Exhibit 10.18

SURGICAL CARE AFFILIATES, INC.

2013 OMNIBUS LONG-TERM INCENTIVE PLAN

(Amended and Restated as of September 17, 2015)

 

 

1.

Purpose of the Plan

This Plan is intended to promote the interests of the Company and its
stockholders by providing employees, directors and consultants of the Company
and its Subsidiaries, who are largely responsible for the management, growth and
protection of the business of the Company and its Subsidiaries, with appropriate
incentives and rewards to encourage them to continue in the service of the
Company and its Subsidiaries.

2.

Definitions

As used in the Plan or in any instrument governing the terms of any Incentive
Award, the following definitions apply to the terms indicated below:

(a)“Affiliate” means, with respect to a specified person, a person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified person.

(b)“Award Agreement” means a written agreement, in a form determined by the
Committee from time to time, entered into by each Participant and the Company,
evidencing the grant of an Incentive Award under the Plan.

(c)“Board of Directors” means the Board of Directors of the Company.

(d)“Cash Incentive Award” means an award granted to a Participant pursuant to
Section 8 of the Plan.

(e)“Change in Control” means (i) any one person, or more than one person acting
as a group (as defined under Treasury Regulation § 1.409A-3(i)(5)(v)(B)), other
than the Company, TPG or any employee benefit plan sponsored by the Company,
acquires ownership of stock of the Company that, together with stock held by
such person or group, constitutes more than fifty percent (50%) of the total
fair market value or total Voting Power of the stock of the Company; or (ii) any
one person, or more than one person acting as a group (as defined under Treasury
Regulation § 1.409A-3(i)(5)(v)(B)), other than the Company or any employee
benefit plan sponsored by the Company, acquires (or has acquired during the
twelve (12) month period ending on the date of the most recent acquisition by
such person or persons) ownership of stock of the Company possessing fifty
percent (50%) or more of the total Voting Power of the stock of the Company;
or  (iii) a majority of the members of the Board of Directors is replaced during
any twelve (12) month period by directors whose appointment or election is not
endorsed by a majority of the members of the Board of Directors before the date
of each appointment or election; or (iv) any one person, or more than one person
acting as a group (as defined in Treasury Regulation § 1.409A-3(i)(5)(v)(B))
acquires (or has acquired during the twelve (12) month period ending on the date
of the most recent acquisition by such person or persons) assets from the
Company that have a total gross fair market value equal to or more than 40
percent

 

 

  

 

 

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(40%) of the total gross fair market value of all of the assets of the Company
immediately before such acquisition or acquisitions.  For purposes of subsection
(iv), gross fair market value means the value of the assets of the Company, or
the value of the assets being disposed of, determined without regard to any
liabilities associated with such assets.  The foregoing subsections (i) through
(iv) shall be interpreted in a manner that is consistent with the Treasury
Regulations promulgated pursuant to Section 409A of the Code so that all, and
only, such transactions or events that could qualify as a “change in control
event” within the meaning of Treasury Regulation §1.409A-3(i)(5)(i) will be
deemed to be a Change in Control for purposes of this Plan. 

(f)“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and all regulations, interpretations and administrative guidance issued
thereunder.

(g)“Committee” means the Compensation Committee of the Board of Directors or
such other committee as the Board of Directors shall appoint from time to time
to administer the Plan and to otherwise exercise and perform the authority and
functions assigned to the Committee under the terms of the Plan.

(h)“Common Stock” means the Company’s common stock, $0.01 par value per share,
or any other security into which the common stock shall be changed pursuant to
the adjustment provisions of Section 10 of the Plan.

(i)“Company” means Surgical Care Affiliates, Inc., a Delaware corporation, and
any successors thereto.

(j)“Covered Employee” means each Participant who is an executive officer (within
the meaning of Rule 3b-7 under the Exchange Act) of the Company.

(k)“Deferred Compensation Plan” means any plan, agreement or arrangement
maintained by the Company from time to time that provides opportunities for
deferral of compensation.

(l)“Effective Date” means the date the Plan is adopted.

(m)“Employment” means the period during which an individual is classified or
treated by the Company as an employee or other service provider of the Company,
as applicable.

(n)“Exchange Act” means the Securities Exchange Act of 1934, as amended.

(o)“Fair Market Value” means, with respect to a share of Common Stock, as of the
applicable date of determination or if the market is not open for trading on
such date, the immediately preceding day on which the market is open for
trading, the average of the high and low sales prices as reported on the date of
determination on the principal securities exchange on which shares of Common
Stock are then listed or admitted to trading.  In the event that the price of a
share of Common Stock shall not be so reported, the Fair Market Value of a share
of Common Stock shall be determined by the Committee in its sole discretion.

 

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(p)“Immediate Family Member” means any person who is a “family member” of the
Participant, as such term is used in the instructions to Form S-8 under the
Securities Act or any successor form of registration statement promulgated by
the Securities and Exchange Commission. 

(q)“Incentive Award” means one or more Stock Incentive Awards and/or Cash
Incentive Awards, collectively.

(r)“Option” means a stock option to purchase shares of Common Stock granted to a
Participant pursuant to Section 6 hereof.

(s)“Other Stock-Based Award” means an award granted to a Participant pursuant to
Section 7 hereof.

(t)“Participant” means an employee, consultant or director of the Company or one
of its Subsidiaries who is eligible to participate in the Plan and to whom one
or more Incentive Awards have been granted pursuant to the Plan and have not
been fully settled or cancelled and, following the death of any such Person, his
successors, heirs, executors and administrators, as the case may be.

(u)“Performance-Based Award” means any Incentive Award pursuant to which any
compensation paid is intended to be Performance-Based Compensation.

(v)“Performance-Based Compensation” means compensation that satisfies the
requirements of Section 162(m) of the Code for deductibility of “qualified
performance-based compensation.”

(w)“Performance Measures” means such measures as are described in Section 9
hereof on which performance goals are based in order to qualify certain awards
granted hereunder as Performance-Based Compensation.

(x)“Performance Percentage” means the factor determined pursuant to a
Performance Schedule that is to be applied to a Target Award and that reflects
actual performance compared to the Performance Target.

(y)“Performance Period” means the period of time during which the performance
goals must be met in order to determine the degree of payout and/or vesting with
respect to an Incentive Award that is intended to qualify as Performance-Based
Compensation.  Performance Periods may be overlapping.

(z)“Performance Schedule” means a schedule or other objective method for
determining the applicable Performance Percentage to be applied to each Target
Award.

(aa)“Performance Target” means the performance goals and objectives with respect
to a Performance Period.

 

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(bb)“Permitted Transferee” means any transferee of an Incentive Award pursuant
to and in accordance with Section 19(a) or Section 19(b) hereof. 

(cc)“Person” means a “person” as such term is used in Section 13(d) and 14(d) of
the Exchange Act, including any “group” within the meaning of Section 13(d)(3)
under the Exchange Act.

(dd)“Plan” means this 2013 Omnibus Long-Term Incentive Plan, as it may be
amended from time to time.

(ee)“Securities Act” means the Securities Act of 1933, as amended.

(ff)“Stock Incentive Award” means an Option or Other Stock-Based Award granted
pursuant to the terms of the Plan.

(gg)“Subsidiary” means any “subsidiary” within the meaning of Rule 405 under the
Securities Act.

(hh)“Target Award” means the target payout amount for an Incentive Award.

(ii)“TPG” means TPG Partners V, L.P., TPG FOF V-A, L.P., TPG FOF V-B, L.P. and
their respective Affiliates.

(jj)“Voting Power” means the number of votes available to be cast (determined by
reference to the maximum number of votes entitled to be cast by the holders of
Voting Securities, or by the holders of any Voting Securities for which other
Voting Securities may be convertible, exercisable or exchangeable, upon any
matter submitted to stockholders where the holders of all Voting Securities vote
together as a single class) by the holders of Voting Securities.

(kk)“Voting Securities” means any securities or other ownership interests of an
entity entitled, or which may be entitled, to vote on matters submitted to
Persons holding such securities or other ownership interests in such entity
generally (whether or not entitled to vote in the general election of
directors), or securities or other ownership interests which are convertible
into, or exercisable in exchange for, such Voting Securities, whether or not
subject to the passage of time or any contingency.

3.

Stock Subject to the Plan and Limitations on Cash Incentive Awards

(a)Stock Subject to the Plan

(i)The maximum number of shares of Common Stock that may be covered by Incentive
Awards granted under the Plan shall not exceed 2,220,000 shares of Common Stock
in the aggregate.  Out of such aggregate, the maximum number of shares of Common
Stock that may be covered by Options that are designated as “incentive stock
options” within the meaning of Section 422 of the Code shall not exceed
2,220,000 shares of Common Stock.  The maximum

 

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number of shares referred to in the preceding sentences of this Section 3(a)(i)
shall in each case be subject to adjustment as provided in Section 10 hereof and
the following provisions of this Section 3.  Of the shares described, one
hundred percent (100%) may be delivered in connection with “full-value Incentive
Awards,” meaning Incentive Awards other than Options, stock appreciation rights,
or Incentive Awards for which the Participant pays the intrinsic value either
directly or in exchange for (or by foregoing) a right to receive a cash payment
from the Company equal to the intrinsic value of the Incentive Award.  Shares of
Common Stock issued under the Plan may be authorized and unissued shares,
treasury shares, shares purchased by the Company in the open market, or any
combination of the preceding categories as the Committee determines in its sole
discretion. 

(ii)For purposes of Section 3(a)(i) hereof, any shares of Common Stock subject
to an Award that is cancelled, forfeited or expires prior to exercise or
realization, either in full or in part, shall again become available for
issuance under the Plan. Notwithstanding anything to the contrary contained
herein, shares subject to an Award under the Plan shall not again be made
available for issuance or delivery under the Plan if such shares are (a) shares
tendered in payment of an Option, (b) shares delivered or withheld by the
Company to satisfy any tax withholding obligation, or (c) shares covered by a
stock-settled stock appreciation right or other Awards that were not issued upon
the settlement of the Award. Shares of Common Stock covered by Incentive Awards
granted pursuant to the Plan in connection with the assumption, replacement,
conversion or adjustment of outstanding equity-based awards in the context of a
corporate acquisition or merger (within the meaning of NASDAQ Listing Rule 5635)
shall not count as used under the Plan for purposes of this Section 3.

(b)Individual Award Limits

Subject to adjustment as provided in Section 10 hereof, the maximum number of
shares of Common Stock that may be covered by Incentive Awards granted under the
Plan to any Participant in any calendar year shall not exceed 450,000
shares.  The amount payable to any Participant with respect to any calendar year
for all Cash Incentive Awards shall not exceed $3,500,000.  For purposes of the
preceding sentences, the phrase “amount payable with respect to any calendar
year” means the amount of cash, or value of other property, required to be paid
based on the achievement of applicable Performance Measures during a Performance
Period that ends in such calendar year, disregarding any deferral pursuant to
the terms of a Deferred Compensation Plan unless the terms of the deferral are
intended to comply with the requirements for qualified performance-based
compensation under Section 162(m) of the Code.

4.

Administration of the Plan

(a)The Plan shall be administered by a Committee of the Board of Directors
consisting of two or more persons, each of whom, solely to the extent required
by applicable law, qualifies as a “non-employee director” (within the meaning of
Rule 16b-3 promulgated under

 

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Section 16 of the Exchange Act), an “outside director” within the meaning of
Treasury Regulation Section 1.162-27(e)(3) and as “independent” as required by
NASDAQ or any security exchange on which the Common Stock is listed.  From time
to time, the Board of Directors may increase or decrease the size of the
Committee, add additional members to, remove members (with or without cause)
from, appoint new members in substitution therefor, and fill vacancies, however
caused, in the Committee.  The Committee shall, consistent with the terms of the
Plan, from time to time designate those individuals who shall be granted
Incentive Awards under the Plan and the amount, type and other terms and
conditions of such Incentive Awards.  All of the powers and responsibilities of
the Committee under the Plan may be delegated by the Committee, in writing, to
any subcommittee thereof, in which case the acts of such subcommittee shall be
deemed to be acts of the Committee hereunder. The Committee may also from time
to time authorize a subcommittee consisting of one or more members of the Board
of Directors (including members who are employees of the Company or one of its
Subsidiaries) or employees of the Company or one of its Subsidiaries to grant
Incentive Awards to persons who are not “executive officers” of the Company
(within the meaning of Rule 16a-1 under the Exchange Act), subject to such
restrictions and limitations as the Committee may specify and to the
requirements of Section 157 of the General Corporation Law of the State of
Delaware. 

(b)The Committee shall have full discretionary authority to administer the Plan,
including discretionary authority to interpret and construe any and all
provisions of the Plan and any Award Agreement thereunder, and to adopt, amend
and rescind from time to time such rules and regulations for the administration
of the Plan, including rules and regulations related to sub-plans established
for the purpose of satisfying applicable foreign laws and/or qualifying for
preferred tax treatment under applicable foreign tax laws, as the Committee may
deem necessary or appropriate.  Decisions of the Committee shall be final,
binding and conclusive on all parties.  For the avoidance of doubt, the
Committee may exercise all discretion granted to it under the Plan in a
non-uniform manner among Participants.

(c)The Committee may delegate the administration of the Plan to one or more
officers or employees of the Company or one of its Subsidiaries, and such
administrator(s) may have the authority to execute and distribute Award
Agreements, to maintain records relating to Incentive Awards, to process or
oversee the issuance of Common Stock under Incentive Awards, to interpret and
administer the terms of Incentive Awards, and to take such other actions as may
be necessary or appropriate for the administration of the Plan and of Incentive
Awards under the Plan, provided that in no case shall any such administrator be
authorized (i) to grant Incentive Awards under the Plan (except in connection
with any delegation made by the Committee pursuant to Section 4(a) hereof),
(ii) to take any action that would cause Incentive Awards intended to qualify as
Performance-Based Compensation to fail to so qualify, (iii) to take any action
inconsistent with Section 409A of the Code or (iv) to take any action
inconsistent with applicable provisions of the General Corporation Law of the
State of Delaware. Any action by any such administrator within the scope of its
delegation shall be deemed for all purposes to have been taken by the Committee
and, except as otherwise specifically provided, references in this Plan to the
Committee shall include any such administrator. The Committee and, to the extent
it so provides, any subcommittee, shall have sole authority to determine whether
to review any actions and/or interpretations of any such administrator, and if
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conduct such a review, any such actions and/or interpretations of any such
administrator shall be subject to approval, disapproval, or modification by the
Committee. 

(d)On or after the date of grant of an Incentive Award under the Plan, the
Committee may (i) accelerate the date on which any such Incentive Award becomes
vested, exercisable or transferable, as the case may be, (ii) extend the term of
any such Incentive Award, including, without limitation, extending the period
following a termination of a Participant’s Employment during which any such
Incentive Award may remain outstanding, (iii) waive any conditions to the
vesting, exercisability or transferability, as the case may be, of any such
Incentive Award or (iv) provide for the payment of dividends or dividend
equivalents with respect to any such Incentive Award; provided that the
Committee shall not have any such authority to the extent that the exercise of
such authority would cause any tax to become due under Section 409A of the
Code.  Notwithstanding anything herein to the contrary, (A) the Company shall
not reprice any stock option (within the meaning of NASDAQ Listing Rule 5635(c)
and any other formal or informal guidance issued by NASDAQ) without the approval
of the stockholders of the Company or, (B) in the case of an Option with an
exercise price per share that exceeds the Fair Market Value of a share of Common
Stock, the Company shall not purchase any such Option from the holder thereof
for any consideration.

(e)The Company shall pay any amount payable with respect to an Incentive Award
in accordance with the terms of such Incentive Award, provided that the
Committee may, in its discretion, defer the payment of amounts payable with
respect to an Incentive Award subject to and in accordance with the terms of a
Deferred Compensation Plan.  

(f)No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated, against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action,
omission or determination was taken or made by such member, director or employee
in bad faith and without reasonable belief that it was in the best interests of
the Company.

5.

Eligibility

The Persons who shall be eligible to receive Incentive Awards pursuant to the
Plan shall be those employees, consultants and directors of the Company or one
of its Subsidiaries whom the Committee shall select from time to time, including
officers of the Company or one of its Subsidiaries, whether or not they are
directors.  Each Incentive Award granted under the Plan shall be evidenced by an
Award Agreement.

 

6.

Options

 

The Committee may from time to time grant Options on such terms as it shall
determine, subject to the terms and conditions set forth in the Plan.  The Award
Agreement shall clearly

 

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identify such Option as either an “incentive stock option” within the meaning of
Section 422 of the Code or as a non-qualified stock option.  

 

(a)Exercise Price

The exercise price per share of Common Stock covered by any Option shall be not
less than one hundred percent (100%) of the Fair Market Value of a share of
Common Stock on the date on which such Option is granted.  

(b)Term and Exercise of Options

(i)Each Option shall become vested and exercisable on such date or dates, during
such period and for such number of shares of Common Stock as shall be determined
by the Committee on or after the date such Option is granted; provided, however,
that no Option shall be exercisable after the expiration of ten (10) years from
the date such Option is granted; and, provided, further, that each Option shall
be subject to earlier termination, expiration or cancellation as provided in the
Plan or the Award Agreement.

(ii)Each Option shall be exercisable in whole or in part; provided, however,
that no partial exercise of an Option shall be for an aggregate exercise price
of less than $1,000.  The partial exercise of an Option shall not cause the
expiration, termination or cancellation of the remaining portion thereof.

(iii)An Option shall be exercised by such methods and procedures as the
Committee determines from time to time, including without limitation through net
physical settlement or other method of cashless exercise.

(c)Special Rules for Incentive Stock Options

(i)The aggregate Fair Market Value of shares of Common Stock with respect to
which “incentive stock options” (within the meaning of Section 422 of the Code)
are exercisable for the first time by a Participant during any calendar year
under the Plan and any other stock option plan of the Company or any of its
“subsidiaries” (within the meaning of Section 424 of the Code) shall not exceed
$100,000.  Such Fair Market Value shall be determined as of the date on which
each such incentive stock option is granted.  In the event that the aggregate
Fair Market Value of shares of Common Stock with respect to such incentive stock
options exceeds $100,000, then incentive stock options granted hereunder to such
Participant shall, to the extent and in the order required by regulations
promulgated under the Code (or any other authority having the force of
regulations), automatically be deemed to be non-qualified stock options, but all
other terms and provisions of such incentive stock options shall remain
unchanged.  In the absence of such regulations (and authority), or in the event
such regulations (or authority) require or permit a designation of the Options
which shall cease to constitute incentive stock options, incentive stock options

 

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granted hereunder shall, to the extent of such excess and in the order in which
they were granted, automatically be deemed to be non-qualified stock options,
but all other terms and provisions of such incentive stock options shall remain
unchanged. 

(ii)Incentive stock options may only be granted to individuals who are employees
of the Company or its “subsidiaries” (within the meaning of Section 424 of the
Code).  No incentive stock option may be granted to an individual if, at the
time of the proposed grant, such individual owns stock possessing more than ten
percent (10%) of the total combined Voting Power of all classes of stock of the
Company or any of its “subsidiaries” (within the meaning of Section 424 of the
Code), unless (A) the exercise price of such incentive stock option is at least
one hundred and ten percent (110%) of the Fair Market Value of a share of Common
Stock at the time such incentive stock option is granted and (B) such incentive
stock option is not exercisable after the expiration of five (5) years from the
date such incentive stock option is granted.

7.

Other Stock-Based Awards

The Committee may from time to time grant equity-based or equity-related awards
not otherwise described herein in such amounts and on such terms as it shall
determine, subject to the terms and conditions set forth in the Plan. Without
limiting the generality of the preceding sentence, each such Other Stock-Based
Award may (i) involve the transfer of actual shares of Common Stock to
Participants, either at the time of grant or thereafter, or payment in cash or
otherwise of amounts based on the value of shares of Common Stock, (ii) be
subject to performance-based and/or service-based conditions, (iii) be in the
form of stock appreciation rights, phantom stock, restricted stock, restricted
stock units, performance shares, deferred share units or share-denominated
performance units, (iv) be designed to comply with applicable laws, including
jurisdictions other than the United States and (v) be designed to qualify as
Performance-Based Compensation; provided that each Other Stock-Based Award shall
be denominated in, or shall have a value determined by reference to, a number of
shares of Common Stock that is specified at the time of the grant of such
Incentive Award; and provided, further, that the exercise price applicable to
stock appreciation rights shall not be less than one hundred percent (100%) of
the Fair Market Value of a share of Common Stock on the date on which such Other
Stock-Based Award is granted.

 

8.

Cash Incentive Awards

The Committee may from time to time grant Cash Incentive Awards on such terms as
it shall determine, subject to the terms and conditions set forth in the
Plan.  Cash Incentive Awards may be settled in cash or in other property,
including shares of Common Stock, provided that the term “Cash Incentive Award”
shall exclude any Option or Other Stock-Based Award.

9.

Performance-Based Compensation

 

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(a)Calculation 

The amount payable with respect to an Incentive Award that is intended to
qualify as Performance-Based Compensation shall be determined in any manner
permitted by Section 162(m) of the Code.  

(b)Discretionary Reduction

Unless otherwise specified in the Award Agreement, the Committee may, in its
discretion, reduce or eliminate the amount payable to any Participant with
respect to the Incentive Award, based on such factors as the Committee may deem
relevant, but the Committee may not increase any such amount above the amount
established in accordance with the relevant Performance Schedule.  For purposes
of clarity, the Committee may exercise the discretion provided for by the
foregoing sentence in a non-uniform manner among Participants.

(c)Performance Measures

(i)The performance goals upon which the payment or vesting of any Incentive
Award (other than Options and stock appreciation rights) that is intended to
qualify as Performance-Based Compensation depends shall (A) be objective
business criteria and shall otherwise meet the requirements of Section 162(m) of
the Code, including the requirement that the level or levels of performance
targeted by the Committee result in the achievement of performance goals being
“substantially uncertain,” and (B) relate to one or more of the following
Performance Measures: market price of Common Stock, earnings per share of Common
Stock, adjusted earnings per share of Common Stock, adjusted cash earnings per
share of Common Stock, income, net income or profit (before or after taxes),
economic profit, operating income, return on equity or stockholder equity, total
stockholder return, market capitalization, enterprise value, cash flow
(including, but not limited to, operating cash flow and free cash flow), cash
position, return on assets or net assets, return on capital, return on invested
capital, stockholder returns, economic value added, cash value added, earnings
or net earnings (before or after interest, taxes, depreciation and/or
amortization and allowing for the inclusion or exclusion of non-controlling
interest expense), earnings from continuing operations, operating earnings,
controllable profits, net patient revenues or net operating revenues, revenues,
revenues growth, capital or investment, ratio of debt to debt plus equity, ratio
of operating earnings to capital spending, new product or service line
innovation, market share, cost reduction goals, inventory or supply chain
management initiatives, budget comparisons, implementation or completion of
specified projects or processes, objective measures of customer, physician or
employee satisfaction, productivity, expense, margins, operating efficiency,
working capital, the formation of joint ventures, research or development
collaborations, the completion of other transactions, any other measure of
financial performance that can be determined pursuant to United States generally
accepted accounting principles, or any combination of any of the foregoing.

 

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(ii)A Performance Measure (A) may relate to the performance of the Participant,
the Company, a Subsidiary, any business group, business unit or other
subdivision of the Company, or any combination of the foregoing, as the
Committee deems appropriate and (B) may be expressed as an amount, as an
increase or decrease over a specified period, as a relative comparison to the
performance of a group of comparator companies or a published or special index,
or any other measure of the selected performance criteria, as the Committee
deems appropriate.  Unless otherwise determined by the Committee during the
period referred to in Section 9(d) hereof, the Committee shall retain the
ability to use negative discretion to reduce the amount of an Incentive Award or
to exclude any adverse impact and include the positive impact of unusual,
nonrecurring or extraordinary items or expenses; items relating to financing
activities; charges for restructurings; other non-operating items; discontinued
operations; items related to the disposal of a business or segment of a
business; the cumulative effect of changes in accounting treatment; items
related to a change in accounting principle; items related to changes in
applicable laws or business conditions; any impact of changes in foreign
exchange rates and other changes in currency; any impact of impairment of
tangible or intangible assets; any impact of the issuance or repurchase of
equity securities or other changes in the number of outstanding shares of any
class of Company equity securities; any gain, loss, income or expense
attributable to acquisitions or dispositions of stock or assets; items
attributable to the business operations of any entity acquired by the Company
during a Performance Period; stock-based compensation expense; in-process
research and development expense; gain or loss from all or certain claims and/or
litigation and insurance recoveries; and any other items, each determined by the
Committee according to Section 9(d) hereof in accordance with generally accepted
accounting principles and as identified in the Company’s audited financial
statements, including the notes thereto. 

(d)Performance Schedules

Within ninety (90) days after the beginning of a Performance Period, and in any
case before twenty-five (25%) of the Performance Period has elapsed, the
Committee shall establish (i) Performance Targets for such Performance Period,
(ii) Target Awards for each Participant, and (iii) Performance Schedules for
such Performance Period.

(e)Committee Discretion

Nothing in this Plan is intended to limit the Committee’s discretion to adopt
conditions with respect to any Incentive Award that is not intended to qualify
as Performance-Based Compensation that relate to performance other than the
Performance Measures.  Furthermore, nothing in this Plan shall be construed to
require the Committee to grant any Incentive Award intended to qualify as
Performance-Based Compensation.  The Committee may, subject to the terms of the
Plan, amend previously granted Incentive Awards in a way that disqualifies them
as Performance-Based Compensation.

 

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10.

Adjustment Upon Certain Changes 

 

Subject to any action by the stockholders of the Company required by law,
applicable tax rules or the rules of any exchange on which shares of Common
Stock are listed for trading:

 

(a)Shares Available for Grants

In the event of any change in the number of shares of Common Stock outstanding
by reason of any stock dividend or split, recapitalization, merger,
consolidation, combination or exchange of shares or similar corporate change,
the maximum aggregate number of shares of Common Stock with respect to which the
Committee may grant Incentive Awards and the maximum aggregate number of shares
of Common Stock with respect to which the Committee may grant Incentive Awards
to any individual Participant in any year shall be appropriately adjusted or
substituted by the Committee.  In the event of any change in the number of
shares of Common Stock outstanding by reason of any other event or transaction,
the Committee shall, to the extent deemed appropriate by the Committee, make
such adjustments to the type or number of shares of Common Stock with respect to
which Incentive Awards may be granted.

(b)Increase or Decrease in Issued Shares Without Consideration

In the event of any increase or decrease in the number of issued shares of
Common Stock resulting from a subdivision or consolidation of shares of Common
Stock or the payment of a stock dividend (but only on the shares of Common
Stock), or any other increase or decrease in the number of such shares effected
without receipt or payment of consideration by the Company, the Committee shall,
to the extent deemed appropriate by the Committee, adjust the type or number of
shares of Common Stock subject to each outstanding Incentive Award and the
exercise price per share of Common Stock of each such Incentive Award.

(c)Certain Mergers and Other Transactions

(i)In the event of any merger, consolidation or similar transaction as a result
of which the holders of shares of Common Stock receive consideration consisting
exclusively of securities of the surviving corporation in such transaction, the
Committee shall, to the extent deemed appropriate by the Committee, adjust each
Incentive Award outstanding on the date of such merger or consolidation so that
it pertains and applies to the securities which a holder of the number of shares
of Common Stock subject to such Incentive Award would have received in such
merger or consolidation.

(ii)In the event of (A) a dissolution or liquidation of the Company, (B) a sale
of all or substantially all of the Company’s assets (on a consolidated basis),
(C) a merger, consolidation or similar transaction involving the Company in
which the holders of shares of Common Stock receive securities and/or other
property, including cash, other than shares of the surviving corporation in such
transaction, the Committee shall, to the extent deemed appropriate by the
Committee, have the power to: (1) cancel, effective immediately prior to the

 

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occurrence of such event, each Incentive Award (whether or not then exercisable
or vested), and, in full consideration of such cancellation, pay to the
Participant to whom such Incentive Award was granted an amount in cash, for each
share of Common Stock subject to such Incentive Award, equal to the value, as
determined by the Committee, of such Incentive Award, provided that with respect
to any outstanding Option such value shall be equal to the excess of (x) the
value, as determined by the Committee, of the property (including cash) received
by the holder of a share of Common Stock as a result of such event over (y) the
exercise price of such Option; or (2) provide for the exchange of each Incentive
Award (whether or not then exercisable or vested) for an Incentive Award with
respect to (x) some or all of the property which a holder of the number of
shares of Common Stock subject to such Incentive Award would have received in
such transaction or (y) securities of the acquiror or surviving entity and,
incident thereto, make an equitable adjustment as determined by the Committee in
the exercise price of the Incentive Award, or the number of shares or amount of
property subject to the Incentive Award or provide for a payment (in cash or
other property) to the Participant to whom such Incentive Award was granted in
partial consideration for the exchange of the Incentive Award. 

(d)Other Changes

In the event of any change in the capitalization of the Company or corporate
change other than those specifically referred to in Sections 10(a), (b) or (c)
hereof, the Committee shall, to the extent deemed appropriate by the Committee,
make such adjustments in the number and class of shares subject to Incentive
Awards outstanding on the date on which such change occurs and in such other
terms of such Incentive Awards as the Committee may consider appropriate.

(e)Cash Incentive Awards

In the event of any transaction or event described in this Section 10, including
without limitation any corporate change referred to in Section 10(d) hereof, the
Committee shall, to the extent deemed appropriate by the Committee, make such
adjustments in the terms and conditions of any Cash Incentive Award.

(f)No Other Rights

Except as expressly provided in the Plan or any Award Agreement, no Participant
shall have any rights by reason of any subdivision or consolidation of shares of
stock of any class, the payment of any dividends or dividend equivalents, any
increase or decrease in the number of shares of stock of any class or any
dissolution, liquidation, merger or consolidation of the Company or any other
corporation.  Except as expressly provided in the Plan, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number of shares or amount of other property
subject to, or the terms related to, any Incentive Award.

(g)Savings Clause

 

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(i)No provision of this Section 10 shall be given effect to the extent that such
provision would cause any tax to become due under Section 409A of the Code. 

(ii)With respect to Incentive Awards which are granted to Covered Employees and
are intended to qualify as Performance-Based Compensation, no provision of this
Section 10 shall be given effect to the extent that such provision would cause
such Incentive Award to fail to so qualify as Performance-Based Compensation
under Section 162(m) of the Code.  

(iii)Furthermore, no provision of this Section 10 shall be given effect to the
extent such provision would result in short-swing profits liability under
Section 16 of the Exchange Act or violate the exemptive conditions of Rule 16b-3
of the Exchange Act.

11.

Change in Control; Termination of Employment

(a)Change in Control

The consequences of a Change in Control, if any, will be set forth in the Award
Agreement in addition to what is provided in Section 10 hereof.

 

(b)Termination of Employment  

(i)Except as to any Incentive Awards constituting stock rights subject to
Section 409A of the Code, termination of Employment shall mean a separation from
service within the meaning of Section 409A, unless the Participant is retained
as a consultant pursuant to a written agreement and such agreement provides
otherwise.  The Employment of a Participant with the Company shall be deemed to
have terminated for all purposes of the Plan if such person is employed by or
provides services to a Person that is a Subsidiary of the Company and such
Person ceases to be a Subsidiary of the Company, unless the Committee determines
otherwise.  A Participant who ceases to be an employee of the Company but
continues, or simultaneously commences, services as a director of the Company
shall be deemed to have had a termination of Employment for purposes of the
Plan.  Without limiting the generality of the foregoing, the Committee shall
determine whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of Employment, provided that a
Participant who is an employee will not be deemed to cease Employment in the
case of any leave of absence approved by the Company.  Furthermore, no payment
shall be made with respect to any Incentive Awards under the Plan that are
subject to Section 409A of the Code as a result of any such authorized leave of
absence or absence in military or government service unless such authorized
leave or absence constitutes a separation from service for purposes of Section
409A of the Code and the regulations promulgated thereunder.  

 

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(ii)The Award Agreement shall specify the consequences with respect to such
Option of the termination of Employment of the Participant holding the Option.  

(iii)The consequences with respect to a Performance-Based Award of the
termination of Employment of the Participant holding the Performance-Based Award
shall be determined by the Committee in its sole discretion and set forth in the
Award Agreement, it being intended that no agreement providing for a payment to
a Participant upon termination of Employment shall be given effect to the extent
that it would cause an Incentive Award that was intended to qualify as a
Performance-Based Award to fail to so qualify.

12.

Rights Under the Plan

(a)The Committee shall have full discretionary authority to administer the Plan,
including discretionary authority to interpret and construe any and all
provisions of the Plan and any Award Agreement thereunder, and to adopt, amend
and rescind from time to time such rules and regulations for the administration
of the Plan, including rules and regulations related to sub-plans established
for the purpose of satisfying applicable foreign laws and/or qualifying for
preferred tax treatment under applicable foreign tax laws, as the Committee may
deem necessary or appropriate.  Decisions of the Committee shall be final,
binding and conclusive on all parties.  For the avoidance of doubt, the
Committee may exercise all discretion granted to it under the Plan in a
non-uniform manner among Participants.

(b)No Person shall have any rights as a stockholder with respect to any shares
of Common Stock covered by or relating to any Incentive Award until the date of
the issuance of such shares on the books and records of the Company.  Except as
otherwise expressly provided in Section 10 hereof, no adjustment of any
Incentive Award shall be made for dividends or other rights for which the record
date occurs prior to the date of such issuance.  Nothing in this Section 12 is
intended, or should be construed, to limit authority of the Committee to cause
the Company to make payments based on the dividends that would be payable with
respect to any share of Common Stock if it were issued or outstanding, or from
granting rights related to such dividends.

(c)The Company shall not have any obligation to establish any separate fund or
trust or other segregation of assets to provide for payments under the Plan.  To
the extent any person acquires any rights to receive payments hereunder from the
Company, such rights shall be no greater than those of an unsecured creditor.

13.

No Special Employment Rights; No Right to Incentive Award

(a)Nothing contained in the Plan or any Award Agreement shall confer upon any
Participant any right with respect to the continuation of his or her Employment
by the Company or interfere in any way with the right of the Company at any time
to terminate such Employment or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of an Incentive
Award.

 

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(b)No person shall have any claim or right to receive an Incentive Award
hereunder.  The Committee’s granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant an Incentive Award to such
Participant or any other Participant or other person at any time nor preclude
the Committee from making subsequent grants to such Participant or any other
Participant or other person. 

14.

Securities Matters

 

(a)The Company shall be under no obligation to effect the registration pursuant
to the Securities Act of any shares of Common Stock to be issued hereunder or to
effect similar compliance under any state or local laws.  Notwithstanding
anything herein to the contrary, the Company shall not be obligated to cause to
be issued shares of Common Stock pursuant to the Plan unless and until the
Company is advised by its counsel that the issuance is in compliance with all
applicable laws, regulations of governmental authority and the requirements of
any securities exchange on which shares of Common Stock are traded.  The
Committee may require, as a condition to the issuance of shares of Common Stock
pursuant to the terms hereof, that the recipient of such shares make such
covenants, agreements and representations, and that any related certificates
representing such shares bear such legends, as the Committee, in its sole
discretion, deems necessary or desirable.

(b)The exercise of any Incentive Award (including without limitation any Option)
granted hereunder shall only be effective at such time as counsel to the Company
shall have determined that the issuance and delivery of shares of Common Stock
pursuant to such exercise is in compliance with all applicable laws, regulations
of governmental authority and the requirements of any securities exchange on
which shares of Common Stock are traded.  The Company may, in its sole
discretion, defer the effectiveness of any exercise of an Incentive Award
granted hereunder in order to allow the issuance of shares pursuant thereto to
be made pursuant to registration or an exemption from registration or other
methods for compliance available under federal or state or local securities
laws.  The Company shall inform the Participant in writing of its decision to
defer the effectiveness of the exercise of an Incentive Award granted
hereunder.  During the period that the effectiveness of the exercise of an
Incentive Award has been deferred, the Participant may, by written notice,
withdraw such exercise and obtain the refund of any amount paid with respect
thereto.

15.

Withholding Taxes  

 

(a)Cash Remittance

 

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Whenever withholding tax obligations are incurred in connection with any
Incentive Award, the Company shall have the right to require the Participant to
remit to the Company in cash an amount sufficient to satisfy federal, state and
local withholding tax requirements, if any, attributable to such event.  In
addition, upon the exercise or settlement of any Incentive Award in cash, or the
making of any other payment with respect to any Incentive Award (other than in
shares of Common Stock), the Company shall have the right to withhold from any
payment required to be made pursuant thereto an amount sufficient to satisfy the
federal, state and local withholding tax requirements, if any, attributable to
such exercise, settlement or payment. 

 

(b)Stock Remittance

At the election of the Participant, subject to the approval of the Committee,
whenever withholding tax obligations are incurred in connection with any
Incentive Award, the Participant may tender to the Company a number of shares of
Common Stock that have been owned by the Participant for at least six (6) months
(or such other period as the Committee may determine) having a Fair Market Value
at the tender date determined by the Committee to be sufficient to satisfy the
minimum federal, state and local withholding tax requirements, if any,
attributable to such event.  Such election shall satisfy the Participant’s
obligations under Section 15(a) hereof, if any.

 

(c)Stock Withholding

At the election of the Participant, subject to the approval of the Committee,
whenever withholding tax obligations are incurred in connection with any
Incentive Award, the Company shall withhold a number of such shares having a
Fair Market Value determined by the Committee to be sufficient to satisfy the
minimum federal, state and local withholding tax requirements, if any,
attributable to such event.  Such election shall satisfy the Participant’s
obligations under Section 15(a) hereof, if any.

 

16.

Amendment or Termination of the Plan

 

The Board of Directors may at any time suspend or discontinue the Plan or revise
or amend it in any respect whatsoever; provided, however, that to the extent
that any applicable law, tax requirement, or rule of a stock exchange requires
stockholder approval in order for any such revision or amendment to be
effective, such revision or amendment shall not be effective without such
approval.  The preceding sentence shall not restrict the Committee’s ability to
exercise its discretionary authority hereunder pursuant to Section 4 hereof,
which discretion may be exercised without amendment to the Plan.  No provision
of this Section 16 shall be given effect to the extent that such provision would
cause any tax to become due under Section 409A of the Code.  Except as expressly
provided in the Plan, no action hereunder may, without the consent of a
Participant, adversely affect the Participant’s rights under any previously
granted and outstanding Incentive Award.  Nothing herein shall cause a
Performance-Based Award to cease to qualify under Section 162(m) of the
Code.  Nothing in the Plan shall limit the right of the Company to pay
compensation of any kind outside the terms of the Plan.

 

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17.

Recoupment 

 

Notwithstanding anything in the Plan or in any Award Agreement to the contrary,
the Company will be entitled to the extent permitted or required by applicable
law (including without limitation the Dodd-Frank Wall Street Reform and Consumer
Protection Act), Company policy and/or the requirements of an exchange on which
the Company’s shares are listed for trading, in each case, as in effect from
time to time, to recoup compensation of whatever kind paid or awarded by the
Company at any time to a Participant under this Plan.

 

18.

No Obligation to Exercise

 

The grant to a Participant of an Incentive Award shall impose no obligation upon
such Participant to exercise such Incentive Award.

 

19.

Transfers

 

(a)Incentive Awards may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of a
Participant, only by the Participant; provided, however, that the Committee may
permit Options that are not incentive stock options to be sold, pledged,
assigned, hypothecated, transferred, or disposed of, on a general or specific
basis, subject to such conditions and limitations as the Committee may
determine.  Upon the death of a Participant, outstanding Incentive Awards held
by such Participant at the time of his or her death may be exercised only by the
executors or administrators of the Participant’s estate or by any person or
persons who shall have acquired such right to exercise by will or by the laws of
descent and distribution.  No transfer by will or the laws of descent and
distribution of any Incentive Award, or the right to exercise any Incentive
Award, shall be effective to bind the Company unless the Committee shall have
been furnished with (i) written notice thereof and with a copy of the will
and/or such evidence as the Committee may deem necessary to establish the
validity of the transfer and (ii) an agreement by the transferee to comply with
all the terms and conditions of the Incentive Award that are or would have been
applicable to the Participant and to be bound by the acknowledgements made by
the Participant in connection with the grant of the Incentive Award.  

 

(b)Notwithstanding the foregoing, the Committee may, in its sole discretion,
permit Incentive Awards (other than Options that are incentive stock options) to
be transferred by a Participant, without consideration, subject to such rules as
the Committee may adopt consistent with any applicable Award Agreement to
preserve the purposes of the Plan, to (i) an Immediate Family Member, (ii) a
trust solely for the benefit of the Participant and/or his or her Immediate
Family Members, (iii) a corporation, partnership or limited liability company
whose only stockholders, partners or members, as applicable, are the Participant
and/or his or her Immediate Family Members, or (iv) any other transferee as may
be approved by the Committee in its sole discretion, in each case provided that
(x) the Participant gives the Committee advance written notice describing the
terms and conditions of the proposed transfer, (y) the transferee furnishes the
Committee with an agreement to comply with all the terms and conditions of the

 

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Incentive Award that are or would have been applicable to the Participant and to
be bound by the acknowledgements made by the Participant in connection with the
grant of the Incentive Award and (z) the Committee approves the proposed
transfer. 

 

(c)The terms of any Incentive Award transferred in accordance with this Section
19 shall apply to the Permitted Transferee, and any reference in the Plan, or in
any applicable Award Agreement, to a Participant shall be deemed to refer to the
Permitted Transferee, except that (i) Permitted Transferees shall not be
entitled to transfer any Incentive Award, other than by will or the laws of
descent and distribution or with the written consent of the Committee,
(ii) Permitted Transferees shall not be entitled to exercise any transferred
Option unless there shall be in effect a registration statement on an
appropriate form covering the shares of Common Stock to be acquired pursuant to
the exercise of such Option if the Committee determines, consistent with any
applicable Award Agreement, that such a registration statement is necessary or
appropriate, (iii) neither the Committee nor the Company shall be required to
provide any notice to a Permitted Transferee, whether or not such notice is or
would otherwise have been required to be given to the Participant under the Plan
or otherwise, and (iv) the consequences of the termination of the Participant’s
Employment under the terms of the Plan and the applicable Award Agreement shall
continue to be applied with respect to the Permitted Transferee, including
without limitation that an Option shall be exercisable by the Permitted
Transferee only to the extent, and for the periods, specified in the Plan and
the applicable Award Agreement.  

 

20.

Expenses and Receipts

 

The expenses of the Plan shall be paid by the Company.  Any proceeds received by
the Company in connection with any Incentive Award will be used for general
corporate purposes.

21.

Failure to Comply

In addition to the remedies of the Company elsewhere provided for herein,
failure by a Participant to comply with any of the terms and conditions of the
Plan or any Award Agreement, unless such failure is remedied by such Participant
within ten (10) days after having been notified of such failure by the
Committee, shall be grounds for the cancellation and forfeiture of such
Incentive Award, in whole or in part, as the Committee, in its absolute
discretion, may determine.

22.

Governing Law

The Plan and the rights of all persons under the Plan shall be construed and
administered in accordance with the laws of the State of Delaware without regard
to its conflict of law principles.

23.

Severability

If all or any part of this Plan is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not
serve to invalidate any portion of

 

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this Plan not declared to be unlawful or invalid.  Any Section or part of a
Section so declared to be unlawful or invalid shall, if possible, be construed
in a manner that will give effect to the terms of such Section or part of a
Section to the fullest extent possible while remaining lawful and valid.

24.

Effective Date and Term of Plan

 

The Effective Date of the Plan is October 24, 2013.  No grants of Incentive
Awards may be made under the Plan after October 24, 2023.  

 

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