Exhibit 10.1

 

BIOSPHERE MEDICAL, INC.

 

2006 STOCK INCENTIVE PLAN

 

1.             Purpose

 

The purpose of this 2006 Stock Incentive Plan (the “Plan”) of BioSphere
Medical, Inc., a Delaware corporation (the “Company”), is to advance the
interests of the Company’s stockholders by enhancing the Company’s ability to
attract, retain and motivate persons who are expected to make important
contributions to the Company and by providing such persons with equity ownership
opportunities and performance-based incentives that are intended to align their
interests with those of the Company’s stockholders.  Except where the context
otherwise requires, the term “Company” shall include any of the Company’s
present or future parent or subsidiary corporations as defined in
Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the “Code”) and any other business venture
(including, without limitation, joint venture or limited liability company) in
which the Company has a controlling interest, as determined by the Board of
Directors of the Company (the “Board”).

 

2.             ELIGIBILITY

 

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

 

3.             ADMINISTRATION AND DELEGATION

 

(A)           ADMINISTRATION BY BOARD OF DIRECTORS.  THE PLAN WILL BE
ADMINISTERED BY THE BOARD.  THE BOARD SHALL HAVE AUTHORITY TO GRANT AWARDS AND
TO ADOPT, AMEND AND REPEAL SUCH ADMINISTRATIVE RULES, GUIDELINES AND PRACTICES
RELATING TO THE PLAN AS IT SHALL DEEM ADVISABLE.  THE BOARD MAY CONSTRUE AND
INTERPRET THE TERMS OF THE PLAN AND ANY AWARD AGREEMENTS ENTERED INTO UNDER THE
PLAN.  THE BOARD MAY CORRECT ANY DEFECT, SUPPLY ANY OMISSION OR RECONCILE ANY
INCONSISTENCY IN THE PLAN OR ANY AWARD IN THE MANNER AND TO THE EXTENT IT SHALL
DEEM EXPEDIENT TO CARRY THE PLAN INTO EFFECT AND IT SHALL BE THE SOLE AND FINAL
JUDGE OF SUCH EXPEDIENCY.  ALL DECISIONS BY THE BOARD SHALL BE MADE IN THE
BOARD’S SOLE DISCRETION AND SHALL BE FINAL AND BINDING ON ALL PERSONS HAVING OR
CLAIMING ANY INTEREST IN THE PLAN OR IN ANY AWARD.  NO DIRECTOR OR PERSON ACTING
PURSUANT TO THE AUTHORITY DELEGATED BY THE BOARD SHALL BE LIABLE FOR ANY ACTION
OR DETERMINATION RELATING TO OR UNDER THE PLAN MADE IN GOOD FAITH.

 

(B)           APPOINTMENT OF COMMITTEES.  TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE BOARD MAY DELEGATE ANY OR ALL OF ITS POWERS UNDER THE PLAN TO ONE OR
MORE COMMITTEES OR SUBCOMMITTEES OF THE BOARD (A “COMMITTEE”).  DURING SUCH TIME
AS THE COMMON STOCK, $0.01 PAR VALUE PER SHARE, OF THE COMPANY (THE “COMMON
STOCK”) IS REGISTERED UNDER THE SECURITIES EXCHANGE ACT OF 1934 (THE “EXCHANGE
ACT”), THE BOARD SHALL APPOINT ONE SUCH COMMITTEE OF NOT LESS THAN TWO MEMBERS,
EACH MEMBER OF WHICH SHALL BE AN “OUTSIDE DIRECTOR” WITHIN THE MEANING OF
SECTION 162(M) OF THE CODE AND A “NON-EMPLOYEE DIRECTOR” AS DEFINED IN
RULE 16B-3 PROMULGATED UNDER THE EXCHANGE ACT.  ALL REFERENCES IN THE PLAN TO
THE “BOARD” SHALL MEAN THE

 

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BOARD OR A COMMITTEE OF THE BOARD OR THE OFFICERS REFERRED TO IN SECTION 3(C) TO
THE EXTENT THAT THE BOARD’S POWERS OR AUTHORITY UNDER THE PLAN HAVE BEEN
DELEGATED TO SUCH COMMITTEE OR OFFICERS.

 

(C)           DELEGATION TO OFFICERS.  TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE BOARD MAY DELEGATE TO ONE OR MORE OFFICERS OF THE COMPANY THE POWER TO
GRANT AWARDS TO EMPLOYEES OR OFFICERS OF THE COMPANY OR ANY OF ITS PRESENT OR
FUTURE SUBSIDIARY CORPORATIONS AND TO EXERCISE SUCH OTHER POWERS UNDER THE PLAN
AS THE BOARD MAY DETERMINE, PROVIDED THAT THE BOARD SHALL FIX THE TERMS OF THE
AWARDS TO BE GRANTED BY SUCH OFFICERS (INCLUDING THE EXERCISE PRICE OF SUCH
AWARDS, WHICH MAY INCLUDE A FORMULA BY WHICH THE EXERCISE PRICE WILL BE
DETERMINED) AND THE MAXIMUM NUMBER OF SHARES SUBJECT TO AWARDS THAT THE OFFICERS
MAY GRANT; PROVIDED FURTHER, HOWEVER, THAT NO OFFICER SHALL BE AUTHORIZED TO
GRANT AWARDS TO ANY “EXECUTIVE OFFICER” OF THE COMPANY (AS DEFINED BY RULE 3B-7
UNDER THE EXCHANGE ACT OF 1934) OR TO ANY “OFFICER” OF THE COMPANY (AS DEFINED
BY RULE 16A-1 UNDER THE EXCHANGE ACT).

 

4.            STOCK AVAILABLE FOR AWARDS

 

(A)           NUMBER OF SHARES.  SUBJECT TO ADJUSTMENT UNDER SECTION 10, AWARDS
MAY BE MADE UNDER THE PLAN FOR UP TO 2,000,000 SHARES OF COMMON STOCK.  IF ANY
AWARD EXPIRES OR IS TERMINATED, SURRENDERED OR CANCELED WITHOUT HAVING BEEN
FULLY EXERCISED, IS FORFEITED IN WHOLE OR IN PART (INCLUDING AS THE RESULT OF
SHARES OF COMMON STOCK SUBJECT TO SUCH AWARD BEING REPURCHASED BY THE COMPANY AT
THE ORIGINAL ISSUANCE PRICE PURSUANT TO A CONTRACTUAL REPURCHASE RIGHT), IS
SETTLED IN CASH OR OTHERWISE RESULTS IN ANY COMMON STOCK NOT BEING ISSUED, THE
UNUSED COMMON STOCK COVERED BY SUCH AWARD SHALL AGAIN BE AVAILABLE FOR THE GRANT
OF AWARDS UNDER THE PLAN.  HOWEVER, IN THE CASE OF INCENTIVE STOCK OPTIONS (AS
HEREINAFTER DEFINED), THE FOREGOING PROVISIONS SHALL BE SUBJECT TO ANY
LIMITATIONS UNDER THE CODE.  SHARES ISSUED UNDER THE PLAN MAY CONSIST IN WHOLE
OR IN PART OF AUTHORIZED BUT UNISSUED SHARES OR TREASURY SHARES.

 

(B)           SUB-LIMITS.  SUBJECT TO ADJUSTMENT UNDER SECTION 10, THE FOLLOWING
SUB-LIMITS ON THE NUMBER OF SHARES SUBJECT TO AWARDS SHALL APPLY:

 

(1)           SECTION 162(M) PER-PARTICIPANT LIMIT.  THE MAXIMUM NUMBER OF
SHARES OF COMMON STOCK WITH RESPECT TO WHICH AWARDS MAY BE GRANTED TO ANY
PARTICIPANT UNDER THE PLAN SHALL BE 600,000 PER CALENDAR YEAR.  FOR PURPOSES OF
THE FOREGOING LIMIT, THE COMBINATION OF AN OPTION IN TANDEM WITH AN SAR (AS EACH
IS HEREAFTER DEFINED) SHALL BE TREATED AS A SINGLE AWARD.  THE PER-PARTICIPANT
LIMIT DESCRIBED IN THIS SECTION 4(B)(1) SHALL BE CONSTRUED AND APPLIED
CONSISTENTLY WITH SECTION 162(M) OF THE CODE OR ANY SUCCESSOR PROVISION THERETO,
AND THE REGULATIONS THEREUNDER (“SECTION 162(M)”).

 

(2)           LIMIT ON AWARDS TO DIRECTORS.  THE MAXIMUM NUMBER OF SHARES WITH
RESPECT TO WHICH AWARDS MAY BE GRANTED TO ANY DIRECTOR WHO IS NOT AN EMPLOYEE OF
THE COMPANY AT THE TIME OF GRANT SHALL BE 50,000 PER CALENDAR YEAR.

 

(C)           SUBSTITUTE AWARDS.  IN CONNECTION WITH A MERGER OR CONSOLIDATION
OF AN ENTITY WITH THE COMPANY OR THE ACQUISITION BY THE COMPANY OF PROPERTY OR
STOCK OF AN ENTITY, THE BOARD MAY GRANT AWARDS IN SUBSTITUTION FOR ANY OPTIONS
OR OTHER STOCK OR STOCK UNIT AWARDS GRANTED BY SUCH ENTITY OR AN AFFILIATE
THEREOF.  SUBSTITUTE AWARDS MAY BE GRANTED ON SUCH TERMS AS THE BOARD

 

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DEEMS APPROPRIATE IN THE CIRCUMSTANCES, NOTWITHSTANDING ANY LIMITATIONS ON
AWARDS CONTAINED IN THE PLAN.  SUBSTITUTE AWARDS SHALL NOT COUNT AGAINST THE
OVERALL SHARE LIMIT SET FORTH IN SECTION 4(A), EXCEPT AS MAY BE REQUIRED BY
REASON OF SECTION 422 AND RELATED PROVISIONS OF THE CODE.

 

5.             STOCK OPTIONS

 

(A)           GENERAL.  THE BOARD MAY GRANT OPTIONS TO PURCHASE COMMON STOCK
(EACH, AN “OPTION”) AND DETERMINE THE NUMBER OF SHARES OF COMMON STOCK TO BE
COVERED BY EACH OPTION, THE EXERCISE PRICE OF EACH OPTION AND THE CONDITIONS AND
LIMITATIONS APPLICABLE TO THE EXERCISE OF EACH OPTION, INCLUDING CONDITIONS
RELATING TO APPLICABLE FEDERAL OR STATE SECURITIES LAWS, AS IT CONSIDERS
NECESSARY OR ADVISABLE.  AN OPTION THAT IS NOT INTENDED TO BE AN INCENTIVE STOCK
OPTION (AS HEREINAFTER DEFINED) SHALL BE DESIGNATED A “NONSTATUTORY STOCK
OPTION.”

 

(B)           INCENTIVE STOCK OPTIONS.  AN OPTION THAT THE BOARD INTENDS TO BE
AN “INCENTIVE STOCK OPTION” AS DEFINED IN SECTION 422 OF THE CODE (AN “INCENTIVE
STOCK OPTION”) SHALL ONLY BE GRANTED TO EMPLOYEES OF BIOSPHERE MEDICAL, INC.,
ANY OF BIOSPHERE MEDICAL, INC.’S PRESENT OR FUTURE PARENT OR SUBSIDIARY
CORPORATIONS AS DEFINED IN SECTIONS 424(E) OR (F) OF THE CODE, AND ANY OTHER
ENTITIES THE EMPLOYEES OF WHICH ARE ELIGIBLE TO RECEIVE INCENTIVE STOCK OPTIONS
UNDER THE CODE, AND SHALL BE SUBJECT TO AND SHALL BE CONSTRUED CONSISTENTLY WITH
THE REQUIREMENTS OF SECTION 422 OF THE CODE.  THE COMPANY SHALL HAVE NO
LIABILITY TO A PARTICIPANT, OR ANY OTHER PARTY, IF AN OPTION (OR ANY PART
THEREOF) THAT IS INTENDED TO BE AN INCENTIVE STOCK OPTION IS NOT AN INCENTIVE
STOCK OPTION OR FOR ANY ACTION TAKEN BY THE BOARD, INCLUDING WITHOUT LIMITATION
THE CONVERSION OF AN INCENTIVE STOCK OPTION TO A NONSTATUTORY STOCK OPTION.

 

(C)           EXERCISE PRICE.  THE BOARD SHALL ESTABLISH THE EXERCISE PRICE OF
EACH OPTION AND SPECIFY SUCH EXERCISE PRICE IN THE APPLICABLE OPTION AGREEMENT;
PROVIDED, HOWEVER, THAT THE EXERCISE PRICE SHALL BE NOT LESS THAN 100% OF THE
FAIR MARKET VALUE (AS DEFINED BELOW) ON THE DATE THE OPTION IS GRANTED.

 

(D)           DURATION OF OPTIONS.  EACH OPTION SHALL BE EXERCISABLE AT SUCH
TIMES AND SUBJECT TO SUCH TERMS AND CONDITIONS AS THE BOARD MAY SPECIFY IN THE
APPLICABLE OPTION AGREEMENT, PROVIDED, HOWEVER, THAT NO OPTION WILL BE GRANTED
FOR A TERM IN EXCESS OF 10 YEARS.

 

(E)           EXERCISE OF OPTION.  OPTIONS MAY BE EXERCISED BY DELIVERY TO THE
COMPANY OF A WRITTEN NOTICE OF EXERCISE SIGNED BY THE PROPER PERSON OR BY ANY
OTHER FORM OF NOTICE (INCLUDING ELECTRONIC NOTICE) APPROVED BY THE BOARD,
TOGETHER WITH PAYMENT IN FULL AS SPECIFIED IN SECTION 5(F) FOR THE NUMBER OF
SHARES FOR WHICH THE OPTION IS EXERCISED.  SHARES OF COMMON STOCK SUBJECT TO THE
OPTION WILL BE DELIVERED BY THE COMPANY FOLLOWING EXERCISE EITHER AS SOON AS
PRACTICABLE OR, SUBJECT TO SUCH CONDITIONS AS THE BOARD SHALL SPECIFY, ON A
DEFERRED BASIS (WITH THE COMPANY’S OBLIGATION TO BE EVIDENCED BY AN INSTRUMENT
PROVIDING FOR FUTURE DELIVERY OF THE DEFERRED SHARES AT THE TIME OR TIMES
SPECIFIED BY THE BOARD).

 

(F)            PAYMENT UPON EXERCISE.  COMMON STOCK PURCHASED UPON THE EXERCISE
OF AN OPTION GRANTED UNDER THE PLAN SHALL BE PAID FOR AS FOLLOWS:

 

(1)           IN CASH OR BY CHECK, PAYABLE TO THE ORDER OF THE COMPANY;

 

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(2)           EXCEPT AS MAY OTHERWISE BE PROVIDED IN THE APPLICABLE OPTION
AGREEMENT, BY (I) DELIVERY OF AN IRREVOCABLE AND UNCONDITIONAL UNDERTAKING BY A
CREDITWORTHY BROKER TO DELIVER PROMPTLY TO THE COMPANY SUFFICIENT FUNDS TO PAY
THE EXERCISE PRICE AND ANY REQUIRED TAX WITHHOLDING OR (II) DELIVERY BY THE
PARTICIPANT TO THE COMPANY OF A COPY OF IRREVOCABLE AND UNCONDITIONAL
INSTRUCTIONS TO A CREDITWORTHY BROKER TO DELIVER PROMPTLY TO THE COMPANY CASH OR
A CHECK SUFFICIENT TO PAY THE EXERCISE PRICE AND ANY REQUIRED TAX WITHHOLDING;

 

(3)           TO THE EXTENT PROVIDED FOR IN THE APPLICABLE OPTION AGREEMENT OR
APPROVED BY THE BOARD, IN ITS SOLE DISCRETION, BY DELIVERY (EITHER BY ACTUAL
DELIVERY OR ATTESTATION) OF SHARES OF COMMON STOCK OWNED BY THE PARTICIPANT
VALUED AT THEIR FAIR MARKET VALUE AS DETERMINED BY (OR IN A MANNER APPROVED BY)
THE BOARD (“FAIR MARKET VALUE”), PROVIDED (I) SUCH METHOD OF PAYMENT IS THEN
PERMITTED UNDER APPLICABLE LAW, (II) SUCH COMMON STOCK, IF ACQUIRED DIRECTLY
FROM THE COMPANY, WAS OWNED BY THE PARTICIPANT FOR SUCH MINIMUM PERIOD OF TIME,
IF ANY, AS MAY BE ESTABLISHED BY THE BOARD IN ITS DISCRETION AND (III) SUCH
COMMON STOCK IS NOT SUBJECT TO ANY REPURCHASE, FORFEITURE, UNFULFILLED VESTING
OR OTHER SIMILAR REQUIREMENTS;

 

(4)           TO THE EXTENT PERMITTED BY APPLICABLE LAW AND PROVIDED FOR IN THE
APPLICABLE OPTION AGREEMENT OR APPROVED BY THE BOARD, IN ITS SOLE DISCRETION, BY
(I) DELIVERY OF A PROMISSORY NOTE OF THE PARTICIPANT TO THE COMPANY ON TERMS
DETERMINED BY THE BOARD, OR (II) PAYMENT OF SUCH OTHER LAWFUL CONSIDERATION AS
THE BOARD MAY DETERMINE; OR

 

(5)           BY ANY COMBINATION OF THE ABOVE PERMITTED FORMS OF PAYMENT.

 

(G)           LIMITATION ON REPRICING.  UNLESS SUCH ACTION IS APPROVED BY THE
COMPANY’S STOCKHOLDERS:  (I) NO OUTSTANDING OPTION GRANTED UNDER THE PLAN MAY BE
AMENDED TO PROVIDE AN EXERCISE PRICE PER SHARE THAT IS LOWER THAN THE
THEN-CURRENT EXERCISE PRICE PER SHARE OF SUCH OUTSTANDING OPTION (OTHER THAN
ADJUSTMENTS PURSUANT TO SECTION 10) AND (II) THE BOARD MAY NOT CANCEL ANY
OUTSTANDING OPTION (WHETHER OR NOT GRANTED UNDER THE PLAN) AND GRANT IN
SUBSTITUTION THEREFORE NEW AWARDS UNDER THE PLAN COVERING THE SAME OR A
DIFFERENT NUMBER OF SHARE OF COMMON STOCK AND HAVING AN EXERCISE PRICE PER SHARE
LOWER THAN THE THEN-CURRENT EXERCISE PRICE PER SHARE OF THE CANCELLED OPTION.

 

6.             DIRECTOR AWARDS.

 

(A)           INITIAL GRANT.  UPON THE COMMENCEMENT OF SERVICE ON THE BOARD BY
ANY INDIVIDUAL WHO IS NOT THEN AN EMPLOYEE OF THE COMPANY OR ANY SUBSIDIARY OF
THE COMPANY, THE COMPANY SHALL GRANT TO SUCH PERSON A NONSTATUTORY STOCK OPTION
TO PURCHASE 10,000 SHARES OF COMMON STOCK (SUBJECT TO ADJUSTMENT UNDER
SECTION 10).

 

(B)           ANNUAL GRANT.  ON THE DATE OF EACH ANNUAL MEETING OF STOCKHOLDERS
OF THE COMPANY, THE COMPANY SHALL GRANT TO EACH MEMBER OF THE BOARD OF DIRECTORS
OF THE COMPANY WHO IS BOTH SERVING AS A DIRECTOR OF THE COMPANY IMMEDIATELY
PRIOR TO AND IMMEDIATELY FOLLOWING SUCH ANNUAL MEETING AND WHO IS NOT THEN AN
EMPLOYEE OF THE COMPANY OR ANY OF ITS SUBSIDIARIES, (I) A NONSTATUTORY STOCK
OPTION TO PURCHASE 5,000 SHARES OF COMMON STOCK AND (II) 2,500 SHARES OF
RESTRICTED STOCK (AS DEFINED IN SECTION 8 BELOW) (EACH SUBJECT TO ADJUSTMENT
UNDER SECTION 10); PROVIDED, HOWEVER, THAT A DIRECTOR SHALL NOT BE ELIGIBLE TO
RECEIVE AN OPTION

 

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GRANT OR RESTRICTED STOCK GRANT UNDER THIS SECTION 6(B) UNTIL SUCH DIRECTOR HAS
SERVED ON THE BOARD FOR AT LEAST SIX MONTHS.

 

(C)           TERMS OF DIRECTOR OPTIONS.  OPTIONS GRANTED UNDER THIS SECTION 6
SHALL: (I) HAVE AN EXERCISE PRICE EQUAL TO THE CLOSING SALE PRICE (FOR THE
PRIMARY TRADING SESSION) OF THE COMMON STOCK ON THE NASDAQ STOCK MARKET
(“NASDAQ”) OR THE NATIONAL SECURITIES EXCHANGE ON WHICH THE COMMON STOCK IS THEN
TRADED ON THE TRADING DATE IMMEDIATELY PRIOR TO THE DATE OF GRANT (AND IF THE
COMMON STOCK IS NOT THEN TRADED ON NASDAQ OR A NATIONAL SECURITIES EXCHANGE, THE
FAIR MARKET VALUE OF THE COMMON STOCK ON SUCH DATE AS DETERMINED BY THE BOARD),
(II) WITH RESPECT TO OPTIONS GRANTED UNDER SECTION 6(A), VEST IN FIVE EQUAL
ANNUAL INSTALLMENTS BEGINNING ON THE FIRST ANNIVERSARY OF THE DATE OF GRANT,
(III) WITH RESPECT TO OPTIONS GRANTED UNDER SECTION 6(B), VEST IN FULL ON THE
DATE OF GRANT, (III) EXPIRE ON THE EARLIER OF 10 YEARS FROM THE DATE OF GRANT OR
THREE MONTHS FOLLOWING CESSATION OF SERVICE ON THE BOARD, AND (IV) CONTAIN SUCH
OTHER TERMS AND CONDITIONS AS THE BOARD SHALL DETERMINE.

 

(D)           TERMS OF DIRECTOR RESTRICTED STOCK.  RESTRICTED STOCK GRANTED
UNDER THIS SECTION 6 SHALL (I) HAVE AN EXERCISE PRICE EQUAL TO $.01 PER SHARE,
(II) BE SUBJECT TO REPURCHASE BY THE COMPANY AT A PRICE EQUAL TO THE PURCHASE
PRICE UNTIL THE SECOND ANNIVERSARY OF THE DATE OF GRANT PROVIDED THAT THE
INDIVIDUAL IS SERVING ON THE BOARD ON SUCH DATE, AND PROVIDED THAT THE BOARD MAY
PROVIDE NOT TO EXERCISE SUCH REPURCHASE OPTION IN THE CASE OF DEATH, DISABILITY,
ATTAINMENT OF MANDATORY RETIREMENT AGE OR RETIREMENT FOLLOWING AT LEAST 10 YEARS
OF SERVICE, AND (III) CONTAIN SUCH OTHER TERMS AND CONDITIONS AS THE BOARD SHALL
DETERMINE.

 

(E)           BOARD DISCRETION.  THE BOARD RETAINS THE SPECIFIC AUTHORITY TO
FROM TIME TO TIME INCREASE OR DECREASE THE NUMBER OF SHARES SUBJECT TO OPTIONS
AND RESTRICTED STOCK AWARDS GRANTED UNDER THIS SECTION 6, SUBJECT TO THE
PROVISIONS OF SECTION 4(B)(2).

 

7.             STOCK APPRECIATION RIGHTS.

 

(a)           General.  The Board may grant Awards consisting of a Stock
Appreciation Right (“SAR”) entitling the holder, upon exercise, to receive an
amount in Common Stock or cash or a combination thereof (such form to be
determined by the Board) determined by reference to appreciation, from and after
the date of grant, in the fair market value of a share of Common Stock.  The
date as of which such appreciation or other measure is determined shall be the
exercise date.

 

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

 

(1)           Tandem Awards.  When Stock Appreciation Rights are expressly
granted in tandem with Options, (i) the Stock Appreciation Right will be
exercisable only at such time or times, and to the extent, that the related
Option is exercisable (except to the extent designated by the Board in
connection with an Acquisition Event) and will be exercisable in accordance with
the procedure required for exercise of the related Option; (ii) the Stock
Appreciation Right will terminate and no longer be exercisable upon the
termination or exercise of the related Option, except to the extent designated
by the Board in connection with an Acquisition Event and except that a Stock
Appreciation Right granted with respect to less than the full number of shares

 

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COVERED BY AN OPTION WILL NOT BE REDUCED UNTIL THE NUMBER OF SHARES AS TO WHICH
THE RELATED OPTION HAS BEEN EXERCISED OR HAS TERMINATED EXCEEDS THE NUMBER OF
SHARES NOT COVERED BY THE STOCK APPRECIATION RIGHT; (III) THE OPTION WILL
TERMINATE AND NO LONGER BE EXERCISABLE UPON THE EXERCISE OF THE RELATED STOCK
APPRECIATION RIGHT; AND (IV) THE STOCK APPRECIATION RIGHT WILL BE TRANSFERABLE
ONLY WITH THE RELATED OPTION.

 

(2)           Independent SARs.  A Stock Appreciation Right not expressly
granted in tandem with an Option will become exercisable at such time or times,
and on such conditions, as the Board may specify in the SAR Award.

 

 

(C)           GRANT PRICE.  THE GRANT PRICE OR EXERCISE PRICE OF AN SAR SHALL
NOT BE LESS THAN 100% OF THE FAIR MARKET VALUE PER SHARE OF COMMON STOCK ON THE
DATE OF GRANT OF THE SAR.

 

(D)           TERM.  THE TERM OF AN SAR SHALL NOT BE MORE THAN 10 YEARS FROM THE
DATE OF GRANT.

 

(E)           EXERCISE.  STOCK APPRECIATION RIGHTS MAY BE EXERCISED BY DELIVERY
TO THE COMPANY OF A WRITTEN NOTICE OF EXERCISE SIGNED BY THE PROPER PERSON OR BY
ANY OTHER FORM OF NOTICE (INCLUDING ELECTRONIC NOTICE) APPROVED BY THE BOARD,
TOGETHER WITH ANY OTHER DOCUMENTS REQUIRED BY THE BOARD.

 

8.            RESTRICTED STOCK; RESTRICTED STOCK UNITS.

 

(A)           GENERAL.  THE BOARD MAY GRANT AWARDS ENTITLING RECIPIENTS TO
ACQUIRE SHARES OF COMMON STOCK (“RESTRICTED STOCK”), SUBJECT TO THE RIGHT OF THE
COMPANY TO REPURCHASE ALL OR PART OF SUCH SHARES AT THEIR ISSUE PRICE OR OTHER
STATED OR FORMULA PRICE (OR TO REQUIRE FORFEITURE OF SUCH SHARES IF ISSUED AT NO
COST) FROM THE RECIPIENT IN THE EVENT THAT CONDITIONS SPECIFIED BY THE BOARD IN
THE APPLICABLE AWARD ARE NOT SATISFIED PRIOR TO THE END OF THE APPLICABLE
RESTRICTION PERIOD OR PERIODS ESTABLISHED BY THE BOARD FOR SUCH AWARD.  INSTEAD
OF GRANTING AWARDS FOR RESTRICTED STOCK, THE BOARD MAY GRANT AWARDS ENTITLING
THE RECIPIENT TO RECEIVE SHARES OF COMMON STOCK TO BE DELIVERED AT THE TIME SUCH
SHARES OF COMMON STOCK VEST (“RESTRICTED STOCK UNITS”) (RESTRICTED STOCK AND
RESTRICTED STOCK UNITS ARE EACH REFERRED TO HEREIN AS A “RESTRICTED STOCK
AWARD”).

 

(B)           TERMS AND CONDITIONS FOR ALL RESTRICTED STOCK AWARDS.  THE BOARD
SHALL DETERMINE THE TERMS AND CONDITIONS OF A RESTRICTED STOCK AWARD, INCLUDING
THE CONDITIONS FOR VESTING AND REPURCHASE (OR FORFEITURE) AND THE ISSUE PRICE,
IF ANY.

 

(C)           ADDITIONAL PROVISIONS RELATING TO RESTRICTED STOCK.

 

(1)            DIVIDENDS.  PARTICIPANTS HOLDING SHARES OF RESTRICTED STOCK WILL
BE ENTITLED TO ALL ORDINARY CASH DIVIDENDS PAID WITH RESPECT TO SUCH SHARES,
UNLESS OTHERWISE PROVIDED BY THE BOARD.  IF ANY SUCH DIVIDENDS OR DISTRIBUTIONS
ARE PAID IN SHARES, OR CONSIST OF A DIVIDEND OR DISTRIBUTION TO HOLDERS OF
COMMON STOCK OTHER THAN AN ORDINARY CASH DIVIDEND, THE SHARES, CASH OR OTHER
PROPERTY WILL BE SUBJECT TO THE SAME RESTRICTIONS ON TRANSFERABILITY AND
FORFEITABILITY AS THE SHARES OF RESTRICTED STOCK WITH RESPECT TO WHICH THEY WERE
PAID.   EACH DIVIDEND PAYMENT WILL BE MADE NO LATER THAN THE END OF THE CALENDAR
YEAR IN WHICH THE DIVIDENDS ARE PAID TO SHAREHOLDERS OF THAT CLASS OF STOCK OR,
IF LATER, THE 15TH DAY OF THE THIRD MONTH FOLLOWING THE DATE THE DIVIDENDS ARE
PAID TO SHAREHOLDERS OF THAT CLASS OF STOCK.

 

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(2)           STOCK CERTIFICATES.  THE COMPANY MAY REQUIRE THAT ANY STOCK
CERTIFICATES ISSUED IN RESPECT OF SHARES OF RESTRICTED STOCK SHALL BE DEPOSITED
IN ESCROW BY THE PARTICIPANT, TOGETHER WITH A STOCK POWER ENDORSED IN BLANK,
WITH THE COMPANY (OR ITS DESIGNEE).  AT THE EXPIRATION OF THE APPLICABLE
RESTRICTION PERIODS, THE COMPANY (OR SUCH DESIGNEE) SHALL DELIVER THE
CERTIFICATES NO LONGER SUBJECT TO SUCH RESTRICTIONS TO THE PARTICIPANT OR IF THE
PARTICIPANT HAS DIED, TO THE BENEFICIARY DESIGNATED, IN A MANNER DETERMINED BY
THE BOARD, BY A PARTICIPANT TO RECEIVE AMOUNTS DUE OR EXERCISE RIGHTS OF THE
PARTICIPANT IN THE EVENT OF THE PARTICIPANT’S DEATH (THE “DESIGNATED
BENEFICIARY”).  IN THE ABSENCE OF AN EFFECTIVE DESIGNATION BY A PARTICIPANT,
“DESIGNATED BENEFICIARY” SHALL MEAN THE PARTICIPANT’S ESTATE.

 

(D)           ADDITIONAL PROVISIONS RELATING TO RESTRICTED STOCK UNITS.

 

(1)           SETTLEMENT.  UPON THE VESTING OF AND/OR LAPSING OF ANY OTHER
RESTRICTIONS (I.E., SETTLEMENT) WITH RESPECT TO EACH RESTRICTED STOCK UNIT, THE
PARTICIPANT SHALL BE ENTITLED TO RECEIVE FROM THE COMPANY ONE SHARE OF COMMON
STOCK OR AN AMOUNT OF CASH EQUAL TO THE FAIR MARKET VALUE OF ONE SHARE OF COMMON
STOCK, AS PROVIDED IN THE APPLICABLE AWARD AGREEMENT.  THE BOARD MAY, IN ITS
DISCRETION, PROVIDE THAT SETTLEMENT OF RESTRICTED STOCK UNITS SHALL BE DEFERRED,
ON A MANDATORY BASIS OR AT THE ELECTION OF THE PARTICIPANT.

 

(2)           VOTING RIGHTS.  A PARTICIPANT SHALL HAVE NO VOTING RIGHTS WITH
RESPECT TO ANY RESTRICTED STOCK UNITS.

 

(3)           DIVIDEND EQUIVALENTS.  TO THE EXTENT PROVIDED BY THE BOARD, IN ITS
SOLE DISCRETION, A GRANT OF RESTRICTED STOCK UNITS MAY PROVIDE PARTICIPANTS WITH
THE RIGHT TO RECEIVE AN AMOUNT EQUAL TO ANY DIVIDENDS OR OTHER DISTRIBUTIONS
DECLARED AND PAID ON AN EQUAL NUMBER OF OUTSTANDING SHARES OF COMMON STOCK
(“DIVIDEND EQUIVALENTS”).  DIVIDEND EQUIVALENTS MAY BE PAID CURRENTLY OR
CREDITED TO AN ACCOUNT FOR THE PARTICIPANTS, MAY BE SETTLED IN CASH AND/OR
SHARES OF COMMON STOCK AND MAY BE SUBJECT TO THE SAME RESTRICTIONS ON TRANSFER
AND FORFEITABILITY AS THE RESTRICTED STOCK UNITS WITH RESPECT TO WHICH PAID, AS
DETERMINED BY THE BOARD IN ITS SOLE DISCRETION, SUBJECT IN EACH CASE TO SUCH
TERMS AND CONDITIONS AS THE BOARD SHALL ESTABLISH, IN EACH CASE TO BE SET FORTH
IN THE APPLICABLE AWARD AGREEMENT.

 

9.             OTHER STOCK UNIT AWARDS.

 

Other Awards of shares of Common Stock, and other Awards that are valued in
whole or in part by reference to, or are otherwise based on, shares of Common
Stock or other property, may be granted hereunder to Participants (“Other Stock
Unit Awards”), including without limitation Awards entitling recipients to
receive shares of Common Stock to be delivered in the future.  Such Other Stock
Unit Awards shall also be available as a form of payment in the settlement of
other Awards granted under the Plan or as payment in lieu of compensation to
which a Participant is otherwise entitled.  Other Stock Unit Awards may be paid
in shares of Common Stock or cash, as the Board shall determine.  Subject to the
provisions of the Plan, the Board shall determine the terms and conditions of
each Other Stock Unit Award, including any purchase price applicable thereto.

 

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10.           ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS.

 

(A)           CHANGES IN CAPITALIZATION.  IN THE EVENT OF ANY STOCK SPLIT,
REVERSE STOCK SPLIT, STOCK DIVIDEND, RECAPITALIZATION, COMBINATION OF SHARES,
RECLASSIFICATION OF SHARES, SPIN-OFF OR OTHER SIMILAR CHANGE IN CAPITALIZATION
OR EVENT, OR ANY DIVIDEND OR DISTRIBUTION TO HOLDERS OF COMMON STOCK OTHER THAN
AN ORDINARY CASH DIVIDEND, (I) THE NUMBER AND CLASS OF SECURITIES AVAILABLE
UNDER THIS PLAN, (II) THE SUB-LIMITS SET FORTH IN SECTION 4(B), (III) THE NUMBER
AND CLASS OF SECURITIES AND EXERCISE PRICE PER SHARE OF EACH OUTSTANDING OPTION
AND EACH OPTION ISSUABLE UNDER SECTION 6, (IV) THE SHARE- AND PER-SHARE
PROVISIONS AND THE EXERCISE PRICE OF EACH STOCK APPRECIATION RIGHT, (V) THE
NUMBER OF SHARES SUBJECT TO AND THE REPURCHASE PRICE PER SHARE SUBJECT TO EACH
OUTSTANDING RESTRICTED STOCK AWARD AND (VI) THE SHARE- AND PER-SHARE-RELATED
PROVISIONS AND THE PURCHASE PRICE, IF ANY, OF EACH OUTSTANDING OTHER STOCK UNIT
AWARD, SHALL BE APPROPRIATELY ADJUSTED BY THE COMPANY (OR SUBSTITUTED AWARDS MAY
BE MADE, IF APPLICABLE) TO THE EXTENT DETERMINED BY THE BOARD.  WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, IN THE EVENT THE COMPANY EFFECTS A SPLIT OF THE
COMMON STOCK BY MEANS OF A STOCK DIVIDEND AND THE EXERCISE PRICE OF AND THE
NUMBER OF SHARES SUBJECT TO SUCH OPTION ARE ADJUSTED AS OF THE DATE OF THE
DISTRIBUTION OF THE DIVIDEND (RATHER THAN AS OF THE RECORD DATE FOR SUCH
DIVIDEND), THEN AN OPTIONEE WHO EXERCISES AN OPTION BETWEEN THE RECORD DATE AND
THE DISTRIBUTION DATE FOR SUCH STOCK DIVIDEND SHALL BE ENTITLED TO RECEIVE, ON
THE DISTRIBUTION DATE, THE STOCK DIVIDEND WITH RESPECT TO THE SHARES OF COMMON
STOCK ACQUIRED UPON SUCH OPTION EXERCISE, NOTWITHSTANDING THE FACT THAT SUCH
SHARES WERE NOT OUTSTANDING AS OF THE CLOSE OF BUSINESS ON THE RECORD DATE FOR
SUCH STOCK DIVIDEND.

 

(B)           ACQUISITION EVENTS

 

(1)           CONSEQUENCES OF ACQUISITION EVENTS. SUBJECT TO
SECTION 10(B)(2) BELOW, UPON THE OCCURRENCE OF AN ACQUISITION EVENT (AS DEFINED
BELOW), OR THE EXECUTION BY THE COMPANY OF ANY AGREEMENT WITH RESPECT TO AN
ACQUISITION EVENT, THE BOARD SHALL TAKE ANY ONE OR MORE OF THE FOLLOWING ACTIONS
WITH RESPECT TO THEN OUTSTANDING AWARDS: (I) PROVIDE THAT OUTSTANDING OPTIONS
SHALL BE ASSUMED, OR EQUIVALENT OPTIONS SHALL BE SUBSTITUTED, BY THE ACQUIRING
OR SUCCEEDING CORPORATION (OR AN AFFILIATE THEREOF), PROVIDED THAT ANY SUCH
OPTIONS SUBSTITUTED FOR INCENTIVE STOCK OPTIONS SHALL SATISFY, IN THE
DETERMINATION OF THE BOARD, THE REQUIREMENTS OF SECTION 424(A) OF THE CODE;
(II) UPON WRITTEN NOTICE TO THE PARTICIPANTS, PROVIDE THAT ALL THEN UNEXERCISED
OPTIONS WILL BECOME EXERCISABLE IN FULL AS OF A SPECIFIED DATE (THE
“ACCELERATION DATE”) PRIOR TO THE ACQUISITION EVENT AND WILL TERMINATE
IMMEDIATELY PRIOR TO THE CONSUMMATION OF SUCH ACQUISITION EVENT, EXCEPT TO THE
EXTENT EXERCISED BY THE PARTICIPANTS BETWEEN THE ACCELERATION DATE AND THE
CONSUMMATION OF SUCH ACQUISITION EVENT; (III) IN THE EVENT OF AN ACQUISITION
EVENT UNDER THE TERMS OF WHICH HOLDERS OF COMMON STOCK WILL RECEIVE UPON
CONSUMMATION THEREOF A CASH PAYMENT FOR EACH SHARE OF COMMON STOCK SURRENDERED
PURSUANT TO SUCH ACQUISITION EVENT (THE “ACQUISITION PRICE”), PROVIDE THAT ALL
OUTSTANDING OPTIONS SHALL TERMINATE UPON CONSUMMATION OF SUCH ACQUISITION EVENT
AND EACH PARTICIPANT SHALL RECEIVE, IN EXCHANGE THEREFOR, A CASH PAYMENT EQUAL
TO THE AMOUNT (IF ANY) BY WHICH (A) THE ACQUISITION PRICE MULTIPLIED BY THE
NUMBER OF SHARES OF COMMON STOCK SUBJECT TO SUCH OUTSTANDING OPTIONS (WHETHER OR
NOT THEN EXERCISABLE), EXCEEDS (B) THE AGGREGATE EXERCISE PRICE OF SUCH OPTIONS;
(IV) PROVIDE THAT ALL RESTRICTED STOCK AWARDS THEN OUTSTANDING SHALL BECOME FREE
OF ALL RESTRICTIONS PRIOR TO THE CONSUMMATION OF THE ACQUISITION EVENT; AND
(V) PROVIDE THAT ANY OTHER STOCK-BASED AWARDS OUTSTANDING (A) SHALL BECOME
EXERCISABLE, REALIZABLE OR VESTED IN FULL,

 

8

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OR SHALL BE FREE OF ALL CONDITIONS OR RESTRICTIONS, AS APPLICABLE TO EACH SUCH
AWARD, PRIOR TO THE CONSUMMATION OF THE ACQUISITION EVENT, OR (B), IF
APPLICABLE, SHALL BE ASSUMED, OR EQUIVALENT AWARDS SHALL BE SUBSTITUTED, BY THE
ACQUIRING OR SUCCEEDING CORPORATION (OR AN AFFILIATE THEREOF).

 

An “Acquisition Event” shall be deemed to have occurred only if any of the
following events occur: (a) the stockholders of the Company approve a merger or
consolidation which results in the voting securities of the Company outstanding
immediately prior thereto representing thereafter (either by remaining
outstanding or by being converted into voting securities of the surviving or
acquiring entity) less than 50% of the combined voting power of the voting
securities of the Company or such surviving or acquiring entity outstanding
immediately after such merger or consolidation; (b) any sale of all or
substantially all of the assets of the Company; (c) the complete liquidation of
the Company; or (d) the acquisition of “beneficial ownership” (as defined in
Rule 13d-3 under the Exchange Act) of securities of the Company representing 50%
or more of the combined voting power of the Company’s then outstanding
securities (other than through a merger or consolidation or an acquisition of
securities directly from the Company) by any “person”, as such term is used in
Sections 13(d) and 14(d) of the Exchange Act other than the Company, Sepracor
Inc. (or its successor), any trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company; or (e) individuals who,
on the date on which the Plan was adopted by the Board of Directors, constituted
the Board of Directors of the Company, together with any new director whose
election by the Board of Directors or  nomination for election by the Company’s
stockholders was approved by a vote of at least a majority of the directors then
still in office who were directors on the date on which the Plan was adopted by
the Board of Directors or whose election or nomination was previously so
approved, cease for any reason to constitute at least a majority of the Board of
Directors.

 

(2)           ACCELERATION UPON AN ACQUISITION EVENT. EXCEPT TO THE EXTENT
OTHERWISE PROVIDED IN THE INSTRUMENT EVIDENCING THE AWARD OR IN ANY OTHER
AGREEMENT BETWEEN THE PARTICIPANT AND THE COMPANY, UPON THE OCCURRENCE OF AN
ACQUISITION EVENT OR WITH RESPECT TO OPTIONS OR ANY OTHER SIMILAR AWARDS ONLY,
UPON THE EXECUTION BY THE COMPANY OF ANY AGREEMENT WITH RESPECT TO AN
ACQUISITION EVENT, (I) THE BOARD SHALL PROVIDE A WRITTEN NOTICE TO THE
PARTICIPANTS THAT ARE DIRECTORS OR EMPLOYEES OF THE COMPANY THAT ALL OPTIONS
THEN OUTSTANDING SHALL BECOME IMMEDIATELY EXERCISABLE IN FULL AS OF A SPECIFIED
DATE (THE “ACCELERATION DATE”) PRIOR TO THE ACQUISITION EVENT AND WILL TERMINATE
IMMEDIATELY PRIOR TO THE CONSUMMATION OF SUCH ACQUISITION EVENT, EXCEPT TO THE
EXTENT EXERCISED BY THE PARTICIPANTS BETWEEN THE ACCELERATION DATE AND THE
CONSUMMATION OF SUCH ACQUISITION EVENT; (II) ALL RESTRICTED STOCK AWARDS THEN
OUTSTANDING AND HELD BY DIRECTORS OR EMPLOYEES OF THE COMPANY SHALL BECOME
IMMEDIATELY FREE OF ALL RESTRICTIONS; (III) ALL OTHER STOCK-BASED AWARDS THAT
ARE HELD BY DIRECTORS OR EMPLOYEES OF THE COMPANY SHALL BECOME IMMEDIATELY
EXERCISABLE, REALIZABLE OR VESTED IN FULL, OR SHALL BE IMMEDIATELY FREE OF ALL
RESTRICTIONS OR CONDITIONS, AS THE CASE MAY BE.

 

11.           GENERAL PROVISIONS APPLICABLE TO AWARDS

 

(A)           TRANSFERABILITY OF AWARDS.  AWARDS SHALL NOT BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED OR OTHERWISE ENCUMBERED BY THE PERSON TO WHOM THEY ARE
GRANTED, EITHER VOLUNTARILY OR BY OPERATION OF LAW, EXCEPT BY WILL OR THE LAWS
OF DESCENT AND DISTRIBUTION OR, OTHER THAN IN THE

 

9

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CASE OF AN INCENTIVE STOCK OPTION, PURSUANT TO A QUALIFIED DOMESTIC RELATIONS
ORDER, AND, DURING THE LIFE OF THE PARTICIPANT, SHALL BE EXERCISABLE ONLY BY THE
PARTICIPANT; PROVIDED, HOWEVER, THAT THE BOARD MAY PERMIT OR PROVIDE IN AN AWARD
FOR THE GRATUITOUS TRANSFER OF THE AWARD BY THE PARTICIPANT TO OR FOR THE
BENEFIT OF ANY IMMEDIATE FAMILY MEMBER, FAMILY TRUST OR OTHER ENTITY ESTABLISHED
FOR THE BENEFIT OF THE PARTICIPANT AND/OR AN IMMEDIATE FAMILY MEMBER THEREOF IF,
WITH RESPECT TO SUCH PROPOSED TRANSFEREE, THE COMPANY WOULD BE ELIGIBLE TO USE A
FORM S-8 FOR THE REGISTRATION OF THE SALE OF THE COMMON STOCK SUBJECT TO SUCH
AWARD UNDER THE SECURITIES ACT OF 1933, AS AMENDED; PROVIDED, FURTHER, THAT THE
COMPANY SHALL NOT BE REQUIRED TO RECOGNIZE ANY SUCH TRANSFER UNTIL SUCH TIME AS
THE PARTICIPANT AND SUCH PERMITTED TRANSFEREE SHALL, AS A CONDITION TO SUCH
TRANSFER, DELIVER TO THE COMPANY A WRITTEN INSTRUMENT IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY CONFIRMING THAT SUCH TRANSFEREE SHALL BE BOUND BY
ALL OF THE TERMS AND CONDITIONS OF THE AWARD.  REFERENCES TO A PARTICIPANT, TO
THE EXTENT RELEVANT IN THE CONTEXT, SHALL INCLUDE REFERENCES TO AUTHORIZED
TRANSFEREES.

 

(B)           DOCUMENTATION.  EACH AWARD SHALL BE EVIDENCED IN SUCH FORM
(WRITTEN, ELECTRONIC OR OTHERWISE) AS THE BOARD SHALL DETERMINE.  EACH AWARD MAY
CONTAIN TERMS AND CONDITIONS IN ADDITION TO THOSE SET FORTH IN THE PLAN.

 

(C)           BOARD DISCRETION.  EXCEPT AS OTHERWISE PROVIDED BY THE PLAN, EACH
AWARD MAY BE MADE ALONE OR IN ADDITION OR IN RELATION TO ANY OTHER AWARD.  THE
TERMS OF EACH AWARD NEED NOT BE IDENTICAL, AND THE BOARD NEED NOT TREAT
PARTICIPANTS UNIFORMLY.

 

(D)           TERMINATION OF STATUS.  THE BOARD SHALL DETERMINE THE EFFECT ON AN
AWARD OF THE DISABILITY, DEATH, TERMINATION OF EMPLOYMENT, AUTHORIZED LEAVE OF
ABSENCE OR OTHER CHANGE IN THE EMPLOYMENT OR OTHER STATUS OF A PARTICIPANT AND
THE EXTENT TO WHICH, AND THE PERIOD DURING WHICH, THE PARTICIPANT, OR THE
PARTICIPANT’S LEGAL REPRESENTATIVE, CONSERVATOR, GUARDIAN OR DESIGNATED
BENEFICIARY, MAY EXERCISE RIGHTS UNDER THE AWARD.

 

(E)           WITHHOLDING.  THE PARTICIPANT MUST SATISFY ALL APPLICABLE FEDERAL,
STATE, AND LOCAL OR OTHER INCOME AND EMPLOYMENT TAX WITHHOLDING OBLIGATIONS
BEFORE THE COMPANY WILL DELIVER STOCK CERTIFICATES OR OTHERWISE RECOGNIZE
OWNERSHIP OF COMMON STOCK UNDER AN AWARD.  THE COMPANY MAY DECIDE TO SATISFY THE
WITHHOLDING OBLIGATIONS THROUGH ADDITIONAL WITHHOLDING ON SALARY OR WAGES.  IF
THE COMPANY ELECTS NOT TO OR CANNOT WITHHOLD FROM OTHER COMPENSATION, THE
PARTICIPANT MUST PAY THE COMPANY THE FULL AMOUNT, IF ANY, REQUIRED FOR
WITHHOLDING OR HAVE A BROKER TENDER TO THE COMPANY CASH EQUAL TO THE WITHHOLDING
OBLIGATIONS.  PAYMENT OF WITHHOLDING OBLIGATIONS IS DUE BEFORE THE COMPANY WILL
ISSUE ANY SHARES ON EXERCISE OR RELEASE FROM FORFEITURE OF AN AWARD OR, IF THE
COMPANY SO REQUIRES, AT THE SAME TIME AS IS PAYMENT OF THE EXERCISE PRICE UNLESS
THE COMPANY DETERMINES OTHERWISE.  IF PROVIDED FOR IN AN AWARD OR APPROVED BY
THE BOARD IN ITS SOLE DISCRETION, A PARTICIPANT MAY SATISFY SUCH TAX OBLIGATIONS
IN WHOLE OR IN PART BY DELIVERY OF SHARES OF COMMON STOCK, INCLUDING SHARES
RETAINED FROM THE AWARD CREATING THE TAX OBLIGATION, VALUED AT THEIR FAIR MARKET
VALUE; PROVIDED, HOWEVER, EXCEPT AS OTHERWISE PROVIDED BY THE BOARD, THAT THE
TOTAL TAX WITHHOLDING WHERE STOCK IS BEING USED TO SATISFY SUCH TAX OBLIGATIONS
CANNOT EXCEED THE COMPANY’S MINIMUM STATUTORY WITHHOLDING OBLIGATIONS (BASED ON
MINIMUM STATUTORY WITHHOLDING RATES FOR FEDERAL AND STATE TAX PURPOSES,
INCLUDING PAYROLL TAXES, THAT ARE APPLICABLE TO SUCH SUPPLEMENTAL TAXABLE
INCOME).  SHARES SURRENDERED TO SATISFY TAX WITHHOLDING REQUIREMENTS CANNOT BE
SUBJECT TO ANY REPURCHASE, FORFEITURE, UNFULFILLED VESTING OR OTHER SIMILAR
REQUIREMENTS.

 

10

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(F)            AMENDMENT OF AWARD.  EXCEPT AS OTHERWISE PROVIDED IN
SECTION 5(G), THE BOARD MAY AMEND, MODIFY OR TERMINATE ANY OUTSTANDING AWARD,
INCLUDING BUT NOT LIMITED TO, SUBSTITUTING THEREFOR ANOTHER AWARD OF THE SAME OR
A DIFFERENT TYPE, CHANGING THE DATE OF EXERCISE OR REALIZATION, AND CONVERTING
AN INCENTIVE STOCK OPTION TO A NONSTATUTORY STOCK OPTION, PROVIDED EITHER
(I) THAT THE PARTICIPANT’S CONSENT TO SUCH ACTION SHALL BE REQUIRED UNLESS THE
BOARD DETERMINES THAT THE ACTION, TAKING INTO ACCOUNT ANY RELATED ACTION, WOULD
NOT MATERIALLY AND ADVERSELY AFFECT THE PARTICIPANT OR (II) THAT THE CHANGE IS
PERMITTED UNDER SECTION 10 HEREOF.

 

(G)           CONDITIONS ON DELIVERY OF STOCK.  THE COMPANY WILL NOT BE
OBLIGATED TO DELIVER ANY SHARES OF COMMON STOCK PURSUANT TO THE PLAN OR TO
REMOVE RESTRICTIONS FROM SHARES PREVIOUSLY DELIVERED UNDER THE PLAN UNTIL
(I) ALL CONDITIONS OF THE AWARD HAVE BEEN MET OR REMOVED TO THE SATISFACTION OF
THE COMPANY, (II) IN THE OPINION OF THE COMPANY’S COUNSEL, ALL OTHER LEGAL
MATTERS IN CONNECTION WITH THE ISSUANCE AND DELIVERY OF SUCH SHARES HAVE BEEN
SATISFIED, INCLUDING ANY APPLICABLE SECURITIES LAWS AND ANY APPLICABLE STOCK
EXCHANGE OR STOCK MARKET RULES AND REGULATIONS, AND (III) THE PARTICIPANT HAS
EXECUTED AND DELIVERED TO THE COMPANY SUCH REPRESENTATIONS OR AGREEMENTS AS THE
COMPANY MAY CONSIDER APPROPRIATE TO SATISFY THE REQUIREMENTS OF ANY APPLICABLE
LAWS, RULES OR REGULATIONS.

 

(H)           ACCELERATION.  THE BOARD MAY AT ANY TIME PROVIDE THAT ANY AWARD
SHALL BECOME IMMEDIATELY EXERCISABLE IN FULL OR IN PART, FREE OF SOME OR ALL
RESTRICTIONS OR CONDITIONS, OR OTHERWISE REALIZABLE IN FULL OR IN PART, AS THE
CASE MAY BE.

 

(I)            PERFORMANCE AWARDS.

 

(1)           GRANTS.  RESTRICTED STOCK AWARDS AND OTHER STOCK UNIT AWARDS UNDER
THE PLAN MAY BE MADE SUBJECT TO THE ACHIEVEMENT OF PERFORMANCE GOALS PURSUANT TO
THIS SECTION 11(I) (“PERFORMANCE AWARDS”), SUBJECT TO THE LIMIT IN
SECTION 4(B)(1) ON SHARES COVERED BY SUCH GRANTS.

 

(2)           COMMITTEE.  GRANTS OF PERFORMANCE AWARDS TO ANY COVERED EMPLOYEE
INTENDED TO QUALIFY AS “PERFORMANCE-BASED COMPENSATION” UNDER
SECTION 162(M) (“PERFORMANCE-BASED COMPENSATION”) SHALL BE MADE ONLY BY A
COMMITTEE (OR SUBCOMMITTEE OF A COMMITTEE) COMPRISED SOLELY OF TWO OR MORE
DIRECTORS ELIGIBLE TO SERVE ON A COMMITTEE MAKING AWARDS QUALIFYING AS
“PERFORMANCE-BASED COMPENSATION” UNDER SECTION 162(M).  IN THE CASE OF SUCH
AWARDS GRANTED TO COVERED EMPLOYEES, REFERENCES TO THE BOARD OR TO A COMMITTEE
SHALL BE DEEMED TO BE REFERENCES TO SUCH COMMITTEE OR SUBCOMMITTEE.  “COVERED
EMPLOYEE” SHALL MEAN ANY PERSON WHO IS A “COVERED EMPLOYEE” UNDER
SECTION 162(M)(3) OF THE CODE.

 

(3)           PERFORMANCE MEASURES.  FOR ANY AWARD THAT IS INTENDED TO QUALIFY
AS PERFORMANCE-BASED COMPENSATION, THE COMMITTEE SHALL SPECIFY THAT THE DEGREE
OF GRANTING, VESTING AND/OR PAYOUT SHALL BE SUBJECT TO THE ACHIEVEMENT OF ONE OR
MORE OBJECTIVE PERFORMANCE MEASURES ESTABLISHED BY THE COMMITTEE, WHICH SHALL BE
BASED ON THE RELATIVE OR ABSOLUTE ATTAINMENT OF SPECIFIED LEVELS OF ONE OR ANY
COMBINATION OF THE FOLLOWING:  (A) NET INCOME, (B) EARNINGS BEFORE OR AFTER
DISCONTINUED OPERATIONS, INTEREST, TAXES, DEPRECIATION AND/OR AMORTIZATION,
(C) OPERATING PROFIT BEFORE OR AFTER DISCONTINUED OPERATIONS AND/OR TAXES,
(D) SALES, (E) SALES GROWTH, (F) EARNINGS GROWTH, (G) CASH FLOW OR CASH
POSITION, (H) GROSS MARGINS, (I) STOCK PRICE, (J) MARKET SHARE, (K) RETURN ON
SALES, ASSETS, EQUITY OR INVESTMENT, (L) IMPROVEMENT OF FINANCIAL

 

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RATINGS, (M) ACHIEVEMENT OF BALANCE SHEET OR INCOME STATEMENT OBJECTIVES OR
(N) TOTAL SHAREHOLDER RETURN, AND MAY BE ABSOLUTE IN THEIR TERMS OR MEASURED
AGAINST OR IN RELATIONSHIP TO OTHER COMPANIES COMPARABLY, SIMILARLY OR OTHERWISE
SITUATED.  SUCH PERFORMANCE MEASURES MAY BE ADJUSTED TO EXCLUDE ANY ONE OR MORE
OF (I) EXTRAORDINARY ITEMS, (II) GAINS OR LOSSES ON THE DISPOSITIONS OF
DISCONTINUED OPERATIONS, (III) THE CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING
PRINCIPLES, (IV) THE WRITEDOWN OF ANY ASSET, AND (V) CHARGES FOR RESTRUCTURING
AND RATIONALIZATION PROGRAMS.  SUCH PERFORMANCE MEASURES:  (I) MAY VARY BY
PARTICIPANT AND MAY BE DIFFERENT FOR DIFFERENT AWARDS; (II) MAY BE PARTICULAR TO
A PARTICIPANT OR THE DEPARTMENT, BRANCH, LINE OF BUSINESS, SUBSIDIARY OR OTHER
UNIT IN WHICH THE PARTICIPANT WORKS AND MAY COVER SUCH PERIOD AS MAY BE
SPECIFIED BY THE COMMITTEE; AND (III) SHALL BE SET BY THE COMMITTEE WITHIN THE
TIME PERIOD PRESCRIBED BY, AND SHALL OTHERWISE COMPLY WITH THE REQUIREMENTS OF,
SECTION 162(M).  AWARDS THAT ARE NOT INTENDED TO QUALIFY AS PERFORMANCE-BASED
COMPENSATION MAY BE BASED ON THESE OR SUCH OTHER PERFORMANCE MEASURES AS THE
BOARD MAY DETERMINE.

 

(4)           ADJUSTMENTS.  NOTWITHSTANDING ANY PROVISION OF THE PLAN, WITH
RESPECT TO ANY PERFORMANCE AWARD THAT IS INTENDED TO QUALIFY AS
PERFORMANCE-BASED COMPENSATION, THE COMMITTEE MAY ADJUST DOWNWARDS, BUT NOT
UPWARDS, THE CASH OR NUMBER OF SHARES PAYABLE PURSUANT TO SUCH AWARD, AND THE
COMMITTEE MAY NOT WAIVE THE ACHIEVEMENT OF THE APPLICABLE PERFORMANCE MEASURES
EXCEPT IN THE CASE OF THE DEATH OR DISABILITY OF THE PARTICIPANT.

 

(5)           OTHER.  THE COMMITTEE SHALL HAVE THE POWER TO IMPOSE SUCH OTHER
RESTRICTIONS ON PERFORMANCE AWARDS AS IT MAY DEEM NECESSARY OR APPROPRIATE TO
ENSURE THAT SUCH AWARDS SATISFY ALL REQUIREMENTS FOR PERFORMANCE-BASED
COMPENSATION.

 

12.          MISCELLANEOUS

 

(A)            NO RIGHT TO EMPLOYMENT OR OTHER STATUS.  NO PERSON SHALL HAVE ANY
CLAIM OR RIGHT TO BE GRANTED AN AWARD, AND THE GRANT OF AN AWARD SHALL NOT BE
CONSTRUED AS GIVING A PARTICIPANT THE RIGHT TO CONTINUED EMPLOYMENT OR ANY OTHER
RELATIONSHIP WITH THE COMPANY.  THE COMPANY EXPRESSLY RESERVES THE RIGHT AT ANY
TIME TO DISMISS OR OTHERWISE TERMINATE ITS RELATIONSHIP WITH A PARTICIPANT FREE
FROM ANY LIABILITY OR CLAIM UNDER THE PLAN, EXCEPT AS EXPRESSLY PROVIDED IN THE
APPLICABLE AWARD.

 

(B)           NO RIGHTS AS STOCKHOLDER.  SUBJECT TO THE PROVISIONS OF THE
APPLICABLE AWARD, NO PARTICIPANT OR DESIGNATED BENEFICIARY SHALL HAVE ANY RIGHTS
AS A STOCKHOLDER WITH RESPECT TO ANY SHARES OF COMMON STOCK TO BE DISTRIBUTED
WITH RESPECT TO AN AWARD UNTIL BECOMING THE RECORD HOLDER OF SUCH SHARES.

 

(C)            EFFECTIVE DATE AND TERM OF PLAN.  THE PLAN SHALL BECOME EFFECTIVE
ON THE DATE THE PLAN IS APPROVED BY THE COMPANY’S STOCKHOLDERS (THE “EFFECTIVE
DATE”).  NO AWARDS SHALL BE GRANTED UNDER THE PLAN AFTER THE COMPLETION OF 10
YEARS FROM THE EFFECTIVE DATE, BUT AWARDS PREVIOUSLY GRANTED MAY EXTEND BEYOND
THAT DATE.

 

(D)           AMENDMENT OF PLAN.  THE BOARD MAY AMEND, SUSPEND OR TERMINATE THE
PLAN OR ANY PORTION THEREOF AT ANY TIME PROVIDED THAT (I) TO THE EXTENT REQUIRED
BY SECTION 162(M), NO AWARD GRANTED TO A PARTICIPANT THAT IS INTENDED TO COMPLY
WITH SECTION 162(M) AFTER THE DATE OF SUCH AMENDMENT SHALL BECOME EXERCISABLE,
REALIZABLE OR VESTED, AS APPLICABLE TO SUCH AWARD,

 

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UNLESS AND UNTIL SUCH AMENDMENT SHALL HAVE BEEN APPROVED BY THE COMPANY’S
STOCKHOLDERS IF REQUIRED BY SECTION 162(M) (INCLUDING THE VOTE REQUIRED UNDER
SECTION 162(M)); (II) NO AMENDMENT THAT WOULD REQUIRE STOCKHOLDER APPROVAL UNDER
THE RULES OF NASDAQ MAY BE MADE EFFECTIVE UNLESS AND UNTIL SUCH AMENDMENT SHALL
HAVE BEEN APPROVED BY THE COMPANY’S STOCKHOLDERS; AND (III) IF THE NASDAQ AMENDS
ITS CORPORATE GOVERNANCE RULES SO THAT SUCH RULES NO LONGER REQUIRE STOCKHOLDER
APPROVAL OF MATERIAL AMENDMENTS TO EQUITY COMPENSATION PLANS, THEN, FROM AND
AFTER THE EFFECTIVE DATE OF SUCH AMENDMENT TO THE NASDAQ RULES, NO AMENDMENT TO
THE PLAN (A) MATERIALLY INCREASING THE NUMBER OF SHARES AUTHORIZED UNDER THE
PLAN (OTHER THAN PURSUANT TO SECTION 10), (B) EXPANDING THE TYPES OF AWARDS THAT
MAY BE GRANTED UNDER THE PLAN, OR (C) MATERIALLY EXPANDING THE CLASS OF
PARTICIPANTS ELIGIBLE TO PARTICIPATE IN THE PLAN SHALL BE EFFECTIVE UNLESS
STOCKHOLDER APPROVAL IS OBTAINED.  IN ADDITION, IF AT ANY TIME THE APPROVAL OF
THE COMPANY’S STOCKHOLDERS IS REQUIRED AS TO ANY OTHER MODIFICATION OR AMENDMENT
UNDER SECTION 422 OF THE CODE OR ANY SUCCESSOR PROVISION WITH RESPECT TO
INCENTIVE STOCK OPTIONS, THE BOARD MAY NOT EFFECT SUCH MODIFICATION OR AMENDMENT
WITHOUT SUCH APPROVAL.  NO AWARD SHALL BE MADE THAT IS CONDITIONED UPON
STOCKHOLDER APPROVAL OF ANY AMENDMENT TO THE PLAN.

 

(E)           PROVISIONS FOR FOREIGN PARTICIPANTS.  THE BOARD MAY MODIFY AWARDS
OR OPTIONS GRANTED TO PARTICIPANTS WHO ARE FOREIGN NATIONALS OR EMPLOYED OUTSIDE
THE UNITED STATES OR ESTABLISH SUBPLANS OR PROCEDURES UNDER THE PLAN TO
RECOGNIZE DIFFERENCES IN LAWS, RULES, REGULATIONS OR CUSTOMS OF SUCH FOREIGN
JURISDICTIONS WITH RESPECT TO TAX, SECURITIES, CURRENCY, EMPLOYEE BENEFIT OR
OTHER MATTERS.

 

(F)            COMPLIANCE WITH CODE SECTION 409A.  NO AWARD SHALL PROVIDE FOR
DEFERRAL OF COMPENSATION THAT DOES NOT COMPLY WITH SECTION 409A OF THE CODE,
UNLESS THE BOARD, AT THE TIME OF GRANT, SPECIFICALLY PROVIDES THAT THE AWARD IS
NOT INTENDED TO COMPLY WITH SECTION 409A OF THE CODE.  THE COMPANY SHALL HAVE NO
LIABILITY TO A PARTICIPANT, OR ANY OTHER PARTY, IF AN AWARD THAT IS INTENDED TO
BE EXEMPT FROM, OR COMPLIANT WITH, SECTION 409A IS NOT SO EXEMPT OR COMPLIANT OR
FOR ANY ACTION TAKEN BY THE BOARD.

 

(G)           GOVERNING LAW.  THE PROVISIONS OF THE PLAN AND ALL AWARDS MADE
HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH
STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER
THAN SUCH STATE.

 

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BIOSPHERE MEDICAL, INC.

 

AMENDMENT NO. 1 TO

2006 STOCK INCENTIVE PLAN

 

Pursuant to Section 6(e) of the 2006 Stock Incentive Plan (the “Plan”) of
BioSphere Medical, Inc., a Delaware corporation (the “Company”), the Plan be,
and hereby is, amended as set forth below.  Capitalized terms used and not
defined herein shall have the meanings ascribed to them in the Plan.

 

1.             Section 6(a) of the Plan is hereby deleted in its entirety and
the following is substituted in its place:

 

“(a)  Initial Grant.  Upon commencement of service on the Board by any
individual who is not then an employee of the Company or any subsidiary of the
Company, the Company shall grant to such person a Nonstatutory Stock Option to
purchase 15,000 shares of Common Stock (subject to adjustment under
Section 10).”

 

2.             Section 6(c) of the Plan is hereby deleted in its entirety and
the following is substituted in its place:

 

“(c)  Terms of Director Options.  Options granted under this Section 6 shall:
(i) have an exercise price equal to the closing price (for the primary trading
session) of the Common Stock on The Nasdaq Stock Market (“NASDAQ”) or the
national securities exchange on which the Common Stock is then traded on the
date of grant (and if the Common Stock is not then traded on NASDAQ or a
national securities exchange, the Fair Market Value on the date the Option is
granted), (ii) with respect to Options granted under Section 6(a), vest in five
equal annual installments beginning on the first anniversary of the date of
grant, (iii) with respect to Options granted under Section 6(b), vest in full on
the date of grant, (iii) expire on the earlier of 10 years from the date of
grant or three months following cessation of services on the Board, and
(iv) contain such other terms and conditions as the Board shall determine.”

 

3.             This amendment shall be effective as of the date approved by the
Board of Directors of the Company.

 

 

Approved by the Board of Directors on August 3, 2006

 

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AMENDMENT NO. 2

 

TO

 

BIOSPHERE MEDICAL, INC.

 

2006 STOCK INCENTIVE PLAN

 

This Amendment No. 2 (the “Amendment”) is made to the 2006 Stock Incentive Plan
(the “Plan”) of BioSphere Medical, Inc., a Delaware corporation (the “Company).

 

Section 4(a) of the Plan is hereby deleted in its entirety and the following is
substituted in its place:

 

“(a)  Number of Shares.   Subject to adjustment under Section 10, Awards may be
made under the Plan for up to 2,500,000 shares of Common Stock. If any Award
expires or is terminated, surrendered or canceled without having been fully
exercised, is forfeited in whole or in part (including as the result of shares
of Common Stock subject to such Award being repurchased by the Company at the
original issuance price pursuant to a contractual repurchase right), is settled
in cash or otherwise results in any Common Stock not being issued, the unused
Common Stock covered by such Award shall again be available for the grant of
Awards under the Plan. However, in the case of Incentive Stock Options (as
hereinafter defined), the foregoing provisions shall be subject to any
limitations under the Code. Shares issued under the Plan may consist in whole or
in part of authorized but unissued shares or treasury shares.”

 

Except to the extent amended hereby, the Plan is in all respects hereby ratified
and confirmed and shall continue in full force and effect.

 

Approved by the Board of Directors, March 25, 2008

 

Approved by the Shareholders, May 14, 2008

 

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AMENDMENT NO. 3

 

TO

 

BIOSPHERE MEDICAL, INC.

 

2006 STOCK INCENTIVE PLAN

 

This Amendment No. 3 (the “Amendment”) is made to the 2006 Stock Incentive Plan
(the “Plan”) of BioSphere Medical, Inc., a Delaware corporation (the “Company).

 

Section 4(a) of the Plan is hereby deleted in its entirety and the following is
inserted in lieu thereof:

 

“(a)  Number of Shares.   Subject to adjustment under Section 10, Awards may be
made under the Plan for up to 3,000,000 shares of Common Stock. If any Award
expires or is terminated, surrendered or canceled without having been fully
exercised, is forfeited in whole or in part (including as the result of shares
of Common Stock subject to such Award being repurchased by the Company at the
original issuance price pursuant to a contractual repurchase right), is settled
in cash or otherwise results in any Common Stock not being issued, the unused
Common Stock covered by such Award shall again be available for the grant of
Awards under the Plan. However, in the case of Incentive Stock Options (as
hereinafter defined), the foregoing provisions shall be subject to any
limitations under the Code. Shares issued under the Plan may consist in whole or
in part of authorized but unissued shares or treasury shares.”

 

Except to the extent amended hereby, the Plan is in all respects hereby ratified
and confirmed and shall continue in full force and effect.

 

Approved by the Board of Directors, February 25, 2009

 

Approved by the Shareholders, May 14, 2009

 

16

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