1
Exhibit 10.5
THE PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
(As amended and restated effective February 15, 2001)
1. DEFINITIONS
In this Plan, except where the context otherwise indicates, the
following definitions apply.
1.1. "Agreement" means a written agreement implementing a grant of an
Option, Right or Performance Unit or an award of Incentive Shares.
1.2. "Board" means the Board of Directors of the Corporation.
1.3. "Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
1.4. "Committee" means (a) in the case of grants and awards to Eligible
Persons other than Directors ("Employee Awards"), the Board's Personnel and
Compensation Committee, or such other committee appointed by the Board to
administer Employee Awards, all of the members of which shall be "non-employee
directors" as defined in Rule 16b-3 (b)(3)(i) under the Exchange Act or any
similar successor rule and "outside directors" as defined in Treas. Reg. Section
1.162-27(e)(3) or any similar successor regulation and (b) in the case of grants
and awards to Directors, the Board's Committee on Corporate Governance, unless
otherwise determined by the Board.
1.5. "Common Stock" means the common stock of the Corporation.
1.6. "Corporation" means The PNC Financial Services Group, Inc.
1.7. "Date of Exercise" means the date on which the Corporation
receives notice of the exercise of an Option, Right or Performance Unit in
accordance with the terms of Article 9.
1.8. "Date of Grant" means the date on which an Option, Right or
Performance Unit is granted or Incentive Shares are awarded by the Committee or
such later date as may be specified by the Committee in authorizing the grant or
award.
1.9. "Director" means any member of the Board who is not also an
employee of the Corporation or any Subsidiary.
1.10. "Eligible Person" means a Senior Executive or Director.
1.11. "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2
1.12. "Fair Market Value" of a Share means the amount equal to the fair
market value of a Share as determined pursuant to a reasonable method adopted by
the Committee in good faith for such purpose.
1.13. "Grantee" means an Eligible Person to whom Incentive Shares have
been awarded pursuant to Article 12.
1.14. "Incentive Shares" means Shares awarded pursuant to the
provisions of Article 12.
1.15. "Incentive Stock Option" means an Option granted under the Plan
that qualifies as an incentive stock option under Section 422 of the Code and
that the Corporation designates as such in the Agreement granting the Option.
1.16. "Nonstatutory Stock Option" means an Option granted under the
Plan that is not an Incentive Stock Option.
1.17. "Option" means an option to purchase Shares granted under the
Plan in accordance with the terms of Article 6.
1.18. "Option Period" means the period during which an Option may be
exercised.
1.19. "Option Price" means the price per Share at which an Option may
be exercised. The Option Price shall be determined by the Committee, but, unless
otherwise determined by the Committee pursuant to Section 3.7, in no event shall
the Option Price be less than the Fair Market Value per Share determined as of
the Date of Grant.
1.20. "Optionee" means an Eligible Person to whom an Option, Right or
Performance Unit has been granted.
1.21. "Performance Period" means the period or periods during which
each performance criterion of a Performance Unit will be measured against the
performance standards established by the Committee and specified in the
Agreement relating thereto.
1.22. "Performance Unit" means a performance unit granted under the
Plan in accordance with the terms of Article 8.
1.23. "Performance Unit Exercise Period" means the period during which
a Performance Unit may be exercised.
1.24. "Plan" means The PNC Financial Services Group, Inc. 1997
Long-Term Incentive Award Plan, as amended from time to time.
1.25. "Related Option" means an Option granted in connection with a
specified Right or Performance Unit.
- 2 -
3
1.26. "Related Performance Unit" means a Performance Unit granted in
connection with a specified Option.
1.27. "Related Right" means a Right granted in connection with a
specified Option.
1.28. "Right" means a stock appreciation right granted under the Plan
in accordance with the terms of Article 7.
1.29. "Right Period" means the period during which a Right may be
exercised.
1.30. "Senior Executive" means any officer or key employee of the
Corporation or a Subsidiary who is designated as a "Senior Executive" by the
Committee.
1.31. "Share" means a share of authorized but unissued Common Stock or
a reacquired share of Common Stock.
1.32. "Subsidiary" means a corporation at least 80% of the total
combined voting power of all classes of stock of which is owned by the
Corporation, either directly or through one or more other Subsidiaries, except
that with respect to Nonstatutory Stock Options, Rights, Performance Units and
Incentive Shares granted or awarded after March 27, 2000, such term shall mean a
corporation, bank, partnership, business trust, limited liability company or
other form of business organization which is a consolidated subsidiary of the
Corporation under generally accepted accounting principles.
2. PURPOSE
The Plan is intended to assist in attracting, retaining, and motivating
Eligible Persons of outstanding ability and to promote the identification of
their interests with those of the shareholders of the Corporation.
3. ADMINISTRATION
The Plan shall be administered by the Committee or by the Chairman of
the Committee in the exercise of such authority as the Committee may delegate to
him or her from time to time, provided that Section 162(m)(4)(C) of the Code
does not require action by the Committee as a whole. In addition to any other
powers granted to the Committee, it shall have the following powers, subject to
the express provisions of the Plan:
3.1. to determine in its discretion the Eligible Persons to whom
Options, Performance Units or Rights shall be granted and to whom Incentive
Shares shall be awarded, the number of Shares to be subject to each Option,
Right, Performance Unit grant, or Incentive Share award, and the terms upon
which Options, Rights or Performance Units may be acquired, exercised, or
forfeited and the terms and conditions of Incentive Share awards;
- 3 -
4
3.2. to determine all other terms and provisions of each Agreement,
which need not be identical;
3.3. without limiting the generality of the foregoing, to provide in
its discretion in an Agreement:
(i) for an agreement by the Optionee or Grantee to render
services to the Corporation or a Subsidiary upon such terms and
conditions as may be specified in the Agreement, provided that the
Committee shall not have the power under the Plan to commit the
Corporation or any Subsidiary to employ or otherwise retain any
Optionee or Grantee;
(ii) for restrictions on the transfer, sale or other
disposition of Shares issued to the Optionee upon the exercise of an
Option, Right or Performance Unit, or for conditions with respect to
the issuance of Incentive Shares;
(iii) for an agreement by the Optionee or Grantee to resell to
the Corporation, under specified conditions, Shares issued upon the
exercise of an Option, Right or Performance Unit or awarded as
Incentive Shares;
(iv) for the payment of the Option Price upon the exercise of
an Option otherwise than in cash, including without limitation by
delivery of Shares valued at Fair Market Value on the Date of Exercise
of the Option or a combination of cash and Shares; by means of any
attestation procedure approved or ratified by the Committee; or by
delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the
Corporation the amount of sale or loan proceeds to pay the exercise
price;
(v) for the deferral of receipt of amounts that otherwise
would be distributed upon exercise of a Performance Unit, the terms and
conditions of any such deferral and any interest or dividend equivalent
or other payment that shall accrue with respect to deferred
distributions, subject to the provisions of Article 11;
(vi) for the forfeiture by any Optionee or Grantee of any
Option, Right, Performance Unit or Incentive Shares upon such terms and
conditions as the Committee may deem advisable from time to time; and
(vii) for the effect of a "change in control," as defined in
the Agreement, of the Corporation on the rights of an Optionee or
Grantee with respect to any Options, Rights, Performance Units or
Incentive Shares;
3.4. to construe and interpret the Agreements and the Plan;
3.5. to require, whether or not provided for in the pertinent
Agreement, of any person exercising an Option, Right or Performance Unit or
acquiring Incentive Shares, at the time of such exercise or acquisition, the
making of any representations or agreements
- 4 -
5
which the Committee may deem necessary or advisable in order to comply with
applicable securities, tax, or other laws;
3.6. to provide for satisfaction of an Optionee's or Grantee's tax
liabilities arising in connection with the Plan through, without limitation,
retention by the Corporation of shares of Common Stock otherwise issuable on the
exercise of a Nonstatutory Stock Option, Right or Performance Unit or pursuant
to an award of Incentive Shares or through delivery of Common Stock to the
Corporation by the Optionee or Grantee under such terms and conditions as the
Committee deems appropriate, including but not limited to any attestation
procedure approved or ratified by the Committee;
3.7. to provide with respect to any Option (other than a Reload Option,
as hereinafter defined) granted under the Plan on or after January 1, 1997,
that, if the Optionee, while an Eligible Person, exercises the Option or
satisfies any related tax withholding obligation in whole or in part by
surrendering already-owned shares of Common Stock, the Optionee will, subject to
this Section 3.7 and such other terms and conditions as may be imposed by the
Committee, receive an additional option ("Reload Option"). The Reload Option
will be to purchase, at Fair Market Value as of the date the original Option was
exercised, a number of shares of Common Stock equal to the number of whole
shares surrendered by the Optionee to exercise the original Option or to satisfy
any related tax withholding obligation. The Reload Option will be exercisable
only between its Date of Grant and the date of the expiration of the original
Option. A Reload Option shall be subject to such additional terms and conditions
as the Committee shall approve, which terms may provide that the Committee may
cancel the Optionee's right to receive the Reload Option and that the Reload
Option will be granted only if the Committee has not canceled such right prior
to the exercise of the original Option.
3.8. to make all other determinations and take all other actions
necessary or advisable for the administration of the Plan; and
3.9. to delegate to officers or managers of the Corporation or any
Subsidiary the authority to perform administrative functions under the Plan with
respect to grants and awards to Eligible Persons other than Directors, provided
that Section 162(m)(4)(C) of the Code does not require action by the Committee
as a whole with respect to such function.
Any determinations or actions made or taken by the Committee pursuant
to this Article shall be binding and final.
4. ELIGIBILITY
Options, Rights, Performance Units and Incentive Shares may be granted
or awarded only to Eligible Persons; provided, however, that Directors shall not
be granted Incentive Stock Options.
- 5 -
6
5. STOCK SUBJECT TO THE PLAN
5.1. The maximum number of Shares that may be issued or as to which
grants or awards may be made under the Plan (excluding Shares issued pursuant to
grants or awards made prior to February 20, 1997) shall not exceed the sum of
(i) 10,141,853 Shares plus (ii) as of January 1 of each calendar year commencing
with 1998 an additional number of Shares (which shall be cumulative from year to
year) equal to one and one-half percent (1.5%) of the total issued shares of
Common Stock (including reacquired Shares) at the end of the immediately
preceding calendar year. Notwithstanding the foregoing, in no event shall more
than three percent (3%) of the total issued shares of Common Stock (including
reacquired Shares) at the end of the immediately preceding calendar year be
cumulatively available for grants and awards made in any calendar year. The
maximum number of Shares as to which grants or awards may be made under the Plan
to one Senior Executive with respect to one calendar year shall be 1,000,000
(250,000 for calendar years 1997 through 1999). Notwithstanding the foregoing,
(a) grants of Incentive Stock Options may not be made with respect to more than
1,000,000 Shares during any calendar year, and (b) Incentive Share awards may
not be granted during any calendar year with respect to more than twenty percent
(20%) of the maximum number of Shares available for grants and awards made
during such calendar year. The limitation provided in the first sentence of this
Section 5.1 is hereinafter called the "Cumulative Limitation;" the limitation
provided in the second sentence is hereinafter called the "Annual Limitation;"
the limitation provided in the third sentence is hereinafter called the
"Individual Limitation;" the limitation provided in clause (a) of the fourth
sentence is hereinafter called the "ISO Limitation;" and the limitation provided
in clause (b) of the fourth sentence is hereinafter called the "Incentive Share
Limitation." For purposes of the Individual Limitation, to the extent consistent
with the requirements of the performance-based compensation exception under
Section 162(m) of the Code, a Reload Option (a) shall be deemed to have been
granted at the same time as, and as a part of, the original Option in respect of
which the Reload Option is granted and (b) shall not be deemed to increase the
number of Shares covered by such original Option.
5.2. If an Option, Right or Performance Unit expires or terminates for
any reason (other than termination by virtue of the exercise of a Related
Option, Related Right or Related Performance Unit, as the case may be) without
having been fully exercised, or if Shares covered by an Incentive Share award
are not issued or are forfeited Shares which had been subject to the Agreement
relating thereto shall for purposes of the Cumulative Limitation (and if granted
or awarded in the same calendar year, then also for purposes of the Annual
Limitation, the ISO Limitation, and the Incentive Share Limitation) again become
available for the grant of other Options, Rights and Performance Units or for
the award of additional Incentive Shares.
5.3. The Shares issued upon the exercise of a Right or Performance Unit
(or if cash is payable in connection with such exercise, that number of Shares
having a Fair Market Value equal to the cash payable upon such exercise), shall
be charged against the number of Shares issuable under the Plan and shall not
become available for the grant of
- 6 -
7
other Options, Rights and Performance Units or for the award of Incentive
Shares. If the Right referred to in the preceding sentence is a Related Right,
or if the Performance Unit referred to in the preceding sentence is a Related
Performance Unit, the Shares subject to the Related Option, to the extent not
charged against the number of Shares subject to the Plan in accordance with this
Section 5.3, shall for purposes of the Cumulative Limitation (and if granted in
the same calendar year, then also for purposes of the Annual Limitation) again
become available for the grant of other Options, Rights or Performance Units or
for the award of additional Incentive Shares.
6. OPTIONS
6.1. The Committee is hereby authorized to grant Incentive Stock
Options and Nonstatutory Stock Options to Senior Executives and to grant
Nonstatutory Stock Options to Directors, provided that the number of Options
granted to a Senior Executive during a calendar year shall not exceed the
Individual Limitation when aggregated with other grants or awards made to that
Senior Executive during that calendar year.
6.2. All Agreements granting Options shall contain a statement that the
Option is intended to be either (i) a Nonstatutory Stock Option or (ii) an
Incentive Stock Option.
6.3. The Option Period shall be determined by the Committee and
specifically set forth in the Agreement, provided that an Option shall not be
exercisable until the expiration of at least six months from the Date of Grant
(except that this limitation need not apply in the event of the death or
disability of the Optionee or as otherwise permitted by the Agreement upon a
change in control of the Corporation) or after ten years from the Date of Grant.
6.4. All Incentive Stock Options granted under the Plan shall comply
with the provisions of the Code governing incentive stock options and with all
other applicable rules and regulations.
6.5. All other terms of Options granted under the Plan shall be
determined by the Committee in its sole discretion.
7. RIGHTS
7.1. The Committee is hereby authorized to grant Rights to Eligible
Persons, provided that the number of Rights granted to a Senior Executive during
a calendar year shall not exceed the Individual Limitation when aggregated with
other grants or awards made to that Senior Executive during that calendar year.
7.2. A Right may be granted under the Plan:
(i) in connection with, and at the same time as, the grant of
an Option to an Eligible Person;
- 7 -
8
(ii) by amendment of an outstanding Nonstatutory Stock Option
granted under the Plan to an Eligible Person; or
(iii) independently of any Option granted under the Plan.
A Right granted under clause (i) or (ii) of the preceding sentence is a
Related Right. A Related Right may, in the Committee's discretion, apply to all
or a portion of the Shares subject to the Related Option.
7.3. A Right may be exercised in whole or in part as provided in the
Agreement, and, subject to the provisions of the Agreement, entitles its
Optionee to receive, without any payment to the Corporation (other than required
tax withholding amounts), either cash or that number of Shares (equal to the
highest whole number of Shares), or a combination thereof, in an amount or
having a Fair Market Value determined as of the Date of Exercise not to exceed
the number of Shares subject to the portion of the Right exercised multiplied by
an amount equal to the excess of the Fair Market Value per Share on the Date of
Exercise of the Right over either (i) the Fair Market Value per Share on the
Date of Grant of the Right or the base price determined by the Committee
pursuant to Section 3.7 if the Right is not a Related Right, or (ii) the Option
Price as provided in the Related Option if the Right is a Related Right.
7.4. The Right Period shall be determined by the Committee and
specifically set forth in the Agreement, provided, however:
(i) a Right may not be exercised until the expiration of at
least six months from the Date of Grant (except that this limitation
need not apply in the event of the death or disability of the Optionee
or as otherwise permitted by the Agreement upon a change in control of
the Corporation);
(ii) a Right will expire no later than the earlier of (A) ten
years from the Date of Grant, or (B) in the case of a Related Right,
the expiration of the Related Option; and
(iii) a Right that is a Related Right may be exercised only
when and to the extent the Related Option is exercisable.
7.5. The exercise, in whole or in part, of a Related Right shall cause
a reduction in the number of Shares subject to the Related Option equal to the
number of Shares with respect to which the Related Right is exercised.
Similarly, the exercise, in whole or in part, of a Related Option shall cause a
reduction in the number of Shares subject to the Related Right equal to the
number of Shares with respect to which the Related Option is exercised.
- 8 -
9
8. PERFORMANCE UNITS
8.1. The Committee is hereby authorized to grant Performance Units to
Eligible Persons, provided that the number of Performance Units granted to a
Senior Executive during a calendar year shall not exceed the Individual
Limitation when aggregated with other grants or awards made to that Senior
Executive during that calendar year.
8.2. Performance Units may be granted under the Plan:
(i) in connection with, and at the same time as, the grant of
a Nonstatutory Stock Option to an Eligible Person;
(ii) by amendment of an outstanding Nonstatutory Stock Option
granted under the Plan to an Eligible Person; or
(iii) independently of any Option granted under the Plan.
A Performance Unit granted under Subparagraph (i) or (ii) of the
preceding sentence is a Related Performance Unit. A Related Performance Unit
may, in the Committee's discretion, apply to all or a portion of the Shares
subject to the Related Option. A Performance Unit may not be granted in
connection with, or by amendment to, an Incentive Stock Option.
8.3. A Performance Unit may be exercised in whole or in part as
provided in the Agreement, and, subject to the provisions of the Agreement,
entitles its Optionee to receive, without any payment to the Corporation (other
than required tax withholding amounts), cash, Shares or a combination of cash
and Shares, based upon the degree to which performance standards established by
the Committee and specified in the Agreement have been achieved. During the
Performance Period, such performance standards may be particular to an Eligible
Person or the department, branch, Subsidiary or other unit in which he works, or
may be based on the performance of the Corporation generally. The performance
standards may be based on earnings or earnings growth; return on assets, equity
or investment; regulatory compliance; satisfactory internal or external audits;
improvement of financial ratings; reduction of nonperforming loans; achievement
of balance sheet or income statement objectives; or any other objective goals
established by the Committee, and may be absolute in their terms or measured
against or in relationship to other companies comparably, similarly or otherwise
situated.
8.4. The Performance Unit Exercise Period shall be determined by the
Committee and specifically set forth in the Agreement; provided, however:
(i) A Performance Unit may not be exercised until the
expiration of at least six months from the Date of Grant (except that
this limitation need not apply in the event of the death or disability
of the Optionee or as otherwise permitted by an Agreement upon a change
in control of the Corporation); and
- 9 -
10
(ii) a Performance Unit will expire no later than the earlier
of (A) ten years from the Date of Xxxxx, or (B) in the case of a
Related Performance Unit, the expiration of the Related Option.
8.5. Each Agreement granting Performance Units shall specify the number
of Performance Units granted; provided, that the maximum number of Related
Performance Units may not exceed the maximum number of Shares subject to the
Related Option and the number of Performance Units may not exceed the maximum
number of Shares subject to the Related Option and the maximum value of a
Related Performance Unit may not exceed the Fair Market Value of a Share subject
to the Related Option.
8.6. The exercise, in whole or in part, of Related Performance Units
shall cause a reduction in the number of Shares subject to the Related Option
and the number of Performance Units in accordance with the terms of the
Agreement. Similarly, the exercise, in whole or in part, of a Related Option
shall cause a reduction in the number of Related Performance Units equal to the
number of Shares with respect to which the Related Option is exercised.
9. EXERCISE; PAYMENT OF WITHHOLDING TAXES
An Option, Right or Performance Unit may, subject to the provisions of
the Agreement under which it was granted, be exercised in whole or in part by
the delivery to the Corporation of written notice of the exercise, in such form
as the Committee may prescribe, accompanied, in the case of an Option, by full
payment for the Shares with respect to which the Option is exercised, and in the
case of an Option, Right or Performance Unit, full payment for related
withholding taxes, if any. The receipt of Incentive Shares shall be subject to
full payment by the Grantee of any withholding taxes then required to be paid.
10. NONTRANSFERABILITY
Except as the Committee may expressly provide otherwise in or with
respect to an Agreement, including any Agreement in effect as of February 20,
1997, Options, Rights and Performance Units granted under the Plan shall not be
transferable otherwise than by will or the laws of descent and distribution, and
an Option, Right or Performance Unit may be exercised during his or her lifetime
only by the Optionee or, in the event of his or her legal incapacity, by his or
her legal representative. A Related Right or Related Performance Unit is
transferable only when the Related Option is transferable and only with the
Related Option and under the same conditions. An Optionee may also designate a
beneficiary to exercise his or her Options after the Optionee's death, provided
that the Committee has first expressly approved the procedures and forms
necessary to effect such a designation.
- 10 -
11
11. DEFERRAL OF AWARDS
If an Optionee so elects in accordance with the terms of an Agreement,
the Optionee may defer any or all of the amount otherwise payable on the
exercise of Performance Units in accordance with the provisions of a deferred
compensation plan maintained by the Corporation or a Subsidiary, provided:
(i) that the Optionee makes such election by delivering to the
Corporation written notice of such election, in such form as the
Committee may from time to time prescribe, prior to the beginning of
the Performance Period;
(ii) that such election shall be irrevocable until at least
six months after termination of the Optionee's employment; and
(iii) that such deferred payment shall be made in accordance
with the provisions of such deferred compensation plan.
12. INCENTIVE SHARE AWARDS
The Committee may, in its sole discretion, grant Incentive Share awards
to Eligible Persons, provided that the number of Incentive Share awards granted
to a Senior Executive during a calendar year shall not exceed the Individual
Limitation when aggregated with other grants or awards made to that Senior
Executive during that calendar year. Incentive Share awards shall entitle an
Eligible Person to receive Shares, to be issued at such times, subject to the
achievement of such performance standards or other goals, in recognition of such
performance or other achievements or for such other purposes, and on such other
terms and conditions, if any, as the Committee shall deem appropriate.
Performance standards may be based on earnings or earnings growth; return on
assets, equity or investment; regulatory compliance; satisfactory internal or
external audits; improvement of financial ratings; reduction of nonperforming
loans; achievement of balance sheet or income statement objectives; or any other
objective goals established by the Committee, and may be absolute in their terms
or measured against or in relationship to other companies comparably, similarly
or otherwise situated. The number of Incentive Share awards made to a Senior
Executive during a calendar year shall not exceed the Individual Limitation when
aggregated with other grants or awards made to that Senior Executive during that
calendar year.
13. CAPITAL ADJUSTMENTS
The number and class of Shares (or the Performance Unit equivalent)
subject to each outstanding Option, Right or Performance Unit or Incentive Share
award, the Option Price, and the aggregate number and class of Shares for which
grants or awards thereafter may be made, the Annual Limitation, the Individual
Limitation, the ISO Limitation, and the Incentive Share Limitation provided for
in Section 5.1, shall be subject to such adjustment, if any, as the Committee in
its sole discretion deems appropriate to reflect
- 11 -
12
such events as stock dividends, stock splits, recapitalizations, mergers,
consolidations or reorganizations of or by the Corporation.
14. TERMINATION OR AMENDMENT
The Board or the Committee may amend, alter or terminate this Plan in
any respect, at any time; provided, however, that, after this Plan has been
approved by the Shareholders of the Corporation, no amendment, alteration or
termination of this Plan shall be made by the Board or the Committee without
approval of (i) the Corporation's shareholders to the extent shareholder
approval of the amendment is required by applicable law or regulations or the
requirements of the principal exchange or interdealer quotation system on which
the Common Stock is listed or quoted, and (ii) each affected Optionee if such
amendment, alteration or termination would adversely affect his or her rights or
obligations under any grant or award made prior to the date of such amendment,
alteration or termination.
15. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS, RIGHTS AND PERFORMANCE
UNITS
Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Options, Rights and
Performance Units, or accept the surrender of outstanding options, rights and
performance units (to the extent not theretofore exercised) granted under the
Plan or under any other plan of the Corporation, a Subsidiary or a company or
similar entity acquired by the Corporation or a Subsidiary, and authorize the
granting of new Options, Rights and Performance Units pursuant to the Plan in
substitution therefor (to the extent not theretofore exercised), and the
substituted Options, Rights and Performance Units may specify a longer term than
the surrendered Options, Rights and Performance Units or have any other
provisions that are authorized by the Plan; provided, however, that the
substituted Options, Rights and Performance Units may not specify a lower
exercise price than the surrendered options, rights and performance units.
Subject to the terms and conditions and within the limitations of the Plan, the
Committee may modify the terms of any outstanding Agreement providing for awards
of Incentive Shares. Notwithstanding the foregoing, however, no modification of
an Option, Right or Performance Unit granted under the Plan, or an award of
Incentive Shares, shall (i) without the consent of the Optionee or Grantee,
adversely affect the rights or obligations of the Optionee or Grantee or (ii)
reduce the exercise price or base price of an Option, Right or Performance Unit.
16. EFFECTIVENESS OF THE PLAN AND AMENDMENTS
The effective date of the Plan was December 17, 1987. The effective
date of any amendment to the Plan will be the date specified by the Board or
Committee, as applicable. Any amendments to the Plan requiring shareholder
approval pursuant to Article 14 are subject to approval by vote of the
shareholders of the Corporation within 12 months after their adoption by the
Board or the Committee. Subject to that approval,
- 12 -
13
any such amendments are effective on the date on which they are adopted by the
Board. Options, Rights, Performance Units or Incentive Shares may be granted or
awarded prior to shareholder approval of amendments, but each Option, Right,
Performance Unit or Incentive Share grant or award requiring such amendments
shall be subject to the approval of the amendments by the shareholders. The date
on which any Option, Right, Performance Unit or Incentive Shares granted or
awarded prior to shareholder approval of the amendment shall be the Date of
Grant for all purposes of the Plan as if the Option, Right, Performance Unit or
Incentive Shares had not been subject to approval. No Option, Right or
Performance Unit granted subject to shareholder approval of an amendment may be
exercised prior to such shareholder approval, and any Incentive Share award
subject to shareholder approval of an amendment and any dividends payable
thereon are subject to forfeiture if such shareholder approval is not obtained.
17. TERM OF THE PLAN
Unless sooner terminated by the Board or the Committee pursuant to
Article 14, the Plan shall terminate on February 20, 2007, and no Options,
Rights, Performance Units or Incentive Share awards may be granted or awarded
after termination. The termination shall not affect the validity of any Option,
Right, Performance Unit or Incentive Share awards outstanding on the date of
termination.
18. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Corporation against the reasonable expenses, including
attorneys' fees, actually and reasonably incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein, 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, Right,
Performance Unit or Incentive Shares granted or awarded hereunder, and against
all amounts reasonably paid by them in settlement thereof or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, if such
members acted in good faith and in a manner which they believed to be in, and
not opposed to, the best interests of the Corporation.
19. COMPLIANCE WITH SECTION 162(M) OF THE CODE
To the extent that any provision of the Plan or an Agreement, or any
action of the Committee, may result in the application of Section 162(m)(1) of
the Code to compensation payable to a Grantee or Optionee, such provision or
action shall be deemed to be null and void, to the extent permitted by law and
deemed advisable by the Committee. The Committee shall have the authority to
override the application of this Article by an action duly approved or ratified
by the Committee and reflected in the Committee's records.
- 13 -
14
20. GENERAL PROVISIONS
20.1. The establishment of the Plan shall not confer upon any Eligible
Person any legal or equitable right against the Corporation, any Subsidiary or
the Committee, except as expressly provided in the Plan.
20.2. Neither the Plan nor any Agreement constitutes inducement or
consideration for the employment or retention of any Eligible Person, nor are
they a contract between the Corporation or any Subsidiary and any Eligible
Person. Participation in the Plan shall not give an Eligible Person any right to
be retained in the service of the Corporation or any Subsidiary.
20.3. The Corporation and its Subsidiaries may assume options,
warrants, or rights to purchase stock issued or granted by other corporations
whose stock or assets shall be acquired by the Corporation or its Subsidiaries,
or which shall be merged into or consolidated with the Corporation or its
Subsidiaries. Neither the adoption of this Plan, nor its submission to the
shareholders, shall be taken to impose any limitations on the powers of the
Corporation or its affiliates to issue, grant, or assume options, warrants, or
rights, otherwise than under this Plan, or to adopt other stock option or
restricted stock plans or to impose any requirement of shareholder approval upon
the same.
20.4. Except as the Committee may otherwise provide pursuant to Article
10, or as otherwise required by a deferral election pursuant to Article 11, the
interests of any Eligible Person under the Plan are not subject to the claims of
creditors and may not, in any way, be assigned, alienated or encumbered.
20.5. The Plan shall be governed, construed and administered in
accordance with the laws of the Commonwealth of Pennsylvania, and it is the
intention of the Corporation that Incentive Stock Options granted under the Plan
qualify as such under Section 422 of the Code.
- 14 -
