Exhibit 10.2

 

 

KRONOS INCORPORATED

2002 STOCK INCENTIVE PLAN

 

1.

Purpose

 

The purpose of this 2002 Stock Incentive Plan (the “Plan”) of Kronos
Incorporated, a Massachusetts corporation (the “Company”), is to advance the
interests of the Company’s stockholders by enhancing the Company’s ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company’s stockholders.
Except where the context otherwise requires, the term “Company” shall include
any of the Company’s present or future parent or subsidiary corporations as
defined in Section 424(e) or (f) of the Internal Revenue Code of 1986, as
amended, and any regulations promulgated thereunder (the “Code”) and any other
business venture (including, without limitation, joint venture or limited
liability company) in which the Company has a significant interest, as
determined by the Board of Directors of the Company (the “Board”).

 

2.

Eligibility

 

All of the Company’s employees, officers, directors, consultants, advisors and
other entities are eligible to receive options, stock appreciation rights,
restricted stock and other stock-based awards (each, an “Award”) under the Plan.
Each person who receives an Award under the Plan shall be deemed a
“Participant”.

 

3.

Administration and Delegation

 

(a) Administration by Board of Directors. The Plan will be administered by the
Board. The Board shall have authority to grant Awards and to adopt, amend and
repeal such administrative rules, guidelines and practices relating to the Plan
as it shall deem advisable. The Board may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the Board
shall be made in the Board’s sole discretion and shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.

 

 

 

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(b) Appointment of Committees. To the extent permitted by applicable law, the
Board may delegate any or all of its powers under the Plan to a committee or
sub-committee of the Board (a “Committee”). Such Committee shall consist of not
less than two members, each member of which shall be an “outside director”
within the meaning of Section 162(m) of the Internal Revenue Code and a
“non-employee director” as defined in Rule 16-b3 promulgated under the Exchange
Act. All references in the Plan to the “Board” shall mean the Board or a
Committee of the Board or a single member of the Board referred to in Section
3(c) to the extent that the Board’s powers or authority under the Plan have been
delegated to such Committee or board member.

 

(c) Delegation to a Single Member of the Board. To the extent permitted by
applicable law, the Board may delegate to a single member of the Board the power
to grant Awards to employees of the Company or any of its present or future
subsidiary corporations and to exercise such other powers under the Plan as the
Board may determine, provided that the Board shall fix the terms of the Awards
to be granted by such Board member (including the exercise price of such Awards,
which may include a formula by which the exercise price will be determined) and
the maximum number of shares subject to Awards that the Board member may grant;
provided further, however, that the Board member shall not be authorized to
grant Awards to any “executive officer” of the Company (as defined by Rule 3b-7
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or
to any “officers” of the Company (as defined by Rule 16a-1 under the Exchange
Act).

 

4.

Stock Available for Awards

 

(a) Number of Shares. Subject to adjustment under Section 13, Awards may be made
under the Plan for up to 9,000,000 shares of common stock, $.01 par value per
share, of the Company (the “Common Stock”). If any Award expires, is terminated,
is canceled or is surrendered without having been fully exercised or is
forfeited in whole or in part (including as the result of shares of Common Stock
subject to such Award being repurchased by the Company at the original issuance
price pursuant to a contractual repurchase right) or results in any Common Stock
not being issued, the unused Common Stock covered by such Award shall again be
available for the grant of Awards under the Plan. However, in the case of
Incentive Stock Options (as hereinafter defined), the foregoing provisions shall
be subject to any limitations under the Code. Shares issued under the Plan shall
consist of authorized but unissued shares.

 

(b) Share Counting Formula. Solely for the purpose of applying the limitation in
this Section 4(a):

 

(1) each stock Option and Stock Appreciation Right granted under this plan shall
reduce the number of shares available for grant by one share for every one share
granted.

 

 

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(2) each Award granted under this plan other than a Stock Option or a Stock
Appreciation Right shall reduce the number of shares available for grant by 2.2
shares for every one share granted.

 

(c) Sub-Limits. Subject to adjustment under Section 13, the following sub-limits
on the number of shares subject to Awards shall apply:

 

(1) Section 162(m) Per Participant Limit. The maximum number of shares of Common
Stock with respect to which Awards may be granted to any Participant under the
Plan shall be 300,000 per fiscal year. For purposes of the foregoing limit, the
combination of an Option in tandem with a SAR (as each is hereafter defined)
shall be treated as a single Award. The per-Participant limit described in this
Section 4(c)(1) shall be construed and applied consistently with Section 162(m)
of the Code or any successor provision thereto, and the regulations thereunder
(“Section 162(m)”).

 

(2) Limit on Awards to Directors. The maximum number of shares with respect to
which annual Awards may be granted to directors who are not employees of the
Company at the time of grant shall be 7,500, except in the case of newly
appointed directors who will receive a grant of up to 7,500 additional shares
upon their appointment to the Board.

 

5.

Stock Options

 

(a) General. The Board may grant options to purchase Common Stock (each, an
“Option”) and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a “Nonstatutory Stock
Option”.

 

(b) Incentive Stock Options. An Option that the Board intends to be an
“incentive stock option” as defined in Section 422 of the Code (an “Incentive
Stock Option”) shall only be granted to employees of Kronos Incorporated, any of
Kronos Incorporated’s present or future parent or subsidiary corporations as
defined in Sections 424(e) or (f) of the Code and shall be subject to and shall
be construed consistently with the requirements of Section 422 of the Code. The
Company shall have no liability to a Participant, or any other party, if an
Option (or any part thereof) which is intended to be an Incentive Stock Option
is not an Incentive Stock Option or for any action taken by the Board pursuant
to Section 11(e), including without limitation the conversion of an Incentive
Stock Option to a Nonstatutory Stock Option.

 

 

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(c) Exercise Price. The Board shall establish the exercise price at the time
each Option is granted and specify it in the applicable option agreement
provided, however, that the exercise price shall be not less than 100% of the
fair market value of the Common Stock, as determined by the Board, at the time
the Option is granted.

 

(d) Vesting and Duration of Options. Each Option shall be exercisable at such
times and subject to such terms and conditions as the Board may specify in the
applicable agreement provided, however, that no Option shall vest in whole or in
part before the first anniversary date of grant of that Option and no Option
will be granted for a term in excess of 5 years.

 

(e) Exercise of Option. Options may be exercised by delivery to the Company of a
written notice of exercise signed by the proper person or by any other form of
notice (including electronic notice) approved by the Board together with payment
in full as specified in Section 5(f) for the number of shares for which the
Option is exercised. Shares of Common Stock subject to the Option will be
delivered by the Company following exercise either as soon as practicable or,
subject to such conditions as the Board shall specify, on a deferred basis (with
the Company’s obligation to be evidenced by an instrument providing for future
delivery of the deferred shares at the time or times specified by the Board).

 

(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option
granted under the Plan shall be paid for as follows:

 

(1) in cash or by check, payable to the order of the Company;

 

(2) except as the Board may, in its sole discretion, otherwise provide in an
option agreement, by (i) delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price and any required tax withholding or
(ii) delivery by the Participant to the Company of a copy of irrevocable and
unconditional instructions to a creditworthy broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price and any required
tax withholding;

 

(3) when the Common Stock is registered under the Securities Exchange Act of
1934 (the “Exchange Act”), by delivery of shares of Common Stock owned by the
Participant valued at their fair market value as determined by (or in a manner
approved by) the Board in good faith (“Fair Market Value”), provided (i) such
method of payment is then permitted under applicable law, (ii) such Common
Stock, if acquired directly from the Company was owned by the Participant at
least six months prior to such delivery; and (iii) such Common Stock is not
subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements; or

 

(4) by any combination of the above permitted forms of payment.

 

 

 

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(g) Substitute Options. In connection with a merger or consolidation of an
entity with the Company or the acquisition by the Company of property or stock
of an entity, the Board may grant Options in substitution for any options or
other stock or stock-based awards granted by such entity or an affiliate
thereof. Substitute Options may be granted on such terms as the Board deems
appropriate in the circumstances, notwithstanding any limitations on Options
contained in this Section 5 or in Section 2.

 

6.

Director Options.  

(a) Initial Grant. Upon the commencement of service on the Board by any
individual who is not then an employee of the Company or any subsidiary of the
Company, the Company shall grant to such person a Nonstatutory Stock Option to
purchase 6,750 shares of Common Stock (subject to adjustment under Section 13).

 

(b) Annual Grant. On the date of each annual meeting of stockholders of the
Company, the Company shall grant to each member of the Board of Directors of the
Company who is both serving as a director of the Company immediately prior to
and immediately following such annual meeting and who is not then an employee of
the Company or any of its subsidiaries, a Nonstatutory Stock Option to purchase
6,750 shares of Common Stock (subject to adjustment under Section 13); provided,
however, that a director shall not be eligible to receive an option grant under
this Section 6(b) until such director has served on the Board for at least six
months.

 

(c) Terms of Director Options. Options granted under this Section 6 shall (i)
have an exercise price equal to the closing sale price (for the primary trading
session) of the Common Stock on The Nasdaq Stock Market® or the national
securities exchange on which the Common Stock is then traded on the trading date
immediately prior to the date of grant, (ii) vest in four equal installments
beginning on the first anniversary of the date of grant, provided that no
additional vesting shall take place after the Participant ceases to serve as a
director and further provided that the Board may provide for accelerated vesting
in the case of death, disability, attainment of mandatory retirement age or
retirement following at least 10 years of service, (iii) expire on the earlier
of 4½ years from the date of grant or three months following cessation of
service on the Board and (iv) contain such other terms and conditions as the
Board shall determine.

 

(d) Board Discretion. The Board shall have the specific authority to from time
to time increase or decrease the number of shares subject to options granted
under this Section 6, subject to the provisions of Section 4(c)(2).

 

7.

Stock Appreciation Rights.

 

(a) General. A Stock Appreciation Right, or SAR, is an Award entitling the
holder, upon exercise, to receive an amount in cash or Common Stock or a
combination thereof (such form to be determined by the Board) determined in
whole or in part by reference to appreciation, from and after the date of grant,
in the fair market value of a share of Common Stock. SARs may be based solely on
appreciation in the fair market value of Common Stock or on a comparison of such
appreciation with some other measure of market growth such as (but not limited
to) appreciation in a recognized market index. The date as of which such
appreciation or other measure is determined shall be the exercise date unless
another date is specified by the Board in the SAR Award.

 

 

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(b) Grants. Stock Appreciation Rights may be granted in tandem with, or
independently of, Options granted under the Plan.

 

(1) Tandem Awards. When Stock Appreciation Rights are expressly granted in
tandem with Options, (i) the Stock Appreciation Right will be exercisable only
at such time or times, and to the extent, that the related Option is exercisable
(except to the extent designated by the Board in connection with a
Reorganization Event or a Change in Control Event) and will be exercisable in
accordance with the procedure required for exercise of the related Option; (ii)
the Stock Appreciation Right will terminate and no longer be exercisable upon
the termination or exercise of the related Option, except to the extent
designated by the Board in connection with a Reorganization Event or a Change in
Control Event and except that a Stock Appreciation Right granted with respect to
less than the full number of shares covered by an Option will not be reduced
until the number of shares as to which the related Option has been exercised or
has terminated exceeds the number of shares not covered by the Stock
Appreciation Right; (iii) the Option will terminate and no longer be exercisable
upon the exercise of the related Stock Appreciation Right; and (iv) the Stock
Appreciation Right will be transferable only with the related Option.

 

(2) Independent SARs. A Stock Appreciation Right not expressly granted in tandem
with an Option will become exercisable at such time or times, and on such
conditions, as the Board may specify in the SAR Award, but in no case will it
become exercisable in whole or in part before the first anniversary date of
grant of the Award and no SAR Award will be granted for a term of more than 5
years.

 

(c) Exercise. Stock Appreciation Rights may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board,
together with any other documents required by the Board.

 

8.

Restricted Stock; Restricted Stock Units.

 

(a) General. The Board may grant Awards entitling recipients to acquire shares
of Common Stock (“Restricted Stock”), subject to the right of the Company to
repurchase all or part of such shares at their issue price or other stated or
formula price from the recipient in the event that conditions specified by the
Board in the applicable Award are not satisfied prior to the end of the
applicable restriction period or periods established by the Board for such
Award. Instead of granting Awards for Restricted Stock, the Board may grant
Awards entitling the recipient to receive shares of Common Stock to be delivered
at the time such shares of Common Stock vest (“Restricted Stock Units”).
(Restricted Stock and Restricted Stock Units are referred to herein as a
“Restricted Stock Award”).

 

 

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(b) Terms and Conditions. The Board shall determine the terms and conditions of
a Restricted Stock Award, including the conditions for repurchase (or
forfeiture) and the issue price.

 

(c) Limitations on Vesting.

 

(1)           Restricted Stock Awards that vest based on the passage of time
alone shall not vest before the first anniversary of the date of grant and no
more than 33 1/3% shall vest on each anniversary of the date of grant.
Restricted Stock Awards that vest upon the passage of time and provide for
accelerated vesting based on performance shall not vest before the first
anniversary of the date of grant. This subsection (8)(c)(1) shall not apply to
Awards granted pursuant to Section 11(h).

 

(2)          Notwithstanding any other provision of this Plan, the Board may, in
its discretion, either at the time a Restricted Stock Award is made or at any
time thereafter, waive its right to repurchase shares of Common Stock (or waive
the forfeiture thereof) or remove or modify any part or all of the restrictions
applicable to the Restricted Stock Award, provided that the Board may only
exercise such rights in extraordinary circumstances which shall include, without
limitation, death or disability of the Participant; a merger, consolidation,
sale, reorganization, recapitalization, or change in control of the Company; or
any other nonrecurring significant event affecting the Company, a Participant or
the Plan.

 

(d) Stock Certificates. Any stock certificates issued in respect of a Restricted
Stock Award shall be registered in the name of the Participant and, unless
otherwise determined by the Board, deposited by the Participant, together with a
stock power endorsed in blank, with the Company (or its designee). At the
expiration of the applicable restriction periods, the Company (or such designee)
shall deliver the certificates no longer subject to such restrictions to the
Participant or if the Participant has died, to the beneficiary designated, in a
manner determined by the Board, by a Participant to receive amounts due or
exercise rights of the Participant in the event of the Participant’s death (the
“Designated Beneficiary”). In the absence of an effective designation by a
Participant, “Designated Beneficiary” shall mean the Participant’s estate.

 

9.

Other Stock-Based Awards.

 

Other Awards of shares of Common Stock, and other Awards that are valued in
whole or in part by reference to, or are otherwise based on, shares of Common
Stock or other property, may be granted hereunder to Participants (“Other Stock
Unit Awards”), including without limitation Awards entitling recipients to
receive shares of Common Stock to be delivered in the future. Such Other Stock
Unit Awards shall also be available as a form of payment in the settlement of
other Awards granted under the Plan or as payment in lieu of compensation to
which a Participant is otherwise entitled. Other Stock Unit Awards may be paid
in shares of Common Stock or cash, as the Board shall determine. Subject to the
provisions of the Plan, the Board shall determine the conditions of each Other
Stock Unit Awards, including any purchase price applicable thereto. Other stock
based awards, with the exception of stock that is delivered in lieu of already
earned compensation, shall not vest before the first anniversary date of grant
and no more than 33 1/3% shall vest on each anniversary of the date of grant.

 

 

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10.

Changes in Employment or Status

 

(a) Termination by Death. If any Participant’s employment or service to the
Company or its subsidiaries terminates by reason of death, any Award to the
extent exercisable immediately prior to date of death may be exercised by the
legal representative or legatee of the Participant until the earlier of the
second anniversary of the date of death or the original expiration date of the
Award. The Board, in its sole discretion, may accelerate the vesting provisions
of any outstanding options held by the participant immediately prior to the date
of death.

 

(b) Termination by Reason of Disability. If any Participant’s employment or
service to the Company or its subsidiaries terminates by reason of disability,
any Award to the extent exercisable on the date of termination may be exercised
by the Participant until the earlier of the first anniversary of the date of
termination or the original expiration date of the Award.

 

(c) Termination by Reason of Retirement. If any Participant’s employment with
the company or its subsidiaries terminates by reason of Retirement, any Award to
the extent exercisable on the date of termination may be exercised by the
Participant until the earlier of three (3) months from the date of termination
or the original expiration date of the Award.

 

Notwithstanding the foregoing, a Participant who is at least sixty (60) years of
age and has been in continuous employment with the Company for at least ten (10)
years, shall have the privilege of accelerated vesting and an extended exercise
period (neither of which may exceed the original expiration date of the Award)
according to the following schedule:

 

 

 

Years of Employment

In the Company

 

Years of Accelerated Vesting

 

Years to Exercise

10 years or more

1 year

2 years

15 years or more

2 years

3 years

20 years or more

3 years

3 years

25 years or more

4 years

4 years

 

 

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The Retiree must give written notice of Retirement and have a signed Proprietary
Rights and Confidentiality Agreement on file with the Company.

 

(d) Termination for Cause. If any Participant’s employment or service to the
Company or its subsidiaries is terminated for Cause, any Award held by such
Participant shall terminate immediately; provided that the Board may, at its
sole discretion, allow the exercise of the Award by the Participant to the
extent exercisable on the date of termination until the earlier of one month
from the date of termination or the original expiration date of the Award.

 

(e) Leave of Absence. If any Participant’s employment with the Company is
interrupted by reason of a leave of absence, whether paid or unpaid, any Award
held by the Participant shall cease to vest during such leave of absence and
will resume vesting upon the Participant’s return from such leave. The original
expiration date of the Award shall in no way be affected.

 

(f) Other Termination. Unless otherwise determined by the Board, if a
Participant’s status with the Company or its subsidiaries terminates for any
reason other than death, disability, retirement, cause or leave of absence, any
Awards to the extent exercisable on the date of termination or change of status
may be exercised by the Participant until the earlier of three (3) months from
the date of termination or change of status or the original expiration date of
the Award.

 

11.

General Provisions Applicable to Awards

 

(a) Transferability of Awards. Except as otherwise provided in this paragraph
11(a), Awards shall not be sold, assigned, transferred, pledged or otherwise
encumbered by the person to whom they are granted, either voluntarily or by
operation of law, except by will or the laws of descent and distribution or,
other than in the case of an Incentive Stock Option, pursuant to a qualified
domestic relations order, and, during the life of the Participant, shall be
exercisable only by the Participant or, in the event of a Participant’s
incapacity, his or her guardian or legal representative. However, the
Participant, with the approval of the Board, may transfer a Nonstatutory Stock
Option for no consideration to the Participant’s immediate family or a trust for
the benefit of the Participant’s immediate family, as defined in Rule 16a-1(e)
of the Exchange Act. The transferee shall remain subject to all the terms and
conditions applicable to the Stock Option. References to a Participant, to the
extent relevant in the context, shall include references to authorized
transferees.

 

(b) Documentation. Each Award shall be evidenced in such form (written,
electronic or otherwise), as the Board shall determine. Each Award may contain
terms and conditions in addition to those set forth in the Plan.

 

 

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(c) Board Discretion. Except as otherwise provided by the Plan, each Award may
be made alone or in addition or in relation to any other Award. The terms of
each Award need not be identical, and the Board need not treat Participants
uniformly.

 

(d) Withholding. Each Participant shall pay to the Company, or make provision
satisfactory to the Board for payment of, any taxes required by law to be
withheld in connection with Awards to such Participant no later than the date of
the event creating the tax liability. Except as the Board may otherwise provide
in an Award, when the Common Stock is registered under the Exchange Act,
Participants may satisfy such tax obligations in whole or in part by delivery of
shares of Common Stock, including shares retained from the Award creating the
tax obligation, valued at their Fair Market Value; provided, however, that the
total tax withholding where stock is being used to satisfy such tax obligations
cannot exceed the Company’s minimum statutory withholding obligations (based on
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are applicable to such supplemental taxable
income). The Company may, to the extent permitted by law, deduct any such tax
obligations from any payment of any kind otherwise due to a Participant.

 

(e) Amendment of Award. The Board may amend, modify or terminate any outstanding
Award, including but not limited to, substituting therefor another Award of the
same or a different type, changing the date of exercise or realization, and
converting an Incentive Stock Option to a Nonstatutory Stock Option, provided
that (i) the Participant’s consent to such action shall be required unless the
Board determines that the action, taking into account any related action, would
not materially and adversely affect the Participant. Notwithstanding the
foregoing, except for adjustments pursuant to paragraph 13 (“Adjustments for
Changes in Common Stock and Certain Other Events”), the exercise price for any
outstanding Award granted under the Plan may not be decreased after the date of
grant nor may any outstanding Award under the Plan be surrendered to the Company
as consideration for the grant of a new Award with a lower exercise price.

 

(f) Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company’s counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.

 

(g) Acceleration. Except as otherwise provided in Section 5(d), 8(c) and 9, the
Board may at any time provide that any Award shall become immediately
exercisable in full or in part, free of some or all restrictions or conditions,
or otherwise realizable in full or in part, as the case may be.

 

 

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(h)

Performance Conditions.

 

 

(1) This Section 11(h) shall be administered by a Committee approved by the
Board, all of the members of which are “outside directors” as defined by Section
162(m) (the Compensation Committee”).

 

(2) Notwithstanding any other provision of the Plan, if the Compensation
Committee determines, at the time a Restricted Stock Award or Other Stock Unit
Award is granted to a Participant who is then an officer, that such Participant
is, or is likely to be as of the end of the tax year in which the Company would
claim a tax deduction in connection with such Award, a Covered Employee (as
defined in Section 162(m)), then the Compensation Committee may provide that
this Section 11 (h) is applicable to such Award.

 

(3) If a Restricted Stock Award or Other Stock Unit Award is subject to this
Section 11(h), then the lapsing of restrictions thereon and the distribution of
cash or Shares pursuant thereto, as applicable, shall be subject to the
achievement of one or more objective performance goals established by the
Compensation Committee, which shall be based on the relative or absolute
attainment of specified levels of one or any combination of the following: (a)
earnings per share, (b) return on average equity or average assets with respect
to a pre-determined peer group, (c) earnings, (d) earnings growth, (e) revenues,
(f) expenses, (g) stock price, (h) market share, (i) return on sales, assets,
equity or investment, (j) regulatory compliance, (k) improvement of financial
ratings, (l) achievement of balance sheet or income statement objectives, (m)
total shareholder return, (n) net operating profit after tax, (o) pre-tax or
after-tax income, (p) cash flow, or (q) such other objective goals established
by the Board, and may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated.
Such performance goals may be adjusted to exclude any one or more of (i)
extraordinary items, (ii) gains or losses on the dispositions of discontinued
operations, (iii) the cumulative effects of changes in accounting principles,
(iv) the write-down of any asset, and (v) charges for restructuring and
rationalization programs. Such performance goals may vary by Participant and may
be different for different Awards. Such performance goals shall be set by the
Compensation Committee within the time period prescribed by, and shall otherwise
comply with the requirements of, Section 162(m).

 

(4) Notwithstanding any provision of the Plan, with respect to any Restricted
Stock Award or Other Stock Unit Award that is subject to this Section 11(h), the
Compensation Committee may adjust downwards, but not upwards, the cash or number
of Shares payable pursuant to such Award, and the Compensation Committee may not
waive the achievement of the applicable performance goals except in the case of
the death or disability of the Participant.

 

 

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(5) The Compensation Committee shall have the power to impose such other
restrictions on Awards subject to this Section 11(h) as it may deem necessary or
appropriate to ensure that such Awards satisfy all requirements for
“performance-based compensation” within the meaning of Section 162(m)(4)(C) of
the Code, or any successor provision thereto.

 

12.

Forfeiture Provision

 

In the event that a Participant terminates his or her employment with the
Company or any of its subsidiaries for any reason whatsoever, and within twenty
four (24) months for a Participant in the fields of research and development,
engineering, testing, strategic planning or any phase of management or within
twelve (12) months for a Participant in all other fields (i) accepts employment
with any competitor of, or otherwise engages in competition with, the Company or
(ii) attempts directly or indirectly to induce any employee of the Company to
accept employment elsewhere, the Board of Directors, in its sole discretion, may
require the Participant to return, or (if not received) to forfeit, to the
Company the economic value of an Award which is realized or obtained (measured
at the date of exercise or vesting) by such Participant during the twelve (12)
months prior to the date of such Participant’s termination of employment with
the Company. Nothing herein shall limit any other remedies that may be available
to the Company under any other agreement(s).

 

13.

Adjustments for Changes in Common Stock and Certain Other Events

 

(a) Changes in Capitalization. In the event of any stock split, reverse stock
split, stock dividend, recapitalization, combination of shares, reclassification
of shares, spin-off or other similar change in capitalization or event, or any
distribution to holders of Common Stock other than a normal cash dividend, (i)
the number and class of securities available under this Plan, (ii) the
sub-limits set forth in Section 4(c), (iii) the number and class of securities
and exercise price per share of each outstanding Option and each Option issuable
under Section 5 and Section 6, (iv) the shares and per-share provisions of each
Stock Appreciation Right, (v) the repurchase price per share subject to each
outstanding Restricted Stock Award and (vi) the share- and per-share-related
provisions of each outstanding Other Stock Unit Award shall be appropriately
adjusted by the Company (or substituted Awards may be made, if applicable) to
the extent determined by the Board.

 

(b) Liquidation or Dissolution. In the event of a proposed liquidation or
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date.

 

 

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(c)

Reorganization and Change in Control Events

(1) Definitions

(a) A “Reorganization Event” shall mean:

(i) any merger or consolidation of the Company with or into another entity as a
result of which all of the Common Stock of the Company is converted into or
exchanged for the right to receive cash, securities or other property; or is
cancelled;

(ii)          any exchange of all of the Common Stock of the Company for cash,
securities or other property pursuant to a share exchange transaction.

 

(iii)

any liquidation or dissolution of the Company

(b) A “Change in Control Event” shall mean:

(i) 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 of any capital stock of the Company if, after such acquisition, such
Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 25% or more of either (x) the then-outstanding shares of common
stock of the Company (the “Outstanding Company Common Stock”) or (y) the
combined voting power of the then-outstanding securities of the Company entitled
to vote generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change in Control Event: (A) any
acquisition directly from the Company (excluding an acquisition pursuant to the
exercise, conversion or exchange of any security exercisable for, convertible
into or exchangeable for common stock or voting securities of the Company,
unless the Person exercising, converting or exchanging such security acquired
such security directly from the Company or an underwriter or agent of the
Company), (B) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company, or (C) any acquisition by any corporation pursuant to a Business
Combination (as defined below) which complies with clauses (x) and (y) of
subsection (iii) of this definition; or

 

 

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(ii)          such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board (or, if applicable, the Board of Directors of
a successor corporation to the Company), where the term “Continuing Director”
means at any date a member of the Board (x) who was a member of the Board on the
date of the initial adoption of this Plan by the Board or (y) who was nominated
or elected subsequent to such date by at least a majority of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (y)
any individual whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by
or on behalf of a person other than the Board; or

(iii)         the consummation of a merger, consolidation, reorganization,
recapitalization or share exchange involving the Company or a sale or other
disposition of all or substantially all of the assets of the Company (a
“Business Combination”), unless, immediately following such Business
Combination, each of the following two conditions is satisfied: (x) all or
substantially all of the individuals and entities who were the beneficial owners
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of the then-outstanding shares of common
stock and the combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors, respectively, of the resulting
or acquiring corporation in such  Business Combination (which shall include,
without limitation, a   corporation which as a result of such transaction owns
the Company or substantially all of the Company’s assets either directly or
through one or more subsidiaries) (such resulting or acquiring corporation is
referred to herein    as the “Acquiring Corporation”) in substantially the same
proportions as their ownership of the  Outstanding Company Common Stock and
Outstanding Company Voting Securities, respectively, immediately prior to such
Business Combination and (y) no Person (excluding the Acquiring Corporation or
any employee benefit plan (or related trust) maintained or sponsored by the
Company or by the Acquiring Corporation) beneficially owns, directly or
indirectly, 25% or more of the then-outstanding shares of common stock of the
Acquiring Corporation, or of the combined voting power of the then-outstanding
securities of such corporation entitled to vote generally in the election of
directors (except to the extent that such ownership existed prior to the
Business Combination); or

 

 

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(iv)

the liquidation or dissolution of the Company.

(c) “Good Reason” shall mean any significant diminution in the Participant’s
title, authority, or responsibilities from and after such Reorganization Event
or Change in Control Event, as the case may be, or any reduction in the annual
cash compensation payable to the Participant from and after such Reorganization
Event or Change in Control Event, as the case may be, or the relocation of the
place of business at which the Participant is principally located to a location
that is greater than 50 miles from the current site.

 

(d) “Cause” shall mean any (i) willful failure by the Participant, which failure
is not cured within 30 days of written notice to the Participant from the
Company, to perform his or her material responsibilities to the Company or (ii)
willful misconduct by the Participant which affects the business reputation of
the Company. The Participant shall be considered to have been discharged for
“Cause” if the Company determines, within 30 days after the Participant’s
resignation, that discharge for Cause was warranted.

(2) Effect on Options

(a) Reorganization Event. Upon the occurrence of a Reorganization Event
(regardless of whether such event also constitutes a Change in Control Event),
or the execution by the Company of any agreement with respect to a
Reorganization Event (regardless of whether such event will result in a Change
in Control Event), the Board shall provide that all outstanding Options shall be
assumed, or equivalent options shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof); provided that if such
Reorganization Event also constitutes a Change in Control Event, except to the
extent specifically provided to the contrary in the instrument evidencing any
Option or any other agreement between a Participant and the Company (A) one-half
of the number of shares subject to the Option which were not already vested
shall be exercisable upon the occurrence of such Reorganization Event and,
subject to (B) below, the remaining one-half of such number of shares shall
continue to become vested in accordance with the original vesting schedule set
forth in such option, with one-half of the number of shares that would otherwise
have become vested on each subsequent vesting date in accordance with the
original schedule becoming vested on each subsequent vesting date and (B) such
assumed or substituted options shall become immediately exercisable in full if,
on or prior to the first anniversary of the date of the consummation of the
Reorganization Event, the Participant’s employment with the Company or the
acquiring or succeeding corporation is terminated for Good Reason by the
Participant or is terminated without Cause by the Company or the acquiring or
succeeding corporation. For purposes hereof, an Option shall be considered to be
assumed if, following consummation of the Reorganization Event, the Option
confers the right to purchase, for each share of Common Stock subject to the
Option immediately prior to the consummation of the Reorganization Event, the
consideration (whether cash, securities or other property) received as a result
of the Reorganization Event by holders of Common Stock for each share of Common
Stock held immediately prior to the consummation of the Reorganization Event
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Common Stock); provided, however, that if the consideration received as a result
of the Reorganization Event is not solely common stock of the acquiring or
succeeding corporation (or an affiliate thereof), the Company may, with the
consent of the acquiring or succeeding corporation, provide for the
consideration to be received upon the exercise of Options to consist solely of
common stock of the acquiring or succeeding corporation (or an affiliate
thereof) equivalent in fair market value to the per share consideration received
by holders of outstanding shares of Common Stock as a result of the
Reorganization Event.

 

 

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Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an
affiliate thereof) does not agree to assume, or substitute for, such Options, or
in the event of a liquidation or dissolution of the Company, then the Board
shall, upon written notice to the Participants, provide that all then
unexercised Options will become exercisable in full as of a specified time prior
to the Reorganization Event and will terminate immediately prior to the
consummation of such Reorganization Event, except to the extent exercised by the
Participants before the consummation of such Reorganization Event; provided,
however, that in the event of a Reorganization Event under the terms of which
holders of Common Stock will receive upon consummation thereof a cash payment
for each share of Common Stock surrendered pursuant to such Reorganization Event
(the “Acquisition Price”), then the Board may instead provide that all
outstanding Options shall terminate upon consummation of such Reorganization
Event and that each Participant shall receive, in exchange therefore, a cash
payment equal to the amount (if any) by which (A) the Acquisition Price
multiplied by the number of shares of Common Stock subject to such outstanding
Options (whether or not then exercisable), exceeds (B) the aggregate exercise
price of such Options. To the extent all or any portion of an Option becomes
exercisable solely as a result of the first sentence of this paragraph, upon
exercise of such Option the Participant shall receive shares subject to a right
of repurchase by the Company or its successor at the Option exercise price. Such
repurchase right (1) shall lapse at the same rate as the Option would have
become exercisable under its terms and (2) shall not apply to any shares subject
to the Option that were exercisable under its terms without regard to the first
sentence of this paragraph

(b) Change in Control Event that is not a Reorganization Event. Upon the
occurrence of a Change in Control Event that does not also constitute a
Reorganization Event, except to the extent specifically provided to the contrary
in the instrument evidencing any Option or any other agreement between a
Participant and the Company, the vesting schedule of such Option shall be
accelerated in part so that one-half of the number of shares that would
otherwise have first become vested on any date after the date of the Change in
Control Event shall immediately become exercisable. The remaining one-half of
such number of shares shall continue to become vested in accordance with the
original vesting schedule set forth in such Option, with one-half of the number
of shares that would otherwise have become vested on each subsequent vesting
date in accordance with the original schedule becoming vested on each such
subsequent vesting date; provided, however, that each such Option shall be
immediately exercisable in full if, on or prior to the first anniversary of the
date of the consummation of the Change in Control Event, the Participant’s
employment with the Company or the acquiring or succeeding corporation is
terminated for Good Reason by the Participant or is terminated without Cause by
the Company or the acquiring or succeeding corporation.

 

(3) Effect on Restricted Stock Awards

(a) Reorganization Event that is not a Change in Control Event. Upon the
occurrence of a Reorganization Event that is not a Change in Control Event, the
repurchase and other rights of the Company under each outstanding Restricted
Stock Award shall inure to the benefit of the Company’s successor and shall
apply to the cash, securities or other property which the Common Stock was
converted into or exchanged for pursuant to such Reorganization Event in the
same manner and to the same extent as they applied to the Common Stock subject
to such Restricted Stock Award.

 

 

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(b) Change in Control Event. Upon the occurrence of a Change in Control Event
(regardless of whether such event also constitutes a Reorganization Event),
except to the extent specifically provided to the contrary in the instrument
evidencing any Restricted Stock Award or any other agreement between a
Participant and the Company, the vesting schedule of all Restricted Stock Awards
shall be accelerated in part so that one-half of the number of shares that would
otherwise have first become free from conditions or restrictions on any date
after the date of the Change in Control Event shall immediately become free from
conditions or restrictions. Subject to the following sentence, the remaining
one-half of such number of shares shall continue to become free from conditions
or restrictions in accordance with the original schedule set forth in such
Restricted Stock Award, with one-half of the number of shares that would
otherwise have become free from conditions or restrictions on each subsequent
vesting date in accordance with the original schedule becoming free from
conditions or restrictions on each subsequent vesting date. In addition, each
such Restricted Stock Award shall immediately become free from all conditions or
restrictions if, on or prior to the first anniversary of the date of the
consummation of the Change in Control Event, the Participant’s employment with
the Company or the acquiring or succeeding corporation is terminated for Good
Reason by the Participant or is terminated without Cause by the Company or the
acquiring or succeeding corporation.

 

(4) Effect on Stock Appreciation Rights and Other Stock Unit Awards

The Board may specify in an Award at the time of the grant the effect of a
Reorganization Event and Change in Control Event on any SAR and Other Stock Unit
Award.

14.

Miscellaneous

(a) No Right To Employment or Other Status. No person shall have any claim or
right to be granted an Award, and the grant of an Award shall not be construed
as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.

(b) No Rights As Stockholder. Subject to the provisions of the applicable Award,
no Participant or Designated Beneficiary shall have any rights as a stockholder
with respect to any shares of Common Stock to be distributed with respect to an
Award until becoming the record holder of such shares. Notwithstanding the
foregoing, in the event the Company effects a split of the Common Stock by means
of a stock dividend and the exercise price of and the number of shares subject
to such Option are adjusted as of the date of the distribution of the dividend
(rather than as of the record date for such dividend), then an optionee who
exercises an Option between the record date and the distribution date for such
stock dividend shall be entitled to receive, on the distribution date, the stock
dividend with respect to the shares of Common Stock acquired upon such Option
exercise, notwithstanding the fact that such shares were not outstanding as of
the close of business on the record date for such stock dividend.

 

 

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(c) Effective Date and Term of Plan. The Plan shall become effective on the date
on which it is approved by the Company’s stockholders. No Awards shall be
granted under the Plan after the completion of ten years from the date the Plan
was approved by the Company’s stockholders, but Awards previously granted may
extend beyond that date.

(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any
portion thereof at any time, provided that (i) to the extent required by Section
162(m), no Award granted to a Participant that is intended to comply with
Section 162(m) after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award, unless and until such
amendment shall have been approved by the Company’s stockholders as required by
Section 162(m) (including the vote required under Section 162(m); (ii) no
amendment may increase the limitations on the number of shares set forth in
paragraph 4(a) or decrease the minimum Option exercise price set forth in
paragraph 5(c) unless such amendment shall have been approved by the Company’s
stockholders; (iii) the provisions relating to Option repricing in paragraph
11(e) may not be amended unless such amendment shall have been approved by the
Company’s stockholders; (iv) no other type of Award other than those provided
under the Plan may be awarded unless such amendment shall have been approved by
the Company’s stockholders and (v) no other changes that require stockholder
approval under the rules of the NASDAQ National Market, Inc.® may be made unless
approved by the Company’s stockholders. In addition, if at any time the approval
of the Company’s stockholders is required as to any modification or amendment
under Section 422 of the Code or any successor provision with respect to
Incentive Stock Options, the Board may not effect such modification or amendment
without such approval. No Award shall be made that is conditioned upon
stockholder approval of any amendment to the Plan.

 

(e) Provisions for Foreign Participants. The Board may modify Awards or Options
granted to Participants who are foreign nationals or employed outside the United
States or establish subplans or procedures under the Plan to recognize
differences in laws, rules, regulations or customs of such foreign jurisdictions
with respect to tax, securities, currency, employee benefit or other matters.

(f) Governing Law. The provisions of the Plan and all Awards made hereunder
shall be governed by and interpreted in accordance with the laws of the
Commonwealth of Massachusetts, without regard to any applicable conflicts of
law.

 

Adopted by the Board of Directors on November 15, 2005

Approved by the Shareholders on February 16, 2006

 

 

 

 

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