PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
1990 INCENTIVE AND NONQUALIFIED
STOCK OPTION PLAN
(As Amended and Restated Effective July 1, 1997)
Table of Contents
Page
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1. Purpose......................................................... 1
2. Administration.................................................. 2
3. Eligibility..................................................... 2
4. Stock........................................................... 2
5. Granting of Options............................................. 3
6. Annual Limit.................................................... 3
7. Terms and Conditions of Options................................. 4
8. Forfeiture...................................................... 9
9. Option Agreements -- Other Provisions........................... 9
10. Capital Adjustments............................................. 9
11. Certain Corporate Transactions.................................. 9
12. Exercise Upon Change in Control................................. 10
13. Amendment or Termination of the Plan............................ 11
14. Rights.......................................................... 12
15. Indemnification of Board and Committee.......................... 12
16. Application of Funds............................................ 12
17. Shareholder Approval............................................ 13
18. No Obligation to Exercise Option................................ 13
19. Termination of Plan............................................. 13
20. Governing Law................................................... 13
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
1990 INCENTIVE AND NONQUALIFIED
STOCK OPTION PLAN
(As Amended and Restated Effective July 1, 1997)
WHEREAS, the Pennsylvania Real Estate Investment Trust (the
"Trust") adopted the 1990 Incentive and Nonqualified Stock Option Plan (the
"Plan"), effective as of September 17, 1990, and has amended the Plan on one
occasion thereafter;
WHEREAS, Section 9 of the Plan provides that, subject to
certain inapplicable limitations, the Plan may be amended;
WHEREAS, the Trust wishes to amend and restate the Plan (i)
to reflect recent changes made to rules promulgated under Section 16(b) of the
Securities Exchange Act of 1934, (ii) to reflect changes made to the Internal
Revenue Code of 1986, as amended (particularly, the addition of Section 162(m)
to the Code), (iii) to provide Key Employees with additional methods of
exercising stock options to be granted in the future; and (iv) to make certain
other technical changes.
NOW THEREFORE, effective as of July 1, 1997, the Plan shall
be amended and restated as follows:
1. Purpose. This Pennsylvania Real Estate Investment Trust 1990
Incentive and Nonqualified Stock Option Plan (the "Plan") is intended to
provide a means whereby the Trust may, through the grant of incentive stock
options and nonqualified stock options (collectively, the "Options") to
purchase common shares of the Trust ("Common Stock") to officers and other key
employees of the Trust ("Key Employees"), attract and retain such Key
Employees and motivate them to exercise their best efforts on behalf of the
Trust and of any Related Corporation. For purposes of the Plan, a "Related
Corporation" shall mean either a "subsidiary corporation" of the Trust, as
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended
(the "Code"), or the "parent corporation" of the Trust, as defined in Section
424(e) of the Code.
As used in the Plan, (i) the term "ISO" shall mean an option
which, at the time such option is granted, qualifies as an incentive stock
option within the meaning of Section 422 of the Code and is designated as an
ISO in the "Option Agreement" (as defined in Section 9 hereof); and (ii) the
term "NQSO" shall mean an option which, at the time such option is granted,
does not qualify as an ISO, and is designated as a nonqualified stock option
in the Option Agreement.
2. Administration
(a) The Plan shall be administered by the Trust's Executive
Compensation and Human Resources Committee (the "Committee"), which shall
consist solely of not fewer than two non-employee trustees (directors) of the
Trust (within the meaning of Rule 16b-3(b)(3) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any successor thereto) who
are also outside trustees (directors) (within the meaning of Treas. Reg.
ss.1.162-27(e)(3), or any successor thereto) of the Trust, and who shall be
appointed by, and shall serve at the pleasure of, the Trust's Board of
Trustees (the "Board"). Each member of the Committee, while serving as such,
shall be deemed to be acting in his capacity as a trustee of the Trust.
(b) The Committee shall have full authority, subject to the
terms of the Plan, to select the Key Employees to be granted Options under the
Plan, to grant Options on behalf of the Trust, and to set the date of grant
and the other terms of such Options. The Committee may correct any defect,
supply any omission, and reconcile any inconsistency in the Plan and in any
Option granted hereunder in the manner and to the extent it deems desirable.
The Committee may also, in its discretion but with the written consent of the
Key Employee, revise previously granted Options (including extending the
exercise date of any outstanding Option held by a Key Employee with at least
15 years of service who is retiring from the Trust), adjust the price of an
Option, or cancel an Option and grant a new Option to replace the cancelled
Option. The Committee also shall have the authority to establish such rules
and regulations, not inconsistent with the provisions of the Plan, for the
proper administration of the Plan, to amend, modify, or rescind any such rules
and regulations, and to make such determinations and interpretations under, or
in connection with, the Plan, as it deems necessary or advisable. All such
rules, regulations, determinations, and interpretations shall be binding and
conclusive upon the Trust, its shareholders, and all Key Employees, upon their
respective legal representatives, beneficiary, successors, and assigns, and
upon all other persons claiming under or through any of them.
No member of the Board or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan or any
Option granted under it.
3. Eligibility. The class of employees who shall be eligible to
receive Options under the Plan shall be the Key Employees (including any
trustees who also are officers or key employees) of the Trust. More than one
Option may be granted to a Key Employee under the Plan. A Key Employee who has
been granted an Option under the Plan shall hereinafter be referred to as an
"Optionee."
4. Stock. Options may be granted under the Plan to purchase up to a
maximum of 400,000 shares of Common Stock, par value $1.00 per share;
provided, however, that no Key Employee shall receive Options for more than
50,000 shares of the Trust's Common Stock in any single calendar year.
However, both limits in the preceding sentence shall be subject to adjustment
as hereinafter provided. Shares issuable under the Plan may be
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authorized but unissued shares or reacquired shares, and the Trust may
purchase shares required for this purpose, from time to time, if it deems such
purchase to be advisable.
If any Option granted under the Plan expires or otherwise
terminates for any reason whatsoever (including, without limitation, the
Optionee's surrender thereof) without having been exercised, the shares
subject to the unexercised portion of the Option shall continue to be
available for the granting of Options under the Plan as fully as if the shares
had never been subject to an Option. However, (i) if an Option is cancelled,
the shares of Common Stock covered by the cancelled Option shall be counted
against the maximum number of shares specified above for which Options may be
granted to a single Key Employee, and (ii) if the exercise price of an Option
is reduced after the date of grant, the transaction shall be treated as a
cancellation of the original Option and the grant of a new Option for purposes
of such maximum.
5. Granting of Options. From time to time until the expiration or
earlier suspension or discontinuance of the Plan, the Committee may, on behalf
of the Trust, grant to Key Employees under the Plan such Options as it
determines are warranted; provided, however, that grants of ISOs and NQSOs
shall be separate and not in tandem. In making any determination as to whether
a Key Employee shall be granted an Option, the type of Option to be granted,
the number of shares to be covered by the Option, and other terms of the
Option, the Committee shall take into account the duties of the Key Employee,
his present and potential contributions to the success of the Trust, the tax
implications to the Trust and the Key Employee of any Option granted, and such
other factors as the Committee shall deem relevant in accomplishing the
purposes of the Plan. Moreover, the Committee may provide in the Option that
said Option may be exercised only if certain conditions, as determined by the
Committee, are fulfilled.
6. Annual Limit
(a) ISOs. The aggregate fair market value (determined under
Section 7(b) hereof as of the date the ISO is granted) of the Common Stock
with respect to which ISOs are exercisable for the first time by a Key
Employee during any calendar year (counting ISOs under this Plan and incentive
stock options under any other stock option plan of the Trust or a Related
Corporation) shall not exceed $100,000. If an Option intended as an ISO is
granted to a Key Employee and the Option may not be treated in whole or in
part as an ISO pursuant to the $100,000 limitation, the Option shall be
treated as an ISO to the extent it may be so treated under the limitation and
as an NQSO as to the remainder. For purposes of determining whether an ISO
would cause the limitation to be exceeded, ISOs shall be taken into account in
the order granted.
(b) NQSOs. The annual limits set forth above for ISOs shall
not apply to NQSOs.
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7. Terms and Conditions of Options. Options granted pursuant to the
Plan shall include expressly or by reference the following terms and
conditions, as well as such other provisions not inconsistent with the
provisions of the Plan (and, for ISOs granted under the Plan, the provisions
of Section 422(b) of the Code), as the Committee shall deem desirable --
(a) Number of Shares. The Option shall state the number of
shares of Common Stock to which the Option pertains.
(b) Price. The Option shall state the Option price which
shall be determined and fixed by the Committee in its discretion but, in the
case of an ISO, shall not be less than the higher of 100 percent (110 percent
in the case of a more-than-10-percent shareholder, as provided in subsection
(j) below) of the fair market value of the optioned shares of Common Stock on
the date the ISO is granted, or the par value thereof, and, in the case of an
NQSO, shall not be less than the higher of 100 percent of the fair market
value of the optioned shares of Common Stock on the date the NQSO is granted,
or the par value thereof.
The fair market value of a share of Common Stock shall be
arrived at by a good faith determination of the Committee and shall be --
(i) if there are sales of Common Stock on a
registered securities exchange or in an over-the-counter market on
the date of grant, then the mean between the highest and lowest
quoted selling price on the date of grant; or
(ii) if there are no such sales of Common Stock on
the date of grant but there are such sales on dates within a
reasonable period both before and after the date of grant, then the
weighted average of the means between the highest and lowest selling
price on the nearest date before and the nearest date after the date
of grant; or
(iii) if actual sales are not available during a
reasonable period beginning before and ending after the date of
grant, then the mean between the bid and asked price on the date of
grant as reported by the National Quotation Bureau; or
(iv) if (i) through (iii) are not applicable, such
other method of determining fair market value as shall be authorized
by the Code, or the rules or regulations thereunder, and adopted by
the Committee.
Where the fair market value of the optioned shares of Common Stock is
determined under (ii) above, the average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the date of
grant shall be weighted inversely by the respective numbers of trading days
between the selling dates and the date of grant (i.e, the valuation date), in
accordance with Treas. Reg. ss. 20.2031-2(b)(1), or any successor thereto.
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(c) Term
(1) ISOs. Subject to earlier termination as provided
in subsections (e), (f), and (g) below and in Section 9 hereof, the term of each
ISO shall be not more than 10 years (five years in the case of a
more-than-10-percent shareholder, as discussed in subsection (j) below) from the
date of grant.
(2) NQSOs. Subject to earlier termination as provided
in subsections (e), (f), and (g) below and in Section 9 hereof, the term of each
NQSO shall be not more than 10 years from the date of grant.
(d) Exercise. Options shall be exercisable in such
installments and on such dates as the Committee may specify; provided that (i)
in the case of new Options granted to an Optionee to replace options (whether
granted under the Plan or otherwise) held by the Optionee or in the case of
Options repriced by the Committee, the new or repriced Options may be made
exercisable, if so determined by the Committee, in its discretion, at the
earliest date the original Options were exercisable, but not earlier than
three months from the date of grant of the new Options or the repricing of the
original Options; and (ii) the Committee may accelerate the exercise date
and/or extend the exercise period of any outstanding Options, in its
discretion, if it deems such acceleration or extension to be desirable.
Any exercisable Options may be exercised at any time up to
the expiration or termination of the Option. Exercisable Options may be
exercised, in whole or in part and from time to time, by giving written notice
of exercise to the Trust at its principal office, specifying the number of
shares to be purchased and accompanied by payment in full of the aggregate
Option exercise price for such shares. Only full shares shall be issued under
the Plan, and any fractional share which might otherwise be issuable upon
exercise of an Option granted hereunder shall be forfeited.
The Option price shall be payable in the case of an ISO, if
the Committee in its discretion causes the Option Agreement so to provide, and
in the case of an NQSO, if the Committee in its discretion so determines at or
prior to the time of exercise --
(1) in cash or its equivalent;
(2) in shares of Common Stock previously acquired by
the Optionee; provided that (i) if such shares of Common Stock were acquired
through the exercise of an ISO and are used to pay the Option price for ISOs,
such shares have been held by the Optionee for a period of not less than the
holding period described in Section 422(a)(1) of the Code on the date of
exercise, or (ii) if such shares of Common Stock were acquired through the
exercise of an NQSO and are used to pay the Option price of an ISO, or if such
shares of Common Stock were acquired through the exercise of an ISO or an NQSO
and are used to pay the Option price of an NQSO, such shares have been held by
the Optionee for a period of more than one year on the date of exercise;
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(3) by delivering a properly executed notice of
exercise of the Option to the Trust and a broker, with irrevocable instructions
to the broker promptly to deliver to the Trust the amount of sale or loan
proceeds necessary to pay the exercise price of the Option;
(4) if the Optionee is designated as an "eligible
participant" by the Committee at the date of grant in the case of an ISO, or at
or after the date of grant in the case of an NQSO, and if the Optionee
thereafter so requests, (i) the Trust will loan the Optionee the money required
to pay the exercise price of the Option; (ii) any such loan to an Optionee shall
be made only at the time the Option is exercised; and (iii) the loan will be
made on the Optionee's personal, negotiable, demand promissory note, bearing
interest at the lowest rate which will avoid imputation of interest under
Section 7872 of the Code, and including such other terms as the Committee may
prescribe; or
(5) in any combination of paragraphs (1), (2), (3),
and (4) above.
In the event the Option price is paid, in whole or in part,
with shares of Common Stock, the portion of the Option price so paid shall be
equal to the aggregate fair market value (determined under subsection (b)
above, but as of the date of exercise of the Option, rather than the date of
grant) of the Common Stock so surrendered in payment of the Option price.
(e) Termination of Employment. If an Optionee's employment
by the Trust is terminated by either party prior to the expiration date fixed
for his Option for any reason other than retirement, death, disability, change
in control, cause, or employment with a competitor, such Option may be
exercised, to the extent of the number of shares with respect to which the
Optionee could have exercised it on the date of such termination, or to any
greater extent permitted by the Committee, by the Optionee at any time prior
to the earlier of (i) the expiration date specified in such Option, or (ii) an
accelerated expiration date determined by the Committee, in its discretion,
and set forth in the Option Agreement; except that, subject to Section 9
hereof, such accelerated expiration date shall not be earlier than the date of
the Optionee's termination of employment, and in the case of ISOs, such
accelerated expiration date shall not be later than three months after such
termination of employment.
(f) Retirement or Disability. If an Optionee attains the age
which the Trust may from time to time establish as the retirement age for any
class of its employees or becomes disabled (within the meaning of Section
22(e)(3) of the Code) during his employment and, prior to the expiration date
fixed for his Option, his employment is terminated as a consequence of such
retirement or disability, such Option may be exercised, to the extent of the
number of shares with respect to which the Optionee could have exercised it on
the date of such termination, or to any greater extent permitted by the
Committee, by the Optionee at any time prior to the earlier of (i) the
expiration date specified in such Option, or (ii) an accelerated termination
date determined by the Committee, in its discretion, and set forth in the
Option Agreement; except that, subject to
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Section 9 hereof, such accelerated termination date shall not be earlier than
the date of the Optionee's termination of employment by reason of retirement
or disability, and in the case of ISOs, such accelerated termination date
shall not be later than three months after such termination of employment. In
the event of the Optionee's legal disability, such Option may be exercised by
the Optionee's legal representative.
(g) Death. If an Optionee dies during his employment, and
prior to the expiration date fixed for his Option, or if an Optionee whose
employment is terminated for any reason, dies following his termination of
employment but prior to the earliest of (i) the expiration date fixed for his
Option, (ii) the expiration of the period determined under subsections (e) and
(f) above, or (iii) in the case of an ISO, three months following termination
of employment, such Option may be exercised, to the extent of the number of
shares with respect to which the Optionee could have exercised it on the date
of his death, or to any greater extent permitted by the Committee, by the
Optionee's estate, personal representative, or beneficiary who acquired the
right to exercise such Option by bequest or inheritance or by reason of the
death of the Optionee. Such post-death exercise may occur at any time prior to
the earlier of (i) the expiration date specified in such Option or (ii) an
accelerated termination date determined by the Committee, in its discretion,
and set forth in the Option Agreement; except that, subject to Section 9
hereof, such accelerated termination date shall not be earlier than one year,
nor later than three years, after the date of death.
(h) Non-Transferability; Registration. No ISO and (except as
otherwise provided in any Option Agreement) no NQSO shall be assignable or
transferable by the Optionee other than by will or by the laws of descent and
distribution, and (subject to the preceding clause) during the lifetime of the
Optionee, shall be exercisable only by him or by his guardian or legal
representative. If the Optionee is married at the time of exercise and if the
Optionee so requests at the time of exercise, the certificate or certificates
shall be registered in the name of the Optionee and the Optionee's spouse,
jointly, with right of survivorship.
(i) Rights as a Shareholder. An Optionee shall have no
rights as a shareholder with respect to any shares covered by his Option until
the issuance of a stock certificate to him for such shares.
(j) Ten Percent Shareholder. If the Optionee owns more than
10 percent of the total combined voting power of all shares of stock of the
Trust at the time an ISO is granted to him, the Option price for the ISO shall
be not less than 110 percent of the fair market value (as determined under
subsection (b) above) of the optioned shares of Common Stock on the date the
ISO is granted, and such ISO, by its terms, shall not be exercisable after the
expiration of five years from the date the ISO is granted. The conditions set
forth in this subsection shall not apply to NQSOs.
(k) Listing and Registration of Shares. Each Option shall be
subject to the requirement that, if at any time the Committee shall determine,
in its discretion, that the
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listing, registration, or qualification of the shares of Common Stock covered
thereby upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such
Option or the purchase of shares of Common Stock thereunder, or that action by
the Trust or by the Optionee should be taken in order to obtain an exemption
from any such requirement, no such Option may be exercised, in whole or in
part, unless and until such listing, registration, qualification, consent,
approval, or action shall have been effected, obtained, or taken under
conditions acceptable to the Committee. Without limiting the generality of the
foregoing, each Optionee or his legal representative or beneficiary may also
be required to give satisfactory assurance that shares purchased upon exercise
of an Option are being purchased for investment and not with a view to
distribution, and certificates representing such shares may be legended
accordingly.
(l) Withholding and Use of Shares to Satisfy Tax
Obligations. The obligation of the Trust to deliver shares of Common Stock
upon the exercise of any Option (or cash in lieu thereof) shall be subject to
applicable federal, state, and local tax withholding requirements.
If the exercise of any Option is subject to the withholding
requirements of applicable federal tax law, the Committee, in its discretion,
may permit or require the Optionee to satisfy the federal withholding tax, in
whole or in part, by electing to have the Trust withhold shares of Common
Stock subject to the exercise (or by returning previously acquired shares of
Common Stock to the Trust). The Trust may not withhold shares in excess of the
number necessary to satisfy the minimum federal income tax withholding
requirements. Shares of Common Stock shall be valued, for purposes of this
subsection, at their fair market value under subsection (b) above, but as of
the date the amount attributable to the exercise of the Option is includable
in income by the Optionee under Section 83 of the Code (the "Determination
Date"). If shares of Common Stock acquired by the exercise of an ISO are used
to satisfy the withholding requirement described above, such shares of Common
Stock must have been held by the Optionee for a period of not less than the
holding period described in Section 422(a)(1) of the Code as of the
Determination Date.
The Committee shall adopt such withholding rules as it deems
necessary to carry out the provisions of this subsection.
(m) Loans. If an Optionee is designated as an "eligible
participant" by the Committee at the date of grant in the case of an ISO, or
at or after the date of grant in the case of an NQSO, and if the Optionee
thereafter so requests, the Trust will loan the Optionee the money required to
satisfy any regular income tax obligations (as opposed to alternative minimum
tax obligations) resulting from the exercise of any Options. Any loan or loans
to an Optionee shall be made only at the time any such tax resulting from such
exercise is due. The Committee, in its discretion, may require an affidavit
from the Optionee specifying the amount of the tax required to be paid and the
date when such tax must be paid. The loan will be made on the Optionee's
personal, negotiable, demand promissory note, bearing
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interest at the lowest rate which will avoid imputation of interest under
Section 7872 of the Code, and including such other terms as the Committee may
prescribe.
8. Forfeiture. If the employment of an Optionee is terminated for
"Cause" (as defined below) or the Optionee terminates his employment and
commences working for a "Competitor" (as defined below), his right under any
then outstanding Option shall terminate at the time of such termination of
employment. As used in this Section, in the case of any Optionee not subject
to a written employment agreement, "Cause" shall mean any willful or
intentional act having the effect of injuring the reputation, business, or
business relationships of the Trust, or any repeated or continuous failure,
neglect, or refusal to perform in a satisfactory manner duties assigned to
such Optionee. In the case of an Optionee subject to a written employment
agreement, "Cause" shall mean any action giving the Trust the right to
terminate such person's employment agreement for Cause. "Competitor" shall
mean any person or entity other than the Trust engaged in a business
competitive (in the good faith judgment of the Committee) with that of the
Trust.
9. Option Agreements -- Other Provisions. Options granted under the
Plan shall be evidenced by written documents ("Option Agreements") in such
form as the Committee shall from time to time approve, and containing such
provisions not inconsistent with the provisions of the Plan (and, for ISOs
granted pursuant to the Plan, not inconsistent with Section 422(b) of the
Code), as the Committee shall deem advisable. The Option Agreements shall
specify whether the Option is an ISO or NQSO. Each Optionee shall enter into,
and be bound by, an Option Agreement as soon as practicable after the grant of
an Option.
10. Capital Adjustments. The number of shares which may be issued
under the Plan, and the maximum number of shares with respect to which Options
may be granted to any Key Employee under the Plan, both as stated in Section 4
hereof, and the number of shares issuable upon exercise of outstanding Options
under the Plan (as well as the Option price per share under such outstanding
Options) shall, subject to the provisions of Section 424(a) of the Code, be
adjusted, as may be deemed appropriate by the Committee, to reflect any stock
dividend, stock split, share combination, or similar change in the
capitalization of the Trust. In the event any such change in capitalization
cannot be reflected in a straight mathematical adjustment of the number of
shares issuable upon the exercise of outstanding Options (and a straight
mathematical adjustment of the exercise price thereof), the Committee shall
make such adjustments as are appropriate to reflect most nearly such straight
mathematical adjustment. Such adjustments shall be made only as necessary to
maintain the proportionate interest of Optionees, and preserve, without
exceeding, the value of Options.
11. Certain Corporate Transactions. In the event of a corporate
transaction (as that term is described in Section 424(a) of the Code and the
Treasury Regulations issued thereunder as, for example, a merger,
consolidation, acquisition of property or stock, separation, reorganization,
or liquidation), each outstanding Option shall be assumed by the surviving or
successor corporation; provided, however, that, in the event of a proposed
corporate transaction, the Committee may terminate all or a portion of the
outstanding
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Options if it determines that such termination is in the best interests of the
Trust. If the Committee decides to terminate outstanding Options, the
Committee shall give each Key Employee holding an Option to be terminated not
fewer than seven days' notice prior to any such termination, and any Option
which is to be so terminated may be exercised (if and only to the extent that
it is then exercisable) up to, and including the date immediately preceding
such termination. Further, as provided in Section 7(d) hereof, the Committee,
in its discretion, may accelerate, in whole or in part, the date on which any
or all Options become exercisable.
The Committee also may, in its discretion, change the terms
of any outstanding Option to reflect any such corporate transaction, provided
that, in the case of ISOs, such change would not constitute a "modification"
under Section 424(h) of the Code, unless the Optionee consents to the change.
12. Exercise Upon Change in Control
(a) Notwithstanding any other provision of this Plan, all
outstanding Options shall become fully vested and exercisable upon a Change in
Control.
(b) "Change in Control" shall mean:
(1) The acquisition by an individual, entity, or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
(a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30 percent or more of the combined voting
power of the then outstanding voting securities of the Trust entitled to vote
generally in the election of trustees (the "Outstanding Shares"); provided,
however, that the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Trust, (ii) any acquisition by
the Trust, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Trust or any corporation controlled by the Trust,
(iv) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of paragraph (3) below, or (v) any acquisition
by any Person entitled to file Form 13G under the Exchange Act with respect to
such acquisition; or
(2) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a trustee subsequent to the date hereof whose appointment, election, or
nomination for election by the Trust's shareholder, was approved by a vote of at
least a majority of the trustees then comprising the Incumbent Board (other than
an appointment, election, or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the trustees of the Trust, as such terms are
used in Rule 14a-1 promulgated under the Exchange Act) shall be, for purposes of
the Plan, considered as though such person were a Member of the Incumbent Board;
or
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(3) approval by the shareholders of the Trust of a
reorganization, merger or consolidation, or sale or other disposition of all or
substantially all of the assets of the Trust (a "Business Combination"), in each
case, unless, following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners of the
Outstanding Shares immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 60 percent of, respectively, the then
outstanding shares of stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
trustees, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Trust or all or substantially all of the Trust's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Shares, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Trust or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 30 percent
or more of, respectively, the then outstanding shares of stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination, and
(iii) at least a majority of the members of the board of trustees or directors
of the entity resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(4) approval by the shareholders of the Trust of a
complete liquidation or dissolution of the Trust.
13. Amendment or Termination of the Plan
(a) In General. The Board, pursuant to a written resolution,
from time to time may suspend or terminate the Plan or amend it, and the
Committee may amend any outstanding Options in any respect whatsoever; except
that, without the approval of the shareholders (given in the manner set forth
in subsection (b) below) --
(1) any amendment which would --
(A) change the class of employees eligible
to participate in the Plan with respect to ISOs;
(B) except as permitted under Section 9
hereof, increase the maximum number of shares of Common Stock with respect to
which ISOs may be granted under the Plan; or
(C) extend the duration of the Plan under
Section 19 hereof with respect to any ISOs granted hereunder.
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(2) No amendment requiring shareholder approval
pursuant to Treas. Reg. ss. 1.162-27(e)(4)(vi) or any successor thereto may be
made.
Notwithstanding the foregoing, no such suspension, discontinuance, or
amendment shall materially impair the rights of any holder of an outstanding
Option without the consent of such holder.
(b) Manner of Shareholder Approval. The approval of
shareholders must be effected by a majority of the votes cast (including
abstentions, to the extent abstentions are counted as voting under applicable
state law), in a separate vote at a duly held shareholders' meeting at which a
quorum representing a majority of all outstanding voting stock is, either in
person or by proxy, present and voting on the Plan.
14. Rights. Neither the adoption of the Plan nor any action of the
Board or the Committee shall be deemed to give any individual any right to be
granted an Option, or any other right hereunder, unless and until the
Committee shall have granted such individual an Option, and then his rights
shall be only such as are provided by the Option Agreement. Notwithstanding
any provisions of the Plan or the Option Agreement with a Key Employee, the
Trust shall have the right, in its discretion but subject to any employment
contract entered into with the Key Employee, to retire the Key Employee at any
time pursuant to its retirement rules or otherwise to terminate his employment
at any time for any reason whatsoever.
15. Indemnification of Board and Committee. Without limiting any
other rights of indemnification which they may have from the Trust, any
Related Corporation, or TRO, the members of the Board and the members of the
Committee shall be indemnified by the Trust against all costs and expenses
reasonably incurred by them in connection with any claim, action, suit, or
proceeding to which they or any of them may be a party by reason of any action
taken or failure to act under, or in connection with, the Plan, or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by legal counsel selected by the Trust)
or paid by them in satisfaction of a judgment in any such action, suit, or
proceeding, except a judgment based upon a finding of willful misconduct or
recklessness on their part. Upon the making or institution of any such claim,
action, suit, or proceeding, the Board or Committee member shall notify the
Trust in writing, giving the Trust an opportunity, at its own expense, to
handle and defend the same before such Board or Committee member undertakes to
handle it on his own behalf. The provisions of this Section shall not give
members of the Board or the Committee greater rights than they would have
under the Trust's by-laws or Pennsylvania law.
16. Application of Funds. The proceeds received by the Trust from the
sale of Common Stock pursuant to Options granted under the Plan shall be used
for general corporate purposes. Any cash received in payment for shares upon
exercise of an Option shall be added to the general funds of the Trust and
shall be used for its corporate purposes.
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Any Common Stock received in payment for shares upon exercise of an Option
shall become treasury stock.
17. Shareholder Approval. This Plan was effective on September 17,
1990 (the date the Plan was adopted by the Board). The amendment and
restatement of the Plan shall become effective on July 1, 1997; provided,
however, that if the Plan is not approved by the shareholders, in the manner
described in Section 13(b) hereof, within 12 months before or after the date
the amended and restated Plan is adopted by the Board, all Options granted on
and after July 1, 1997 hereunder shall be null and void and no additional
Options shall be granted hereunder.
18. No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon a Key Employee to exercise such Option.
19. Termination of Plan. Unless earlier terminated as provided in the
Plan, the Plan and all authority granted hereunder shall terminate absolutely
at 12:00 midnight on September 16, 2000, which date is within 10 years after
the date the Plan was adopted by the Board, and no Options hereunder shall be
granted thereafter. Nothing contained in this Section, however, shall
terminate or affect the continued existence of rights created under Options
issued hereunder, and outstanding on the date set forth in the preceding
sentence, which by their terms extend beyond such date.
20. Governing Law. The Plan shall be governed by the applicable Code
provisions to the maximum extent possible. Otherwise, the laws of the
Commonwealth of Pennsylvania shall govern the operation of, and the rights of
Key Employees under, the Plan, and Options granted hereunder.
PHB 46319
071497
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