As filed with the Securities and Exchange Commission on
October 8, 1998
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
ENVIRONMENTAL TECTONICS CORPORATION
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-1714256
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
Environmental Tectonics Corporation 1998 Stock Option Plan
(Full title of Plan)
Environmental Tectonics Corporation
County Line Industrial Park
Southampton, Pennsylvania 18966
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
William F. Mitchell,
President and Chief Executive Officer
Environmental Tectonics Corporation
County Line Industrial Park
Southampton, Pennsylvania 18966
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Jeffrey P. Waldron, Esquire
Stevens & Lee
One Glenhardie Corporate Center
1275 Drummers Lane
P.O. Box 236
Wayne, Pennsylvania 19087
(610) 964-1480
____________________
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of each Maximum Maximum Amount
Class of Amount Offering Aggregate of
Securities to to be Price per Offering Registration
Registered Registered Share(1) Price Fee
Common Stock, 500,000 $6.88 $3,440,000 $1,014.80
par value $.10
per share
(1) Calculated in accordance with Rule 457, based on the closing
price of $6.88 as reported on the American Stock Exchange on
October 5, 1998.
<PAGE>
PART II
Item 3. Incorporation of Documents by Reference.
The following documents filed with the Securities and
Exchange Commission are incorporated by reference in this
Registration Statement and made a part hereof:
(a) The Company's Annual Report on Form 10-KSB for the fiscal
year ended February 27, 1998;
(b) The Company's Quarterly Reports on Form 10-QSB for the
quarter ended May 29;
(c) The description of the Company's Common Stock set forth in
the Company's Registration Statement on Form 8-A, dated
November 9, 1990, pursuant to which the Company registered
the Common Stock pursuant under Section 12(g) of the
Exchange Act; and
(d) All other documents filed by the Company after the date of
this Registration Statement under Section 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934, prior to
the filing of a post-effective amendment to the Registration
Statement which indicates that all securities offered have
been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in
this Registration Statement and part of this Registration
Statement from the date of filing of such documents.
Item 4. Description of Securities.
The description of the Common Stock is incorporated by
reference herein to the Company's Registration Statement on Form
8-A. See "Item 3. Incorporation of Documents by Reference."
Item 5. Interest of Named Experts and Counsel.
Not Applicable.
Item 6. Indemnification of Directors and Officers.
Pennsylvania law provides that a Pennsylvania corporation
may indemnify directors, officers, employees and agents of the
corporation against liabilities they may incur in such capacities
for any action taken or any failure to act, whether or not the
corporation would have the power to indemnify the person under
any provision of law, unless such action or failure to act is
determined by a court to have constituted recklessness or willful
misconduct. Pennsylvania law also permits the adoption of a
bylaw amendment, approved by shareholders, providing for the
elimination of a director's liability for monetary damages for
any action taken or any failure to take any action unless (1) the
director has breached or failed to perform the duties of his
office and (2) the breach or failure to perform constitutes self-
dealing, willful misconduct or recklessness.
The bylaws of the Company provide for (1) indemnification of
directors, officers, employees and agents of the Registrant and
(2) the elimination of a director's liability for monetary
damages, to the fullest extent permitted by Pennsylvania law
unless the director has breached or failed to perform the duties
of his or her office under Subchapter B of Chapter 17 of the
Pennsylvania Business Corporation Law of 1988, as it may be
amended, and such breach or failure to perform constitutes self-
dealing, willful misconduct or recklessness.
Directors and officers are also insured against certain
liabilities for their actions, as such, by an insurance policy
obtained by the Company.
Item 7. Exemption from Registration Claimed.
Not Applicable.
Item 8. Exhibits
Exhibits:
Number Title
4.1 Articles of Incorporation of Registrant (Incorporated
by reference to Exhibit 3.1 to the Registrant's Annual
Report on Form 10-KSB for the year ended February 28,
1997).
4.2 By-Laws of Registrant (Incorporated by reference to
Exhibit 3(ii) to the Registrant's Annual Report on
Form 10-K for the year ended February 25, 1994).
5.1 Opinion of Stevens & Lee
23.1 Consent of Stevens & Lee (included in Exhibit 5.1)
23.2 Consent of Grant Thornton, LLP
24.1 Power of Attorney (included on signature page)
99.1 Environmental Tectonics Corporation 1998 Stock Option
Plan.
_____
Item 9. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such
information in the registration statement.
Provided, however, that paragraphs
(a)(1)(i) and (a)(1)(ii) do not apply if the information required
to be included in a post-effective amendment by these paragraphs
is contained in periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration
statement.
(2) That for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant, the registrant has
been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements of filing on
Form S-8 and has authorized this registration statement to be
signed on its behalf by the undersigned in the Town of Oaks,
State of Pennsylvania on October 1, 1998.
ENVIRONMENTAL TECTONICS CORPORATION
By: /s/ William F. Mitchell
William F. Mitchell,
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints William F.
Mitchell or Jeffrey P. Waldron, Esquire, and each of them, his
true and lawful attorney-in-fact, as agent with full power of
substitution and resubstitution for him and in his name, place
and stead, in any and all capacity, to sign any or all amendments
to this Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting to such
attorney-in-fact and agents full power and authority to do and
perform each and every act and this requisite and necessary to be
done in and about the premises, as fully and to all intents and
purposes as they might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or
their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement was signed below by the
following persons and in the capacities and on the dates stated.
Signature
/s/ William F. Mitchell Chairman of the October 1, 1998
William F. Mitchell Board, President
and Director
(Principal
Executive Officer
/s/ Duane D. Deaner Chief Financial October 1, 1998
Duane D. Deaner Officer
(Principal
Financial and
Accounting
Officer)
/s/ Richard E. McAdams Executive Vice October 1, 1998
Richard E. McAdams President and
Director
/s/ Pete L. Stephens Director October 1, 1998
Pete L. Stephens, M.D.
/s/ Craig MacNab Director October 1, 1998
Craig MacNab
/s/ Philip L. Wagner Director October 7, 1998
Philip L. Wagner, Ph.D.
<PAGE>
EXHIBIT INDEX
Number Title
4.1 Articles of Incorporation of Registrant (Incorporated
by reference to Exhibit 3.1 to the Registrant's Annual
Report on Form 10-KSB for the year ended February 28,
1997).
4.2 By-Laws of Registrant (Incorporated by reference to
Exhibit 3(ii) to the Registrant's Annual Report on
Form 10-K for the year ended February 25, 1994).
5.1 Opinion of Stevens & Lee
23.1 Consent of Stevens & Lee (included in Exhibit 5.1)
23.2 Consent of Grant Thornton, LLP
24.1 Power of Attorney (included on signature page)
99.1 Environmental Tectonics Corporation 1998 Stock Option
Plan.
_____
October 8, 1998
Board of Directors
Environmental Tectonics Corporation
County Line Industrial Park
Southampton, Pennsylvania 18906
Re: Environmental Tectonics Corporation 1998 Stock Option Plan
Gentlemen:
You have asked us to provide you with our opinion whether
the 500,000 shares of common stock, par value $0.10 per share
(the "Common Stock"), of Environmental Tectonics Corporation (the
"Company") that may be issued from time to time pursuant to the
exercise of options issued under the Environmental Tectonics
Corporation 1998 Stock Option Plan (the "Plan"), when and if such
shares are issued pursuant to and in accordance with the Plan,
will be duly and validly issued, fully paid and nonassessable.
We, as counsel to the Company, have reviewed:
1. The Pennsylvania Business Corporation Law of 1988, as
amended;
2. The Articles of Incorporation of the Company;
3. The By-laws of the Company; and
4. The minutes of the Board of Directors of the Company
adopted on September 30, 1998, as certified by the
Corporate Secretary of the Company.
Based on our review of such documents, it is our opinion
that the Common Stock issuable upon the exercise of options
granted under the Plan, when and as issued and paid for in
accordance with the provisions of the Plan, will be duly and
validly issued, fully paid and nonassessable. In giving the
foregoing opinion, we have assumed that the Company will have, at
the time of the issuance of such Common Stock, a sufficient
number of authorized shares available for issue.
We consent to the filing of this opinion as an exhibit to
the registration statement the Company is filing today in
connection with the registration of 500,000 shares of the
Company's Common Stock, and to the reference to us under the
heading "legal matters" in the related Prospectus. In giving
this consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the Rules and
Regulations of the Securities and Exchange Commission thereunder.
Very truly yours
/s/ Stevens & Lee
STEVENS & LEE<PAGE>
WORD PERFECT SYSTEM
Long Document Name: OPINION LETTER - ENVIRONMENTAL TECTONICS
CORPORATION 1998 STOCK OPTION PLAN
System Document Name: O:\DMS\WJR\0087819.WP
Document Location: Reading
Additional Information:
DUPED RDG. DOC. #81638
________________________________________________________________________
YOU WILL HAVE LINE NUMBERS DOWN THE SIDE OF EACH DRAFT DOCUMENT UNLESS
YOU INDICATE OTHERWISE. 1.5 LINE SPACING WILL BE USED ON ALL DRAFTS
UNLESS YOU INDICATE OTHERWISE.
RETURN TO: _____________________ LOCATION: _________________________
RETURN: ____ draft ____ final ____ blacklined ____ stapled
LINE SPACING: ____ same; ____ 1.0; ____ 1.5; ____ 2.0
DUPLICATE: ____ yes ____ no (New Client/Matter No. _________________)
SAVE FOR BLACKLINING PRIOR TO REVISIONS: ____ yes ____ no
Caret Method ____ Standard Method ____
DELETE PRIOR VERSION(S) SAVED FOR BLACKLINING: ____ yes ____ no
Litigation Dept. Use: PROFILE'S TITLE/SUBJECT AREA:
procedural posture: ______________________________________________
substantive issues: ______________________________________________
________________________________________________________________________
NOTE(S) TO NEXT WORD PROCESSING SPECIALIST:
Origination Date: 10/02/98
Author's Initials: WJR
Last Revised By: lms/tlt/mm
Last Revision Date: 10-2;10-8
Paragraph Numbering:
1 = 4 = 7 =
2 = 5 = 8 =
3 = 6 =
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated May 1, 1998 accompanying the
consolidated financial statements of Environmental Tectonics
Corporation and Subsidiary included in the Annual Report on
Form 10-KSB for the year ended February 27, 1998 which is
incorporated by reference in this Registration Statement. We
consent to the incorporation by reference in the Registration
Statement of the aforementioned report.
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Philadelphia, Pennsylvania
October 7, 1998
EXHIBIT 99.1
ENVIRONMENTAL TECTONICS CORPORATION
1998 STOCK OPTION PLAN
PAGE 1
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1. PURPOSE OF THE PLAN; TYPE OF OPTIONS........... 1
ARTICLE 2. DEFINITIONS.................................... 1
ARTICLE 3. ADMINISTRATION OF THE PLAN..................... 2
ARTICLE 4. COMMON STOCK SUBJECT TO THE PLAN............... 4
ARTICLE 5. STOCK OPTIONS.................................. 4
ARTICLE 6. ELIGIBILITY.................................... 6
ARTICLE 7. TERM, VESTING AND EXERCISE OF OPTIONS.......... 6
ARTICLE 8. TERMINATION OF EMPLOYMENT...................... 8
ARTICLE 9. ADJUSTMENT PROVISIONS.......................... 9
ARTICLE 10. GENERAL PROVISIONS............................ 10
PAGE 2
<PAGE>
ARTICLE 1. PURPOSE OF THE PLAN; TYPE OF OPTIONS
1.1 Purpose. The Environmental Tectonics Corporation 1998
Stock Option Plan is intended to provide selected Employees of
Environmental Tectonics Corporation and its Subsidiaries an
opportunity to acquire Common Stock of the Corporation. The Plan
is designed to help the Corporation attract, retain and motivate
talented employees and to induce selected individuals to make
substantial contributions to the success of its business.
1.2 Stock Options to be Granted. Incentive Stock Options and
Nonqualified Stock Options may be granted within the limitations of
the Plan herein described.
ARTICLE 2. DEFINITIONS
2.1 "Agreement" means the written instrument evidencing the
grant of an Option. A Participant may be issued one or more
Agreements from time to time, reflecting one or more Options.
2.2 "Board" means the Board of Directors of the Corporation.
2.3 "Cause" means that an Optionee (i) is convicted of, or
enters a plea of nolo contendere to, (A) a felony or (B) a crime of
fraud or other dishonesty with respect to the Corporation, a
Subsidiary, or any successor to either, or (ii) wilfully fails to
follow the lawful instructions of the Board after the Optionee's
receipt of written notice of such instructions, other than a
failure resulting from the Optionee's incapacity because of
physical or mental illness.
2.4 "Code" means the Internal Revenue Code of 1986, as
amended and as the same may hereafter be amended, and the
regulations promulgated thereunder.
2.5 "Committee" means the Committee which the Board appoints
to administer the Plan in accordance with the provisions of Section
3.1.
2.6 "Common Stock" means the common stock of the Corporation
($0.10 par value) as described in the Corporation's Articles of
Incorporation, or such other stock as shall be substituted
therefor.
2.7 "Corporation" means Environmental Tectonics Corporation,
a Pennsylvania corporation.
2.8 "Effective Date" means the date specified in
Section 10.1.
2.9 "Employee" means any common law employee of the
Corporation or a Subsidiary who is considered to be a "key
employee" and regularly works on a substantially full-time basis,
<PAGE 1> as determined by the Committee from time to time.
2.10 "Exchange Act" means the Securities Exchange Act of
1934, as amended and as the same may hereafter be amended, and the
regulations promulgated thereunder.
2.11 "Exercise Price" means the price per share applicable to
an Option, as determined pursuant to Section 5.1.
2.12 "Incentive Stock Option" means a Stock Option intended
to satisfy the requirements of Code Section 422(b).
2.13 "Nonqualified Stock Option" means a Stock Option other
than an Incentive Stock Option.
2.14 "Optionee" means a Participant who is awarded a Stock
Option pursuant to the provisions of the Plan. Such term also
includes any person holding an Option as a permitted successor or
transferee of such a Participant.
2.15 "Participant" means an Employee selected by the
Committee to receive a grant of an Option under the Plan.
2.16 "Plan" means the Environmental Tectonics Corporation
1998 Stock Option Plan.
2.17 "Retirement" means termination of employment upon or
following the attainment of age 65.
2.18 "Securities Act" means the Securities Act of 1933, as
amended and as the same may hereafter be amended, and the
regulations promulgated thereunder.
2.19 "Stock Option" or "Option" means an award of a right to
purchase Common Stock pursuant to the provisions of the Plan.
2.20 "Subsidiary" means a "subsidiary corporation," as
defined in Code Section 424(f), that is a subsidiary of the
Corporation or, as the context requires, another corporation.
ARTICLE 3. ADMINISTRATION OF THE PLAN
3.1 The Committee. The Plan shall be administered by a
committee of the Board composed of two or more members all of whom
are (i) "non-employee directors," as such term is defined under the
rules and regulations adopted from time to time by the Securities
and Exchange Commission pursuant to Section 16(b) of the Exchange
Act, and (ii) "outside directors," within the meaning of Code
Section 162(m). The Board may from time to time remove members
from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board.
<PAGE 2>
3.2 Powers of the Committee.
(a) The Committee shall be vested with full authority to
make such rules and regulations as it deems necessary or
desirable to administer the Plan and to interpret the
provisions of the Plan, unless otherwise determined by a
majority of the disinterested members of the Board. Any
determination, decision or action of the Committee in
connection with the construction, interpretation,
administration or application of the Plan shall be final,
conclusive and binding upon all Optionees and any person
claiming under or through an Optionee, unless otherwise
determined by a majority of the disinterested members of the
Board.
(b) Subject to the terms, provisions and conditions of
the Plan and subject to ratification by a majority of the
disinterested members of the Board, the Committee shall have
exclusive jurisdiction to:
(i) determine and select, based upon the
recommendation of the Corporation's Chief Executive
Officer (except as to himself), the Employees to be
granted Options (it being understood that more than one
Option may be granted to the same person);
(ii) determine the number of shares of Common Stock
subject to each Option;
(iii) determine the date or dates when the Options
will be granted, which dates shall not be earlier than
the date of Board ratification;
(iv) determine the Exercise Price of the shares
subject to each Option;
(v) determine the date or dates when each Option
may be exercised within the term of the Option specified
pursuant to Article 7;
(vi) determine whether or not an Option constitutes
an Incentive Stock Option; and
(vii) prescribe the form, which shall be consistent
with this Plan document, of the Agreement evidencing any
Options granted under the Plan.
3.3 Terms. The grant of an Option under the Plan shall be
evidenced by an Agreement and may include any terms and conditions
that are not inconsistent with this Plan document, as the Committee
may determine.
<PAGE 3>
3.4 Liability. No member of the Board or the Committee shall
be liable for any action or determination made in good faith by the
Board or the Committee with respect to the Plan or any Options
granted under the Plan.
ARTICLE 4. COMMON STOCK SUBJECT TO THE PLAN
4.1 Common Stock Authorized. The aggregate number of shares
of Common Stock for which Options may be granted under the Plan
shall not exceed 500,000 shares. The limitation established by the
preceding sentence shall be subject to adjustment as provided in
Article 9.
4.2 Shares Available. The capital stock to be issued upon
exercise of Options granted under the Plan shall be the
Corporation's Common Stock which shall be made available, at the
discretion of the Board, either from authorized but unissued Common
Stock or from Common Stock acquired by the Corporation. In the
event that any outstanding Option under the Plan for any reason
expires or is terminated, the shares of Common Stock allocable to
the unexercised portion of such Option may thereafter be made
subject to another Option.
ARTICLE 5. STOCK OPTIONS
5.1 Exercise Price. The Exercise Price of a Stock Option
shall be, in the case of an Incentive Stock Option, 100 percent of
the fair market value of one share of Common Stock on the date the
Option is granted, except that the Exercise Price shall be 110
percent of such fair market value in the case of an Incentive Stock
Option granted to any individual described in Section 6.2. The
Exercise Price of a Stock Option shall be, in the case of a
Nonqualified Stock Option, not less than 100 percent of the fair
market value of one share of Common Stock on the date the Option is
granted. The Exercise Price of an Option shall be subject to
adjustment only as provided in Article 9.
5.2 Limitation on Incentive Stock Options. The aggregate
fair market value (determined as of the date an Option is granted)
of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any individual in any
calendar year (under the Plan and all other plans maintained by the
Corporation and its Subsidiaries) shall not exceed $100,000.
5.3 Determination of Fair Market Value.
(a) During such time as Common Stock is not listed on an
established stock exchange or exchanges but is listed on the
NASDAQ National Market System, the fair market value per share
shall be the closing sale price for a share of the Common
Stock on the day the Option is granted. If no sale of Common
Stock occurs on that day, the fair market value shall be
<PAGE 4> determined by reference to such price for the next
preceding day on which a sale occurred.
(b) During such time as the Common Stock is not listed
on an established stock exchange or on the NASDAQ National
Market System, the fair market value per share shall be the
mean between the closing dealer "bid" and "asked" prices for
a share of the Common Stock on the day the Option is granted.
If no "bid" and "asked" prices are quoted for the day of the
grant, the fair market value shall be determined by reference
to such prices on the next preceding day on which such prices
were quoted.
(c) If the Common Stock is listed on an established
stock exchange or exchanges, the fair market value shall be
the composite closing price of a share of the Common Stock on
such stock exchange or exchanges on the day the Option is
granted. If no sale of Common Stock occurs on that day, the
fair market value shall be determined by reference to such
price for the next preceding day on which a sale occurred.
(d) In the event that the Common Stock is not listed on
an established stock exchange or traded on the NASDAQ National
Market System, and no closing dealer "bid" and "asked" prices
are available on the date of a grant, then fair market value
shall be the price established by the Committee in good faith.
5.4 Limitation on Grants. Grants to any Employee under the
Plan shall not exceed, in the aggregate, Options to purchase more
than 100,000 shares of Common Stock during any period of 12
consecutive months. Such limitation shall be subject to adjustment
in the manner described in Article 9.
5.5 Transferability of Options. Unless otherwise designated
by the Committee to the contrary, each Option granted under the
Plan shall by its terms be nontransferable by the Optionee (except
by will or the laws of descent and distribution), and each Option
shall be exercisable during the Optionee's lifetime only by the
Optionee, his guardian or his legal representative, or by such
other means as the Committee may approve from time to time that is
not inconsistent with or contrary to the provisions of applicable
law.
5.6 Beneficiary Designation. An Optionee may, from time to
time, designate in writing a beneficiary to exercise his Stock
Option(s) after the Optionee's death. Any change in such
beneficiary designation shall not become effective unless it is
executed by the Optionee and filed with the Secretary of the
Corporation prior to his death.
<PAGE 5>
ARTICLE 6. ELIGIBILITY
6.1 Participation. Options shall be granted only to persons
who are Employees, as determined by the Committee, based upon the
recommendation of the Chief Executive Officer (except as to
himself) and ratified by a majority of the disinterested members of
the Board.
6.2 Incentive Stock Option Eligibility Restrictions.
Notwithstanding any other provision of the Plan, an individual who
owns more than 10 percent of the total combined voting power of all
classes of outstanding stock of the Corporation shall not be
eligible for the grant of an Incentive Stock Option, unless the
special requirements set forth in Sections 5.1 and 7.1 of the Plan
are satisfied. For purposes of this section, in determining stock
ownership, an individual shall be considered as owning the stock
owned, directly or indirectly, by or for his brothers and sisters
(whether by the whole or half blood), spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be considered as
being owned proportionately by or for its shareholders, partners or
beneficiaries. "Outstanding stock" shall include all stock
actually issued and outstanding immediately before the grant of the
Option. "Outstanding stock" shall not include shares authorized
for issue under outstanding Options held by the Optionee or by any
other person.
ARTICLE 7. TERM, VESTING AND EXERCISE OF OPTIONS
7.1 Term and Vesting.
(a) Each Option granted under the Plan shall terminate
on the date determined by the Committee, approved by a
majority of the disinterested members of the Board and
specified in the relevant Agreement; provided, however, that
(i) each intended Incentive Stock Option granted to an
individual described in Section 6.2 of the Plan shall
terminate not later than five years after the date of the
grant, (ii) each other intended Incentive Stock Option shall
terminate not later than ten years after the date of grant,
and (iii) each Option granted under the Plan which is intended
to be a Nonqualified Stock Option shall terminate not later
than ten years and one month after the date of grant. Each
Option granted under the Plan shall be exercisable and shall
be subject to forfeiture in accordance with the provisions
determined by the Committee in connection with the grant and
set forth in the relevant Agreement. An Option may be
exercised only during the continuance of the Optionee's
employment, except as provided in Article 8.
(b) In the event the Agreement issued to an Optionee
fails to specify a vesting schedule with respect to the
<PAGE 6> exercisability of the Option granted thereby, such
schedule shall be as follows:
Continuous Employment
With Corporation and/
or Subsidiary Following Percentage of Option
Date of Grant Exercisable
Less than 1 year 0
At least 1 year, but
less than 2 years 25
At least 2 years, but
less than 3 years 50
At least 3 years, but
less than 4 years 75
At least 4 years 100
For purposes of this vesting schedule and any vesting schedule
described or set forth in an Agreement, continuous employment
shall be deemed to have terminated if an Optionee ceases to
work on a substantially full-time basis, as determined from
time to time by the Committee. The Committee may, subject to
such conditions as it may specify, treat approved temporary
leaves of absence as not constituting a termination of
employment for Plan purposes.
(c) Notwithstanding any vesting provision herein or in
an Agreement to the contrary, an Optionee shall be deemed 100%
vested in all of his Options upon termination of employment
under a circumstance described in Section 8.1 or 8.2.
7.2 Exercise.
(a) A person electing to exercise an Option shall give
written notice to the Corporation of such election and of the
number of shares of Common Stock he has elected to purchase,
in such form as the Committee shall have prescribed or
approved, and shall at the time of exercise tender, in cash,
the full Exercise Price of the shares to be purchased.
(b) A person holding more than one Option at any
relevant time may elect to exercise such Options in any order.
(c) At the request of a Participant and to the extent
permitted by applicable law, the Corporation may, in its sole
discretion, selectively approve arrangements with a brokerage
firm under which such brokerage firm, on behalf of the
Participant, shall pay to the Corporation the Exercise Price
of the Stock Option being exercised (and any required
withholding taxes), and the Corporation, pursuant to an
irrevocable notice from the Participant, shall promptly
deliver the shares being purchased to such firm. <PAGE 7>
7.3 Forfeiture for Cause. If an event of Cause occurs with
respect to an Optionee, all unexercised Options (vested and
nonvested) held by him (or any person claiming under or through
him) shall be forfeited immediately.
ARTICLE 8. TERMINATION OF EMPLOYMENT
8.1 Retirement. Except as otherwise provided in Section 8.5,
in the event of an Optionee's Retirement, his Options shall lapse
at the earlier of (i) the expiration of the Options' respective
terms, or (ii) (A) in the case of an Incentive Stock Option, three
months following the date of Retirement, and (B) in the case of a
Nonqualified Stock Option, at the discretion of the Committee and
as specified in the relevant Agreement, up to 24 months following
the date of Retirement.
8.2 Death or Disability. In the event of an Optionee's
termination of employment due to death or "disability," as defined
in Code Section 72(m)(7), his Options may be exercised shall lapse
at the earlier of (i) the expiration of each Option's respective
term, or (ii) six months after termination due to such cause.
8.3 Other Termination. Except as otherwise provided in
Section 8.4, in the event of termination of an Optionee's
employment for any reason other than is described in Section 8.1 or
8.2, all Options (vested and unvested) shall lapse as of the date
of termination.
8.4 Special Termination Provisions.
(a) Notwithstanding anything herein to the contrary, the
Committee may, in its discretion and subject to the approval
of a majority of the disinterested members of the Board, waive
any vesting provisions applicable to an Option held by a
terminated Optionee who has not satisfied the same prior to
termination. Any such waiver may be made with retroactive
effect, provided it is made within 60 days following the
Optionee's termination of employment.
(b) Notwithstanding anything herein to the contrary, the
Committee may, in its discretion and subject to the approval
of a majority of the disinterested members of the Board, waive
the lapse provisions otherwise applicable to a vested Option
and permit the exercise thereof until a date which is no later
than the earlier of (i) the expiration of the term of such
Option, or (ii) one year following the date of termination of
the Optionee's employment.
8.5 Transfer of Employee, Etc. An Employee's employment
shall not be deemed to be terminated, for purposes of the Plan, if
<PAGE 8> he is transferred between or among the Corporation and any
of its Subsidiaries, nor shall termination of employment be deemed
to have taken place solely by reason of the occurrence of a
transaction pursuant to which any entity acquires all or
substantially all of the Corporation's assets by operation of law
or otherwise, provided the employment relationship continues with
the acquiror or a company affiliated with the acquiror.
ARTICLE 9. ADJUSTMENT PROVISIONS
9.1 Share and Exercise Price Adjustments.
(a) In the event that the shares of Common Stock, as
presently constituted, shall be changed into or exchanged for
a different number or kind of shares of stock or other
securities of the Corporation or of another corporation
(whether by reason of merger, consolidation, recapitalization,
reclassification, split-up, combination of shares or
otherwise) or if the number of such shares of Common Stock
shall be increased through the payment of a stock dividend or
split, then there shall be substituted for or added to each
share of Common Stock which was theretofore appropriated, or
which thereafter may become subject to an Option under the
Plan, the number and kind of shares of stock or other
securities into which each outstanding share of the Common
Stock shall be so changed or for which each such share shall
be exchanged or to which each such share shall be entitled, as
the case may be. Outstanding Options shall also be
appropriately amended, as to Exercise Price and other terms,
as may be necessary to reflect the foregoing events.
(b) If there shall be any other change in the number or
kind of the outstanding shares of the Common Stock, or of any
stock or other securities in which such stock shall have been
changed, or for which it shall have been exchanged, and if a
majority of the disinterested members of the Board shall, in
its sole discretion, determine that such change equitably
requires an adjustment in any Option which was theretofore
granted or which may thereafter be granted under the Plan,
then such adjustment shall be made in accordance with such
determination.
(c) The grant of an Option pursuant to the Plan shall
not affect in any way the right or power of the Corporation to
make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, to merge, to
consolidate, to dissolve, to liquidate or to sell or transfer
all or any part of its business or assets.
9.2 Corporate Changes. Notwithstanding the provisions of
Section 9.1, a dissolution or liquidation of the Corporation, or a
merger or consolidation in which the Corporation is not the
<PAGE 9> surviving corporation, shall cause each outstanding Option
to terminate, except to the extent that another corporation may and
does in the transaction assume and continue the Option or
substitute its own options.
9.3 Fractional Shares. Fractional shares resulting from any
adjustment in Options pursuant to this article may be settled as a
majority of the disinterested members of the Board shall determine.
9.4 Binding Determination. To the extent that the foregoing
adjustments relate to stock or securities of the Corporation, such
adjustments shall be made by a majority of the disinterested
members of the Board, whose determination in that respect shall be
final, binding and conclusive. Notice of any adjustment shall be
given by the Corporation to each holder of an Option which shall
have been so adjusted.
ARTICLE 10. GENERAL PROVISIONS
10.1 Effective Date. The Plan shall become effective on
August 1, 1998, provided that any grant of Options is subject to
the approval of the Plan by the shareholders of the Corporation
within 12 months thereafter.
10.2 Termination of the Plan. Unless sooner terminated by
the Board, the Plan shall terminate on, and no Options shall be
granted after, the tenth anniversary of its Effective Date.
10.3 Limitation on Termination, Amendment, Modification or
Suspension of Plan.
(a) The Board may at any time terminate, amend, modify
or suspend the Plan; provided, however, that no amendment or
modification shall be made solely by the Board if it is also
required to be approved by the Corporation's shareholders
under any applicable securities or corporate law.
(b) Except as otherwise provided herein, no termination,
amendment, modification or suspension of the Plan shall in any
manner adversely affect any Option theretofore granted under
the Plan without the consent of the Optionee or any person
validly claiming under or through the Optionee.
10.4 No Right to Employment. Neither anything contained in
this Plan document, nor the grant of any Option hereunder, shall
confer upon any Optionee the right to continue in the employ of the
Corporation or of any Subsidiary or limit in any respect the right
of the Corporation or of any Subsidiary to terminate the Optionee's
employment at any time and for any reason.
10.5 No Right to Grant of Options. Nothing in this Plan
document shall be construed as requiring that an Option be granted
<PAGE 10> to any particular individual, regardless of such
individual's position with the Corporation or any Subsidiary.
10.6 Withholding Taxes. Subject to the provisions of
Subsection (b), the Corporation will require that an Optionee, as
a condition of the exercise of an Option (other than an Incentive
Stock Option), or any other person or entity receiving Common Stock
upon exercise of an Option, pay or reimburse any taxes which the
Corporation is required to withhold in connection with the exercise
of the Option.
10.7 Listing and Registration of Shares.
(a) No Option granted pursuant to the Plan shall be
exercisable in whole or in part if at any time a majority of
the disinterested members of the Board shall determine in its
discretion that the listing, registration or qualification of
the shares of Common Stock subject to such Option on any
securities exchange or under any applicable 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 issue of shares
thereunder, unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free
of any conditions not acceptable to a majority of the
disinterested members of the Board.
(b) If a registration statement under the Securities Act
with respect to the shares issuable upon exercise of any
Option granted under the Plan is not in effect at the time of
exercise, as a condition of the issuance of the shares, the
person exercising such Option shall give the Committee a
written statement, satisfactory in form and substance to the
Committee, that he is acquiring the shares for his own account
for investment and not with a view to their distribution. The
Corporation may place upon any stock certificate for shares
issuable upon exercise of such Option the following legend or
such other legend as the Committee may prescribe to prevent
disposition of the shares in violation of the Securities Act
or other applicable law:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 ("ACT") AND
MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM
UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE
CORPORATION THAT REGISTRATION IS NOT REQUIRED.
10.8 Number. Any words used herein in the singular shall be
construed as used in the plural, as appropriate in the relevant
context, and vice versa. <PAGE 11>
10.9 Gender. Any pronoun used herein shall be deemed a
reference to all genders, as appropriate in the relevant context.
10.10 Governing Law. Except to the extent preempted by
federal law, this Plan document shall be construed, administered
and enforced in accordance with the domestic internal law of the
Commonwealth of Pennsylvania.
<PAGE 12>
