Exhibit 10.1

 

DERMA SCIENCES, INC.
2012 EQUITY INCENTIVE PLAN

1.  Establishment, Purpose, Duration.

a.   Establishment .  Derma Sciences, Inc. (the “Company”), hereby establishes
an equity compensation plan to be known as the Derma Sciences, Inc. 2012 Equity
Incentive Plan (the “Plan”). The Plan is effective as of May 30, 2012 (the
“Effective Date”), subject to the approval of the Plan by the stockholders of
the Company (the date of such stockholder approval being the “Approval Date”).
Definitions of capitalized terms used in the Plan are contained in Section 2 of
the Plan.

b.   Purpose .  The purpose of the Plan is to attract and retain Directors,
officers and other key Employees of, and Consultants to, the Company and its
Subsidiaries and to provide to such persons incentives and rewards for their
performance.

c.   Duration .  No Award may be granted under the Plan after the day
immediately preceding the tenth (10th) anniversary of the Effective Date, or
such earlier date as the Board shall determine. The Plan will remain in effect
with respect to outstanding Awards until no Awards remain outstanding.

d.   Prior Plans .  If the Company’s stockholders approve the Plan, the Derma
Sciences, Inc. Amended and Restated Stock Option Plan and the Derma Sciences,
Inc. Restricted Stock Plan (the “Prior Plans”) each will terminate in its
entirety effective on the Approval Date; provided that all outstanding awards
under the Prior Plans as of the Approval Date shall remain outstanding and shall
be administered and settled in accordance with the provisions of the applicable
Prior Plan.

 

2.   Definitions.  As used in the Plan, the following definitions shall apply.

“Applicable Laws” means the applicable requirements relating to the
administration of equity-based compensation plans under U.S. state corporate
laws, U.S. federal and state securities laws, the Code, the rules of any stock
exchange or quotation system on which the Shares are listed or quoted and the
applicable laws of any other country or jurisdiction where Awards are granted
under the Plan.

“Approval Date” has the meaning given such term in Section 1(a).

“Award” means a Nonqualified Stock Option, Incentive Stock Option, Stock
Appreciation Right, Restricted Shares Award, Restricted Share Unit, Other
Share-Based Award, or Cash-Based Award granted pursuant to the terms and
conditions of the Plan.

“Award Agreement” means either: (a) an agreement, either in written or
electronic format, entered into by the Company and a Participant setting forth
the terms and provisions applicable to an Award granted under the Plan; or (b) a
statement, either in written or electronic format, issued by the Company to a
Participant describing the terms and provisions of such Award, which need not be
signed by the Participant.

“Board” means the Board of Directors of the Company.

“Cash-Based Award” shall mean a cash Award granted pursuant to Section 11 of the
Plan.

“Cause” as a reason for a Participant’s termination of employment shall have the
meaning assigned such term in the employment or consulting agreement, if any,
between the Participant and the Company or Subsidiary. If the Participant is not
a party to an employment or consulting agreement with the Company or a
Subsidiary in which such term is defined, then unless otherwise defined in the
applicable Award Agreement, “Cause” shall mean any of the following, as
reasonably determined by the Committee: (i) the Participant’s material failure
to perform his or her responsibilities to the Company, (ii) the Participant’s
material failure to follow directives or policies established by or at the
direction of the Board, or (iii) the Participant conducting himself or herself
in a manner materially detrimental to the interests of the Company.

 

 

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“Change in Control” means the occurrence of any of the following events:

(a)  The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of more than fifty percent (50%) of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting Securities”); or

(b)  Individuals who, as of the date of this Plan, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided , however , that any individual becoming a Director subsequent
to the date of this Plan whose election, or nomination for election by the
Company’s stockholders, was approved by a vote of at least two-thirds (2/3) of
the Directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs 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

(c)  Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company or the
acquisition of assets of another entity (a “Corporate Transaction”), in each
case, unless, following such Corporate Transaction, all or substantially all of
the individuals and entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Corporate Transaction
beneficially own, directly or indirectly, more than fifty percent (50%) of the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction of the Outstanding Company
Voting Securities; or

(d)   Approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.

“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means the Compensation Committee of the Board or such other
committee or subcommittee of the Board as may be duly appointed to administer
the Plan and having such powers in each instance as shall be specified by the
Board. To the extent required by Applicable Laws, the Committee shall consist of
two or more members of the Board, each of whom is a “non-employee director”
within the meaning of Rule 16b-3 promulgated under the Exchange Act, an “outside
director” within the meaning of regulations promulgated under Section 162(m) of
the Code, and an “independent director” within the meaning of applicable rules
of any securities exchange upon which Shares are listed.

“Company” has the meaning given such term in Section 1(a) and any successor
thereto.

“Consultant” means an independent contractor that (i) performs services for the
Company or a Subsidiary in a capacity other than as an Employee or Director and
(ii) qualifies as a consultant under the applicable rules of the SEC for
registration of shares on a Form S-8 Registration Statement.

“Date of Grant” means the date as of which an Award is determined to be
effective and designated in a resolution by the Committee and is granted
pursuant to the Plan. The Date of Grant shall not be earlier than the date of
the resolution and action therein by the Committee. In no event shall the Date
of Grant be earlier than the Effective Date.

“Director” means any individual who is a member of the Board who is not an
Employee.

“Effective Date” has the meaning given such term in Section 1(a).

 

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“Employee” means any employee of the Company or a Subsidiary; provided , however
, that for purposes of determining whether any person may be a Participant for
purposes of any grant of Incentive Stock Options, the term “Employee” has the
meaning given to such term in Section 3401(c) of the Code, as interpreted by the
regulations thereunder and Applicable Law.

“Exchange Act” means the Securities Exchange Act of 1934 and the rules and
regulations thereunder, as such law, rules and regulations may be amended from
time to time.

“Fair Market Value” means the value of one Share on any relevant date,
determined under the following rules: (a) the closing sale price per Share on
that date as reported on the principal exchange on which Shares are then
trading, if any, or if applicable the NASDAQ Capital Market, or if there are no
sales on that date, on the next preceding trading day during which a sale
occurred; (b) if the Shares are not reported on a principal exchange or national
market system, the average of the closing bid and asked prices last quoted on
that date by an established quotation service for over-the-counter securities;
or (c) if neither (a) nor (b) applies, (i) with respect to Stock Options, Stock
Appreciation Rights and any Award of stock rights that is subject to Section
409A of the Code, the value as determined by the Committee through the
reasonable application of a reasonable valuation method, taking into account all
information material to the value of the Company, within the meaning of Section
409A of the Code, and (ii) with respect to all other Awards, the fair market
value as determined by the Committee in good faith.

“Incentive Stock Option” or “ISO” means a Stock Option that is designated as an
Incentive Stock Option and that is intended to meet the requirements of Section
422 of the Code.

“Nonqualified Stock Option” means a Stock Option that is not intended to meet
the requirements of Section 422 of the Code or otherwise does not meet such
requirements.

“Other Share-Based Award” means an equity-based or equity-related Award not
otherwise described by the terms of the Plan, granted in accordance with the
terms and conditions set forth in Section 10.

“Participant” means any eligible individual as set forth in Section 5 who holds
one or more outstanding Awards.

“Performance-Based Exception” means the performance-based exception from the tax
deductibility limitations of Section 162(m) of the Code.

“Performance Objectives” means the performance objective or objectives
established by the Committee pursuant to the Plan. Any Performance Objectives
may relate to the performance of the Company or one or more of its Subsidiaries,
divisions, departments, units, functions, partnerships, joint ventures or
minority investments, product lines or products, or the performance of the
individual Participant, and may include, without limitation, the Performance
Objectives set forth in Section 13(b). The Performance Objectives may be made
relative to the performance of a group of comparable companies, or published or
special index that the Committee, in its sole discretion, deems appropriate, or
the Company may select Performance Objectives as compared to various stock
market indices. Performance Objectives may be stated as a combination of the
listed factors.

“Plan” means this Derma Sciences, Inc. 2012 Equity Incentive Plan, as amended
from time to time.

“Prior Plans” has the meaning given such term in Section 1(d).

“Restricted Shares” means Shares granted or sold pursuant to Section 8 as to
which neither the substantial risk of forfeiture nor the prohibition on
transfers referred to in such Section 8 has expired.

“Restricted Share Unit” means a grant or sale of the right to receive Shares or
cash at the end of a specified restricted period made pursuant to Section 9.

“SEC” means the United States Securities and Exchange Commission.

“Share” means a share of common stock of the Company, $0.01 par value per share,
or any security into which such Share may be changed by reason of any
transaction or event of the type referred to in Section 15.

 

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“Stock Appreciation Right” means a right granted pursuant to Section 7.

“Stock Option” means a right to purchase a Share granted to a Participant under
the Plan in accordance with the terms and conditions set forth in Section 6.
Stock Options may be either Incentive Stock Options or Nonqualified Stock
Options.

“Subsidiary” means: (a) with respect to an Incentive Stock Option, a “subsidiary
corporation” as defined under Section 424(f) of the Code; and (b) for all other
purposes under the Plan, any corporation or other entity in which the Company
owns, directly or indirectly, a proprietary interest of more than fifty (50%) by
reason of stock ownership or otherwise.

“Ten Percent Stockholder” shall mean any Participant who owns more than 10% of
the combined voting power of all classes of stock of the Company, within the
meaning of Section 422 of the Code.

 

3.  Shares Available Under the Plan.

a.   Shares Available for Awards.  The maximum number of Shares that may be
issued or delivered pursuant to Awards under the Plan shall be the number of
Shares that, on the Approval Date, are available to be granted under the Prior
Plans but which are not then subject to outstanding awards under the Prior
Plans, all of which may be granted with respect to Incentive Stock Options.
Shares issued or delivered pursuant to an Award may be authorized but unissued
Shares, treasury Shares, including Shares purchased in the open market, or a
combination of the foregoing. The aggregate number of Shares available for
issuance or delivery under the Plan shall be subject to adjustment as provided
in Section 15.

b.   Share Usage.  In addition to the number of Shares provided for in Section
3(a), the following Shares shall be available for Awards under the Plan: (i)
Shares covered by an Award that expires or is forfeited, canceled, surrendered
or otherwise terminated without the issuance of such Shares; (ii) Shares covered
by an Award that is settled only in cash; (iii) Shares granted through the
assumption of, or in substitution for, outstanding awards granted by a company
to individuals who become Employees, Directors or Consultants as the result of a
merger, consolidation, acquisition or other corporate transaction involving such
company and the Company or any of its Affiliates (except as may be required by
reason of Section 422 of the Code or the rules and regulations of any stock
exchange or other trading market on which the Shares are listed); (iv) any
Shares subject to outstanding awards under the Prior Plan as of the Approval
Date that on or after the Approval Date are forfeited, canceled, surrendered or
otherwise terminated without the issuance of such Shares; and (v) any Shares
from awards exercised for or settled in vested and nonforfeitable Shares that
are later returned to the Company pursuant to any compensation recoupment
policy, provision or agreement. Notwithstanding the foregoing, the following
Shares issued or delivered under this Plan shall not again be available for
grant as described above: Shares tendered in payment of the exercise price of a
Stock Option, Shares withheld by the Company or any Subsidiary to satisfy a tax
withholding obligation, and Shares that are repurchased by the Company with
Stock Option proceeds. Without limiting the foregoing, with respect to any Stock
Appreciation Right that is settled in Shares, the full number of Shares subject
to the Award shall count against the number of Shares available for Awards under
the Plan regardless of the number of Shares used to settle the Stock
Appreciation Right upon exercise. This Section 3(b) shall apply to the number of
Shares reserved and available for Incentive Stock Options only to the extent
consistent with applicable Treasury regulations relating to Incentive Stock
Options under the Code.

 

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c.   Per Participant Limits.  Subject to adjustment as provided in Section 15 of
the Plan, the following limits shall apply with respect to Awards that are
intended to qualify for the Performance-Based Exception: (i) the maximum
aggregate number of Shares that may be subject to Stock Options or Stock
Appreciation Rights granted in any calendar year to any one Participant shall be
100,000 Shares; (ii) the maximum aggregate number of Restricted Shares and
Shares issuable or deliverable under Restricted Share Units and Other
Share-Based Awards granted in any calendar year to any one Participant shall be
50,000 Shares; (iii) the maximum aggregate compensation that can be paid
pursuant to Cash-Based Awards or Other Share-Based Awards granted in any
calendar year to any one Participant shall be $500,000 or a number of Shares
having an aggregate Fair Market Value not in excess of such amount; and (iv) the
maximum dividend equivalents that may be paid in any calendar year to any one
Participant shall be $5,000 or a number of Shares having an aggregate Fair
Market Value not in excess of such amount.

 

4.  Administration of the Plan.

a.   In General.  The Plan shall be administered by the Committee. Except as
otherwise provided by the Board, the Committee shall have full and final
authority in its discretion to take all actions determined by the Committee to
be necessary in the administration of the Plan, including, without limitation,
discretion to: select Award recipients; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; grant waivers of terms, conditions, restrictions and limitations
applicable to any Award, or accelerate the vesting or exercisability of any
Award, in a manner consistent with the Plan; construe and interpret the Plan and
any Award Agreement or other agreement or instrument entered into under the
Plan; establish, amend, or waive rules and regulations for the Plan’s
administration; and take such other action, not inconsistent with the terms of
the Plan, as the Committee deems appropriate. To the extent permitted by
Applicable Laws, the Committee may, in its discretion, delegate to one or more
Directors or Employees any of the Committee’s authority under the Plan. The acts
of any such delegates shall be treated hereunder as acts of the Committee with
respect to any matters so delegated.

b.   Determinations.  The Committee shall have no obligation to treat
Participants or eligible Participants uniformly, and the Committee may make
determinations under the Plan selectively among Participants who receive, or
Employees, Directors or Consultants who are eligible to receive, Awards (whether
or not such Participants or eligible Employees, Directors or Consultants are
similarly situated). All determinations and decisions made by the Committee
pursuant to the provisions of the Plan and all related orders and resolutions of
the Committee shall be final, conclusive and binding on all persons, including
the Company, its Subsidiaries, its stockholders, Employees, Directors,
Consultants, Participants and their estates and beneficiaries.

c.   Authority of the Board.  The Board may reserve to itself any or all of the
authority or responsibility of the Committee under the Plan or may act as the
administrator of the Plan for any and all purposes. To the extent the Board has
reserved any such authority or responsibility or during any time that the Board
is acting as administrator of the Plan, it shall have all the powers of the
Committee hereunder, and any reference herein to the Committee (other than in
this Section 4(c)) shall include the Board. To the extent that any action of the
Board under the Plan conflicts with any action taken by the Committee, the
action of the Board shall control.

 

5.  Eligibility and Participation.  Each Employee, Director and Consultant is
eligible to participate in the Plan. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, Directors
and Consultants those to whom Awards shall be granted and shall determine, in
its sole discretion, the nature of any and all terms permissible by Applicable
Law and the amount of each Award.

 

6.  Stock Options.  Subject to the terms and conditions of the Plan, Stock
Options may be granted to Participants in such number, and upon such terms and
conditions, as shall be determined by the Committee in its sole discretion.

 

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a.   Award Agreement.  Each Stock Option shall be evidenced by an Award
Agreement that shall specify the exercise price, the term of the Stock Option,
the number of Shares covered by the Stock Option, the conditions upon which the
Stock Option shall become vested and exercisable and such other terms and
conditions as the Committee shall determine and which are not inconsistent with
the terms and conditions of the Plan. The Award Agreement also shall specify
whether the Stock Option is intended to be an Incentive Stock Option or a
Nonqualified Stock Option.

b.   Exercise Price.  The exercise price per Share of a Stock Option shall be
determined by the Committee at the time the Stock Option is granted and shall be
specified in the related Award Agreement; provided, however , that in no event
shall the exercise price per Share of any Stock Option be less than one hundred
percent (100%) of the Fair Market Value of a Share on the Date of Grant.

c.   Term.  The term of a Stock Option shall be determined by the Committee and
set forth in the related Award Agreement; provided, however , that in no event
shall the term of any Stock Option exceed ten (10) years from its Date of Grant.

d.   Exercisability.  Stock Options shall become vested and exercisable at such
times and upon such terms and conditions as shall be determined by the Committee
and set forth in the related Award Agreement. Such terms and conditions may
include, without limitation, the satisfaction of (a) performance goals based on
one or more Performance Objectives, and (b) time-based vesting requirements.

e.   Exercise of Stock Options.  Except as otherwise provided in the Plan or in
a related Award Agreement, a Stock Option may be exercised for all or any
portion of the Shares for which it is then exercisable. A Stock Option shall be
exercised by the delivery of a notice of exercise to the Company or its designee
in a form specified by the Company which sets forth the number of Shares with
respect to which the Stock Option is to be exercised and full payment of the
exercise price for such Shares. The exercise price of a Stock Option may be
paid, in the discretion of the Committee and as set forth in the applicable
Award Agreement: (i) in cash or its equivalent; (ii) by tendering (either by
actual delivery or attestation) previously acquired Shares having an aggregate
Fair Market Value at the time of exercise equal to the aggregate exercise price;
(iii) by a cashless exercise (including by withholding Shares deliverable upon
exercise and through a broker-assisted arrangement to the extent permitted by
Applicable Laws); (iv) by a combination of the methods described in clauses (i),
(ii) and/or (iii); or (v) through any other method approved by the Committee in
its sole discretion. As soon as practicable after receipt of the notification of
exercise and full payment of the exercise price, the Company shall cause the
appropriate number of Shares to be issued to the Participant.

f.   Special Rules Applicable to Incentive Stock Options.  Notwithstanding any
other provision in the Plan to the contrary:

(i)  Incentive Stock Options may be granted only to Employees of the Company and
its Subsidiaries. The terms and conditions of Incentive Stock Options shall be
subject to and comply with the requirements of Section 422 of the Code.

(ii)  To the extent that the aggregate Fair Market Value of the Shares
(determined as of the Date of Grant) with respect to which an Incentive Stock
Option is exercisable for the first time by any Participant during any calendar
year (under all plans of the Company and its Subsidiaries) is greater than
$100,000 (or such other amount specified in Section 422 of the Code), as
calculated under Section 422 of the Code, then the Stock Option shall be treated
as a Nonqualified Stock Option.

(iii)  No Incentive Stock Option shall be granted to any Participant who, on the
Date of Grant, is a Ten Percent Stockholder, unless (x) the exercise price per
Share of such Incentive Stock Option is at least one hundred and ten percent
(110%) of the Fair Market Value of a Share on the Date of Grant, and (y) the
term of such Incentive Stock Option shall not exceed five (5) years from the
Date of Grant.

 

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7.  Stock Appreciation Rights.  Subject to the terms and conditions of the Plan,
Stock Appreciation Rights may be granted to Participants in such number, and
upon such terms and conditions, as shall be determined by the Committee in its
sole discretion.

a.   Award Agreement.  Each Stock Appreciation Right shall be evidenced by an
Award Agreement that shall specify the exercise price, the term of the Stock
Appreciation Right, the number of Shares covered by the Stock Appreciation
Right, the conditions upon which the Stock Appreciation Right shall become
vested and exercisable and such other terms and conditions as the Committee
shall determine and which are not inconsistent with the terms and conditions of
the Plan.

b.   Exercise Price.  The exercise price per Share of a Stock Appreciation Right
shall be determined by the Committee at the time the Stock Appreciation Right is
granted and shall be specified in the related Award Agreement; provided,
however, that in no event shall the exercise price per Share of any Stock
Appreciation Right be less than one hundred percent (100%) of the Fair Market
Value of a Share on the Date of Grant.

c.   Term.  The term of a Stock Appreciation Right shall be determined by the
Committee and set forth in the related Award Agreement; provided, however , that
in no event shall the term of any Stock Appreciation Right exceed ten (10) years
from its Date of Grant.

d.   Exercisability of Stock Appreciation Rights.  A Stock Appreciation Right
shall become vested and exercisable at such times and upon such terms and
conditions as may be determined by the Committee and set forth in the related
Award Agreement. Such terms and conditions may include, without limitation, the
satisfaction of (i) performance goals based on one or more Performance
Objectives, and (ii) time-based vesting requirements.

e.   Exercise of Stock Appreciation Rights.  Except as otherwise provided in the
Plan or in a related Award Agreement, a Stock Appreciation Right may be
exercised for all or any portion of the Shares for which it is then exercisable.
A Stock Appreciation Right shall be exercised by the delivery of a notice of
exercise to the Company or its designee in a form specified by the Company which
sets forth the number of Shares with respect to which the Stock Appreciation
Right is to be exercised. Upon exercise, a Stock Appreciation Right shall
entitle a Participant to an amount equal to (a) the excess of (i) the Fair
Market Value of a Share on the exercise date over (ii) the exercise price per
Share, multiplied by (b) the number of Shares with respect to which the Stock
Appreciation Right is exercised. A Stock Appreciation Right may be settled in
whole Shares, cash or a combination thereof, as specified by the Committee in
the related Award Agreement.

 

8.  Restricted Shares.  Subject to the terms and conditions of the Plan,
Restricted Shares may be granted or sold to Participants in such number, and
upon such terms and conditions, as shall be determined by the Committee in its
sole discretion.

a.   Award Agreement.  Each Restricted Shares Award shall be evidenced by an
Award Agreement that shall specify the number of Restricted Shares, the
restricted period(s) applicable to the Restricted Shares, the conditions upon
which the restrictions on the Restricted Shares will lapse and such other terms
and conditions as the Committee shall determine and which are not inconsistent
with the terms and conditions of the Plan.

b.   Terms, Conditions and Restrictions.  The Committee shall impose such other
terms, conditions and/or restrictions on any Restricted Shares as it may deem
advisable, including, without limitation, a requirement that the Participant pay
a purchase price for each Restricted Share, restrictions based on the
achievement of specific Performance Objectives, time-based restrictions or
holding requirements or sale restrictions placed on the Shares by the Company
upon vesting of such Restricted Shares. Unless otherwise provided in the related
Award Agreement or required by applicable law, the restrictions imposed on
Restricted Shares shall lapse upon the expiration or termination of the
applicable restricted period and the satisfaction of any other applicable terms
and conditions.

 

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c.   Custody of Certificates.  To the extent deemed appropriate by the
Committee, the Company may retain the certificates representing Restricted
Shares in the Company’s possession until such time as all terms, conditions
and/or restrictions applicable to such Shares have been satisfied or lapse.

d.   Rights Associated with Restricted Shares during Restricted Period.  During
any restricted period applicable to Restricted Shares: (i) the Restricted Shares
may not be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated; (ii) unless otherwise provided in the related Award Agreement, the
Participant shall be entitled to exercise full voting rights associated with
such Restricted Shares; and (iii) the Participant shall be entitled to all
dividends and other distributions paid with respect to such Restricted Shares
during the restricted period. The Award Agreement may require that receipt of
any dividends or other distributions with respect to the Restricted Shares shall
be subject to the same terms and conditions as the Restricted Shares with
respect to which they are paid. Notwithstanding the preceding sentence,
dividends or other distributions with respect to Restricted Shares that vest
based on the achievement of Performance Objectives shall be accumulated until
such Award is earned, and the dividends or other distributions shall not be paid
if the Performance Objectives are not satisfied.

 

9.  Restricted Share Units.  Subject to the terms and conditions of the Plan,
Restricted Share Units may be granted or sold to Participants in such number,
and upon such terms and conditions, as shall be determined by the Committee in
its sole discretion.

a.   Award Agreement.  Each Restricted Share Unit Award shall be evidenced by an
Award Agreement that shall specify the number of units, the restricted period(s)
applicable to the Restricted Share Units, the conditions upon which the
restrictions on the Restricted Share Units will lapse, the time and method of
payment of the Restricted Share Units, and such other terms and conditions as
the Committee shall determine and which are not inconsistent with the terms and
conditions of the Plan.

b.   Terms, Conditions and Restrictions.  The Committee shall impose such other
terms, conditions and/or restrictions on any Restricted Share Units as it may
deem advisable, including, without limitation, a requirement that the
Participant pay a purchase price for each Restricted Share Unit, restrictions
based on the achievement of specific Performance Objectives or time-based
restrictions or holding requirements.

c.   Form of Settlement.  Restricted Share Units may be settled in whole Shares,
cash or a combination thereof, as specified by the Committee in the related
Award Agreement.

d.   Dividend Equivalents.  Restricted Share Units may provide the Participant
with dividend equivalents, on either a current or deferred or contingent basis,
and either in cash or in additional Shares, as determined by the Committee in
its sole discretion and set forth in the related Award Agreement; provided that
dividend equivalents with respect to Restricted Share Units that vest based on
the achievement of Performance Objectives shall be accumulated until such Award
is earned, and the dividend equivalents shall not be paid if the Performance
Objectives are not satisfied.

 

10.  Other Share-Based Awards.  Subject to the terms and conditions of the Plan,
Other Share-Based Awards may be granted to Participants in such number, and upon
such terms and conditions, as shall be determined by the Committee in its sole
discretion. Other Share-Based Awards are Awards that are valued in whole or in
part by reference to, or otherwise based on the Fair Market Value of, Shares,
and shall be in such form as the Committee shall determine, including without
limitation, unrestricted Shares or time-based or performance-based units that
are settled in Shares and/or cash.

a.   Award Agreement.  Each Other Share-Based Award shall be evidenced by an
Award Agreement that shall specify the terms and conditions upon which the Other
Share-Based Award shall become vested, if applicable, the time and method of
settlement, the form of settlement and such other terms and conditions as the
Committee shall determine and which are not inconsistent with the terms and
conditions of the Plan.

b.   Form of Settlement.  An Other Share-Based Award may be settled in whole
Shares, cash or a combination thereof, as specified by the Committee in the
related Award Agreement.

 

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c.   Dividend Equivalents.  Other Share-Based Awards may provide the Participant
with dividend equivalents, on either a current or deferred or contingent basis,
and either in cash or in additional Shares, as determined by the Committee in
its sole discretion and set forth in the related Award Agreement; provided that
dividend equivalents with respect to Other Share-Based Awards that vest based on
the achievement of Performance Objectives shall be accumulated until such Award
is earned, and the dividend equivalents shall not be paid if the Performance
Objectives are not satisfied.

 

11.  Cash-Based Awards.  Subject to the terms and conditions of the Plan,
Cash-Based Awards may be granted to Participants in such amounts and upon such
other terms and conditions as shall be determined by the Committee in its sole
discretion. Each Cash-Based Award shall be evidenced by an Award Agreement that
shall specify the payment amount or payment range, the time and method of
settlement and the other terms and conditions, as applicable, of such Award
which may include, without limitation, restrictions based on the achievement of
specific Performance Objectives.

 

12.  Compliance with Section 409A.  Awards granted under the Plan shall be
designed and administered in such a manner that they are either exempt from the
application of, or comply with, the requirements of Section 409A of the Code. To
the extent that the Committee determines that any award granted under the Plan
is subject to Section 409A of the Code, the Award Agreement shall incorporate
the terms and conditions necessary to avoid the imposition of an additional tax
under Section 409A of the Code upon a Participant. Notwithstanding any other
provision of the Plan or any Award Agreement (unless the Award Agreement
provides otherwise with specific reference to this Section): (i) an Award shall
not be granted, deferred, accelerated, extended, paid out, settled, substituted
or modified under the Plan in a manner that would result in the imposition of an
additional tax under Section 409A of the Code upon a Participant; and (ii) if an
Award is subject to Section 409A of the Code, and if the Participant holding the
award is a “specified employee” (as defined in Section 409A of the Code, with
such classification to be determined in accordance with the methodology
established by the Company), then, to the extent required to avoid the
imposition of an additional tax under Section 409A of the Code upon a
Participant, no distribution or payment of any amount shall be made before the
date that is six (6) months following the date of such Participant’s “separation
from service” (as defined in Section 409A of the Code) or, if earlier, the date
of the Participant’s death. Although the Company intends to administer the Plan
so that Awards will be exempt from, or will comply with, the requirements of
Section 409A of the Code, the Company does not warrant that any Award under the
Plan will qualify for favorable tax treatment under Section 409A of the Code or
any other provision of federal, state, local, or non-United States law. The
Company shall not be liable to any Participant for any tax, interest, or
penalties the Participant might owe as a result of the grant, holding, vesting,
exercise, or payment of any Award under the Plan.

 

13.  Compliance with Section 162(m).

a.   In General .  Notwithstanding anything in the Plan to the contrary, Awards
may be granted in a manner that is intended to qualify for the Performance-Based
Exception. As determined by the Committee in its sole discretion, the grant,
vesting, exercisability and/or settlement of any Restricted Shares, Restricted
Share Units, Other Share-Based Awards and Cash-Based Awards intended to qualify
for the Performance-Based Exception shall be conditioned on the attainment of
one or more Performance Objectives during a performance period established by
the Committee and must satisfy the requirements of this Section 13.

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b.   Performance Objectives.  If an Award is intended to qualify for the
Performance-Based Exception, then the Performance Objectives shall be based on
specified levels of or growth in one or more of the following criteria:
revenues, weighted average revenue per unit, earnings from operations, operating
income, earnings before or after interest and taxes, operating income before or
after interest and taxes, net income, cash flow, earnings per share, debt to
capital ratio, economic value added, return on total capital, return on invested
capital, return on equity, return on assets, total return to stockholders,
earnings before or after interest, taxes, depreciation, amortization or
extraordinary or special items, operating income before or after interest,
taxes, depreciation, amortization or extraordinary or special items, return on
investment, free cash flow, cash flow return on investment (discounted or
otherwise), net cash provided by operations, cash flow in excess of cost of
capital, operating margin, profit margin, contribution margin, stock price
and/or strategic business criteria consisting of one or more objectives based on
meeting specified product development, strategic partnering, research and
development, market penetration, geographic business expansion goals, cost
targets, customer satisfaction, gross or net additional customers, average
customer life, employee satisfaction, management of employment practices and
employee benefits, supervision of litigation and information technology, and
goals relating to acquisitions or divestitures of subsidiaries, affiliates and
joint ventures.

c.   Establishment of Performance Goals.  With respect to Awards intended to
qualify for the Performance-Based Exception, the Committee shall establish: (i)
the applicable Performance Objectives and performance period, and (ii) the
formula for computing the payout. Such terms and conditions shall be established
in writing while the outcome of the applicable performance period is
substantially uncertain, but in no event later than the earlier of: (x) ninety
days after the beginning of the applicable performance period; or (y) the
expiration of twenty-five percent (25%) of the applicable performance period.

d.   Certification of Performance.  With respect to any Award intended to
qualify for the Performance-Based Exception, the Committee shall certify in
writing whether the applicable Performance Objectives and other material terms
imposed on such Award have been satisfied, and, if they have, ascertain the
amount of the payout or vesting of the Award. Notwithstanding any other
provision of the Plan, payment or vesting of any such Award shall not be made
until the Committee certifies in writing that the applicable Performance
Objectives and any other material terms of such Award were in fact satisfied in
a manner conforming to applicable regulations under Section 162(m) of the Code.

e.   Negative Discretion.  With respect to any Award intended to qualify for the
Performance-Based Exception, after the date that the Performance Objectives are
required to be established in writing pursuant to Section 13(c), the Committee
shall not have discretion to increase the amount of compensation that is payable
upon achievement of the designated Performance Objectives. However, the
Committee may, in its sole discretion, reduce the amount of compensation that is
payable upon achievement of the designated Performance Objectives.

 

14.  Transferability.  Except as otherwise determined by the Committee, no Award
or dividend equivalents paid with respect to any Award shall be transferable by
the Participant except by will or the laws of descent and distribution; provided
, that if so determined by the Committee, each Participant may, in a manner
established by the Board or the Committee, designate a beneficiary to exercise
the rights of the Participant with respect to any Award upon the death of the
Participant and to receive Shares or other property issued or delivered under
such Award. Except as otherwise determined by the Committee, Stock Options and
Stock Appreciation Rights will be exercisable during a Participant’s lifetime
only by the Participant or, in the event of the Participant’s legal incapacity
to do so, by the Participant’s guardian or legal representative acting on behalf
of the Participant in a fiduciary capacity under state law and/or court
supervision.

 

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15.  Adjustments.  In the event of any equity restructuring (within the meaning
of Financial Accounting Standards Board Accounting Standards Codification Topic
718, Compensation — Stock Compensation), such as a stock dividend, stock split,
reverse stock split, spinoff, rights offering, or recapitalization through a
large, nonrecurring cash dividend, the Committee shall cause there to be an
equitable adjustment in the numbers of Shares specified in Section 3 of the Plan
and, with respect to outstanding Awards, in the number and kind of Shares
subject to outstanding Awards and the exercise price or other price of Shares
subject to outstanding Awards, in each case to prevent dilution or enlargement
of the rights of Participants. In the event of any other change in corporate
capitalization, or in the event of a merger, consolidation, liquidation, or
similar transaction, the Committee may, in its sole discretion, cause there to
be an equitable adjustment as described in the foregoing sentence, to prevent
dilution or enlargement of rights; provided , however , that, unless otherwise
determined by the Committee, the number of Shares subject to any Award shall
always be rounded down to a whole number. Notwithstanding the foregoing, the
Committee shall not make any adjustment pursuant to this Section 15 that would
(i) cause any Stock Option intended to qualify as an ISO to fail to so qualify,
(ii) cause an Award that is otherwise exempt from Section 409A of the Code to
become subject to Section 409A, or (iii) cause an Award that is subject to
Section 409A of the Code to fail to satisfy the requirements of Section 409A.
The determination of the Committee as to the foregoing adjustments, if any,
shall be conclusive and binding on all Participants and any other persons
claiming under or through any Participant.

 

16.  Fractional Shares.  The Company shall not be required to issue or deliver
any fractional Shares pursuant to the Plan and, unless otherwise provided by the
Committee, fractional shares shall be settled in cash.

 

17.  Withholding Taxes.  To the extent required by Applicable Law, a Participant
shall be required to satisfy, in a manner satisfactory to the Company or
Subsidiary, as applicable, any withholding tax obligations that arise by reason
of a Stock Option or Stock Appreciation Right exercise, the vesting of or
settlement of Shares under an Award, an election pursuant to Section 83(b) of
the Code or otherwise with respect to an Award. The Company and its Subsidiaries
shall not be required to issue or deliver Shares, make any payment or to
recognize the transfer or disposition of Shares until such obligations are
satisfied. The Committee may permit or require these obligations to be satisfied
by having the Company withhold a portion of the Shares that otherwise would be
issued or delivered to a Participant upon exercise of a Stock Option or Stock
Appreciation Right or upon the vesting or settlement of an Award, or by
tendering Shares previously acquired, in each case having a Fair Market Value
equal to the minimum amount required to be withheld or paid. Any such elections
are subject to such conditions or procedures as may be established by the
Committee and may be subject to disapproval by the Committee.

 

18.  Foreign Employees.  Without amending the Plan, the Committee may grant
Awards to Participants who are foreign nationals, or who are subject to
Applicable Laws of one or more non-United States jurisdictions, on such terms
and conditions different from those specified in the Plan as may in the judgment
of the Committee be necessary or desirable to foster and promote achievement of
the purposes of the Plan, and, in furtherance of such purposes, the Committee
may make such modifications, amendments, procedures, and the like as may be
necessary or advisable to comply with provisions of Applicable Laws of other
countries in which the Company or its Subsidiaries operate or have employees.

 

19.  Termination for Cause; Forfeiture of Awards.

a.   Termination for Cause.  If a Participant’s employment or service is
terminated by the Company or a Subsidiary for Cause, then the Participant shall
forfeit all Awards granted under the Plan to the extent held by the Participant
immediately prior to the Participant’s termination of employment or service.

b.   Compensation Recovery Policy.  Any Award granted to a Participant shall be
subject to forfeiture or repayment pursuant to the terms of any applicable
compensation recovery policy adopted by the Company, including any such policy
that may be adopted to comply with the Dodd-Frank Wall Street Reform and
Consumer Protection Act or any rules or regulations issued by the Securities and
Exchange Commission rule or applicable securities exchange.

 

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c.   Set-Off and Other Remedies.  To the extent that amounts are not immediately
returned or paid to the Company as provided in this Section 19, the Company may,
to the extent permitted by Applicable Laws, seek other remedies, including a set
off of the amounts so payable to it against any amounts that may be owing from
time to time by the Company or a Subsidiary to the Participant for any reason,
including, without limitation, wages, or vacation pay or other benefits;
provided, however , that, except to the extent permitted by Treasury Regulation
Section 1.409A-3(j)(4), such offset shall not apply to amounts that are
“deferred compensation” within the meaning of Section 409A of the Code.

 

20.  Change in Control.  In the event of a Change in Control, the Committee, in
its sole discretion, may take such actions, if any, as it deems necessary or
desirable with respect to any Award that is outstanding as of the date of the
consummation of the Change in Control. Such actions may include, without
limitation: (a) the acceleration of the vesting, settlement and/or
exercisability of an Award; (b) the payment of a cash amount in exchange for the
cancellation of an Award; (c) the cancellation of Stock Options and/or Stock
Appreciation Rights without payment therefor if the Fair Market Value of a Share
on the date of the Change in Control does not exceed the exercise price per
Share of the applicable Awards; and/or (d) the issuance of substitute Awards
that substantially preserve the value, rights and benefits of any affected
Awards.

 

21.  Amendment, Modification and Termination.

a.   In General.  The Board may at any time and from time to time, alter, amend,
suspend or terminate the Plan in whole or in part; provided , however , that no
alteration or amendment that requires stockholder approval in order for the Plan
to comply with any rule promulgated by the SEC or any securities exchange on
which Shares are listed or any other Applicable Laws shall be effective unless
such amendment shall be approved by the requisite vote of stockholders of the
Company entitled to vote thereon within the time period required under such
applicable listing standard or rule.

b.   Adjustments to Outstanding Awards.  The Committee may in its sole
discretion at any time (i) provide that all or a portion of a Participant’s
Stock Options, Stock Appreciation Rights and other Awards in the nature of
rights that may be exercised shall become fully or partially exercisable; (ii)
provide that all or a part of the time-based vesting restrictions on all or a
portion of the outstanding Awards shall lapse, and/or that any Performance
Objectives or other performance-based criteria with respect to any Awards shall
be deemed to be wholly or partially satisfied; or (iii) waive any other
limitation or requirement under any such Award, in each case, as of such date as
the Committee may, in its sole discretion, declare. Unless otherwise determined
by the Committee, any such adjustment that is made with respect to an Award that
is intended to qualify for the Performance-Based Exception shall be made at such
times and in such manner as will not cause such Awards to fail to qualify under
the Performance-Based Exception. Additionally, the Committee shall not make any
adjustment pursuant to this Section 21(b) that would cause an Award that is
otherwise exempt from Section 409A of the Code to become subject to Section
409A, or that would cause an Award that is subject to Section 409A of the Code
to fail to satisfy the requirements of Section 409A.

c.   Prohibition on Repricing.  Except for adjustments made pursuant to Sections
15 or 20, the Board or the Committee will not, without the further approval of
the stockholders of the Company, authorize the amendment of any outstanding
Stock Option or Stock Appreciation Right to reduce the exercise price. No Stock
Option or Stock Appreciation Right will be cancelled and replaced with an Award
having a lower exercise price, or for another Award, or for cash without further
approval of the stockholders of the Company, except as provided in Sections 15
or 20. Furthermore, no Stock Option or Stock Appreciation Right will provide for
the payment, at the time of exercise, of a cash bonus or grant or sale of
another Award without further approval of the stockholders of the Company. This
Section 21(c) is intended to prohibit the repricing of “underwater” Stock
Options or Stock Appreciation Rights without stockholder approval and will not
be construed to prohibit the adjustments provided for in Sections 15 or 20.

 

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d.   Effect on Outstanding Awards.  Notwithstanding any other provision of the
Plan to the contrary (other than Sections 15, 20, 21(b) and 23(d)), no
termination, amendment, suspension, or modification of the Plan or an Award
Agreement shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award; provided that the Committee may modify an ISO held by a Participant
to disqualify such Stock Option from treatment as an “incentive stock option”
under Section 422 of the Code without the Participant’s consent.

 

22.  Applicable Laws.  The obligations of the Company with respect to Awards
under the Plan shall be subject to all Applicable Laws and such approvals by any
governmental agencies as the Committee determines may be required. The Plan and
each Award Agreement shall be governed by the laws of the State of New Jersey,
excluding any conflicts or choice of law rule or principle that might otherwise
refer construction or interpretation of the Plan to the substantive law of
another jurisdiction.

 

23.  Miscellaneous.

a.   Deferral of Awards.  Except with respect to Stock Options, Stock
Appreciation Rights and Restricted Shares, the Committee may permit Participants
to elect to defer the issuance or delivery of Shares or the settlement of Awards
in cash under the Plan pursuant to such rules, procedures or programs as it may
establish for purposes of the Plan. The Committee also may provide that deferred
issuances and settlements include the payment or crediting of dividend
equivalents or interest on the deferral amounts. All elections and deferrals
permitted under this provision shall comply with Section 409A of the Code,
including setting forth the time and manner of the election (including a
compliant time and form of payment), the date on which the election is
irrevocable, and whether the election can be changed until the date it is
irrevocable.

b.   No Right of Continued Employment.  The Plan shall not confer upon any
Participant any right with respect to continuance of employment or other service
with the Company or any Subsidiary, nor shall it interfere in any way with any
right the Company or any Subsidiary would otherwise have to terminate such
Participant’s employment or other service at any time. No Employee, Director or
Consultant shall have the right to be selected to receive an Award under the
Plan, or, having been so selected, to be selected to receive future Awards.

c.   Unfunded, Unsecured Plan.  Neither a Participant nor any other person
shall, by reason of participation in the Plan, acquire any right or title to any
assets, funds or property of the Company or any Subsidiary, including without
limitation, any specific funds, assets or other property which the Company or
any Subsidiary may set aside in anticipation of any liability under the Plan. A
Participant shall have only a contractual right to an Award or the amounts, if
any, payable under the Plan, unsecured by any assets of the Company or any
Subsidiary, and nothing contained in the Plan shall constitute a guarantee that
the assets of the Company or any Subsidiary shall be sufficient to pay any
benefits to any person.

d.   Severability.  If any provision of the Plan is or becomes invalid, illegal
or unenforceable in any jurisdiction, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended or limited in scope to conform to Applicable Laws
or, in the discretion of the Committee, it shall be stricken and the remainder
of the Plan shall remain in full force and effect.

e.   Acceptance of Plan.  By accepting any benefit under the Plan, each
Participant and each person claiming under or through any such Participant shall
be conclusively deemed to have indicated their acceptance and ratification of,
and consent to, all of the terms and conditions of the Plan and any action taken
under the Plan by the Committee, the Board or the Company, in any case in
accordance with the terms and conditions of the Plan.

f.   Successors.  All obligations of the Company under the Plan and with respect
to Awards shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or other event, or a sale or disposition of all or
substantially all of the business and/or assets of the Company and references to
the “Company” herein and in any Award agreements shall be deemed to refer to
such successors.

 

[END OF DOCUMENT]

 

 

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