Exhibit 10.1
MARLIN BUSINESS SERVICES CORP.
2003 EQUITY COMPENSATION PLAN
TABLE OF CONTENTS
PAGE
SECTION 1 Administration............................................... 1
SECTION 2 Grants....................................................... 2
SECTION 3 Shares Subject to the Plan................................... 2
SECTION 4 Eligibility for Participation................................ 3
SECTION 5 Options...................................................... 4
SECTION 6 Stock Appreciation Rights.................................... 8
SECTION 7 Stock Awards................................................. 9
SECTION 8 Stock Units.................................................. 10
SECTION 9 Other Equity Awards.......................................... 10
SECTION 10 Dividend Equivalents......................................... 11
SECTION 11 Right of Recapture........................................... 11
SECTION 12 Qualified Performance-Based Compensation..................... 11
SECTION 13 Deferrals.................................................... 12
SECTION 14 Withholding of Taxes......................................... 12
SECTION 15 Transferability of Grants.................................... 13
SECTION 16 Change of Control of the Company............................. 13
SECTION 17 Consequences of a Change of Control.......................... 14
SECTION 18 Limitations On Issuance Or Transfer Of Shares................ 15
SECTION 19 Amendment and Termination of the Plan........................ 15
SECTION 20 Funding of the Plan.......................................... 16
SECTION 21 Rights of Participants....................................... 16
SECTION 22 No Fractional Shares......................................... 16
SECTION 23 Headings..................................................... 16
SECTION 24 Effective Date of the Plan................................... 16
SECTION 25 Miscellaneous................................................ 16
-i-
MARLIN BUSINESS SERVICES CORP.
2003 EQUITY COMPENSATION PLAN
The purpose of the Marlin Business Services Corp. 2003 Equity Compensation
Plan (the "Plan") is to provide (i) designated employees of Marlin Business
Services Corp. (the "Company") and its subsidiaries, (ii) certain consultants
and advisors who perform services for the Company or its subsidiaries and (iii)
non-employee members of the Board of Directors of the Company (the "Board") with
the opportunity to receive grants of incentive stock options, nonqualified stock
options, stock appreciation rights, stock awards, stock units and other
equity-based awards. The Company believes that the Plan will encourage the
participants to contribute materially to the growth of the Company, thereby
benefitting the Company's shareholders, and will align the economic interests of
the participants with those of the shareholders.
It is contemplated that on or prior to the completion of the initial
public offering of the Company's common stock, Marlin Leasing Corporation
("Marlin Leasing") will be reorganized and become a wholly-owned subsidiary of
the Company. The effective date of the reorganization is referred to as the
"Reorganization Date." It is contemplated that in connection with the
reorganization of Marlin Leasing, the Company will assume the Marlin Leasing
Corporation 1997 Equity Compensation Plan (the "Marlin Leasing 1997 Plan") and
merge the Marlin Leasing 1997 Plan into this Plan, so that no additional grants
will be made under the Marlin Leasing 1997 Plan. Outstanding grants under the
Marlin Leasing 1997 Plan will continue in effect according to their terms as in
effect on the Reorganization Date (subject to such amendments as the Committee
(as defined below) determines, consistent with the Marlin Leasing 1997 Plan),
and the shares with respect to outstanding grants under the Marlin Leasing 1997
Plan will be issued or transferred under this Plan.
SECTION 1 Administration
(a) Committee. The Plan shall be administered and interpreted by a
committee consisting of members of the Board, which shall be appointed by the
Board (the "Committee"). The Committee may consist of two or more persons who
are "outside directors" as defined under section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), and related Treasury regulations, and
"non-employee directors" as defined under Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). However, the Board shall
ratify or approve any grants as it deems appropriate, and the Board shall
approve and administer all grants made to non-employee directors. The Committee
may delegate authority to one or more subcommittees, as it deems appropriate. To
the extent a Board or subcommittee administers the Plan, references in the Plan
to the "Committee" shall be deemed to refer to such Board or subcommittee.
(b) Committee Authority. The Committee shall have the sole authority to
(i) determine the individuals to whom grants 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 exercisability and the acceleration of exercisability, (iv) amend
the terms of any previously issued grant, and (v) deal with any other matters
arising under the Plan. However, no previously granted option may be repriced,
replaced or regranted through cancellation or by
lowering the option exercise price, unless the shareholders of the Company
provide prior approval.
(c) Committee Determinations. 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, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.
SECTION 2 Grants
Awards under the Plan may consist of grants of incentive stock options as
described in Section 5 ("Incentive Stock Options"), nonqualified stock options
as described in Section 5 ("Nonqualified Stock Options") (Incentive Stock
Options and Nonqualified Stock Options are collectively referred to as
"Options"), stock appreciation rights as described in Section 6 ("SARs"), stock
awards as described in Section 7 ("Stock Awards"), stock units as described in
Section 8 ("Stock Units"), and other equity-based awards as described in Section
9 ("Other Equity Awards") (hereinafter collectively referred to as "Grants").
All Grants shall be subject to the terms and conditions set forth herein and to
such other terms and conditions consistent with this Plan as the Committee deems
appropriate and as are specified in writing by the Committee to the individual
in a grant instrument or an amendment to the grant instrument (the "Grant
Instrument"). All Grants shall be made conditional upon the Grantee's
acknowledgement, in writing or by acceptance of the Grant, that all decisions
and determinations of the Committee shall be final and binding on the Grantee,
his or her beneficiaries and any other person having or claiming an interest
under such Grant. Grants under a particular Section of the Plan need not be
uniform as among the grantees.
SECTION 3 Shares Subject to the Plan
(a) Shares Authorized. Subject to adjustment as described below, the
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan is 2,100,000 shares; provided,
however, that not more than 1,050,000 shares of Company Stock shall be available
for issuance as Stock Awards (excluding restricted shares received as a result
of an early exercise of an Option pursuant to Section 5(d)(ii)), Stock Units and
Other Equity Awards. The maximum number of authorized shares includes shares
that will cover outstanding grants under the Marlin Leasing 1997 Plan, which is
expected to be assumed on the Reorganization Date as described above. The
maximum aggregate number of shares of Company Stock that shall be subject to
Grants made under the Plan to any individual during any calendar year shall be
100,000 shares, subject to adjustment as described below.
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(b) Determination of Authorized Shares. 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 Options or SARs granted under the Plan (including
options outstanding on the Reorganization Date under the Marlin Leasing 1997
Plan) terminate, expire, or are canceled, forfeited, exchanged or surrendered
without having been exercised or if any Stock Awards, Stock Units, or Other
Equity Awards are forfeited, the shares subject to such Grants shall again be
available for purposes of the Plan. Shares of Company Stock surrendered in
payment of the exercise price of an Option shall again be available for issuance
or transfer under the Plan. To the extent any Grants are paid in cash, and not
in shares of Company Stock, any shares previously subject to such Grants shall
again be available for issuance or transfer under the Plan.
(c) Adjustments. If there is any change in the number or kind of shares of
Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation, (iii) by reason of a
reclassification or change in par value, or (iv) by reason of any other
extraordinary or unusual event 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 as a result of a
spinoff or the Company's payment of an extraordinary dividend or distribution,
the maximum number of shares of Company Stock available for Grants, the maximum
number of shares of Company Stock that any individual participating in the Plan
may be granted in any year, the number and kind of shares covered by outstanding
Grants, the kind of shares to be issued or transferred under the Plan, and the
price per share or the applicable market value of such Grants shall, unless the
Committee determines otherwise, be appropriately adjusted by the Committee to
reflect any increase or decrease in the number of, or change in the kind or
value of, issued shares of Company Stock to preclude, to the extent practicable,
the enlargement or dilution of rights and benefits under such Grants; provided,
however, that any fractional shares resulting from such adjustment shall be
eliminated. Any adjustments determined by the Committee shall be final, binding
and conclusive.
SECTION 4 Eligibility for Participation
(a) Eligible Persons. All employees of the Company and its subsidiaries
("Employees"), including Employees who are officers or members of the Board, and
members of the Board who are not Employees ("Non-Employee Directors") shall be
eligible to participate in the Plan. Consultants and advisors who perform
services for the Company or any of its subsidiaries ("Key Advisors") shall be
eligible to participate in the Plan if the Key Advisors render bona fide
services to the Company or its subsidiaries, the services are not in connection
with the offer and sale of securities in a capital-raising transaction and the
Key Advisors do not directly or indirectly promote or maintain a market for the
Company's securities.
(b) Selection of Grantees. The Committee shall select the Employees,
Non-Employee Directors and Key Advisors to receive Grants and shall determine
the number of shares of Company Stock subject to a particular Grant in such
manner as the Committee determines. Employees, Key Advisors and Non-Employee
Directors who receive Grants under this Plan shall hereinafter be referred to as
"Grantees".
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SECTION 5 Options
The Committee may grant Options to an Employee, Non-Employee Director or
Key Advisor, upon such terms as the Committee deems appropriate. The following
provisions are applicable to Options:
(a) Number of Shares. The Committee shall determine the number of shares
of Company Stock that will be subject to each Grant of Options to Employees,
Non-Employee Directors and Key Advisors.
(b) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of section
422 of the Code or Nonqualified Stock Options that are not intended so to
qualify or any combination of Incentive Stock Options and Nonqualified Stock
Options, all in accordance with the terms and conditions set forth herein.
Incentive Stock Options may be granted only to employees of the Company or its
subsidiaries, as defined in Section 424 of the Code. Nonqualified Stock Options
may be granted to Employees, Non-Employee Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Company Stock
subject to an Option shall be determined by the Committee and may be equal to or
greater than the Fair Market Value (as defined below) of a share of Company
Stock on the date the Option is granted; provided, however, that an Incentive
Stock Option may not be granted to an 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 subsidiary of the Company, unless the
Exercise Price per share is not less than 110% of the Fair Market Value of
Company Stock on the date of grant.
(iii) If the Company Stock is publicly traded, then the Fair Market
Value per share shall be determined as follows: (x) if the principal trading
market for the Company Stock is a national securities exchange or the Nasdaq
National 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 (y) if the Company Stock is not principally traded on such
exchange or market, the mean between the last reported "bid" and "asked" prices
of Company Stock on the relevant date, as reported on Nasdaq or, if not so
reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Committee determines. If the Company Stock is not publicly traded or, if
publicly traded, is not subject to reported transactions or "bid" or "asked"
quotations as set forth above, the Fair Market Value per share shall be as
determined by the Committee.
(c) Option Term. The Committee shall determine the term of each Option.
The term of any Option shall not exceed ten years from the date of grant.
However, an Incentive Stock Option that is granted to an 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 subsidiary of the
Company, may not have a term that exceeds five years from the date of grant.
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(d) Exercisability of Options.
(i) Options shall become exercisable in accordance with such terms
and conditions, consistent with the Plan, as may be determined by the Committee
and specified in the Grant Instrument or in the Grantee's employment agreement,
if any, with the Employer. The Committee may accelerate the exercisability of
any or all outstanding Options at any time for any reason.
(ii) The Committee may provide in a Grant Instrument that the
Grantee may elect to exercise part or all of an Option before it otherwise has
become exercisable. Any shares so purchased shall be restricted shares and shall
be subject to a repurchase right in favor of the Company during a specified
restriction period, with the repurchase price equal to the lesser of (A) the
Exercise Price or (B) the Fair Market Value of such shares at the time of
repurchase, or such other restrictions as the Committee deems appropriate.
(e) Grants to Non-Exempt Employees. Notwithstanding the foregoing, Options
granted to persons who are non-exempt employees under the Fair Labor Standards
Act of 1938, as amended, shall have an Exercise Price not less than 85% of the
Fair Market Value of the Company Stock on the date of grant, and may not be
exercisable for at least six months after the date of grant (except that such
Options may become exercisable, as determined by the Committee, upon the
Grantee's death, Disability or retirement, or upon a Change of Control or other
circumstances permitted by applicable regulations).
(f) Termination of Employment, Disability or Death.
(i) Except as provided below or in the Grantee's employment
agreement, if any, with the Employer, an Option may only be exercised while the
Grantee is employed by, or providing service to, the Employer (as defined below)
as an Employee, Key Advisor or member of the Board.
(ii) In the event that a Grantee ceases to be employed by, or
provide service to, the Employer for any reason other than Disability, death, or
termination for Cause (as defined below), any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within 90 days after
the date on which the Grantee ceases to be employed by, or provide service to,
the Employer (or within such other period of time as may be specified by the
Committee or in the Grantee's employment agreement, if any, with the Employer),
but in any event no later than the date of expiration of the Option term. Except
as otherwise provided by the Committee, any of the Grantee's Options that are
not otherwise exercisable as of the date on which the Grantee ceases to be
employed by, or provide service to, the Employer shall terminate as of such
date.
(iii) In the event the Grantee ceases to be employed by, or provide
service to, the Employer on account of a termination for Cause by the Employer,
any Option held by the Grantee shall terminate as of the date the Grantee ceases
to be employed by, or provide service to, the Employer. In addition,
notwithstanding any other provisions of this Section 5, if the Committee
determines that the Grantee has engaged in conduct that constitutes Cause at any
time while the Grantee is employed by, or providing service to, the Employer or
after the Grantee's
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termination of employment or service, any Option held by the Grantee shall
immediately terminate and the Grantee shall automatically forfeit all shares
underlying any exercised portion of an Option for which the Company has not yet
delivered the share certificates, upon refund by the Company of the Exercise
Price paid by the Grantee for such shares. Upon any exercise of an Option, the
Company may withhold delivery of share certificates pending resolution of an
inquiry that could lead to a finding resulting in a forfeiture.
(iv) In the event the Grantee ceases to be employed by, or provide
service to, the Employer because the Grantee is Disabled, any Option which is
otherwise exercisable by the Grantee shall terminate unless exercised within one
year after the date on which the Grantee ceases to be employed by, or provide
service to, the Employer (or within such other period of time as may be
specified by the Committee or in the Grantee's employment agreement, if any),
but in any event no later than the date of expiration of the Option term. Except
as otherwise provided by the Committee, any of the Grantee's Options which are
not otherwise exercisable as of the date on which the Grantee ceases to be
employed by, or provide service to, the Employer shall terminate as of such
date.
(v) If the Grantee dies while employed by, or providing service to,
the Employer or within 90 days after the date on which the Grantee ceases to be
employed or provide service on account of a termination specified in Section
5(f)(ii) above (or within such other period of time as may be specified by the
Committee or in the Grantee's employment agreement, if any, with the Employer),
any Option that is otherwise exercisable by the Grantee shall terminate unless
exercised within one year after the date on which the Grantee ceases to be
employed by, or provide service to, the Employer (or within such other period of
time as may be specified by the Committee or in the Grantee's employment
agreement, if any), but in any event no later than the date of expiration of the
Option term. Except as otherwise provided by the Committee, any of the Grantee's
Options that are not otherwise exercisable as of the date on which the Grantee
ceases to be employed by, or provide service to, the Employer shall terminate as
of such date.
(vi) For purposes of the Plan:
(A) The term "Employer" shall mean the Company and its
subsidiary corporations or other affiliates, as determined by the
Committee.
(B) "Employed by, or provide service to, the Employer" shall
mean employment or service as an Employee, Key Advisor or member of the
Board (so that, for purposes of exercising Options and SARs and satisfying
conditions with respect to Stock Awards, Stock Units, Dividend Equivalents
and Other Equity Awards, a Grantee shall not be considered to have
terminated employment or service until the Grantee ceases to be an
Employee, Key Advisor and member of the Board), unless the Committee
determines otherwise.
(C) "Disability" shall mean, except as otherwise defined in
the Grantee's employment agreement, if any, with the Employer, a Grantee's
becoming disabled within the meaning of section 22(e)(3) of the Code,
within the meaning of the
6
Employer's long-term disability plan applicable to the Grantee, or as
otherwise determined by the Committee.
(D) "Cause" shall mean, except to the extent specified
otherwise by the Committee or defined in the Grantee's employment
agreement, if any, with the Employer, a finding by the Committee that the
Grantee (i) has materially breached his or her employment or service
contract with the Employer and which breach has been materially and
demonstrably detrimental to the Employer and has not been remedied by the
Grantee after notice has been provided to the Grantee of such breach, (ii)
has engaged in disloyalty to the Company, including, without limitation,
fraud, embezzlement, theft, commission of a felony or proven dishonesty,
(iii) has disclosed trade secrets or confidential information of the
Employer to persons not entitled to receive such information, (iv) has
breached any written non-competition or non-solicitation agreement between
the Grantee and the Employer or (v) has engaged in such other behavior
detrimental to the interests of the Employer as the Committee determines.
(g) Exercise of Options. A Grantee may exercise an Option that has become
exercisable, in whole or in part, by delivering a notice of exercise to the
Company. The Grantee shall pay the Exercise Price for an Option as specified by
the Committee (w) in cash, (x) with the approval of the Committee, by delivering
shares of Company Stock owned by the Grantee (including Company Stock acquired
in connection with the exercise of an Option, subject to such restrictions as
the Committee deems appropriate) and having a Fair Market Value on the date of
exercise equal to the Exercise Price or by attestation (on a form prescribed by
the Committee) to ownership of shares of Company Stock having a Fair Market
Value on the date of exercise equal to the Exercise Price, (y) payment through a
broker in accordance with procedures permitted by Regulation T of the Federal
Reserve Board, or (z) by such other method as the Committee may approve. Shares
of Company Stock used to exercise an Option shall have been held by the Grantee
for the requisite period of time to avoid adverse accounting consequences to the
Company with respect to the Option. The Grantee shall pay the Exercise Price and
the amount of any withholding tax due (pursuant to Section 15) at such time as
may be specified by the Committee.
(h) Reload Options. In the event that shares of Company Stock are used to
exercise an Option, the terms of such Option may provide for a Grant of
additional Options, or the Committee may grant additional Options, to purchase a
number of shares of Company Stock equal to the number of whole shares used to
exercise the Option and the number of whole shares, if any, withheld in payment
of any taxes. Such Options shall be granted with an Exercise Price equal to the
Fair Market Value of the Company Stock on the date of grant of such additional
Options, or at such other Exercise Price as the Committee may establish, for a
term not longer than the unexpired term of the exercised Option and on such
other terms as the Committee shall determine.
(i) Limits on Incentive Stock Options. Each Incentive Stock Option shall
provide that, if the aggregate Fair Market Value of the 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 or a subsidiary, exceeds $100,000, then the
Option, as to the excess, shall be treated as a Nonqualified Stock Option. An
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Incentive Stock Option shall not be granted to any person who is not an Employee
of the Company or a subsidiary (within the meaning of section 424(f) of the
Code) of the Company.
SECTION 6 Stock Appreciation Rights
The Committee may grant stock appreciation rights ("SARs") to an Employee,
Non-Employee Director or Key Advisor separately or in tandem with any Option.
The following provisions are applicable to SARs:
(a) Base Amount. The Committee shall establish the base amount of the SAR
at the time the SAR is granted. Unless the Committee determines otherwise, the
base amount of each SAR shall be equal to the per share Exercise Price of the
related Option or, if there is no related Option, the Fair Market Value of a
share of Company Stock as of the date of Grant of the SAR.
(b) Tandem SARs. The Committee may grant tandem SARs either at the time
the Option is granted or at any time thereafter while the Option remains
outstanding; provided, however, that, in the case of an Incentive Stock Option,
SARs may be granted only at the date of the grant of the Incentive Stock Option.
In the case of tandem SARs, the number of SARs granted to a Grantee that shall
be exercisable during a specified period shall not exceed the number of shares
of Company Stock that the Grantee may purchase upon the exercise of the related
Option during such period. Upon the exercise of an Option, the SARs relating to
the Company Stock covered by such Option shall terminate. Upon the exercise of
SARs, the related Option shall terminate to the extent of an equal number of
shares of Company Stock.
(c) Exercisability. An SAR shall be exercisable during the period
specified by the Committee in the Grant Instrument and shall be subject to such
vesting and other restrictions as may be specified in the Grant Instrument or in
the Grantee's employment agreement, if any, with the Employer. The Committee may
accelerate the exercisability of any or all outstanding SARs at any time for any
reason. SARs may only be exercised while the Grantee is employed by, or
providing service to, the Employer or during the applicable period after
termination of employment or service as described in Section 5(f). A tandem SAR
shall be exercisable only during the period when the Option to which it is
related is also exercisable.
(d) Grants to Non-Exempt Employees. Notwithstanding the foregoing, SARs
granted to persons who are non-exempt employees under the Fair Labor Standards
Act of 1938, as amended, shall have a base amount not less than 85% of the Fair
Market Value of the Company Stock on the date of grant, and may not be
exercisable for at least six months after the date of grant (except that such
SARs may become exercisable, as determined by the Committee, upon the Grantee's
death, Disability or retirement, or upon a Change of Control or other
circumstances permitted by applicable regulations).
(e) Value of SARs. When a Grantee exercises 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 amount by which
the Fair Market Value of the underlying Company Stock on the date of exercise of
the SAR exceeds the base amount of the SAR as described in subsection (a).
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(f) Form of Payment. The Committee shall determine whether the
appreciation in an SAR shall be paid in the form of cash, shares of Company
Stock, or a combination of the two, in such proportion as the Committee deems
appropriate. For purposes of calculating the number of shares of Company Stock
to be received, shares of Company Stock shall be valued at their Fair Market
Value on the date of exercise of the SAR. If shares of Company Stock are to be
received upon exercise of an SAR, cash shall be delivered in lieu of any
fractional share.
SECTION 7 Stock Awards
The Committee may issue or transfer shares of Company Stock to an
Employee, Non-Employee Director or Key Advisor under a Stock Award, upon such
terms as the Committee deems appropriate. The following provisions are
applicable to Stock Awards:
(a) General Requirements. Shares of Company Stock issued or transferred
pursuant to Stock Awards may be issued or transferred for cash consideration or
for no cash consideration, and subject to restrictions or no restrictions, as
determined by the Committee. The Committee may, but shall not be required to,
establish conditions under which restrictions on Stock Awards shall lapse over a
period of time or according to such other criteria as the Committee deems
appropriate, including, without limitation, restrictions based upon the
achievement of specific performance goals. The period of time during which the
Stock Awards will remain subject to restrictions will be designated in the Grant
Instrument as the "Restriction Period."
(b) Number of Shares. The Committee shall determine the number of shares
of Company Stock to be issued or transferred pursuant to a Stock Award and the
restrictions applicable to such shares.
(c) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Employer during a period designated in
the Grant Instrument as the Restriction Period, or if other specified conditions
are not met, the Stock Award shall terminate as to all shares covered by the
Grant as to which the restrictions have not lapsed, and those shares of Company
Stock must be immediately returned to the Company, unless the Grantee's
employment agreement, if any, with the Employer provides otherwise. The
Committee may, however, provide for complete or partial exceptions to this
requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Stock Certificate. During the
Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of a Stock Award except to a successor under
Section 15(a). Each certificate for a share of a Stock Award shall contain a
legend giving appropriate notice of the restrictions in the Grant. The Grantee
shall be entitled to have the legend removed from the stock certificate covering
the shares subject to restrictions when all restrictions on such shares have
lapsed. The Committee may determine that the Company will not issue certificates
for Stock Awards until all restrictions on such shares have lapsed, or that the
Company will retain possession of certificates for shares of Stock Awards until
all restrictions on such shares have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
determines otherwise, during the Restriction Period, the Grantee shall have the
right to vote shares of Stock Awards and to receive any dividends or other
distributions paid on such shares, subject to any
9
restrictions deemed appropriate by the Committee, including, without limitation,
the achievement of specific performance goals.
(f) Lapse of Restrictions. All restrictions imposed on Stock Awards shall
lapse upon the expiration of the applicable Restriction Period and the
satisfaction of all conditions imposed by the Committee. The Committee may
determine, as to any or all Stock Awards, that the restrictions shall lapse
without regard to any Restriction Period.
SECTION 8 Stock Units
The Committee may grant phantom units representing one or more shares of
Company Stock to an Employee, Non-Employee Director or Key Advisor, upon such
terms and conditions as the Committee deems appropriate. The following
provisions are applicable to Stock Units:
(a) Crediting of Units. Each Stock Unit shall represent the right of the
Grantee to receive an amount based on the value of a share of Company Stock, if
specified conditions are met. All Stock Units shall be credited to bookkeeping
accounts established on the Company's records for purposes of the Plan.
(b) Terms of Stock Units. The Committee may grant Stock Units that are
payable if specified performance goals or other conditions are met, or under
other circumstances. Stock Units may be paid at the end of a specified
performance period or other period, or payment may be deferred to a date
authorized by the Committee. The Committee shall determine the number of Stock
Units to be granted and the requirements applicable to such Stock Units.
(c) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Employer during a specified period, or
if other conditions established by the Committee are not met, the Grantee's
Stock Units shall be forfeited, unless the Grantee's employment agreement, if
any, with the Employer provides otherwise. The Committee may, however, provide
for complete or partial exceptions to this requirement as it deems appropriate.
(d) Payment With Respect to Stock Units. Payments with respect to Stock
Units shall be made in cash, in Company Stock, or in a combination of the two,
as determined by the Committee.
SECTION 9 Other Equity Awards
The Committee may grant Other Equity Awards, which are awards (other than
those described in Sections 5, 6, 7, 8 and 10 of the Plan) that are based on,
measured by or payable in Company Stock to any Employee, Non-Employee Director
or Key Advisor, on such terms and conditions as the Committee shall determine.
Other Equity Awards may be awarded subject to the achievement of performance
goals or other conditions and may be payable in cash, Company Stock or any
combination of the foregoing, as the Committee shall determine.
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SECTION 10 Dividend Equivalents
The Committee may include in a Grant Instrument with respect to any Grant
a dividend equivalent right ("Dividend Equivalents") entitling the Grantee to
receive amounts equal to the ordinary dividends that would be paid, during the
time the Grant is outstanding and unexercised, on the shares of Company Stock
covered by the Grant as if such shares were then outstanding. The Committee
shall determine whether Dividend Equivalents shall be paid currently or credited
to a bookkeeping account as a dollar amount or in the form of Stock Units. The
Committee shall determine whether Dividend Equivalents shall be paid in cash, in
shares of Company Stock or in a combination, whether they shall be conditioned
upon the exercise, vesting or payment of the Grant to which they relate, and
such other terms and conditions as the Committee deems appropriate.
SECTION 11 Right of Recapture
The Committee may provide in a Grant Instrument that if at any time within
the one year period after the date on which a Grantee exercises an Option or
SAR, or on which a Stock Award, Stock Unit or Other Equity Award vests or is
paid (each of which events is referred to as a "Realization Event"), the Grantee
(a) is terminated for Cause or (b) engages in any activity that constitutes
Cause, the Grantee shall be required to pay to the Company any gain realized by
the Grantee from the Realization Event, upon notice from the Company. Such gain
shall be determined as of the date of the Realization Event, without regard to
any subsequent change in the Fair Market Value of Company Stock. The Company
shall have the right to offset such gain against any amounts otherwise owed to
the Grantee by the Company (whether as wages, vacation pay, or pursuant to any
benefit plan or other compensatory arrangement), to the extent permitted by
applicable law.
SECTION 12 Qualified Performance-Based Compensation
(a) Designation as Qualified Performance-Based Compensation. The Committee
may determine that Stock Awards, Stock Units, Dividend Equivalents or Other
Equity Awards granted to an Employee shall be considered "qualified
performance-based compensation" under section 162(m) of the Code. The provisions
of this Section 12 shall apply to Grants of Stock Awards, Stock Units, Dividend
Equivalents and Other Equity Awards that are to be considered "qualified
performance-based compensation" under section 162(m) of the Code.
(b) Performance Goals. When Stock Awards, Stock Units, Dividend
Equivalents or Other Equity Awards that are to be considered "qualified
performance-based compensation" are granted, the Committee shall establish in
writing (i) the objective performance goals that must be met, (ii) the
performance period during which the performance goals must be met, (iii) the
threshold, target and maximum amounts that may be paid if the performance goals
are met, and (iv) any other conditions that the Committee deems appropriate and
consistent with the Plan and Section 162(m) of the Code, including the
employment requirements and payment terms. The performance goals may relate to
the Employee's business unit or the performance of the Company and its
subsidiaries as a whole, or any combination of the foregoing. The Committee
shall use objectively determinable performance goals based on one or more of the
following criteria: total stockholder return; total stockholder return as
compared to total stockholder return
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of comparable companies or a publicly available index; net income; pretax
earnings; earnings before interest expense and taxes (EBIT); earnings before
interest expense, taxes, depreciation and amortization (EBITDA); earnings per
share; return on equity; return on assets; revenues; asset growth; operating
ratios; access to and availability of funding; or asset quality.
(c) Establishment of Goals. The Committee shall establish the performance
goals in writing either before the beginning of the performance period or during
a period ending no later than the earlier of (i) 90 days after the beginning of
the performance period or (ii) the date on which 25% of the performance period
has been completed, or such other date as may be required or permitted under
applicable regulations under section 162(m) of the Code. The performance goals
shall satisfy the requirements for "qualified performance-based compensation,"
including the requirement that the achievement of the goals be substantially
uncertain at the time they are established and that the goals be established in
such a way that a third party with knowledge of the relevant facts could
determine whether and to what extent the performance goals have been met. The
Committee shall not have discretion to increase the amount of compensation that
is payable upon achievement of the designated performance goals.
(d) Maximum Payment. The maximum number of shares of Company Stock that
may be subject to Grants made to an individual during a calendar year shall not
exceed the individual limit set forth in Section 3(a) of the Plan. If Dividend
Equivalents are granted as "qualified performance based compensation," the
maximum amount of Dividend Equivalents that may be credited to the Employee's
account in a calendar year is $250,000.
(e) Announcement of Grants. The Committee shall certify and announce the
results for each performance period to all Grantees immediately following the
announcement of the Company's financial results for the performance period. If
and to the extent that the Committee does not certify that the performance goals
have been met, the grants of Stock Awards, Stock Units, Dividend Equivalents or
Other Equity Awards for the performance period shall be forfeited or shall not
be made, as applicable. Any Grants that are to be paid as a result of
achievement of performance goals shall be paid as specified in the Grant
Instrument.
(f) Death, Disability or Other Circumstances. The Committee may provide
that Stock Awards, Stock Units, Dividend Equivalents or Other Equity Awards
shall be payable or restrictions on Stock Awards shall lapse, in whole or in
part, in the event of the Grantee's death or Disability during the Performance
Period, or under other circumstances consistent with the Treasury regulations
and rulings under section 162(m) of the Code.
SECTION 13 Deferrals
The Committee may permit or require a Grantee to defer receipt of the
payment of cash or the delivery of shares that would otherwise be due to such
Grantee in connection with any Grant. If any such deferral election is permitted
or required, the Committee shall establish rules and procedures for such
deferrals.
SECTION 14 Withholding of Taxes
(a) Required Withholding. All Grants under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements. The Employer may
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require that the Grantee or other person receiving or exercising Grants pay to
the Employer the amount of any federal, state or local taxes that the Employer
is required to withhold with respect to such Grants, or the Employer may deduct
from other wages paid by the Employer the amount of any withholding taxes due
with respect to such Grants.
(b) Election to Withhold Shares. If the Committee so permits, a Grantee
may elect to satisfy the Employer's tax withholding obligation with respect to
Grants paid in Company Stock by having shares withheld up to an amount that does
not exceed the minimum applicable withholding tax rate for federal (including
FICA), state and local tax liabilities. The election must be in a form and
manner prescribed by the Committee and may be subject to the prior approval of
the Committee.
SECTION 15 Transferability of Grants
(a) Nontransferability of Grants. Except as provided below, only the
Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except (i) by will or by the laws of
descent and distribution or (ii) with respect to Grants other than Incentive
Stock Options, if permitted in any specific case by the Committee, pursuant to a
domestic relations order or otherwise as permitted by the Committee. When a
Grantee dies, the personal representative or other person entitled to succeed to
the rights of the Grantee may exercise such rights. Any such successor 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.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the foregoing,
the Committee may provide, in a Grant Instrument, that a Grantee may transfer
Nonqualified Stock Options to family members, or one or more trusts or other
entities for the benefit of or owned by family members, consistent with the
applicable securities laws, according to such terms as the Committee may
determine; provided that the Grantee receives no consideration for the transfer
of an Option and the transferred Option shall continue to be subject to the same
terms and conditions as were applicable to the Option immediately before the
transfer.
SECTION 16 Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred if:
(a) Any "person" (as such term is used in sections 13(d) and 14(d) of the
Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
more than 40% of the voting power of the then outstanding securities of the
Company; provided that a Change of Control shall not be deemed to occur as a
result of the initial public offering of the Company Stock and a Change of
Control shall not be deemed to occur as a result of a transaction in which the
Company becomes a subsidiary of another corporation and in which the
shareholders of the Company, immediately prior to the transaction, will
beneficially own, immediately after the transaction, shares entitling such
shareholders to more than 40% of all votes to which all shareholders of the
parent corporation would be entitled in the election of directors (without
consideration of the rights of any class of stock to elect directors by a
separate class vote);
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(b) The consummation of (i) a merger or consolidation of the Company with
another corporation where the shareholders of the Company, immediately prior to
the merger or consolidation, will not beneficially own, immediately after the
merger or consolidation, shares entitling such shareholders to more than 40% of
all votes to which all shareholders of the surviving corporation would be
entitled in the election of directors (without consideration of the rights of
any class of stock to elect directors by a separate class vote), (ii) a sale or
other disposition of all or substantially all of the assets of the Company, or
(iii) a liquidation or dissolution of the Company; or
(c) After the date on which this Plan is approved by the shareholders of
the Company, directors are elected such that a majority of the members of the
Board shall have been members of the Board for less than two years, unless the
election or nomination for election of each new director who was not a director
at the beginning of such two-year period was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period.
SECTION 17 Consequences of a Change of Control
(a) Notice and Acceleration. Upon a Change of Control (i) the Company
shall provide each Grantee with outstanding Grants written notice of such Change
of Control, (ii) all outstanding Options and SARs shall automatically accelerate
and become fully exercisable, (iii) the restrictions and conditions on all
outstanding Stock Awards shall immediately lapse, and (iv) all Grantees holding
Stock Units, Dividend Equivalents and Other Equity Awards shall receive a
payment in settlement of such Stock Units, Dividend Equivalents and Other Equity
Awards in an amount determined by the Committee.
(b) Assumption of Grants. Upon a Change of Control where the Company is
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
and SARs that are not exercised shall be assumed by, or replaced with comparable
options or rights by, the surviving corporation (or a parent or subsidiary of
the surviving corporation), and other outstanding Grants shall be converted to
similar grants of the surviving corporation (or a parent or subsidiary of the
surviving corporation).
(c) Other Alternatives. Notwithstanding the foregoing, in the event of a
Change of Control, unless the Grantee's employment agreement, if any, with the
Employer provides otherwise, the Committee may take one or both of the following
actions with respect to any or all outstanding Options and SARs: the Committee
may (i) require that Grantees surrender their outstanding Options and SARs in
exchange for a payment by the Company, in cash or Company Stock as determined by
the Committee, in an amount equal to the amount by which the then Fair Market
Value of the shares of Company Stock subject to the Grantee's unexercised
Options and SARs exceeds the Exercise Price of the Options or the base amount of
the SARs, as applicable, or (ii) after giving Grantees an opportunity to
exercise their outstanding Options and SARs, terminate any or all unexercised
Options and SARs at such time as the Committee deems appropriate. Such surrender
or termination shall take place as of the date of the Change of Control or such
other date as the Committee may specify.
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SECTION 18 Limitations On Issuance Or Transfer Of Shares
No Company Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. 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, and
certificates representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Company Stock issued or
transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
SECTION 19 Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that the Board shall not amend the Plan without shareholder
approval if such approval is required in order to comply with the Code or
applicable laws or to comply with applicable stock exchange requirements.
(b) Shareholder Approval for "Qualified Performance-Based Compensation".
If Stock Awards, Stock Units, Dividend Equivalents or Other Equity Awards are
granted as "qualified performance-based compensation" under Section 12 above,
the Plan must be reapproved by the shareholders no later than the first
shareholders meeting that occurs in the fifth year following the year in which
the shareholders previously approved the provisions of Section 12, if required
by section 162(m) of the Code or the regulations thereunder.
(c) Termination of Plan. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its effective date, unless the Plan is
terminated earlier by the Board or is extended by the Board with the approval of
the shareholders.
(d) Termination and Amendment of Outstanding Grants. A termination 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 25(b). 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 25(b) or may be amended by agreement of the Company and
the Grantee consistent with the Plan. However, no previously granted Option may
be repriced, replaced or regranted through cancellation or by lowering the
Exercise Price, unless the shareholders of the Company provide prior approval.
(e) Governing Document. 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.
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SECTION 20 Funding of the 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 this Plan.
SECTION 21 Rights of Participants
Nothing in this Plan shall entitle any Employee, Key Advisor, Non-Employee
Director or other person to any claim or right to be granted a Grant under this
Plan. Neither this 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
Employer or any other employment rights.
SECTION 22 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.
SECTION 23 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.
SECTION 24 Effective Date of the Plan
The Plan shall be effective on October 12, 2003.
SECTION 25 Miscellaneous
(a) Grants in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee 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, or for other proper corporate purposes, or (ii) limit the
right of the Company to grant stock options or make other awards outside of this
Plan. Without limiting the foregoing, 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, the parent or any of their subsidiaries in
substitution for a stock option or stock awards grant made by such corporation.
The terms and conditions of the substitute grants 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.
(b) Compliance with Law. The Plan, the exercise of Options and SARs and
the obligations of the Company to issue or transfer shares of Company Stock
under Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may
16
be required. After a public offering of the Company's Stock, 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. In
addition, it is the intent of the Company that the Plan and applicable Grants
under the Plan comply with the applicable provisions of section 162(m) (after a
public offering of the Company's Stock) and section 422 of the Code. To the
extent that any legal requirement of section 16 of the Exchange Act or section
162(m) or 422 of the Code as set forth in the Plan ceases to be required under
section 16 of the Exchange Act or section 162(m) or 422 of the Code, that Plan
provision shall cease to apply. The Committee 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. The Committee may agree to limit its authority
under this Section.
(c) Employees Subject to Taxation Outside the United States. With respect
to Grantees who are subject to taxation in countries other than the United
States, the Committee may make Grants on such terms and conditions as the
Committee deems appropriate to comply with the laws of the applicable countries,
and the Committee may create such procedures, addenda and subplans and make such
modifications as may be necessary or advisable to comply with such laws.
(d) Employment Agreements. If a Grantee has entered into an employment
agreement with the Employer, the terms of the Grantee's employment agreement
shall govern Grants made to the Grantee under the Plan, to the extent consistent
with the terms of the Plan.
(e) Governing Law. The validity, construction, interpretation and effect
of the Plan and Grant Instruments issued under the Plan shall be governed and
construed by and determined in accordance with the laws of the Commonwealth of
Pennsylvania, without giving effect to the conflict of laws provisions thereof.
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