 

10.          Use of Employee’s Name

 

Employer shall
have the right, but not the obligation, to use your name or likeness for any
publicity or advertising purpose.

 

11.          Assignment

 

Employer may
assign this agreement or all or any part of its rights under this agreement to
any entity which succeeds to all or substantially all of Employer’s assets
(whether by merger, acquisition, consolidation, reorganization or otherwise) or
which Employer may own substantially, and this agreement shall inure to the
benefit of such assignee.

 

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12.          No Conflict with Prior Agreements

 

You represent
to Employer that neither your commencement of employment under this Agreement
nor the performance of your duties under this Agreement conflicts or will
conflict with any contractual commitment on your part to any third party, nor
does it or will it violate or interfere with any rights of any third party.

 

13.          General Provisions

 

(a)           Entire Agreement.  This Agreement, including the Employment
Proprietary Information Agreement referred to herein, and, with respect to the
Options, together with Activision’s stock option plan pursuant to which the
Options are granted and the stock option agreement(s) thereunder, supersedes
all prior or contemporaneous agreements and statements, whether written or
oral, concerning the terms of your employment with Employer, and no amendment
or modification of this Agreement shall be binding unless it is set forth in a
writing signed by both Employer and Employee. 
To the extent that this Agreement conflicts with any of Employer’s
policies, procedures, rules or regulations, this Agreement shall supersede the
other policies, procedures, rules or regulations.  Without limiting the generality of the foregoing, you acknowledge
that this Agreement supercedes the 2001 Employment Agreement and such agreement
is hereby declared terminated and of no further force or effect, except that
any Existing Options granted pursuant to such agreement shall remain valid in
all respects and shall be governed by the terms of stock option plans and
agreements pursuant to which such Existing Options were granted.

 

(b)           No Broker.  You have given no indication, representation or
commitment of any nature to any broker, finder, agent or other third party to
the effect that any fees or commissions of any nature are, or under any
circumstances might be, payable by Employer or any affiliate of Employer in
connection with your employment under this Agreement.

 

(c)           Waiver.  No waiver by either party of any breach by
the other party of any provision or condition of this Agreement shall be deemed
a waiver of any similar or dissimilar provision or condition at the same or any
prior or subsequent time.

 

(d)           Prevailing Law.  Nothing contained in this Agreement shall be
construed so as to require the commission of any act contrary to law and
wherever there is any conflict between any provision of this Agreement and any
present or future statute, law, ordinance or regulation, the latter shall
prevail, but in such event the provision of this Agreement affected shall be
curtailed and limited only to the extent necessary to bring it within legal
requirements.

 

(e)           Choice of Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of California without regard
to conflict of law principles.

 

(f)            Immigration.  In accordance with the Immigration Reform
and Control Act of 1986, employment under this Agreement is conditioned upon
satisfactory proof of your identity and legal ability to work in the United
States.

 

(g)           Venue and Jurisdiction.  The parties agree that all actions or
proceedings initiated by either party hereto arising directly or indirectly out
of this Agreement shall be litigated in federal or state court in Los Angeles,
California.  The parties hereto
expressly submit and consent in advance to such jurisdiction

 

8

 

and agree that service of
summons and complaint or other process or papers may be made by registered or
certified mail addressed to the relevant party at the address set forth
below.  The parties hereto waive any
claim that a federal or state court in Los Angeles, California, is an
inconvenient or an improper forum.

 

(h)           Severability.  If any provision of this Agreement is held
to be illegal, invalid or unenforceable under existing or future laws effective
during the term of this Agreement, such provisions shall be fully severable,
the Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision or
by its severance from this Agreement. 
Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal and enforceable.

 

(i)            Legal Counsel.  Employee acknowledges that he has been given
the opportunity to consult with legal counsel of his own choosing regarding
this Agreement.  Employee understands
and agrees that Activision’s General Counsel, or any other attorney or member
of management who has discussed any term or condition of this Agreement with
him, is only acting on behalf of the company and not on behalf of Employee.

 

(j)            Right to Negotiate.  Employee hereby acknowledges that he has
been given the opportunity to participate in the negotiation of the terms of
this Agreement.

 

(k)           Services Unique.  You recognize that the services being
performed by you under this Agreement are of a special, unique, unusual,
extraordinary and intellectual character giving them a peculiar value, the loss
of which cannot be reasonably or adequately compensated for in damages, and in
the event of a breach of this Agreement by you (particularly, but without
limitation, with respect to the provisions hereof relating to the exclusivity
of your services and the provisions of Paragraph 8 of this Agreement).

 

(l)            Injunctive Relief.  In the event of a breach or threatened
breach of this Agreement, you hereby agree that any remedy at law for any
breach or threatened breach of this Agreement will be inadequate and,
accordingly, each party hereby stipulates that the other is entitled to obtain
injunctive relief for any such breaches or threatened breaches.  The injunctive relief provided for in this
paragraph is in addition to, and is not in limitation of, any and all other
remedies at law or in equity otherwise available to the applicable party.  The parties agree to waive the requirement
of posting a bond in connection with a court’s issuance of an injunction.

 

(m)          Remedies Cumulative. The
remedies in this paragraph are not exclusive, and the parties shall have the
right to pursue any other legal or equitable remedies to enforce the terms of
this Agreement.

 

(n)           Attorneys’ Fees And Costs.  If either party brings an action to enforce,
interpret or apply the terms of this Agreement or declare its rights under this
Agreement, the prevailing party in such action, including all appeals, shall
receive all of its or his attorneys’ fees, experts’ fees, and all of its or his
costs, in addition to such other relief as may be granted.

 

9

 

14.          Notices

 

All notices
which either party is required or may desire to give the other shall be in
writing and given either personally or by depositing the same in the United
States mail addressed to the party to be given notice as follows:

 

	
  To Employer:

  	
   

  	
  3100 Ocean
  Park Boulevard

  
	
   

  	
   

  	
  Santa
  Monica, California 90405

  
	
   

  	
   

  	
  Attention:  Senior Vice President,

  
	
   

  	
   

  	
  Business
  Affairs and General Counsel

  
	
   

  	
   

  	
   

  
	
  To Employee:

  	
   

  	
  11 Via
  Emilia

  
	
   

  	
   

  	
  Newport
  Coast, CA  92657

  

 

Either party
may by written notice designate a different address for giving of notices.  The date of mailing of any such notices
shall be deemed to be the date on which such notice is given.

 

15.          Headings

 

The headings
set forth herein are included solely for the purpose of identification and
shall not be used for the purpose of construing the meaning of the provisions
of this Agreement.

 

If the
foregoing accurately reflects our mutual Agreement, please sign where
indicated.

 

ACCEPTED AND AGREED
TO:

 

	
  Employer

  	
   

  	
  Employee

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Ronald Doornink 

  	
   

  	
  By:

  	
    /s/ Kathy Vrabeck 

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Kathy Vrabeck

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date: 

  	
  11/9/03

  	
   

  
							

 

10Exhibit
10.10

 

 

WILLOW GROVE BANCORP, INC.

 

Deferred Compensation Plan

 

 

WILLOW GROVE BANCORP, INC.

 

Deferred Compensation Plan

 

	
  1.

  	
  Purposes

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Administration

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Participation

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Deferrals

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Deferral
  Accounts For Non-Stock-Denominated Awards

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Deferral Accounts For Stock-Denominated
  Awards

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Settlement of Deferral Accounts

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Provisions Relating to Section 16 of the
  Exchange Act

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Statements

  	
   

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Sources
  of Stock: Limitation on Account of Stock-Denominated Deferrals

  	
   

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Amendment/Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  13.

  	
  General
  Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Effective
  Date

  	
   

  

 

ii

 

WILLOW GROVE BANCORP, INC.

 

Deferred Compensation Plan

 

 

1.             Purposes.  The purpose of this Deferred
Compensation Plan (the “Plan”) is to provide Non-Employee Directors of Willow
Grove Bancorp, Inc. (the “Company”) and its Subsidiaries as well as certain
members of the Company’s senior management team with the opportunity to elect
to defer receipt of specified portions of their compensation and to have such
deferred amounts treated as if invested in specified investment vehicles.

 

2.             Definitions.  In addition to the terms defined in
Section 1 above, the following terms used in the Plan shall have the meanings
set forth below:

 

(a)           “Administrator” shall
mean such person or persons designated pursuant to Section 3(b) hereof to whom
the Committee has delegated authority to take action under the Plan, except as
may be otherwise required under Section 9 hereof.

 

(b)           “Beneficiary” shall
mean any person (which may include trusts and is not limited to one person) who
has been designated by the Participant in his or her most recent written
beneficiary designation form filed with the Company to receive the benefits
specified under the Plan in the event of the Participant’s death.  If no Beneficiary has been designated or if
no designated Beneficiary survives the Participant’s death, then the Beneficiary
shall mean the Participant’s estate.

 

(c)           “Change in Control”
shall be deemed to have occurred if: (i) the acquisition of control of the
Company as defined in 12 C.F.R. §574.4, unless a presumption of control is
successfully rebutted or unless the transaction is exempted by 12 C.F.R. §574.3(c)(vii),
or any successor to such sections; (ii) an event that would be required to be
reported in response to Item 1(a) of Form 8-K or Item 6(e) of Schedule 14A of
Regulation 14A pursuant to the Exchange Act (as defined below), whether or not
any class of securities of the Company is registered under the Exchange Act;
(iii) any “person” (as such term is used in Section 13(d) and 14(d) of the
Exchange Act), is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of the securities of the
Company representing 20% or more of the combined voting power of the Company’s
then outstanding securities; or (iv) during any period of three (3) consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by stockholders, of
each new director was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period.

 

(d)           “Code” shall mean the
Internal Revenue Code of 1986, as amended. References to any provision of the
Code or regulation (including proposed regulation) thereunder shall include any
successor provisions or regulations.

 

1

 

(e)           “Committee” shall mean
the Compensation Committee of the Board of Directors of the Company.

 

(f)            “Deferral Account(s)”
shall mean Non-Stock-Denominated Deferral Accounts and Stock-Denominated
Deferral Accounts, singularly or collectively, as appropriate.  Deferral Accounts will be maintained solely
as bookkeeping entries by the Company to evidence the unfunded obligations of
the Company hereunder.

 

(g)           “Disability” shall mean
any physical or mental impairment which qualifies the Participant for
disability benefits under the applicable long-term disability plan maintained
by the Company (or any Subsidiary) or, if no such plan applies, which would
qualify the Participant for disability benefits under the long-term disability
plan maintained by the Company, if such individual were covered by that plan.

 

(h)           “Employee” means any
person who is employed by the Company or any of its Subsidiaries, including
employees who may also be directors of the Company or its Subsidiaries.

 

(i)            “Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended.  References to any provision of the Exchange Act or rule
thereunder shall include any successor provisions or rules.

 

(j)            “Non-Employee
Director” means a member of the Board of Directors of the Company or the Board
of Directors of the Willow Grove Bank or any successor thereto who is not an
Employee.

 

(k)           “Non-Stock-Denominated
Deferral Account” shall mean the accounts or sub-accounts established and
maintained by the Company for specified deferrals made by a Participant
pursuant to Section 6 hereof.

 

(l)            “Participant” shall
mean any Non-Employee Director of the Company or any Subsidiary or any Employee
of the Company or any Subsidiary who is designated by the Company’s Board of
Directors or the Committee as eligible to participate in this Plan and who
makes an election to participate in the Plan.

 

(m)          “Restricted Stock Award”
shall mean awards granted pursuant to the Company’s 1999 and 2002 Recognition
and Retention Plans or any similar and/or successor plans.

 

(n)           “Retirement” shall mean
termination of employment or separation of service for a Non-Employee Director
by a Participant on or after the age of fifty-five (55).

 

(o)           “Stock” shall mean the
Common Stock, with a par value of $0.01 per share, of Willow Grove Bancorp,
Inc. or any other equity securities of the Company designated by the Committee.

 

(p)           “Stock-Denominated
Awards” shall mean a Restricted Stock Award or similar type of award which has
been made pursuant to a plan or arrangement which has been approved

 

2

 

by the Company’s shareholders and which is determined by the Committee
to be appropriate for deferral under the terms of this Plan.

 

(q)           “Stock-Denominated
Deferral Account” shall mean the accounts or sub-accounts established and
maintained by the Company for specified deferrals made by a Participant
pursuant to Section 7 hereof.

 

(r)            “Subsidiary” or “Subsidiaries” means
Willow Grove Bank and any of the subsidiaries of the Company or Willow Grove
Bank which, with the consent of the Board, agree to participate in this Plan.

 

(s)           “Trust” shall mean the
trust or trusts established by the Company pursuant Sections 6 and 7 hereof.

 

(t)            “Trustee(s)” shall
mean the trustee(s) of the Trust(s).

 

(u)           “Trust Agreement” shall
mean the agreement(s) entered into between the Company and the Trustee(s), as
amended or restated from time to time.

 

(v)           “Valuation Date” shall
mean the close of business on the last business day of each calendar quarter;
provided however, that in the case of termination of service for reasons other
than Retirement, death or Disability, the Valuation Date shall mean the close
of business on the last day of business of the month in which service
terminates, and in the case of a Change in Control of the Company, the
Valuation Date shall be the effective date of such Change in Control.

 

3.             Administration.

 

(a)           Committee
Authority.  The Committee shall
administer the Plan in accordance with its terms and shall have all powers
necessary to accomplish such purpose, including the power and authority to
construe and interpret the Plan, to define the terms used herein, to prescribe,
amend and rescind rules and regulations, agreements, forms and notices relating
to the administration of the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan.

 

(b)           Delegation
of Duties; Powers.  The Committee
may delegate its duties and responsibilities hereunder, as it deems reasonable
and appropriate, to the Administrator. 
If an Administrator is appointed by the Committee, such Administrator
shall serve at the will of, and may be removed (with or without cause) by the
Committee.  Any actions of the Committee
or the Administrator with respect to the Plan shall be conclusive and binding
upon all persons interested in the Plan, except that any action of the
Administrator will not be binding on the Committee.  The Committee and Administrator may each appoint agents and
delegate thereto powers and duties under the Plan, except as otherwise limited
by the Plan.

 

(c)           Limitation
of Liability.  Each member of the
Committee and the Administrator shall be entitled to, in good faith, rely or
act upon any report or other information furnished to

 

3

 

him or her by any officer or other employee of the Company or any
Subsidiary, the Company’s independent public accountants or any compensation consultant,
legal counsel, or other professional retained by the Company to assist in the
administration of the Plan.  To the
maximum extent permitted by law, no member of the Committee or the
Administrator, nor any person to whom ministerial duties have been delegated,
shall be liable to any person for any action taken or omitted in connection
with the interpretation and administration of the Plan.  To the maximum extent permitted by law, the
Company shall indemnify the members of the Committee and the Administrator
against any and all claims, losses, damages, expenses, including any counsel
fees and costs incurred by them, and any liability, including any amounts paid
in settlement with their approval, arising from their action or failure to act.

 

4.             Participation.  The Administrator will notify each person of
his or her eligibility to participate and the extent to which such person can
participate in the Plan within 30 days of the Committee’s designation that such
person is so eligible to participate in the Plan.

 

5.             Deferrals.

 

(a)           Deferrals.  With the consent of the Committee, a
Participant may elect to defer otherwise taxable compensation, fees or awards
which may be in the form of cash or Stock to be received from the Company or a
Subsidiary, including Stock-Denominated Awards, director’s fees, salary, annual
incentive awards and taxable compensation payable under other plans and
programs, employment agreements or other arrangements or as designated by the
Committee; provided; however, that a Participant who is an Employee may only
defer, with respect to a given year, receipt of only that portion of the
Participant’s salary, fees, annual incentive awards, Stock-Denominated Awards
and compensation payable under all plans and programs, employment agreements or
other arrangements that exceeds the FICA maximum taxable wage base plus the
amount necessary to satisfy Medicare and all other payroll taxes (other than
federal, state or local income tax withholding) imposed on the wages of such
Participant from the Company and its Subsidiaries.  Amounts deferred hereunder shall, subject to the provisions of
Section 8 (d) hereof, not be distributed out of the Deferred Accounts(s) prior
to the date which is five years subsequent to the date of election to
defer.  In addition to such limitation,
and any terms and conditions of deferral set forth under plans and programs,
employment agreements or other such arrangements from which receipt of
compensation or awards is deferred, the Committee may impose limitations on the
amounts permitted to be deferred and other terms and conditions of deferral
under this Plan.  Any such limitations,
and other terms and conditions of deferral, shall be set forth in the rules
relating to this Plan, or election forms, other forms, or instructions
published by the Committee and/or the Administrator.

 

(b)           Elections.  Once an election form, properly completed,
is received by the Company, such election of the Participant shall be
irrevocable; provided however, that the Committee and/or Administrator may, in
its discretion, permit a Participant to elect to increase the amount to be
deferred and credited to a Deferral Account by filing a later election form;
provided, that such later election form is received by the Committee prior to
the applicable election deadline pursuant to Section 5(c) hereof.  Furthermore, upon a Participant’s initial
deferral election, such Participant shall also elect the number of installments
(but not to exceed ten (10) annual installment payments) in which the
settlement of his or her Deferral Account

 

4

 

shall be completed.  An election
to change a Participant’s settlement election must be made, in writing, while
the Participant is an active employee or in the active service of the Company
or its Subsidiaries and prior to the commencement of distribution.  However, the change shall not become
effective until the one (1) year anniversary of such election, provided the
Participant remains in the active employ or service, as the case maybe, of the
Company or its Subsidiary for the entire one (1) year period.

 

(c)           Date
of Election.  An election to defer
compensation or awards hereunder must be received by the Administrator prior to
the date specified by the Administrator; provided however, that unless
otherwise approved by the Committee, any elections to defer (i) salary, fees,
cash compensation and annual incentive awards shall be made on or prior to the
December 31st preceding the calendar year in which such income shall
be earned, and (ii) Restricted Stock Awards shall be made on or prior to the
December 31st preceding the calendar year in which the Restricted
Stock Awards vest.  Notwithstanding the
foregoing, elections to defer compensation or awards hereunder may be made for
services to be performed subsequent to the election (i) within 30 days of the
effective date of this Plan and (ii) within 30 days of the date a Participant
first becomes eligible to participate in this Plan, in each case, such
elections to be effective as of the immediately following payroll period of the
Company.  Under no circumstances may a
Participant defer compensation or awards to which the Participant has already
attained, at the time of deferral, a legally enforceable right to receive such
compensation or awards.

 

6.             Deferral Accounts For Non-Stock-Denominated Awards.  The following provisions will apply to
Deferral Accounts other than those established under Section 7:

 

(a)           Establishment;
Crediting of Amounts Deferred.  A
Non-Stock-Denominated Deferral Account will be established for each Participant
for any deferrals made by a Participant hereunder.  The amount of compensation or awards deferred with respect to
each Non-Stock-Denominated Deferral Account will be credited to such account as
of the date on which such amounts would have been paid to the Participant but
for deferral hereunder.  Amounts
credited to a Non-Stock-Denominated Deferral Account shall be deemed to be
invested in such hypothetical investment vehicles as selected by the
Participant from the list authorized by the Committee pursuant to Section 6(b)
hereof.  The amounts of hypothetical
income and appreciation and depreciation in value of such accounts will be
credited and debited to such accounts from time to time.  Unless otherwise determined by the
Committee, amounts credited to a Non-Stock-Denominated Deferral Account shall
be deemed invested in such hypothetical investment vehicles within fifteen (15)
business days following the month-end in which the deferral occurs.

 

(b)           Hypothetical
Investment Vehicles.  The Committee
shall establish one or more hypothetical investment vehicles under this Plan
and may add to or change or discontinue any hypothetical investment vehicle
included in the list of available hypothetical investment vehicles in its
absolute discretion, provided, however, that the list of hypothetical
investment vehicles for the Non-Stock Denominated Deferral Account shall not
include any investment or hypothetical investment in the Company’s common
stock.

 

(c)           Allocation
and Reallocation of Hypothetical Investments.  A Participant may allocate amounts credited to his or her
Non-Stock-Denominated Deferral Account to one or more

 

5

 

of the hypothetical investment vehicles authorized under the Plan.  Subject to the rules established by the
Administrator, a Participant may reallocate amounts credited to his or her
Non-Stock-Denominated Deferral Account (to be effective as of the Valuation Date
immediately following the Participant’s election) to one or more of such
hypothetical investment vehicles, by filing with the Administrator a
notice,  in such form as may be
specified by the Administrator.  The Committee
or Administrator may restrict allocations or reallocations by specified Participants
into or out of specified investment vehicles or specify minimum amounts that
may be allocated or reallocated by Participants; however, any such allocation
or reallocation shall be made in accordance with all applicable provisions of
the Exchange Act and the regulations promulgated thereunder, including but not
limited to, Section 16(b) and the regulations thereunder.

 

(d)           Investment
Return.  In order to simulate an
investment return for the amounts held in each Participant’s
Non-Stock-Denominated Deferral Account, the account balance shall be reduced
for the reasonable transaction costs associated with the Participant’s
investment directions and be adjusted to recognize the hypothetical income,
appreciation and depreciation generated by the hypothetical investments that
the Non-Stock-Denominated Deferral Account is deemed to be invested in.

 

(e)           Trusts.  The Committee may, in its discretion,
establish one or more Trusts and deposit therein amounts of cash, Stock, or
other property not exceeding the amount of the Company’s obligations with
respect to the Participants’ Non-Stock-Denominated Deferral Account established
under Section 6 hereof.

 

7.             Deferral Accounts For Stock-Denominated
Awards.

 

(a)           Establishment.  Subject to any terms and conditions imposed
by the Committee, Participants may elect to defer, under the Plan, amounts
which would otherwise be taxable income of a Participant as a result of the
exercise, earning, vesting, or such similar event with respect to
Stock-Denominated Awards.  In connection
with such deferral of a Stock-Denominated Award, a Stock-Denominated Deferral
Account shall be established for such Participant.  On terms determined by the Committee, the Stock-Denominated
Deferral Account will, as of the date that taxable income from a
Stock-Denominated Award would otherwise be recognized by a Participant,  be credited with a number of share units
corresponding to the number of shares of Stock represented in the amount of
Stock-Denominated Award being deferred hereunder.  With respect to any fractional shares, the Committee or the
Administrator may pay such fractional shares to the Participant in cash or
credit the Participant’s Non-Stock-Denominated Deferral Account with such
amount in lieu of depositing such fractional shares into the Stock-Denominated
Deferral Account.

 

(b)           Investment
Return.  Hypothetical appreciation
and depreciation in value of the Stock-Denominated Deferral Account shall be
equal to the actual appreciation and depreciation of the Stock.  Cash dividends and distributions with
respect to share units in the Stock-Denominated Deferral Account shall be
credited to a Participant’s Stock-Denominated Deferral Account in the form of
additional share units.

 

6

 

(c)           Allocation
of Hypothetical Investment. 
Stock-Denominated Awards deferred pursuant to this Section 7 shall
continuously be deemed invested in Stock share units until settlement of the
Stock-Denominated Deferral Account pursuant to Section 8 hereof and the Participant
shall not be entitled to reallocate Stock-denominated deferrals into any other
hypothetical investments.

 

(d)           Trusts.  The Committee may, in its discretion,
establish one or more Trusts (including sub-accounts under such Trusts), and
deposit therein amounts of cash, Stock, or other property not exceeding the
amount of the Company’s obligations with respect to a Participants’
Stock-Denominated Deferral Account established under Section 7.

 

(e)           Voting
of Plan Shares.  Stock-Denominated
Awards deferred under the Plan shall be voted by the Trustee in its discretion
giving consideration to, among other factors, any instructions which the
Trustee may have received from a Participant.

 

8.             Settlement of Deferral Accounts.

 

(a)           Form
of Payment.  The Company shall
settle a Participant’s Deferral Account, and discharge all of its obligations
to pay deferred compensation under the Plan with respect to such Deferral
Account as follows: (i) by payment of cash or, at the Participant’s election,
in the form of the securities underlying the hypothetical investment vehicle(s)
established under Section 6 for amounts credited to a Non-Stock-Denominated
Deferral Account; and (ii) by delivery of Stock for Stock-Denominated Awards.

 

(b)           Timing
of Payments.  Payments in settlement
of a Deferral Account shall be made as soon as practicable after the earlier of
(x) the date or dates selected for an in-service distribution payment as
indicated pursuant to a Participant’s deferral election and as specified on a
Participant’s election form which is submitted in accordance with Section 5(b)
hereof or (y) Retirement or Disability (including upon the occurrence of other
specified events), and in such number of installments (but not to exceed ten
(10) annual installment payments), as may be directed by the Participant in his
or her election relating to such Deferral Account(s).  As described below, payments in settlement of a Deferral Account
shall be made earlier in the event of termination of employment by the
Participant in the following circumstances:

 

(i)            In
the event of termination of employment or service (including, but not limited
to, death) as a Non-Employee Director for reasons other than Retirement or
Disability, a single lump sum payment in settlement of any Deferral Account (including
a Deferral Account with respect to which one or more installment payments have
previously been made) shall be made as promptly as practicable following the
Valuation Date, unless otherwise determined by the Administrator; or

 

(ii)           In
the event of a Change in Control, payments in settlement of any
Stock-Denominated Deferral Account and Non-Stock Denominated Deferral Account
(including a Deferral Account with respect to which one or more installment
payments have previously been made) shall be made within fifteen (15) business
days following the effective date of such Change in Control.

 

7

 

(c)           Financial Emergency and Other Payments.  Other provisions of the Plan (except Section
9) notwithstanding, if, upon the written application of a Participant, the
Committee determines that the Participant has a financial emergency of such
substantial nature and beyond the individual’s control that payment of amounts
previously deferred under the Plan is warranted, the Committee may direct the
payment to the Participant of all or a portion of the balance of a Deferral
Account and the time and manner of such payment, and the Committee may direct
such payments in other circumstances if, in the exercise of its independent
judgment, it determines that circumstances beyond the individual’s control
warrant such action.

 

9.             Provisions Relating to Section 16 of the
Exchange Act.

 

Compliance with Section 16.  With respect to a Participant who is then
subject to the reporting requirements of Section 16(a) of the Exchange Act:

 

(i)                                     Any
function of the Committee under the Plan relating to such Participant shall be
performed solely by the Committee if and to the extent required to ensure the
availability of an exemption under Rule 16b-3 or exclusion under Rule 16a-1(c)
for such Participant with respect to the Plan.

 

(ii)                                  Participants
may not reallocate amounts credited to any Stock-Denominated Deferral Account
established pursuant to Section 7 hereof.

 

(iii)                               To
the extent necessary so that transactions by and the rights of such a
Participant under the Plan are excluded from reporting under Rule 16a-1(c)
(unless acknowledged by the Participant in writing with respect to a specified
transaction not to be excluded), if any provision of this Plan or any rule,
election form or other form, or instruction does not comply with the
requirements of such rule as then applicable to such transaction or right under
the Plan, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.

 

(iv)                              To
the extent any transaction is not excluded from reporting under Rule 16a-1(c),
the Administrator shall provide such information to the Participant that is
required for the Participant’s compliance with Rule 16a-3(g)(1) within the
applicable time periods.

 

10.          Statements.  The Administrator will furnish
statements to each Participant reflecting the amount credited to a
Participant’s Deferral Account(s) and the transactions therein not less
frequently than once each calendar year.

 

11.          Sources
of Stock:  Limitation on Amount of
Stock-Denominated Deferrals.  If
Stock is deposited under the Plan in a Trust pursuant to Section 7 hereof, in
connection with a deferral of a Stock-Denominated Award under another plan,
program, or other such arrangement

 

8

 

that provides for the issuance of Stock, the Stock so deposited shall
be deemed to have originated from and shall be counted against the number of
shares reserved under such other plan, program or other arrangement.

 

12.          Amendment/Termination.  The Committee may, with prospective or
retroactive effect, amend, alter, suspend, discontinue, or terminate the Plan
at any time without the consent of Participants, stockholders, or any other
person; provided however, that, without the consent of a Participant, no such
action shall materially or adversely affect the rights of such Participant with
respect to any rights to receive payment of amounts credited to such
Participant’s Deferral Account(s). 
Notwithstanding the foregoing, the Committee, may, at any time and in
its sole discretion, terminate the Plan and distribute to Participants the
amounts credited to their Deferral Accounts. 
Upon the effective date of a Change in Control, this Plan shall
terminate.

 

13.          General Provisions.

 

(a)           Limits on Transfer of Awards.  Other than by will or the laws of descent
and distribution, no right, title or interest of any kind in the Plan shall be
transferable or assignable by a Participant or his or her Beneficiary or be
subject to alienation, anticipation, encumbrance, garnishment, attachment,
levy, execution or other legal or equitable process, nor subject to the debts,
contracts, liabilities or engagements, or torts of any Participant or his or
her Beneficiary.  Any attempt to
alienate, sell, transfer, assign, pledge, garnish, attach or take any other
action subject to legal or equitable process or encumber or dispose of any
interest in the Plan shall be void.

 

(b)           Receipt and Release.  Payments (in any form) to any Participant or
Beneficiary in accordance with the provisions of the Plan shall, to the extent
thereof, be in full satisfaction of all claims for the compensation or awards
deferred and relating to the Deferral Account(s) to which the payments relate
against the Company or any Subsidiary thereof, the Committee, or the
Administrator. The Committee or the Administrator may require a Participant or
Beneficiary, as a condition to a payment, to execute a receipt and release to
such effect.

 

(c)           Unfunded Status of Awards; Creation of
Trusts.  The Plan is intended to
constitute an “unfunded” plan for deferred compensation and Participants shall
rely solely on the unsecured promise of the Company for payment hereunder.  With respect to any payment not yet made to
a Participant under the Plan, nothing contained in the Plan shall give a
Participant any rights greater than those of a general unsecured creditor of
the Company; provided however, that nothing herein shall restrict or prohibit
the Committee from authorizing the creation of Trusts, including but not
limited to the Trusts referred to in Sections 6 and 7 hereof, or make other
arrangements to meet the Company’s obligations under the Plan, which Trusts
and/or other arrangements shall be consistent with the “unfunded” status of the
Plan, unless the Committee otherwise determines with the consent of each
affected Participant.

 

(d)           Compliance.  The Company shall impose such restrictions
on Stock delivered to a Participant hereunder and any other interest
constituting a security as it may deem advisable in order to comply with the
Securities Act of 1933, as amended, the requirements of the Exchange Act, the
requirements of the Nasdaq National Market System or any other stock exchange
or

 

9

 

automated quotation system upon which the Stock is then listed or
quoted, any state securities laws applicable to such a transfer, any provisions
of the Company’s Articles of Incorporation or Bylaws, or any other law,
regulation, or binding contract to which the Company is a party.

 

(e)           Other Participant Rights.  No Participant shall have any of the rights
or privileges of a stockholder of the Company (including voting rights) under
the Plan, including as a result of crediting of Stock equivalents or other
amounts to a Deferral Account, or the creation of any Trust and the deposit of
such Stock thereof, except at such time as Stock may be actually delivered in
settlement of a Deferral Account.  No
provision of the Plan or transaction hereunder shall confer upon any
Participant any right to be employed by the Company or a Subsidiary thereof, or
to interfere in any way with the right of the Company or a Subsidiary to
increase or decrease the amount of any compensation payable to such
Participant.  Subject to the limitations
set forth in Section 13(a) hereof, the Plan shall inure to the benefit of, and
be binding upon, the parties hereto and their successors and assigns.

 

(f)            Tax Withholding.  The Company and any Subsidiary shall have
the right to deduct from amounts otherwise payable in settlement of a Deferral
Account any sums that federal, state, local or foreign tax law requires to be
withheld with respect to such payment. 
Stock or other property may be withheld to satisfy such obligations in
any case where taxation would be imposed upon delivery of such Stock and other
property.

 

(g)           Payment
of Legal Fees.  All reasonable legal
fees and costs paid or incurred by a Participant pursuant to any dispute or
question or interpretation relating to this Plan shall be paid or reimbursed by
the Company if the Participant is successful on the merits pursuant to a legal
judgment, arbitration or settlement.

 

(h)           Governing Law.  The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan shall be determined
in accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflicts of laws, and applicable provisions of federal
law.

 

(i)            Limitation.  A Participant and his or her Beneficiary
shall assume all risk in connection with any decrease in value of his or her
Deferral Account(s) and neither the Company, the Committee nor the
Administrator shall be liable or responsible therefor.

 

(j)            Construction.  The captions and numbers preceding the
sections of the Plan are included solely as a matter of convenience of
reference and are not to be taken as limiting or extending the meaning of any
of the terms and provisions of the Plan. 
Whenever appropriate, words used in the singular shall include the
plural or the plural may be read as the singular.

 

(k)           Severability.  In the event that any provision of the Plan
shall be declared illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining provisions of the Plan but shall be
fully severable, and the Plan shall be construed and enforced as if said
illegal or invalid provision had never been inserted herein.

 

10

 

(l)            Status.  The establishment and maintenance of, or allocations and credits
to, the Deferral Account(s) of any Participant shall not vest in any
Participant any right, title or interest in and to any Plan assets or benefits
except at the time or times and upon the terms and conditions and to the extent
expressly set forth in the Plan and in accordance with the terms of the Trust.

 

14.          Effective
Date.  The Plan shall be
effective as of October 1, 2003.

 

11

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