Exhibit 10.06

DERMA SCIENCES, INC.
 
AMENDED AND RESTATED STOCK OPTION PLAN

 
THIS DERMA SCIENCES, INC. STOCK OPTION PLAN, made, adopted and declared
effective July 18, 1991 and amended and restated January 14, 1994, May 22, 1996,
July 14, 1998, February 6, 2003, February 24, 2004, March 31, 2006, November 9,
2007 and February 9, 2011 by Derma Sciences, Inc. (herein referred to as the
"Plan").
 
1.      Purpose.  The Plan is intended to enable Derma Sciences, Inc. and its
subsidiaries (the "Company") to attract and retain capable officers, other
employees, capable outside consultants, advisors and directors, to provide them
with incentives to promote the best interests of the Company through the grant
of incentive stock options and nonqualified stock options (collectively,
"Options").
 
As used in the Plan, the term "incentive stock options" means options which are
intended to qualify as incentive stock options within the meaning of §422 of the
Internal Revenue Code of 1986, as amended, (the "Code").  The term "nonqualified
stock options" means options which are not intended to qualify as incentive
stock options.
 
2.      Administration.  The Plan shall be administered by the Board of
Directors of the Company (the “Board”).  Subject to the terms of the Plan, the
Board shall have full and final authority in its absolute discretion to select
the persons to whom Options shall be granted under the Plan and to set the date
of grant and the other terms of such Options.  The Board also shall have the
authority to establish and rescind, from time to time, such rules and
regulations, not inconsistent with the provisions of this Plan, for the proper
administration of this Plan and Options granted hereunder, and to make such
determinations and interpretations under or in connection with this Plan as it
deems necessary or advisable.  The Board may correct any defect, supply any
omission and reconcile any inconsistency in this Plan or in any Option granted
hereunder in the manner and to the extent it shall deem desirable.  All such
rules, regulations, determinations and interpretations shall be binding and
conclusive upon the Company and its officers, employees, directors and outside
consultants and advisors (including former officers, employees and directors) of
the Company, and upon their respective legal representatives, beneficiaries,
successors and assigns and upon all other persons claiming under or through any
of them.  No member of the Board shall be liable for any action or determination
made in good faith with respect to the Plan or any Option granted hereunder.
 
3.      Eligibility.  The persons eligible to receive options (“Eligible
Individuals”) under the Plan shall be the directors, officers and other
employees of the Company, outside consultants and advisors.
 
4.      Stock Subject to the Plan.  Subject to adjustment as provided in
paragraph 7 hereof, 2,500,000 shares (the “Shares”) of $.01 par value common
stock (the “Common Stock”) shall be available for the grant of Options under the
Plan, which shares may be authorized but unissued Shares or reacquired Shares,
as the Company shall determine.
 
If any Option granted under the Plan expires or otherwise terminates, in whole
or in part, without having been exercised, the Shares subject to the unexercised
portion of such Option shall be available for the granting of Options under the
Plan as fully as if such Shares had never been subject to an Option.
 
5.      Grants, Terms and Conditions of Options.  From time to time until the
expiration or earlier termination of the Plan, the Board may grant Options to
Eligible Individuals (such grantees are hereinafter referred to as "Optionees")
under the Plan; provided, however, that grants of incentive and nonqualified
stock options shall be separate and not in tandem.  Options granted pursuant to
the Plan shall be in such form as the Board shall from time to time approve, and
shall be subject to the following terms and conditions:
 
 
 

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(a)      Price.  The option price per Share under each Option granted under the
Plan shall be determined and fixed by the Board in its discretion but shall not
be less than (i) in the case of an Incentive Stock Option granted to a person
who owns more than 10% of the combined voting power of all shares of stock of
the Company or any subsidiary on the date of grant, the greater of $.01 or 110%
of the fair market value of the Shares on the date of grant of such Option, and
(ii) in all other cases the greater of $.01 or 100% of the fair market value of
the Shares on the date of grant of such Option.  The fair market value of a
Share on any day shall mean that amount determined by such method of determining
fair market value as shall be permitted by the Code, or the rules or regulations
thereunder, and used by the Board from time to time.  For purposes of this
paragraph 5 an individual shall be deemed to own any shares of stock of the
Company which are attributed to such individual under § 424(d) of the Code.
 
(b)      Term.  The duration of the Plan shall be ten (10) years from the date
of the Plan’s most recent amendment as set forth in the preamble
hereof.  Subject to earlier termination as provided in subparagraphs (c) through
(f) below and in paragraph 8 hereof, the duration of each Option shall not be
more than ten (10) years from the date of grant; provided that the duration of
any Incentive Stock Option granted to a person who owns more than 10% of the
combined voting powers of all shares of stock of the Company on the date of
grant of the Option shall not be more than five (5) years from the date of
grant.
 
(c)      Exercise and Payment.  Except as otherwise provided in paragraph 8
hereof, options shall be exercisable in such installments and on such dates, as
the Board may specify; provided that the Board may determine that Options will
become immediately exercisable in whole or in part in the event of death,
disability or termination of employment.  Except as otherwise provided in
subparagraphs (d) through (f) below, Optionees must be in the employ of, or
associated with, the Company at the time of Option exercise.  Any Shares which
may be purchased upon exercise of an Option ("Option Shares"), the right to the
purchase of which has accrued, may be purchased at any time up to the expiration
or termination of the Option.  Options may be exercised, in whole or in part,
from time to time, by giving written notice of exercise to Derma Sciences, Inc.
at its principal office, specifying the number of Shares to be purchased, and
accompanied by payment in full of the aggregate purchase price for the
Shares.  Only full Shares shall be delivered and any fractional share which
might otherwise be deliverable upon exercise of an Option granted hereunder
shall be forfeited.
 
The purchase price shall be payable:  (i) in cash or its equivalent, or (ii) if
the Board, in its discretion, so provides in the stock option agreement or, in
the case of nonqualified stock options, if the Board, in its discretion, so
determines at or prior to the time of exercise, in whole or in part through the
transfer of Common Stock previously acquired by the Optionee, provided the
Common Stock so transferred has been held for the applicable holding period set
forth below:
 
  (i)  If such previously acquired shares of Common Stock were acquired through
exercise of an incentive stock option and are being tendered as payment of the
option price under an incentive stock option, such shares have been held by the
Optionee for a period not less than the holding period described in § 422(a)(1)
of the Code;
 
  (ii)  If such previously acquired shares of Common Stock were acquired through
exercise of an incentive stock option or a nonqualified stock option and are
being tendered as payment of the option price under a nonqualified stock option,
such shares have been held by the Optionee for more than six months; or
 
  (iii)  If such previously acquired shares of Common Stock were acquired
through exercise of a nonqualified stock option and are being tendered as
payment of the option price under an incentive stock option, such Shares have
been held by the Optionee for more than six months.
 
In the event such purchase price is paid, in whole or in part, with shares of
Common Stock, the portion of the purchase price so paid shall be equal to the
fair market value, as determined by, or in the manner prescribed by, the Board
in accordance with subparagraph (a) above, on the date of exercise of the
Option, of the shares of Common Stock so tendered in payment of such purchase
price.
 
(d)      Death of Optionee.  If an Optionee's employment or association with the
Company is terminated by reason of his death prior to the expiration date of his
Option, or if an Optionee whose employment or association with the Company is
terminated (as described in subparagraphs (e) and (f) below) shall die within
three (3) months thereafter but prior to the expiration date of his Option or
expiration of the period determined under subparagraphs (e) or (f) below, if
earlier, such Option may be exercised by the Optionee's estate, personal
representative or beneficiary who acquired the right to exercise such Option by
bequest or inheritance or by reason of the death of the Optionee, to the extent
of the number of Shares with respect to which the Optionee could have exercised
it on the date of his death, or to any greater extent permitted by the Board, at
any time prior to the earlier of: (i) one year following the date of the
Optionee's death, or (ii) the expiration date of such Option (which, in the case
of death following a termination of employment or association with the Company
pursuant to subparagraphs (e) or (f) below, shall be deemed to mean the
expiration of the exercise period determined thereunder).
 
 
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(e)      Disability of Optionee.  If an Optionee shall become permanently and
totally disabled during his employment or association with the Company and his
employment or association with the Company is terminated as a consequence of
such permanent and total disability prior to the expiration date of his Option,
such Option may be exercised by the Optionee, to the extent of the number of
Shares with respect to which the Optionee could have exercised it on the date of
such termination of employment or association, or to any greater extent
permitted by the Board, at any time prior to the earlier of: (i) one year
following the date of the Optionee's termination of employment or association,
or (ii) the expiration date of such Option.  In the event of the Optionee's
legal disability, such Option may be so exercised by the Optionee's legal
representative.
 
(f)      Termination of Employment or Association of Optionee.  If an Optionee's
employment or association with the Company is terminated prior to the expiration
date of his Option, such Option may be exercised by the Optionee, to the extent
of the number of Shares with respect to which the Optionee could have exercised
it on the date of such termination, or to any greater extent permitted by the
Board, at any time prior to the later of: (i) three (3) months after the date of
termination, or (ii) the expiration date of such Option; provided, however, if
an Optionee's employment or association with the Company is terminated by the
Company "for cause" (as defined below), the Optionee shall have no right to
exercise his Option on or after the date or such termination.  As used herein,
termination of an Optionee's employment or association by the Company shall be
"for cause" if the Board reasonably concludes that the Optionee has materially
failed to perform his or her responsibilities to the Company, materially failed
to follow directives or policies established by or at the direction of the
Board, or conducted himself or herself in a manner materially detrimental to the
interests of the Company.
 
(g)     Transferability.  No option shall be assignable or transferable by an
Optionee otherwise than by will or by the laws of descent and distribution, and
during the lifetime of the Optionee, his Options shall be exercisable only by
him, or in the event of his legal disability, by his legal representative.
 
(h)     Rights as a Shareholder.  An Optionee shall have no rights as a
shareholder with respect to any Shares covered by his Option until the exercise
of such Option and his payment for such Shares.
 
(i)      Annual Limit on Incentive Stock Options.  The aggregate fair market
value (determined in accordance with Subparagraph (a) above as of the time an
incentive stock option is granted) of the Shares with respect to which incentive
stock options are exercisable for the first time by an Eligible Individual
during any calendar year (under the Plan and any other incentive stock option
plan of the Company) may not exceed one hundred thousand dollars ($100,000), or
such other number as may be in effect under the Code from time to time.
 
(j)      Option Agreement and Further Conditions.  As soon as practicable after
the grant of an Option, each Optionee shall enter into, and be bound by the
terms of, a stock option agreement (the "Option Agreement") which shall state
the number of Shares to which the Option pertains and specify whether the Option
is intended to be an incentive stock option or a nonqualified stock option.  The
Option Agreement shall set forth such terms, conditions and restrictions
regarding the Option not inconsistent with the Plan (and, in the case of
incentive stock options, the provisions of § 422(b) of the Code) as the Board
shall determine.  Without limiting the generality of the foregoing, the Board,
in its discretion, may impose further conditions upon the exercisability of
Options and restrictions on transferability with respect to Shares issued upon
exercise of Options.
 
(k)     Withholding.  The obligation of the Company to deliver Shares upon the
exercise of any Option (or cash in lieu thereof) shall be subject to any
applicable federal, state and local tax withholding requirements.
 
6.      Listing and Registration of Shares.  Each Option under the Plan shall be
subject to the requirement that, if at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of the Option or
Shares covered thereby upon any securities exchange or under the laws of any
jurisdiction, or the consent or approval of any governmental or regulatory body,
is necessary or desirable as a condition of, or in connection with, the granting
of such Option, or the exercise thereof, then no such Option may be exercised in
whole or in part unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained, on conditions
acceptable to the Company.  Each Optionee, or his legal representative or
beneficiaries, also may be required to give satisfactory assurance that Shares
acquired upon exercise of an Option are being acquired for investment and not
with a view to distribution, and certificates representing such Shares may be
legended accordingly.
 
 
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7.      Adjustments.  The number of Shares which may be issued under the Plan,
as stated in paragraph 4 hereof, and the number of Shares issuable upon exercise
of outstanding Options under the Plan (as well as the exercise price per share
under such outstanding Options), shall be equitably adjusted by the Board to
reflect any stock dividend, stock split, share combination, or similar change in
the capitalization of the Company.
 
8.      Merger, Liquidation or Sale.  In the event of a proposed dissolution,
liquidation or sale of substantially all of the assets of the Company, or of a
merger or consolidation involving a 50% change of ownership or control of the
Company, the Board shall, in its unlimited discretion, have the power prior to
such event:  (a) to terminate all outstanding Options upon at least seven (7)
days prior notice to each Optionee and, if the Board deems it appropriate, to
cause the Company to pay to each Optionee an amount in cash with respect to each
Share to which a terminated Option pertains equal to the difference between the
option price and the value, as determined by the Board in its sole discretion,
of the consideration to be received by the holders of shares of Common Stock in
connection with such transaction, or (b) to provide for the exchange of Options
outstanding under the Plan for options to acquire securities or other property
to be delivered in connection with the transaction and in connection therewith
to make an equitable adjustment, as determined by the Board in its sole
discretion, in the option price and number of Shares or amount of property
subject to the Option and, if deemed appropriate, provide for a cash payment to
Optionees in partial consideration for such exchange.  Anything hereinbefore or
hereinafter to the contrary notwithstanding, upon the approval of the Board of
Directors of the Company to implement a dissolution, liquidation, sale of
substantially all of the assets of the Company or merger or consolidation
involving a 50% change of ownership or control of the Company, all unexercised
Options issued hereunder shall become immediately exercisable.
 
9.      Acquisitions.  Notwithstanding any other provision of this Plan, Options
may be granted hereunder in substitution for options held by officers and
employees of other corporations who are about to, or have, become employees of
the Company as a result of a merger, consolidation, acquisition of assets or
similar transaction by the Company.  The terms, including the option price, of
the substitute options so granted may vary from the terms set forth in this Plan
to such extent as the Board may deem appropriate to conform, in whole or in
part, to the provisions of the options in substitution for which they are
granted.
 
10.    Amendment or Discontinuance of the Plan.  The Board at any time, and from
time to time, may suspend or discontinue the Plan or amend it and any
outstanding Options in any respect whatsoever; provided, however, that without
the approval of the holders of at least a majority of the outstanding shares of
Common Stock as may be required by applicable law:  (a) the maximum number of
Shares with respect to which Options may be granted under the Plan shall not be
increased except as permitted under paragraph 7 hereof, (b) the lowest price at
which Options may be granted shall not be reduced, and (c) the duration of the
Plan under paragraph 14 shall not be extended; and provided further, that no
such suspension, discontinuance or amendment shall materially impair the rights
of any holder of an outstanding Option without the consent of such holder.
 
11.    Absence of Rights.  The recommendations or selection of an Eligible
Individual as a recipient of an Option under the Plan shall not entitle such
person to any Option unless and until the grant actually has been made by
appropriate action of the Board, and any such grant is subject to the provisions
of the Plan.  Further, the granting of an Option to a person shall not entitle
that person to continued employment by the Company or affect the terms and
conditions of such employment, and the Company shall have the absolute right, in
its discretion, to retire such person in accordance with its retirement policies
or otherwise to terminate his employment, whether or not such termination may
result in a partial or total termination of this Option.
 
IN WITNESS WHEREOF, this amendment and restatement of the Plan has been executed
this 9th day of February, 2011.
 
DERMA SCIENCES, INC.
 
By:
/s/ Edward J. Quilty
 
 
Edward J. Quilty
 
President and Chief Executive Officer

 

 
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