EXHIBIT 4.1
SAFEGUARD SCIENTIFICS, INC.
1999 EQUITY COMPENSATION PLAN
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The purpose of the Safeguard Scientifics, Inc. 1999 Equity Compensation
Plan (the "Plan") is to provide (i) designated employees of Safeguard
Scientifics, Inc. (the "Company") and its subsidiaries, (ii) individuals to whom
an offer of employment has been extended, (iii) certain advisors who perform
services for the Company or its subsidiaries, and (iv) 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, restricted stock and performance units. The Company
believes that the Plan will encourage the participants to contribute materially
to the growth of the Company, thereby benefiting the Company's shareholders, and
will align the economic interests of the participants with those of the
shareholders.
1. Administration
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(a) Committee. The Plan shall be administered and interpreted by a
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committee appointed by the Board (the "Committee"). The Committee shall consist
of two or more persons appointed by the Board, all of whom may be "outside
directors" as defined under section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code") and related Treasury regulations and may be "non-
employee directors" as defined under Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members or may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time. If the Committee does
not exist, or for any other reason determined by the Board, the Board may take
any action under the Plan that would otherwise be the responsibility of the
Committee.
(b) Committee Authority. The Committee shall have the sole authority
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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, and (iv)
deal with any other matters arising under the Plan.
(c) Committee Determinations. The Committee shall have full power and
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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.
2. Grants
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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"), restricted stock as described in Section 6 (Restricted Stock"),
stock appreciation rights as described in Section 7 ("SARs"), and performance
units as described in Section 8 ("Performance Units") (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 (the "Grant
Instrument") or an amendment to the Grant Instrument. The Committee shall
approve the basic form and provisions of each Grant Instrument. Grants under a
particular Section of the Plan need not be uniform as among the grantees.
3. Shares Subject to the Plan
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(a) Shares Authorized. Subject to the adjustment specified below, the
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aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan is 3,000,000 shares. 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 500,000
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 terminate, expire, or are canceled, forfeited, exchanged
or surrendered without having been exercised, or if any shares of Restricted
Stock or Performance Units are forfeited, the shares subject to such Grants
shall again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of
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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 in which the Company is the
surviving corporation, (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
of shares covered by outstanding Grants, the kind of shares issued under the
Plan, and the price per share or the applicable market value of such Grants
shall 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 by rounding
any portion of a
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share equal to .5 or greater up, and any portion of a share equal to less than
.5 down, in each case to the nearest whole number. Any adjustments determined by
the Committee shall be final, binding and conclusive.
4. Eligibility for Participation
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(a) Eligible Persons. All employees of the Company and its
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subsidiaries ("Employees"), including Employees who are officers or members of
the Board, individuals to whom an offer of employment has been extended ("New
Hire"), and members of the Board who are not Employees ("Non-Employee
Directors") shall be eligible to participate in the Plan. Advisors who perform
services to 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 and such services are not in connection with the offer or sale of
securities in a capital-raising transaction.
(b) Selection of Grantees. The Committee shall select the Employees,
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New Hires, 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, New Hires, Key Advisors, and
Non-Employee Directors who receive Grants under this Plan shall hereinafter be
referred to as "Grantees."
5. Granting of Options
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(a) Number of Shares. The Committee shall determine the number of
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shares of Company Stock that will be subject to each Grant of Options to
Employees, New Hires, Non-Employee Directors, and Key Advisors.
(b) Type of Option and Price.
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(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, 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. Nonqualified Stock Options may
be granted to Employees, New Hires, 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,
greater than, or less than the Fair Market Value (as defined below) of a share
of Company Stock on the date the Option is granted, provided, however, that (x)
the Exercise Price of an Incentive Stock Option shall be equal to, or greater
than, the Fair Market Value of a share of Company Stock on the date the
Incentive Stock Option is granted and (y) 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 parent or subsidiary of the Company, unless the Exercise
Price per share is not less than I 10% of the Fair Market Value of Company Stock
on the date of grant.
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(iii) If the Company Stock is publicly traded, then, except as
otherwise determined by the Committee, the following rules regarding the
determination of Fair Market Value per share apply:
(x) if the principal trading market for the Company Stock is
a national securities exchange or the Nasdaq National Market, the
mean between the highest and lowest quoted selling prices 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.
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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 parent or subsidiary
of the Company, may not have a term that exceeds five years from the date of
grant.
(d) Exercisability of Options.
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(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 an amendment to the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding Options at
any time for any reason.
(ii) Notwithstanding the foregoing, the Option may, but need not,
include a provision whereby the Grantee may elect at any time while an Employee,
Non-Employee Director, or Key Advisor to exercise the Option as to any part or
all of the shares subject to the Option prior to the full vesting of the Option.
Any unvested shares so purchased shall be subject to a repurchase right in favor
of the Company, with the repurchase price to be equal to the original purchase
price, and any other restrictions the Committee determines to be appropriate.
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(e) Termination of Employment, Disability or Death.
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(i) Except as provided below, an Option may only be exercised while
the Grantee is employed by the Company as an Employee, Key Advisor or member of
the Board. In the event that a Grantee ceases to be employed by the Company for
any reason other than a "disability," death or "termination for cause," 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 the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Any of the Grantee's Options that are not otherwise exercisable as
of the date on which the Grantee ceases to be employed by the Company shall
terminate as of such date.
(ii) In the event the Grantee ceases to be employed by the Company on
account of a "termination for cause" by the Company, any Option held by the
Grantee shall terminate as of the date the Grantee ceases to be employed by the
Company.
(iii) In the event the Grantee ceases to be employed by the Company
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 the Company (or within such other
period of time as may be specified by the Committee), but in any event no later
than the date of expiration of the Option term. Any of the Grantee's Options
which are not otherwise exercisable as of the date on which the Grantee ceases
to be employed by the Company shall terminate as of such date.
(iv) If the Grantee dies while employed by the Company or within 90
days after the date on which the Grantee ceases to be employed on account of a
termination of employment specified in Section 5(e)(i) above (or within such
other period of time as may be specified by the Committee), 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 the Company
(or within such other period of time as may be specified by the Committee), but
in any event no later than the date of expiration of the Option term. Any of the
Grantee's Options that are not otherwise exercisable as of the date on which the
Grantee ceases to be employed by the Company shall terminate as of such date.
(v) For purposes of Sections 5(e), 6, 7, and 8:
(A) "Company," when used in the phrase "employed by the Company,"
shall mean the Company and its parent, subsidiary corporations, and
any business venture in which the Company has a significant interest.
(B) "Employed by the Company" shall mean employment or service as
an Employee of Safeguard or any subsidiary or business venture in
which the Company has a significant interest, Key Advisor, or member
of the Board (so that, for purposes of exercising Options and SARs and
satisfying conditions with respect to Restricted Stock and Performance
Units, a Grantee
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shall not be considered to have terminated employment or service until
the Grantee ceases to be an Employee of Safeguard or any subsidiary or
business venture in which the Company has a significant interest, Key
Advisor, and member of the Board), unless the Committee determines
otherwise. The Committee's determination as to a participant's
employment or other provision of services, termination of employment
or cessation of the provision of services, leave of absence, or
reemployment shall be conclusive on all persons unless determined to
be incorrect.
(C) "Disability" shall mean a Grantee's becoming disabled within
the meaning of section 22(e)(3) of the Code.
(D) "Termination for cause" shall mean the determination of the
Committee that any one or more of the following events has occurred:
(1) the Grantee's conviction of any act which constitutes a
felony under applicable federal or state law, either in connection
with the performance of the Grantee's obligations on behalf of the
Company or which affects the Grantee's ability to perform his or her
obligations as an employee, board member or advisor of the Company or
under any employment agreement, non-competition agreement,
confidentiality agreement or like agreement or covenant between the
Grantee and the Company (any such agreement or covenant being herein
referred to as an "Employment Agreement");
(2) the Grantee's willful misconduct in connection with the
performance of his or her duties and responsibilities as an employee,
board member or advisor of the Company or under any Employment
Agreement, which willful misconduct is not cured by the Grantee within
10 days of his or her receipt of written notice thereof from the
Committee;
(3) the Grantee's commission of an act of embezzlement, fraud or
dishonesty which results in a loss, damage or injury to the Company;
(4) the Grantee's substantial and continuing neglect, gross
negligence or inattention in the performance of his or her duties as
an employee, board member or advisor of the Company or under any
Employment Agreement which is not cured by the Grantee within 10 days
of his or her receipt of written notice thereof from the Committee;
(5) the Grantee's unauthorized use or disclosure or any trade
secret or confidential information of the Company which adversely
affects the business of the Company, provided that any disclosure of
any trade secret or confidential information of the Company to a third
party in the ordinary course of business who signs a confidentiality
agreement shall not be deemed a breach of this subparagraph;
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(6) the Grantee's material breach of any of the provisions of any
Employment Agreement, which material breach is not cured by the
Grantee within 10 days of his or her receipt of a written notice from
the Company specifying such material breach; or
(7) the Grantee has voluntarily terminated his or her employment
or service with the Company and breaches his or her noncompetition
agreement with the Company.
(f) Exercise of Options. A Grantee may exercise an Option that has
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become exercisable, in whole or in part, by delivering a notice of exercise to
the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee:
(i) in cash,
(ii) by delivering shares of Company Stock owned by the Grantee for
the period necessary to avoid a charge to the Company's earnings for financial
reporting purposes (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,
(iii) by payment through a broker in accordance with procedures
permitted by Regulation T of the Federal Reserve Board, or
(iv) by such other method of payment 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 9) at the time of exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option shall
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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 parent or subsidiary, exceeds $100,000,
then the option, as to the excess, shall be treated as a Nonqualified Stock
Option. An Incentive Stock Option shall not be granted to any person who is not
an Employee of the Company or a parent or subsidiary (within the meaning of
section 424(f) of the Code).
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6. Restricted Stock Grants
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The Committee may issue or transfer shares of Company Stock to a Grantee
under a Grant of Restricted Stock upon such terms as the Committee deems
appropriate. The following provisions are applicable to Restricted Stock:
(a) General Requirements. Shares of Company Stock issued or
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transferred pursuant to Restricted Stock Grants may be issued or transferred for
consideration or for no consideration, as determined by the Committee. The
Committee may establish conditions under which restrictions on shares of
Restricted Stock shall lapse over a period of time or according to such other
criteria as the Committee deems appropriate. The period of time during which the
Restricted Stock 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
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shares of Company Stock to be issued or transferred pursuant to a Restricted
Stock Grant and the restrictions applicable to such shares.
(c) Requirement of Employment. If the Grantee ceases to be employed by
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the Company (as defined in Section 5(e)) during a period designated in the Grant
Instrument as the Restriction Period, or if other specified conditions are not
met, the Restricted Stock Grant shall terminate as to all shares covered by the
Grant as to which the restrictions have not lapsed, and those shares of Company
Stock must be immediately returned to the Company. 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
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the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Restricted Stock except to a Successor
Grantee under Section 10(a). Each certificate for a share of Restricted Stock
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 shares of Restricted Stock until all restrictions on such
shares have lapsed, or that the Company will retain possession of certificates
for shares of Restricted Stock until all restrictions on such shares have
lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
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determines otherwise, during the Restriction Period, the Grantee shall have the
right to vote shares of Restricted Stock and to receive any dividends or other
distributions paid on such shares, subject to any restrictions deemed
appropriate by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on Restricted
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Stock 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 Restricted Stock Grants, that the restrictions shall
lapse without regard to any Restriction Period.
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7. Stock Appreciation Rights
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(a) General Requirements. The Committee may grant stock appreciation
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rights ("SARs") to a Grantee separately or in tandem with any Option (for all or
a portion of the applicable Option). Tandem SARs may be granted 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 time of the Grant of the Incentive Stock Option.
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. In the case of tandem SARs, the number of SARs
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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. A SAR shall be exercisable during the period
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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. 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 the Company or during the applicable period after termination of
employment as described in Section 5(e). A tandem SAR shall be exercisable only
during the period when the Option to which it is related is also exercisable. No
SAR may be exercised for cash by an officer or director of the Company or any of
its subsidiaries who is subject to Section 16 of the Exchange Act, except in
accordance with Rule 16b-3 under the Exchange Act.
(d) Value of SARs. When a Grantee exercises SARs, the Grantee shall
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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 a 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).
(e) Form of Payment. The Committee shall determine whether the
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appreciation in a 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.
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8. Performance Units
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(a) General Requirements. The Committee may grant performance units
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("Performance Units") to a Grantee. Each Performance Unit shall represent the
right of the Grantee to receive an amount based on the value of the Performance
Unit, if performance goals established by the Committee are met. A Performance
Unit shall be based on the Fair Market Value of a share of Company Stock or on
such other measurement base as the Committee deems appropriate. The Committee
shall determine the number of Performance Units to be granted and the
requirements applicable to such Units.
(b) Performance Period and Performance Goals. When Performance Units
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are granted, the Committee shall establish the performance period during which
performance shall be measured (the "Performance Period"), performance goals
applicable to the Units ("Performance Goals") and such other conditions of the
Grant as the Committee deems appropriate. Performance Goals may relate to the
financial performance of the Company or its operating units, the performance of
Company Stock, individual performance, or such other criteria as the Committee
deems appropriate.
(c) Payment with respect to Performance Units. At the end of each
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Performance Period, the Committee shall determine to what extent the Performance
Goals and other conditions of the Performance Units are met and the amount, if
any, to be paid with respect to the Performance Units. Payments with respect to
Performance Units shall be made in cash, in Company Stock, or in a combination
of the two, as determined by the Committee.
(d) Requirement of Employment. If the Grantee ceases to be employed by
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the Company (as defined in Section 5(e)) during a Performance Period, or if
other conditions established by the Committee are not met, the Grantee's
Performance Units shall be forfeited. The Committee may, however, provide for
complete or partial exceptions to this requirement as it deems appropriate.
9. Qualified Performance-Based Compensation.
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(a) Designation as Qualified Performance-Based Compensation. The
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Committee may determine that Performance Units or Restricted Stock granted to an
Employee shall be considered "qualified performance-based compensation" under
Section 162(m) of the Code. The provisions of this Section 9 shall apply to
Grants of Performance Units and Restricted Stock that are to be considered
"qualified performance-based compensation" under Section I 62(m) of the Code.
(b) Performance Goals. When Performance Units or Restricted Stock that
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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 in order for restrictions on the Restricted Stock to lapse or
amounts to be paid under the Performance Units, (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
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conditions, including without limitation provisions relating to death,
disability, other termination of employment or Reorganization, that the
Committee deems appropriate and consistent with the Plan and Section 162(m) of
the Code. 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: stock price,
earnings per share, net earnings, operating earnings, return on assets,
shareholder return, return on equity, growth in assets, unit volume, sales,
market share, or strategic business criteria consisting of one or more
objectives based on meeting specific revenue goals, market penetration goals,
geographic business expansion goals, cost targets or goals relating to
acquisitions or divestitures.
(c) Establishment of Goals. The Committee shall establish the
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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. If Restricted Stock, or Performance Units
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measured with respect to the fair market value of the Company Stock, are
granted, not more than 500,000 shares may be Granted to any Grantee for any
Performance Period. If Performance Units are measured with respect to other
criteria, the maximum amount that may be paid to a Grantee with respect to a
Performance Period is $ 1,000,000.
(e) Announcement of Grants. The Committee shall certify and announce
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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 Restricted Stock or Performance Units for the
Performance Period shall be forfeited.
10. Withholding of Taxes
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(a) Required Withholding. All Grants under the Plan shall be subject
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to applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to deduct from all Grants paid in
cash, or from other wages paid to the Grantee, any federal, state or local taxes
required by law to be withheld with respect to such Grants. In the case of
Options and other Grants paid in Company Stock, the Company may require the
Grantee or other person receiving such shares to pay to the Company the amount
of any such taxes that the Company is required to withhold with respect to such
Grants, or the
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Company may deduct from other wages paid by the Company the amount of any
withholding taxes due with respect to such Grants.
(b) Election to Withhold Shares. If the Committee so permits, a
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Grantee may elect to satisfy the Company's income tax withholding obligation
with respect to an Option, SAR, Restricted Stock or Performance Unit paid in
Company Stock by having shares withheld up to an amount that does not exceed the
Grantee's maximum marginal 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 shall be subject to the prior approval of the Committee.
11. Transferability of Grants
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(a) Nontransferability of Grants. Except as provided below, only the
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Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or, with respect to Grants other than Incentive Stock Options,
if permitted in any specific case by the Committee, pursuant to a domestic
relations order (as defined under the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the regulations thereunder). When a
Grantee dies, the personal representative or other person entitled to succeed to
the rights of the Grantee ("Successor Grantee") may exercise such rights. A
Successor Grantee must furnish proof satisfactory to the Company of his or her
right to receive the Grant under the Grantee's will or under the applicable laws
of descent and distribution.
(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 other persons or
entities 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.
12. Reorganization of the Company.
-----------------------------
(a) Reorganization. As used herein, a "Reorganization" shall be deemed
--------------
to have occurred if the shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement providing for (i) the
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 50% 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) the sale or other disposition of all
or substantially all of the assets of the Company, or (iii) a liquidation or
dissolution of the Company.
(b) Assumption of Grants. Upon a Reorganization where the Company is
--------------------
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the
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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.
(c) Other Alternatives. Notwithstanding the foregoing, in the event of
------------------
a Reorganization, the Committee may take one or both of the following actions:
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
Reorganization or such other date as the Committee may specify.
(d) Limitations. Notwithstanding anything in the Plan to the contrary,
-----------
in the event of a Reorganization, the Committee shall not have the right to take
any actions described in the Plan (including without limitation actions
described in Subsection (b) above) that would make the Reorganization ineligible
for pooling of interests accounting treatment or that would make the
Reorganization ineligible for desired tax treatment if, in the absence of such
right, the Reorganization would qualify for such treatment and the Company
intends to use such treatment with respect to the Reorganization.
13. Change of Control of the Company.
--------------------------------
(a) As used herein, a "Change of Control" shall be deemed to have
occurred if.
(i) 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 a majority of the voting power of the then outstanding securities
of the Company except where the acquisition is approved by the Board; or
(ii) Any person has commenced a tender offer or exchange offer
for a majority of the voting power of the then outstanding shares of the
Company.
(b) Notice and Acceleration. Unless the Committee determines
-----------------------
otherwise, a Change of Control shall not result in the acceleration of vesting
of outstanding Options and SARs, the removal of restrictions and conditions on
outstanding Restricted Stock grant, or any accelerated payments in connection
with outstanding Performance Units.
(c) Other Alternatives. Notwithstanding the foregoing, in the event of
------------------
a Change of Control, the Committee may take one or both of the following
actions: the Committee may (i) require that Grantees surrender their outstanding
Options and SARs in exchange for a
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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.
(d) Limitations. Notwithstanding anything in the Plan to the contrary,
-----------
in the event of a Change of Control, the Committee shall not have the right to
take any actions described in the Plan (including without limitation actions
described in Subsection (c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
14. Requirements for Issuance or Transfer of Shares
-----------------------------------------------
(a) Shareholder's Agreement. The Committee may require that a Grantee
-----------------------
execute a shareholder's agreement, with such terms as the Committee deems
appropriate, with respect to any Company Stock distributed pursuant to this
Plan.
(b) 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 as a result of any
applicable law, regulation or official interpretation thereof, and certificates
representing such shares may be legended to reflect any such restrictions.
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.
15. Amendment and Termination of the Plan
-------------------------------------
(a) Amendment. The Board may amend or terminate the Plan at any time.
---------
(b) 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.
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(c) 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. 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 in accordance with the Plan or may be amended
by agreement of the Company and the Grantee consistent with the Plan.
(d) 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.
16. 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. In no event shall interest be
paid or accrued on any Grant, including unpaid installments of Grants.
17. Rights of Grantees
------------------
Nothing in this Plan shall entitle any Grantee 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 Company or any other employment rights.
18. 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.
19. 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.
20. Effective Date of the Plan
--------------------------
Subject to the approval of the Company's shareholders, the Plan shall be
effective on February 11, 1999.
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21. 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 of the Company, 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 or any of its subsidiaries
in substitution for a stock option or restricted stock 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 be required. With respect to persons
subject to section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. The Committee
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
also adopt rules regarding the withholding of taxes on payments to Grantees. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(c) Governing Law. The validity, construction, interpretation and
-------------
effect of the Plan and Grant Instruments issued under the Plan shall exclusively
be governed by and determined in accordance with the law of the Commonwealth of
Pennsylvania.
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