UNIVERSAL DISPLAY CORPORATION
EQUITY COMPENSATION PLAN
The purpose of the Universal Display Corporation Equity Compensation
Plan (the "Plan") is to provide designated key employees (including employees
who are also officers and directors) and directors who are not employees
("Non-Employee Directors") of Universal Display Corporation and its "subsidiary
corporations," as that term is defined in section 424(f) of the Internal Revenue
Code of 1986, as amended (the "Code") (hereinafter collectively referred to as
the "Company") and selected consultants ("Consultants") to the Company with the
opportunity to receive grants of incentive stock options, nonqualified stock
options and other forms of equity compensation; provided, however, that
Non-Employee Directors and Consultants shall not be eligible to receive
incentive stock options under the Plan. The Company believes that the Plan will
cause the participants to contribute materially to the growth of the Company,
thereby benefiting the Company's stockholders and will align the economic
interests of the participants with those of the stockholders.
1. ADMINISTRATION
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The Plan shall be administered and interpreted by the Board of
Directors of the Company (the "Board"), or by a committee consisting of members
of the Board, which shall be appointed by the Board. During any period in which
the Company's stock is publicly traded, however, the Plan may be administered by
a committee (the "Committee") consisting of two or more persons, all of whom 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"). Membership on the
Committee shall also be structured so as to comply with applicable exchange
rules. Notwithstanding the foregoing, the Board may retain the ability to ratify
or approve any grants as it deems appropriate, and the Board shall approve and
administer all grants made to non-employee directors. The Board may delegate
this authority to one or more subcommittees, as it deems appropriate. To the
extent that the Board or a subcommittee administers the Plan, references in the
Plan to the "Committee" shall be deemed to refer to such Board or such
subcommittee.
Except as otherwise specifically provided in this Plan, 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
grants to each such individual, (iii) determine the time when the grants will be
made and the duration of the exercise or restriction period, including the
criteria for vesting, the acceleration of vesting, or the lapse of restriction,
(iv) amend the terms of any previously issued grants; (v) select the "Valuation
Expert," as defined below, and (vi) deal with any other matters arising under
the Plan.
The Committee shall have full power and authority to administer and
interpret the Plan, to make factual determinations and to adopt or amend such
rules, regulations, agreements and instruments for implementing the Plan and for
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 interests in the Plan or in any
awards granted hereunder. All powers of the Committee shall be executed 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" or "Stock Options"), stock awards as described in
Section 8 ("Stock Awards"), stock appreciation rights as described in Section 9
("SARs"), and performance units as described in Section 10 ("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 the Plan as the Committee deems appropriate and as
are specified in writing to the individual in a grant letter or other instrument
or amendment thereto (the "Grant Letter").
3. SHARES SUBJECT TO THE PLAN
--------------------------
Subject to the adjustment specified below, the aggregate number of
shares of the common stock of the Company, par value $.01 (the "Company Stock")
that have been or may be issued or transferred under the Plan is 4,600,000
shares, in the aggregate. The shares may be authorized but unissued shares of
Company Stock or reacquired shares of Company Stock, including shares purchased
by the Company 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 Stock Awards or
Performance Units (including restricted Stock Awards received upon the exercise
of Options) are forfeited, the shares subject to such Grants shall again be
available for purposes of the Plan.
If there is any change in the number or kind of shares of Company
Stock issuable under the Plan through the declaration of stock dividends or if
the value of outstanding shares of Company Stock is substantially reduced due to
the Company's payment of an extraordinary dividend or distribution, or through a
recapitalization, stock splits, or combinations or exchanges of such shares, or
merger, reorganization or consolidation of the Company, reclassification or
change in par value or by reason of any other extraordinary or unusual events
affecting the outstanding Company Stock as a class without the Company's receipt
of consideration, the maximum number of shares of Company Stock available for
Grants, the maximum number of shares of Company Stock for which any one
individual participating in the Plan may be granted over the term of the Plan,
the number of shares covered by outstanding Grants, and the price per share or
the applicable market value of such Grants, and the other terms and conditions
of the Grants, as the Committee may deem necessary or desirable, may be
proportionately adjusted by the Committee to reflect any increase or decrease in
the number or kind of issued shares of Company Stock to preclude the enlargement
or dilution of rights and benefits under such Grants; provided, however, that
any fractional shares resulting from such adjustment shall be eliminated. The
adjustments determined by the Committee shall be final, binding and conclusive.
Notwithstanding the foregoing, no adjustment shall be authorized or made
pursuant to this Section to the extent that such authority or adjustment would
cause any Incentive Stock Option to fail to comply with Section 422 of the Code.
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4. ELIGIBILITY FOR PARTICIPATION
-----------------------------
All individuals employed by the Company ("Employees") (including
Employees who are officers or members of the Board), all Non-Employee Directors
and all Consultants whose services, in the judgment of the Committee, can have a
significant effect on the long-term success of the Company shall be eligible to
participate in the Plan. Except as specifically otherwise provided in this Plan,
the Committee shall select the Employees, Non-Employee Directors and Consultants
to receive Grants (each, a "Grantee") and determine the number of shares of
Company Stock subject to a particular Grants in such manner as the Committee
determines.
Nothing contained in this Plan shall be construed to limit the right
of the Company to grant options or warrants or issue stock otherwise in
connection with the acquisition, by purchase, lease, merger, consolidation or
otherwise, of the business or assets of any corporation, firm or association,
including options or warrants granted to employees thereof who become Employees
of the Company, or for other proper corporate purpose.
5. GRANTING OF OPTIONS
-------------------
(a) Number of Shares. The Committee, in its sole discretion, shall
determine the number of shares of Company Stock that will be subject to each
Stock Option grant. The maximum aggregate number of shares of Company Stock that
shall be subject to Grants of Stock Options or SARs made under the Plan to any
individual during any calendar year shall be 400,000 shares, subject to
adjustment as described above.
(b) Type of Option and Price. The Committee may grant Incentive
Stock Options, Nonqualified Stock Options or any combination of Incentive Stock
Options and Nonqualified Stock Options, all in accordance with the terms and
conditions set forth herein; provided, however, that neither Non-Employee
Directors nor Consultants shall be eligible to receive grants of Incentive Stock
Options.
The purchase price of Company Stock subject to a Stock
Option shall be determined by the Committee
and may be equal to, greater than, or less than the fair market value of a share
of such stock on the date such Stock Option is granted; provided, however, that
the purchase price of Company Stock subject to an Incentive Stock Option shall
be equal to, or greater than, the fair market value of a share of such stock on
the date such Stock Option is granted. During such time that the Company Stock
is not listed on an established stock exchange or traded in the
over-the-counter-market, the fair market value of Company Stock shall be
determined by an independent firm, i.e., a firm not otherwise engaged in
consulting work for the Company, unless determined otherwise by the Committee,
with expertise in the valuation of business entities and the securities thereof,
selected by the Committee (the "Valuation Expert") or as otherwise determined by
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the Committee in good faith based on the best available facts and circumstances.
Such determination of fair market value shall be made on a periodic basis, but
no less frequently than once a calendar year. If the Company Stock is listed
upon an established stock exchange or other market source, as determined by the
Committee, fair market value on any date of reference shall be the closing price
of a share of Company Stock (on a consolidated basis) on the principal exchange
or other recognized market source, as determined by the Committee on such date,
or if there is no sale on such date, then the closing price of a share of
Company Stock on the last previous day on which a sale is reported.
(c) Exercise Period. The Committee shall determine the option
exercise period of each Stock Option. The exercise period shall not exceed ten
years from the date of grant.
(d) Exercisability of Options. Stock Options shall become
exercisable in accordance with the terms and conditions determined by the
Committee, in its sole discretion, and specified in the Grant Letter. All
outstanding Stock Options shall become immediately exercisable upon a Change in
Control (as defined herein), unless the Committee, in its sole discretion,
determines not to accelerate such Stock Options upon a Change in Control.
(e) Manner of Exercise. The Grantee of Stock Options (the
"Optionee") may exercise a Stock Option which has become exercisable by
delivering a notice of exercise to the Committee with accompanying payment of
the option price in accordance with (h) below. Such notice may instruct the
Company to deliver shares of Company Stock due upon the exercise of the Stock
Option to any registered broker or dealer designated by the Company ("Designated
Broker") in lieu of delivery to the Optionee. Such instructions must designate
the account into which the shares are to be deposited. The Optionee may tender
this notice of exercise, which has been properly executed by the Optionee, and
the aforementioned delivery instructions to any Designated Broker.
(f) Termination of Employment, Disability or Death.
(1) Employees.
(a) In the event the Optionee during the
Optionee's lifetime ceases to be an employee of the Company for any reason other
than death, disability (as defined herein), retirement approved by the Company,
or termination for cause, as defined below, by the Company, any Stock Option
which is otherwise exercisable by the Optionee shall terminate unless exercised
within three months of the date on which the Optionee ceases to be an employee
(or within such other period of time as may be specified in the Grant Letter),
but in any event no later than the date of expiration of the option exercise
period (except as the Committee may otherwise provide in the Grant Letter). For
purposes of this Section 5, a leave of absence at the request, or with the
approval, of the Company shall not be deemed a termination of employment so long
as the period of such leave does not exceed 90 days, or, if longer, so long as
the Optionee's right to re-employment with the Company is guaranteed by
contract. Any of the Optionee's Stock Options which are not otherwise
exercisable as of the date on which the Optionee ceases to be an employee shall
terminate as of such date (except as the Board may otherwise provide).
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(b) In the event the Optionee ceases to be an
employee of the Company on account of a termination for cause by the Company, as
determined in accordance with the personnel policies of the Company in effect
before any Change in Control of the Company, any Stock Option held by the
Optionee shall terminate as of the date the Optionee ceases to be an employee
(except as the Committee may otherwise provide).
(c) In the event the Optionee ceases to be an
employee of the Company on account of becoming disabled within the meaning of
section 22(e) of the Code, any Stock Option which is otherwise exercisable by
the Optionee on the date on which the Optionee ceases to be an employee shall
terminate unless exercised within one year from the date on which the Optionee
ceases to be an employee (or within such other period of time as may be
specified in the Grant Letter), but in any event no later than the date of the
expiration of the option exercise period (except as the Committee may otherwise
provide in the Grant Letter).
(d) In the event of the death of the Optionee
while he is an employee of the Company or within 30 days of the date on which he
ceases to be an employee for any reason other than a termination for cause by
the Company (or within such other period of time as may be specified in the
Grant Letter), any Stock Option which is otherwise exercisable by the Optionee
on the date on which the Optionee ceases to be an employee shall terminate
unless exercised by the Optionee's personal representative within six months of
the date on which the Optionee ceases to be an employee (or within such other
period of time as may be specified in the Grant Letter), but in any event no
later than the date of the expiration of the option exercise period (except as
the Committee may otherwise provide in the Grant Letter).
(e) Notwithstanding the foregoing provisions,
failure to exercise an Incentive Stock Option within the periods of time
prescribed under sections 421 and 422(a) of the Code shall cause the Incentive
Stock Option to cease to be treated as an "incentive stock option" for purposes
of sections 421 and 422 of the Code.
(2) Non-Employee Directors and Consultants.
(a) In the event the Optionee during the
Optionee's lifetime ceases to be a Non-Employee Director or Consultant to the
Company for any reason other than becoming an employee of the Company, or
termination for cause, as defined below, by the Company, any Stock Option which
is otherwise exercisable by the Optionee shall not terminate until the date of
expiration of the option exercise period (except as the Committee may otherwise
provide in the Grant Letter). Any of the Optionee's Stock Options which are not
otherwise exercisable as of the date on which the Optionee ceases his
relationship with the Company shall terminate as of such date (except as the
Committee may otherwise provide).
(b) In the event the Optionee ceases to be a
Non-Employee Director or Consultant to the Company on account of a termination
for cause by the Company, as determined in accordance with the policies of the
Company in effect before any Change in Control of the Company, any Stock Option
held by the Optionee shall terminate as of the date the Optionee ceases to serve
in such capacity (except as the Committee may otherwise provide).
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(g) Satisfaction of Option Price. The Optionee shall pay the option
price specified in the Grant Letter in (i) cash; (ii) with the approval of the
Committee, by delivering shares of Company Stock owned by the Optionee including
Company Stock (including, but not limited to, shares acquired in connection with
the exercise of a particular Stock Option and having a fair market value on the
date of exercise equal to the option price, subject to such restrictions as the
Committee may impose) (a "Stock-for-Stock Exercise"); (iii) if, as directed by
the Committee, shares of Company Stock may not be sold immediately following the
exercise of a Stock Option, with the proceeds of a promissory note payable by
the Optionee to the Company, but only in accordance with the provisions of a
loan program established by the Company, or any successor program as in effect
from time to time, and only to the extent not precluded by the Sarbanes-Oxley
Act of 2002 and other applicable law, (A) in a principal amount of up to 100% of
the payment due upon the exercise of the Stock Option, or such applicable lower
percentage as may be specified by the Board pursuant to the loan program, and
(B) bearing interest at a rate not less than the applicable Federal rate
prescribed by Section 1274 of the Code, or such higher rate as may be specified
by the Committee pursuant to the loan program; (iv) payment through a broker in
accordance with procedures permitted by Regulation T of the Federal Reserve
Board; (v) by such other method as the Committee may approve; or (vi) through
any combination of (i), (ii), (iii), (iv) or (v). Any loan by the Company under
(iii) above shall be with full recourse against the Optionee to whom the loan is
granted, and shall be secured in whole or in part by the shares of Company Stock
so purchased. In addition, any such loan by the Company shall, at the option of
the Company, become immediately due and payable in full upon termination of the
Optionee's employment or position as an officer or director with the Company for
any reason, or upon a sale of any shares of Company Stock acquired with such
loan to the extent of the cash and fair market value of any property received by
the Optionee in such sale. The Committee may make arrangements for the
application of payroll deductions from compensation payable to the Optionee to
amounts owing to the Company under any such loan. Until any loan by the Company
hereunder is fully paid in cash, the shares of Company Stock purchased with the
loan shall be pledged to the Company as security for the loan, and the Company
shall retain physical possession of the stock certificates evidencing such
shares together with a duly executed stock power for such shares. No loan shall
be made hereunder unless counsel for the Company shall be satisfied that the
loan and the issuance of the shares of Company Stock funded thereby will be in
compliance with all applicable federal, state and local laws. The Optionee shall
pay the option price and the amount of withholding tax due, if any, as specified
by the Committee. Shares of Company Stock shall not be issued or transferred
upon exercise of a Stock Option until the option price is fully paid and any
amount of withholding tax is paid. Shares of Company Stock used in a
Stock-for-Stock Exercise shall have been held by the Optionee for the requisite
period of time to avoid "anti-pyramiding" rules or other adverse accounting
consequences to the Company with respect to the Option.
(h) Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that to the extent that the aggregate fair market value of the
Company Stock on the date of the grant with respect to which Incentive Stock
Options are exercisable for the first time by an Optionee during any calendar
year under the Plan or any other stock option plan of the Company exceeds
$100,000, then such option as to the excess shall be treated as a Nonqualified
Stock Option. An Incentive Stock Option shall not be granted to any Employee
who, at the time of grant, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or parent of the
Company, unless the option price per share is not less than 110% of the fair
market value of Company Stock on the date of grant and the option exercise
period is not more than five years from the date of grant.
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(i) Optional Purchase by the Company. In the sole discretion of the
Committee, in lieu of the exercise of a Stock Option, the Optionee may be
permitted to transfer the Stock Option to the Company in exchange for a cash
payment equal to the excess over the purchase price of the then fair market
value of the shares of Company Stock subject to the Optionee's outstanding Stock
Options.
6. TRANSFERABILITY OF OPTIONS
--------------------------
Only the Optionee or his or her authorized legal representative may
exercise rights under a Stock Option. Such persons may not transfer those rights
except by will or by the laws of descent and distribution or, if permitted under
Rule 16b-3 of the Exchange Act and if permitted in any specific case by the
Committee in its sole discretion, pursuant to a qualified domestic relations
order as defined under the Code or Title I of ERISA or the regulations
thereunder. When an Optionee dies, the personal representative or other person
entitled to succeed to the rights of the Optionee ("Successor Optionee") may
exercise such rights. A Successor Optionee must furnish proof satisfactory to
the Company of his or her right to receive the Stock Option under the Optionee's
will or under the applicable laws of descent and distribution.
Notwithstanding the foregoing, the Committee may permit an Employee
to transfer rights under a Nonqualified Stock Option to the Employee's spouse or
a lineal descendant or to one or more trusts for the benefit of such family
members or to partnerships in which such family members are the only partners (a
"Family Transfer") provided that the Employee receives no consideration for a
Family Transfer and the Grant Letter relating to the Stock Options transferred
in a Family Transfer continues to be subject to the same terms and conditions
that were applicable to such Stock Options immediately prior to the Family
Transfer.
7. STOCK AWARDS
------------
The Committee may issue or transfer shares of Company Stock to an
Employee, Non-Employee Director or Consultant 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
consideration or for no 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 Letter as the "Restriction Period."
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(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 Letter 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. 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 10. 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 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.
8. STOCK APPRECIATION RIGHTS
-------------------------
(a) General Requirements. The Committee may grant stock appreciation
rights ("SARs") to an Employee, Non-Employee Director or Consultant 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.
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(b) Tandem SARs. 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. SARs shall be exercisable during the period
specified by the Committee in the Grant Letter and shall be subject to such
vesting and other restrictions as may be specified in the Grant Letter. 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 comparable to the provisions
of Section 5(f) as related to Stock Options. A tandem SAR shall be exercisable
only during the period when the Option to which it is related is also
exercisable.
(d) 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).
(e) Transferability of SARs. SARs may only be transferred in
situations comparable to those under Section 6 relating to the transfer of Stock
Options.
9. PERFORMANCE UNITS
-----------------
(a) General Requirements. The Committee may grant performance units
("Performance Units") to an Employee, Non-Employee Director or Consultant. 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
are granted, the Committee shall establish the performance period during which
performance shall be measured (the "Performance Period"), performance goals
applicable to such 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.
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(c) Payment with respect to Performance Units. At the end of each
Performance Period, the Committee shall determine to what extent the Performance
Goals and other conditions of the Performance Units are met, the value of the
Performance Units (if applicable), 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 or Service. If the Grantee ceases to
be employed by, or provide service to, the Employer 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.
10. QUALIFIED PERFORMANCE-BASED COMPENSATION
----------------------------------------
(a) Designation as Qualified Performance-Based Compensation. The
Committee may determine that Performance Units or Stock Awards granted to an
Employee shall be considered "qualified performance-based compensation" under
section 162(m) of the Code. The provisions of this Section 10 shall apply to
Grants of Performance Units and Stock Awards that are to be considered
"qualified performance-based compensation" under section 162(m) of the Code.
(b) Performance Goals. When Performance Units or Stock 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 period during which these performance goals must be met,
(iii) the threshold, target and maximum amounts that may be paid if these 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. The performance goals
may relate to the Employee's business unit or the performance of the Company and
its parents and 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
specified 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
performance goals in writing either before the beginning of the relevant
performance period or during a period ending no later than the earlier of (i) 90
days after the beginning of such 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 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.
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(d) Maximum Payment. If Stock Awards or Performance Units measured
with respect to Company Stock are granted, not more than 400,000 shares of
Company Stock may be granted to an Employee as Performance Units or Stock Awards
for any performance period. If Performance Units measured with respect to cash
are granted, the maximum amount that may be paid to an Employee pursuant to
Performance Units with respect to any performance period is $1,000,000.
(e) Announcement of Grants. The Committee shall certify and announce
the results for each performance period to all affected Grantees immediately
following the announcement of the Company's financial results for such period.
If and to the extent that the Committee does not certify that the relevant
performance goals have been met, the grants of Stock Awards or Performance Units
for the performance period shall be forfeited or shall not be made, as
applicable.
(f) Death, Disability or Other Circumstances. The Committee may
provide that Performance Units or Stock 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 relevant performance period, or under other
circumstances, consistent with the Treasury regulations and rulings under
section 162(m) of the Code.
11. CHANGE IN CONTROL OF THE COMPANY
--------------------------------
As used herein, a "Change in Control" shall be deemed to have
occurred if:
(i) As a result of any transaction, any one stockholder
other than an existing stockholder
as of the effective date of the Plan, becomes a beneficial owner, as defined
below, directly or indirectly, of securities of the Company representing more
than 50% of the Common Stock of the Company or the combined voting power of the
Company's then outstanding securities;
(ii) A liquidation or dissolution of or the sale of all
or substantially all of the Company's
assets occurs; or
(iii) After the effective date of the Plan:
(a) As a result of a tender offer, stock
purchase, other stock acquisition, merger, consolidation, recapitalization,
reverse split, or sale or transfer of assets (but excluding any sale of the
Company's securities to the public pursuant to a public offering), any person or
group (as such terms are used in and under Section 13(d) of the Exchange Act)
other than an existing stockholder, becomes the beneficial owner (as defined in
Rule 13-d under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 30% of the combined voting power of the Company's
then outstanding securities; or
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(b) During any period of two consecutive
years, individuals who at the beginning of such period constitute the board of
directors cease for any reason to constitute at least a majority thereof unless
the election, or the nomination for election by the Company's shareholders, of
each new director was approved by a vote of at least 2/3 of the directors then
still in office who were directors at the beginning of the period.
12. CERTAIN CORPORATE CHANGES
-------------------------
(a) Sale or Exchange of Assets, Dissolution or Liquidation, or
Merger or Consolidation Where the Company Does Not Survive. If all or
substantially all of the assets of the Company are to be sold or exchanged, the
Company is to be dissolved or liquidated, or the Company is a party to a merger
or consolidation with another corporation in which the Company will not be the
surviving corporation, then, at least 10 days prior to the effective date of
such event, the Company shall give each Optionee with any outstanding Stock
Options written notice of such event. Each such Optionee shall thereupon have
the right to exercise in full any installments of such Stock Options not
previously exercised (whether or not the right to exercise such installments has
accrued pursuant to such Stock Options), within 10 days after such written
notice is sent by the Company or, if a cashout of such Stock Options would not
result in materially adverse accounting consequences, to require that the
Company purchase such Stock Options for a cash payment equal to the excess over
the purchase price of the then fair market value of the shares of Company Stock
subject to the Optionee's outstanding Stock Options. In addition, under the
above circumstances all restrictions on Stock Awards shall lapse, all SARs shall
become fully vested and exercisable, and all Performance Units shall be deemed
fully earned.
(b) Merger or Consolidation Where the Company Survives. If the
Company is a party to a merger or consolidation in which the Company will be the
surviving corporation, or in the event of the occurrence of any other Change in
Control not described in subsection (a), then the Board may, in its sole
discretion, elect to give each Optionee with any outstanding Stock Options
written notice of such event. If such notice is given, each such Optionee shall
thereupon have the right to exercise some or all of any installments of such
Stock Options not previously exercised (whether or not the right to exercise
such installments has accrued pursuant to such Stock Options), within 10 days
after such written notice is sent by the Company or, if a cashout of such Stock
Options would result in materially adverse accounting consequences, to require
that the Company purchase such Stock Options for a cash payment equal to the
excess over the purchase price of the then fair market value of the shares of
Company Stock subject to the Optionee's outstanding Stock Options. In addition,
under the above circumstances the Board may determine that all restrictions on
Stock Awards shall lapse, all SARs shall become fully vested and exercisable and
all Performance Units shall be deemed fully earned.
13. AMENDMENT AND TERMINATION OF THE PLAN
-------------------------------------
(a) Amendment. The Board, by written resolution, may amend or
terminate the Plan at any time; provided, however, that any amendment that
increases the aggregate number (or individual limit for any single Grantee) of
shares of Company Stock that may be issued or transferred under the Plan (other
than by operation of Section 3(b)), or modifies the requirements as to
eligibility for participation in the Plan, shall be subject to approval by the
shareholders of the Company.
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(b) Termination of Plan. The Plan shall terminate on the tenth
anniversary of its effective date unless terminated earlier by the Board of
Directors of the Company or unless extended by the Board with the approval of
the stockholders.
(c) Termination and Amendment of Outstanding Grant. 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 22(b) hereof. The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 22(b) hereof 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, its successors and assigns and the Grantees and
their assigns.
14. 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 Grant under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grant.
15. RIGHTS OF INDIVIDUALS
---------------------
Nothing in this Plan shall entitle any Employee, Non-Employee
Director, Consultant or other person to any claim or right to be issued a Grant
under this Plan. Neither this Plan nor any action taken hereunder shall be
construed as giving any Employee, Non-Employee Director, Consultant or other
person any rights to be retained by or in the employ of the Company or any other
employment rights.
16. 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.
17. WITHHOLDING OF TAXES
--------------------
The Grantee or other person receiving shares of Company Stock or
other consideration under this Plan shall be required to pay to the Company the
amount of any federal, state or local taxes which the Company is required to
withhold with respect to the taxable income associated with such Grant or the
Company shall have the right to deduct from other wages paid to the Employee by
the Company (including through the withholding of Company Stock purchased upon
the exercise of a Stock Option or otherwise deliverable under this Plan, if then
authorized by the Committee and applicable law) the minimum amount of any
withholding due with respect to such Stock Grant.
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18. AGREEMENTS WITH GRANTEES
------------------------
Each Grant made under this Plan shall be evidenced by a Grant Letter
containing such terms and conditions as the Committee shall approve.
19. REQUIREMENTS FOR ISSUANCE OF SHARES
-----------------------------------
No Company Stock shall be issued or transferred upon the exercise of
any Stock Option or lapse of restrictions or payment of other Grants under this
Plan 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 Optionee hereunder on such Optionee's undertaking in
writing to comply with such restrictions on his 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 under the
Plan will be subject to such stop-transfer orders and other restrictions as may
be applicable under such laws, regulations and other obligations of the Company,
including any requirement that a legend or legends be placed thereon.
20. 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.
21. EFFECTIVE DATE
--------------
(a) Effective Date of the Plan. Subject to the approval of the
Company's stockholders, this Plan shall be effective as of September 1, 1995.
(b) Effectiveness of Section 16 Provisions. The provisions of the
Plan that refer to, or are applicable to persons subject to, Section 16 of the
Exchange Act shall be effective, if at all, upon registration of the Company
Stock under Section 12(g) of the Exchange Act, and shall remain effective
thereafter for so long as such stock is so registered.
22. MISCELLANEOUS
-------------
(a) Substitute Grants. The Committee may make a Grant to an employee
of another corporation who becomes an Employee by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company or any of its subsidiaries in substitution for a stock
option or restricted stock grant granted by such corporation ("Substituted Stock
Incentives"). The terms and conditions of the substitute grant may vary from the
terms and conditions required by the Plan and from those of the Substituted
Stock Incentives. The Committee shall prescribe the provisions of the substitute
grants.
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(b) Compliance with Law. The Plan, the exercise of Stock Options,
granting of other forms of equity compensation under the Plan and the
obligations of the Company to issue or transfer shares of Company Stock with
respect to 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) Ownership of Stock. A Grantee or successor shall have no rights
as a shareholder with respect to any shares of Company Stock covered by a Grant
until the shares are issued or transferred to the Grantee or successor on the
stock transfer records of the Company.
(d) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Letters 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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