EXHIBIT 10.8

 

BIOSTAGE, Inc.

 

2013 EQUITY INCENTIVE PLAN

 

1.    GENERAL PURPOSE OF THE PLAN; DEFINITIONS

 

The name of the plan is the Biostage, Inc. 2013 Equity Incentive Plan (the
“Plan”). The purpose of the Plan is to encourage and enable the officers,
employees, Non-Employee Directors, and other key persons (including consultants)
of Biostage, Inc. (the “Company”) and its Subsidiaries upon whose judgment,
initiative and efforts the Company largely depends for the successful conduct of
its business to acquire a proprietary interest in the Company. It is anticipated
that providing such persons with a direct stake in the Company’s welfare will
assure a closer identification of their interests with those of the Company,
thereby stimulating their efforts on the Company’s behalf and strengthening
their desire to remain with the Company. In addition, the issuance of Awards in
partial substitution of equity awards that cover shares of the common stock of
Harvard Bioscience, Inc. (“HBIO”) immediately prior to the spin-off of the
Company by HBIO are authorized to be issued under this Plan.

 

The following terms shall be defined as set forth below:

 

“Act” means the Securities Act of 1933, as amended, and the rules and
regulations thereunder.

 

“Adjustment Awards” is defined in Section 4.

 

“Administrator” is defined in Section 2(a).

 

“Award” or “Awards,” except where referring to a particular category of grant
under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Deferred Stock Awards, Restricted Stock
Awards, Unrestricted Stock Awards, Performance Share Awards and Dividend
Equivalent Rights.

 

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

 

“Cash-Based Award” means an Award entitling the recipient to receive a
cash-denominated payment.

 

“Change of Control” is defined in Section 19.

 

“Code” means the Internal Revenue Code of 1986, as amended, and any successor
Code, and related rules, regulations and interpretations.

 

“Committee” means the Compensation Committee of the Board or a similar committee
performing the functions of the Compensation Committee and that is comprised of
not less than two Independent Directors.

 

“Covered Employee” means an employee who is a “Covered Employee” within the
meaning of Section 162(m) of the Code.

 

“Deferred Stock Award” means Awards granted pursuant to Section 8.

 

"Distribution Date" means the date that HBIO distributes to holders of shares of
its outstanding common stock, through a spin-off, at least 50% of the
outstanding shares of the Company’s common stock (the “Spin-Off”).

 

“Dividend Equivalent Right” means Awards granted pursuant to Section 13.

 

“Effective Date” shall have the meaning specified in Section 21 hereof.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.

 

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“Fair Market Value” of the Stock on any given date means the fair market value
of the Stock determined in good faith by the Administrator; provided, however,
that if the Stock is traded on a national securities exchange the Fair Market
Value of the Stock will equal the closing sales price as reported on the
principal exchange or market for the Stock on such date, provided further that
with respect to the Separation Grants and the initial Non-Employee Director
grants described in Section 5(b)(i)(1), the Fair Market Value on the date of
grant for such grants shall mean the arithmetic average of the daily dollar
volume-weighted average price of the Stock (during the period beginning at
9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time) for each
of the ten (10) Trading Days immediately preceding the date of grant. If there
is no trading on such date, the determination shall be made by reference to the
last date preceding such date for which there was trading.

 

“HBIO Award” shall have the meaning specified in Section 4 hereof.

 

“Incentive Stock Option” means any Stock Option designated and qualified as an
“incentive stock option” as defined in Section 422 of the Code.

 

“Independent Director” means a member of the Board who is not also an employee
of the Company or any Subsidiary and who is independent.

 

“Non-Employee Director” means a member of the Board who is not also an employee
of the Company or any Subsidiary.

 

“Non-Qualified Stock Option” means any Stock Option that is not an Incentive
Stock Option.

 

“Option” or “Stock Option” means any option to purchase shares of Stock granted
pursuant to Section 5.

 

“Parent” means Harvard Bioscience, Inc., a Delaware corporation that, as of the
Effective Date is the parent of the Company. If at any time Harvard Bioscience,
Inc. ceases to hold stock representing more than 50% of the Voting Securities of
the Company, it shall no longer be treated as the Parent.

 

“Performance Share Award” means Awards granted pursuant to Section 11.

 

“Performance Cycle” means one or more periods of time, which may be of varying
and overlapping durations, as the Administrator may select, over which the
attainment of one or more performance criteria will be measured for the purpose
of determining a grantee’s right to and the payment of a Performance Share
Award, Restricted Stock Award or Deferred Stock Award. Each such period shall
not be less than three months.

 

“Restricted Stock Award” means Awards granted pursuant to Section 7.

 

“Section 409A” means Section 409A of the Code and the regulations and other
guidance promulgated thereunder.

 

“Separation Grants” means the initial Stock Options granted by the Company to
certain executives and employees of the Company in connection with the Spin-Off
which shall be granted on the eleventh Trading Day after the Distribution Date
(with the first Trading Day being the Trading Day immediately after the
Distribution Date).

 

“Spin-Off” shall have the meaning specified in the definition of Distribution
Date.

 

“Stock” means the Common Stock, par value $.01 per share, of the Company,
subject to adjustments pursuant to Section 3.

 

“Stock Appreciation Right” means any Award granted pursuant to Section 6.

 

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“Subsidiary” means any corporation or other entity (other than the Company) in
any unbroken chain of corporations or other entities beginning with the Company
if each of the corporations or entities (other than the last corporation or
entity in the unbroken chain) owns stock or other interests possessing 50
percent or more of the economic interest or the total combined voting power of
all classes of stock or other interests in one of the other corporations or
entities in the chain.

 

“Trading Day” means any day on which the Stock is traded on a national
securities exchange, or, if a national securities exchange is not the principal
trading market for the Stock, then on the principal securities exchange or
securities market on which the Stock is then traded, provided that “Trading Day”
shall not include any day on which the Stock is scheduled to trade on such
exchange or market for less than 4.5 hours or any day that the Stock is
suspended from trading during the final hour of trading on such exchange or
market (or if such exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the hour ending at
4:00:00 p.m., New York time).

 

“Unrestricted Stock Award” means any Award granted pursuant to Section 9.

 

2.    ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND
DETERMINE AWARDS

 

(a) Committee. The Plan shall be administered by either the Board or the
Committee (in either case, the “Administrator”).

 

(b) Powers of Administrator. The Administrator shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:

 

(i) to select the individuals to whom Awards may from time to time be granted;

 

(ii) to determine the time or times of grant, and the extent, if any, of
Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock Awards, Deferred Stock Awards, Unrestricted Stock Awards,
Performance Share Awards and Dividend Equivalent Rights, or any combination of
the foregoing, granted to any one or more grantees;

 

(iii) to determine the number of shares of Stock to be covered by any Award;

 

(iv) to determine and modify from time to time the terms and conditions,
including restrictions, not inconsistent with the terms of the Plan, of any
Award, which terms and conditions may differ among individual Awards and
grantees, and to approve the form of written instruments evidencing the Awards;

 

(v) to accelerate at any time the exercisability or vesting of all or any
portion of any Award; provided that, other than by reason of, or in connection
with, any death, disability, retirement, employment termination (without cause
or by the employee for good reason), Sale Event or Change of Control, the
Administrator shall not accelerate or waive any restriction period applicable to
any outstanding Restricted Stock Award, Deferred Stock Award or Performance
Share Award granted to an employee beyond the minimum restriction periods set
forth in Section 7(d), Section 8(a) and Section 11(a), respectively, or
accelerate the exercisability or vesting of unvested Stock Options which in the
aggregate, when combined with the aggregate number of shares of Stock issued
pursuant to Section 9, exceed ten percent (10%) of the maximum number of shares
of stock reserved and available for issuance under the Plan pursuant to
Section 3(a);

 

(vi) subject to the provisions of Section 5(a)(ii), to extend at any time the
period in which Stock Options may be exercised; and

 

(vii) at any time to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and proceedings as
it shall deem advisable; to interpret the terms and provisions of the Plan and
any Award (including related written instruments); to make all determinations it
deems advisable for the administration of the Plan; to decide all disputes
arising in connection with the Plan; and to otherwise supervise the
administration of the Plan.

 

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All decisions and interpretations of the Administrator shall be binding on all
persons, including the Company and Plan grantees.

 

(c) Delegation of Authority to Grant Awards. The Administrator, in its
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Administrator’s authority and duties with respect to the granting of
Awards at Fair Market Value, to individuals who are not subject to the reporting
and other provisions of Section 16 of the Exchange Act or “covered employees”
within the meaning of Section 162(m) of the Code. Any such delegation by the
Administrator shall include a limitation as to the amount of Awards that may be
granted during the period of the delegation and shall contain guidelines as to
the determination of the exercise price of any Stock Option or Stock
Appreciation Right, the conversion ratio or price of other Awards and the
vesting criteria. The Administrator may revoke or amend the terms of a
delegation at any time but such action shall not invalidate any prior actions of
the Administrator’s delegate or delegates that were consistent with the terms of
the Plan.

 

(d) Indemnification. Neither the Board nor the Committee, nor any member of
either or any delegatee thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection
with the Plan, and the members of the Board and the Committee (and any delegatee
thereof) shall be entitled in all cases to indemnification and reimbursement by
the Company in respect of any claim, loss, damage or expense (including, without
limitation, reasonable attorneys’ fees) arising or resulting therefrom to the
fullest extent permitted by law and/or under the Company’s organizational
documents or any directors’ and officers’ liability insurance coverage which may
be in effect from time to time and/or any indemnification agreement between such
individual and the Company.

 

3.    STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

 

(a)(1) Stock Issuable. Subject to adjustment as provided in Section 3(b), the
last paragraph of this Section 3(a) and any other applicable provisions hereof,
the maximum number of shares of Stock reserved and available for issuance under
the Plan shall be Two Million Ninety-Eight Thousand (2,098,000) shares of Stock,
which includes (i) the 150,000 shares of Stock originally reserved and available
for issuance under the Plan, plus (ii) 48,000 shares of Stock previously added
through March 31, 2016 in accordance with the evergreen provision of Section
3(a)(2) of the Plan, plus (iii) an additional 100,000 shares of Stock reserved
and available for issuance under the Plan in accordance with an amendment dated
as of May 26, 2016, plus (iv) an additional 200,000 shares of Stock reserved and
available for issuance under the Plan in accordance with an amendment dated as
of April 26, 2017, plus (v) an additional 1,600,000 shares of Stock reserved and
available for issuance under the Plan in accordance with an amendment dated as
of May 23, 2018. To the extent an Award (including any Adjustment Awards)
expires or terminates or is surrendered or forfeited (other than by exercise),
in whole or in part, the shares subject to such Award or portion thereof so
forfeited, expired, terminated or surrendered again will become available for
future grant or sale under the Plan. To the extent an Award (including any
Adjustment Awards) expires or terminates or is surrendered or forfeited (other
than by exercise), in whole or in part, the shares subject to such Award or
portion thereof so forfeited, expired, terminated or surrendered again will
become available for future grant or sale under the Plan. Should the exercise
price of an Option be paid with shares underlying such Option, then the
authorized reserve of shares under the Plan shall be reduced by the gross number
of shares for which that Option is exercised, and not by the net number of
shares issued under the exercised Option. If shares otherwise issuable under the
Plan are withheld by the Company in satisfaction of the withholding taxes
incurred in connection with an Award, then the number of shares available for
issuance under the Plan shall be reduced by the gross number of shares issuable
under the Award, calculated in each instance prior to any such share
withholding. In addition, upon exercise of Stock Appreciation Rights, the gross
number of shares exercised shall be deducted from the total number of shares
remaining available for issuance under the Plan. Shares of Stock may be issued
up to such maximum number pursuant to any type or types of Award; provided,
however, that Stock Options or Stock Appreciation Rights with respect to no more
than 1,000,000 shares of Stock may be granted to any one individual grantee
during any one calendar year period. The shares available for issuance under the
Plan may be authorized but unissued shares of Stock or shares of Stock
reacquired by the Company and held in its treasury.

 

(a)(2) Automatic Share Reserve Increase. [Reserved].

 

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(a)(3) Adjustment Awards Increase. [Reserved.]

 

(b) Changes in Stock. Subject to Section 3(c) hereof, if, as a result of any
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar change in the Company’s capital stock, the
outstanding shares of Stock are increased or decreased or are exchanged for a
different number or kind of shares or other securities of the Company, or
additional shares or new or different shares or other securities of the Company
or other non-cash assets are distributed with respect to such shares of Stock or
other securities, or, if, as a result of any merger or consolidation, sale of
all or substantially all of the assets of the Company, the outstanding shares of
Stock are converted into or exchanged for a different number or kind of
securities of the Company or any successor entity (or a parent or subsidiary
thereof), the Administrator shall make an appropriate or proportionate
adjustment in (i) the maximum number of shares reserved for issuance under the
Plan, including the maximum number of shares that may be issued in the form of
Unrestricted Stock Awards, Restricted Stock Awards or Performance Share Awards,
(ii) the number of Stock Options or Stock Appreciation Rights that can be
granted to any one individual grantee and the maximum number of shares that may
be granted under a Performance-based Award, (iii) the number and kind of shares
or other securities subject to any then outstanding Awards under the Plan,
(iv) the repurchase price per share subject to each outstanding Restricted Stock
Award, and (v) the price for each share subject to any then outstanding Stock
Options and Stock Appreciation Rights under the Plan, without changing the
aggregate exercise price (i.e., the exercise price multiplied by the number of
Stock Options and Stock Appreciation Rights) as to which such Stock Options and
Stock Appreciation Rights remain exercisable in a manner that will trigger tax
under Section 409A. The adjustment by the Administrator shall be final, binding
and conclusive. No fractional shares of Stock shall be issued under the Plan
resulting from any such adjustment, but the Administrator in its discretion may
make a cash payment in lieu of fractional shares.

 

The Administrator shall also adjust the number of shares subject to outstanding
Awards and the exercise price and the terms of outstanding Awards to take into
consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Administrator that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no
such adjustment shall be made in the case of an Incentive Stock Option, without
the consent of the grantee, if it would constitute a modification, extension or
renewal of the Option within the meaning of Section 424(h) of the Code.

 

(c) Mergers and Other Transactions. In the case of and subject to the
consummation of (i) the dissolution or liquidation of the Company, (ii) the sale
of all or substantially all of the assets of the Company on a consolidated basis
to an unrelated person or entity, (iii) a merger, reorganization or
consolidation in which the outstanding shares of Stock are converted into or
exchanged for a different kind of securities of the successor entity and the
holders of the Company’s outstanding voting power immediately prior to such
transaction do not own a majority of the outstanding voting power of the
successor entity immediately upon completion of such transaction, or (iv) the
sale of all of the Stock of the Company to an unrelated person or entity (in
each case, a “Sale Event”), all Options and Stock Appreciation Rights that are
not exercisable immediately prior to the effective time of the Sale Event shall
become fully exercisable as of the effective time of the Sale Event and all
other Awards with conditions and restrictions relating solely to the passage of
time and continued employment shall become fully vested and nonforfeitable as of
the effective time of the Sale Event, except as the Administrator may otherwise
specify with respect to particular Awards. Upon the effective time of the Sale
Event, the Plan and all outstanding Awards granted hereunder shall terminate,
unless provision is made in connection with the Sale Event in the sole
discretion of the parties thereto for the assumption or continuation of Awards
theretofore granted by the successor entity, or the substitution of such Awards
with new Awards of the successor entity or parent thereof, with appropriate
adjustment as to the number and kind of shares and, if appropriate, the per
share exercise prices, as such parties shall agree (after taking into account
any acceleration hereunder). In the event of such termination, each grantee
shall be permitted, within a specified period of time prior to the consummation
of the Sale Event as determined by the Administrator, to exercise all
outstanding Options and Stock Appreciation Rights held by such grantee,
including those that will become exercisable upon the consummation of the Sale
Event; provided, however, that the exercise of Options and Stock Appreciation
Rights not exercisable prior to the Sale Event shall be subject to the
consummation of the Sale Event.

 

Notwithstanding anything to the contrary in this Section 3(c), in the event of a
Sale Event pursuant to which holders of the Stock of the Company will receive
upon consummation thereof a cash payment for each share surrendered in the Sale
Event, the Company shall have the right, but not the obligation, to make or
provide for a cash payment to the grantees holding Options and Stock
Appreciation Rights, in exchange for the cancellation thereof, in an amount
equal to the difference between (A) the value as determined by the Administrator
of the consideration payable per share of Stock pursuant to the Sale Event (the
“Sale Price”) times the number of shares of Stock subject to outstanding Options
and Stock Appreciation Rights (to the extent then exercisable at prices not in
excess of the Sale Price) and (B) the aggregate exercise price of all such
outstanding Options and Stock Appreciation Rights.

 

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(d) Substitute Awards. The Administrator may grant Awards under the Plan in
substitution for stock and stock based awards held by employees, directors or
other key persons of another corporation in connection with the merger or
consolidation of the employing corporation with the Company or a Subsidiary or
the acquisition by the Company or a Subsidiary of property or stock of the
employing corporation. The Administrator may direct that the substitute awards
be granted on such terms and conditions as the Administrator considers
appropriate in the circumstances. Any substitute Awards granted under the Plan
shall not count against the share limitation set forth in Section 3(a).

 

4.    ELIGIBILITY

 

Grantees under the Plan will be such full or part-time officers and other
employees, Non-Employee Directors and key persons (including consultants and
prospective employees) of the Company and its Subsidiaries as are selected from
time to time by the Administrator in its sole discretion.

 

Additionally, the Company is authorized to issue Awards (“Adjustment Awards”)
under the Plan in connection with the equitable adjustment by HBIO of certain
stock options, deferred stock awards, restricted stock awards, performance share
awards and other equity-based awards previously granted by HBIO (collectively,
the “HBIO Awards”) to reflect the Company stock dividend on HBIO Awards.
Notwithstanding any other provision of the Plan to the contrary, the number of
shares subject to an Adjustment Award and other terms and conditions relating
thereto, including, but not limited to option exercise prices, shall be
equitable and determined by the Committee (a) in accordance with the provisions
and formulas for the equity adjustment of HBIO Awards that are set forth in the
Separate and Distribution Agreement entered into by and between the Company and
HBIO; and (b) in an amount that will not cause the aggregate number of shares of
Stock available for grant and issuance under the Plan (as set forth in Section
3(a)(3) hereof) to be exceeded.

 

Notwithstanding anything to the contrary contained herein or in any Award
(including any Adjustment Award), for purposes of exercisability, vesting and
the post-termination exercise periods applicable to the Adjustment Awards,
continued employment with, or service to, HBIO (or its subsidiaries) or the
Company (or its subsidiaries) is considered to be continued employment with, and
service to, the other, provided that the failure to exercise Incentive Stock
Options within the applicable deadline following any separation from service
from the Company shall cause such options to be treated thereafter as
Non-Qualified Stock Options.

 

5.    STOCK OPTIONS

 

Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.

 

Stock Options granted under the Plan may be either Incentive Stock Options or
Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a “subsidiary corporation”
within the meaning of Section 424(f) of the Code. To the extent that any Option
does not qualify as an Incentive Stock Option, it shall be deemed a
Non-Qualified Stock Option.

 

(a) Stock Options Granted to Employees and Key Persons. The Administrator in its
discretion may grant Stock Options to eligible employees and key persons of the
Company or any Subsidiary. Stock Options granted pursuant to this Section 5(a)
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Administrator shall deem desirable. If the Administrator so determines,
Stock Options may be granted in lieu of cash compensation at the optionee’s
election, subject to such terms and conditions as the Administrator may
establish.

 

(i) Exercise Price. The exercise price per share for the Stock covered by a
Stock Option granted pursuant to this Section 5(a) shall be determined by the
Administrator at the time of grant but shall not be less than 100 percent of the
Fair Market Value on the date of grant. If an employee owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than 10
percent of the combined voting power of all classes of stock of the Company or
any parent or subsidiary corporation and an Incentive Stock Option is granted to
such employee, the option price of such Incentive Stock Option shall be not less
than 110 percent of the Fair Market Value on the grant date.

 

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(ii) Option Term. The term of each Stock Option shall be fixed by the
Administrator, but no Stock Option shall be exercisable more than 10 years after
the date the Stock Option is granted. If an employee owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than 10
percent of the combined voting power of all classes of stock of the Company or
any parent or subsidiary corporation and an Incentive Stock Option is granted to
such employee, the term of such Stock Option shall be no more than five years
from the date of grant.

 

(iii) Exercisability; Rights of a Stockholder. Stock Options shall become
exercisable at such time or times, whether or not in installments, as shall be
determined by the Administrator at or after the grant date. Subject to
Section 2(b)(v), the Administrator may at any time accelerate the exercisability
of all or any portion of any Stock Option. An optionee shall have the rights of
a stockholder only as to shares acquired upon the exercise of a Stock Option and
not as to unexercised Stock Options.

 

(iv) Method of Exercise. Stock Options may be exercised in whole or in part, by
giving written notice of exercise to the Company, specifying the number of
shares to be purchased. Payment of the purchase price may be made by one or more
of the following methods to the extent provided in the Option Award agreement:

 

(1) In cash, by certified or bank check or other instrument acceptable to the
Administrator;

 

(2) Through the delivery (or attestation to the ownership) of shares of Stock
that have been purchased by the optionee on the open market or that have been
beneficially owned by the optionee for at least six months and are not then
subject to restrictions under any Company plan. Such surrendered shares shall be
valued at Fair Market Value on the exercise date; or

 

(3) By the optionee delivering to the Company a properly executed exercise
notice together with irrevocable instructions to a broker to promptly deliver to
the Company cash or a check payable and acceptable to the Company for the
purchase price; provided that in the event the optionee chooses to pay the
purchase price as so provided, the optionee and the broker shall comply with
such procedures and enter into such agreements of indemnity and other agreements
as the Administrator shall prescribe as a condition of such payment procedure.

 

Payment instruments will be received subject to collection. The transfer to the
optionee on the records of the Company or of the transfer agent of delivery of
certificates representing the shares of Stock to be purchased pursuant to the
exercise of a Stock Option will be contingent upon receipt from the optionee (or
a purchaser acting in his stead in accordance with the provisions of the Stock
Option) by the Company of the full purchase price for such shares and the
fulfillment of any other requirements contained in the Option Award agreement or
applicable provisions of laws (including the satisfaction of any withholding
taxes that the Company is obligated to withhold with respect to the optionee).
In the event an optionee chooses to pay the purchase price by previously-owned
shares of Stock through the attestation method, the number of shares of Stock
transferred to the optionee upon the exercise of the Stock Option shall be net
of the number of attested shares. In the event that the Company establishes, for
itself or using the services of a third party, an automated system for the
exercise of Stock Options, such as a system using an internet website or
interactive voice response, then the paperless exercise of Stock Options may be
permitted through the use of such an automated system.

 

(v) Annual Limit on Incentive Stock Options. To the extent required for
“incentive stock option” treatment under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the shares of Stock
with respect to which Incentive Stock Options granted under this Plan and any
other plan of the Company or its parent and subsidiary corporations become
exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000. To the extent that any Stock Option exceeds this limit, it
shall constitute a Non-Qualified Stock Option.

 

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(b) Stock Options Granted to Non-Employee Directors.

 

(i) Automatic and Other Grant of Options.

 

(1) [Reserved.].

 

(2) [Reserved.].

 

(3) The exercise price per share for the Stock covered by a Stock Option granted
under this Section 5(b) shall be equal to the Fair Market Value of the Stock on
the date the Stock Option is granted.

 

(4) The Administrator, in its discretion, may also grant additional
Non-Qualified Stock Options to Non-Employee Directors. Any such grant may vary
among individual Non-Employee Directors.

 

(ii) Exercise; Termination.

 

(1) Unless otherwise determined by the Administrator, an Option granted under
Section 5(b) shall vest and be exercisable as to all of the shares of Stock
covered thereby as of the first anniversary of the grant date. An Option issued
under this Section 5(b) shall not be exercisable after the expiration of ten
years from the date of grant.

 

(2) Options granted under this Section 5(b) may be exercised only by written
notice to the Company specifying the number of shares to be purchased. Payment
of the full purchase price of the shares to be purchased may be made by one or
more of the methods specified in Section 5(a)(iv). An optionee shall have the
rights of a stockholder only as to shares acquired upon the exercise of a Stock
Option and not as to unexercised Stock Options.

 

(c) Non-transferability of Options. No Stock Option shall be transferable by the
optionee otherwise than by will or by the laws of descent and distribution and
all Stock Options shall be exercisable, during the optionee’s lifetime, only by
the optionee, or by the optionee’s legal representative or guardian in the event
of the optionee’s incapacity. Notwithstanding the foregoing, the Administrator,
in its sole discretion, may provide in the Award agreement regarding a given
Option that the optionee may transfer his Non-Qualified Stock Options to members
of his immediate family, to trusts for the benefit of such family members, or to
partnerships in which such family members are the only partners; provided that
the transferee agrees in writing with the Company to be bound by all of the
terms and conditions of this Plan and the applicable Option.

 

6.    STOCK APPRECIATION RIGHTS.

 

(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an Award
entitling the recipient to receive shares of Stock having a value equal to the
excess of the Fair Market Value of the Stock on the date of exercise over the
exercise price Stock Appreciation Right, which price shall not be less than 100
percent of the Fair Market Value of the Stock on the date of grant multiplied by
the number of shares of Stock with respect to which the Stock Appreciation Right
shall have been exercised.

 

(b) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation Rights
may be granted by the Administrator independently of any Stock Option granted
pursuant to Section 5 of the Plan.

 

(c) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights
shall be subject to such terms and conditions as shall be determined from time
to time by the Administrator; provided that during the grantee’s lifetime all
Stock Appreciation Rights shall be exercisable only by the grantee or the
grantee’s legal representative.

 

(d) Stock Appreciation Rights Term. The term of each Stock Appreciation Right
shall be fixed by the Administrator, but no Stock Appreciation Right shall be
exercisable more than ten years after the date the Stock Appreciation Right is
granted.

 

 8 

 

 

7.    RESTRICTED STOCK AWARDS

 

(a) Nature of Restricted Stock Awards. A Restricted Stock Award is an Award
entitling the recipient to acquire, at such purchase price as determined by the
Administrator, shares of Stock subject to such restrictions and conditions as
the Administrator may determine at the time of grant (“Restricted Stock”).
Conditions may be based on continuing employment (or other service relationship)
and/or achievement of pre-established performance goals and objectives. The
grant of a Restricted Stock Award is contingent on the grantee executing the
Restricted Stock Award agreement. The terms and conditions of each such
agreement shall be determined by the Administrator, and such terms and
conditions may differ among individual Awards and grantees.

 

(b) Rights as a Stockholder. Upon execution of a written instrument setting
forth the Restricted Stock Award and payment of any applicable purchase price, a
grantee shall have the rights of a stockholder with respect to the voting of the
Restricted Stock, subject to such conditions contained in the written instrument
evidencing the Restricted Stock Award. Unless the Administrator shall otherwise
determine, (i) uncertificated Restricted Stock shall be accompanied by a
notation on the records of the Company or the transfer agent to the effect that
they are subject to forfeiture until such Restricted Stock are vested as
provided in Section 7(d) below, and (ii) certificated Restricted Stock shall
remain in the possession of the Company until such Restricted Stock is vested as
provided in Section 7(d) below, and the grantee shall be required, as a
condition of the grant, to deliver to the Company a stock power endorsed in
blank.

 

(c) Restrictions. Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the Restricted Stock Award agreement. If a grantee’s employment (or
other service relationship) with the Company and its Subsidiaries terminates for
any reason, any Restricted Stock that has not vested at the time of termination
shall automatically and without any requirement of notice to such grantee from
or other action by or on behalf of, the Company be deemed to have been
reacquired by the Company at its original purchase price (if any) from such
grantee or such grantee’s legal representative simultaneously with such
termination of employment (or other service relationship), and thereafter shall
cease to represent any ownership of the Company by the grantee or rights of the
grantee as a stockholder. Following such deemed reacquisition of unvested
Restricted Stock that are represented by physical certificates, a grantee shall
surrender such certificates to the Company upon request without consideration.

 

(d) Vesting of Restricted Stock. The Administrator at the time of grant shall
specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the
Restricted Stock and the Company’s right of repurchase or forfeiture shall
lapse. Notwithstanding the foregoing, in the event that any such Restricted
Stock granted to an employee shall have a performance-based goal, the
restriction period with respect to such shares shall not be less than one year,
and in the event any such Restricted Stock granted to an employee shall have a
time-based restriction, the restriction period with respect to such shares shall
not be less than three years; provided, however, that Restricted Stock with a
time-based restriction may become vested incrementally over such three-year
period. The minimum vesting requirements set forth in the foregoing sentence
will not apply to Restricted Stock granted to a Non-Employee Director.
Subsequent to such date or dates and/or the attainment of such pre-established
performance goals, objectives and other conditions, the shares on which all
restrictions have lapsed shall no longer be Restricted Stock and shall be deemed
“vested.” Except as may otherwise be provided by the Administrator either in the
Award agreement or, subject to Section 17 below, in writing after the Award
agreement is issued, a grantee’s rights in any shares of Restricted Stock that
have not vested shall automatically terminate upon the grantee’s termination of
employment (or other service relationship) with the Company and its Subsidiaries
and such shares shall be subject to the Company’s right of repurchase as
provided in Section 7(c) above.

 

(e) Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock Award
agreement may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Restricted Stock.

 

 9 

 

 

8.    DEFERRED STOCK AWARDS

 

(a) Nature of Deferred Stock Awards. A Deferred Stock Award is an Award of
phantom stock units to a grantee, subject to restrictions and conditions as the
Administrator may determine at the time of grant. Conditions may be based on
continuing employment (or other service relationship) and/or achievement of
pre-established performance goals and objectives. The grant of a Deferred Stock
Award is contingent on the grantee executing the Deferred Stock Award agreement.
The terms and conditions of each such agreement shall be determined by the
Administrator, and such terms and conditions may differ among individual Awards
and grantees. Notwithstanding the foregoing, in the event that any such Deferred
Stock Award granted to an employee shall have a performance-based goal, the
restriction period with respect to such award shall not be less than one year,
and in the event any such Deferred Stock Award granted to an employee shall have
a time-based restriction, the restriction period with respect to such award
shall not be less than three years; provided, however, that any such Deferred
Stock Award with a time-based restriction may become vested incrementally over
such three-year period. The minimum vesting requirements set forth in the
foregoing sentence will not apply to Deferred Stock Awards granted to
Non-Employee Directors. At the end of the deferral period, the Deferred Stock
Award, to the extent vested, shall be paid to the grantee in the form of shares
of Stock. To the extent that a Deferred Stock Award is subject to Section 409A,
it may contain such additional terms and conditions as the Administrator shall
determine in its sole discretion in order for such Award to comply with the
requirements of Section 409A.

 

(b) Election to Receive Deferred Stock Awards in Lieu of Compensation. The
Administrator may, in its sole discretion, permit a grantee to elect to receive
a portion of the cash compensation or Restricted Stock Award otherwise due to
such grantee in the form of a Deferred Stock Award. Any such election shall be
made in writing and shall be delivered to the Company no later than the date
specified by the Administrator and in accordance with Section 409A and such
other rules and procedures established by the Administrator. Any such future
cash compensation that the grantee elects to defer shall be converted to a fixed
number of phantom stock units based on the Fair Market Value of Stock on the
date the compensation would otherwise have been paid to the grantee if such
payment had not been deferred as provided herein. The Administrator shall have
the sole right to determine whether and under what circumstances to permit such
elections and to impose such limitations and other terms and conditions thereon
as the Administrator deems appropriate.

 

(c) Rights as a Stockholder. During the deferral period, a grantee shall have no
rights as a stockholder; provided, however, that the grantee may be credited
with Dividend Equivalent Rights with respect to the phantom stock units
underlying his Deferred Stock Award, subject to such terms and conditions as the
Administrator may determine.

 

(d) Restrictions. A Deferred Stock Award may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of during the deferral period.

 

(e) Termination. Except as may otherwise be provided by the Administrator either
in the Award agreement or, subject to Section 17 below, in writing after the
Award agreement is issued, a grantee’s right in all Deferred Stock Awards that
have not vested shall automatically terminate upon the grantee’s termination of
employment (or cessation of service relationship) with the Company and its
Subsidiaries for any reason.

 

9.    UNRESTRICTED STOCK AWARDS

 

The Administrator may, in its sole discretion, grant (or sell at par value or
such higher purchase price determined by the Administrator) an Unrestricted
Stock Award to any grantee pursuant to which such grantee may receive shares of
Stock free of any restrictions (“Unrestricted Stock”) under the Plan.
Unrestricted Stock Awards may be granted in respect of past services or other
valid consideration, or in lieu of cash compensation due to such grantee. The
aggregate number of shares of Stock issuable pursuant to this Section 9, when
combined with the number of shares of underlying unvested Stock Options
accelerated pursuant to Section 2(b)(v) other than by reason of, or in
connection with, any death, disability, retirement, employment termination
(without cause or by the employee for good reason), Sale Event or Change of
Control, is limited to ten percent (10%) of the maximum number of shares of
Stock reserved and available for issuance under the Plan pursuant to
Section 3(a).

 

 10 

 

 

10.    CASH-BASED AWARDS

 

The Administrator may, in its sole discretion, grant Cash-Based Awards to any
grantee in such number or amount and upon such terms, and subject to such
conditions, as the Administrator shall determine at the time of grant. The
Administrator shall determine the maximum duration of the Cash-Based Award, the
amount of cash to which the Cash-Based Award pertains, the conditions upon which
the Cash-Based Award shall become vested or payable, and such other provisions
as the Administrator shall determine. Each Cash-Based Award shall specify a
cash-denominated payment amount, formula or payment ranges as determined by the
Administrator. Payment, if any, with respect to a Cash-Based Award shall be made
in accordance with the terms of the Award and, if such Award is deemed deferred
compensation, Section 15 hereof, and may be made in cash or in shares of Stock,
as the Administrator determines.

 

11.    PERFORMANCE SHARE AWARDS

 

(a) Nature of Performance Share Awards. A Performance Share Award is an Award
entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Administrator may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. The Administrator in its sole discretion shall determine whether and to
whom Performance Share Awards shall be made, the performance goals, the periods
during which performance is to be measured, and all other limitations and
conditions. Notwithstanding the foregoing, any Performance Share Award granted
to an employee shall have a restriction period of not less than one year. The
minimum vesting requirements set forth in the foregoing sentence will not apply
to Performance Share Awards granted to Non-Employee Directors.

 

(b) Rights as a Stockholder. A grantee receiving a Performance Share Award shall
have the rights of a stockholder only as to shares actually received by the
grantee under the Plan and not with respect to shares subject to the Award but
not actually received by the grantee. A grantee shall be entitled to receive a
stock certificate evidencing the acquisition of shares of Stock under a
Performance Share Award only upon satisfaction of all conditions specified in
the Performance Share Award agreement (or in a performance plan adopted by the
Administrator).

 

(c) Termination. Except as may otherwise be provided by the Administrator either
in the Award agreement or, subject to Section 17 below, in writing after the
Award agreement is issued, a grantee’s rights in all Performance Share Awards
shall automatically terminate upon the grantee’s termination of employment (or
cessation of service relationship) with the Company and its Subsidiaries for any
reason.

 

12.    PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES

 

Notwithstanding anything to the contrary contained herein, if any Restricted
Stock Award, Deferred Stock Award, Cash-Based Award or Performance Share Award
granted to a Covered Employee is intended to qualify as “Performance-based
Compensation” under Section 162(m) of the Code and the regulations promulgated
thereunder (a “Performance-Based Award”), such Award shall comply with the
provisions set forth below:

 

(a) Performance Criteria. The Administrator shall define in an objective fashion
the manner of calculating the Performance Criteria it selects to use for any
Performance Cycle. Depending on the Performance Criteria used to establish such
Performance Goals, the Performance Goals may be expressed in terms of overall
Company performance or the performance of a division, business unit, or an
individual. The Administrator, in its discretion, may adjust or modify the
calculation of Performance Goals for such Performance Cycle in order to prevent
dilution or enlargement of the rights of an individual (x) in the event of, or
in anticipation of, any unusual or extraordinary corporate item, transaction,
event or development, (y) in recognition of, or in anticipation of, any either
unusual or nonrecurring events affecting the Company, or the financial
statements of the Company, or (z) in response to, or in anticipation of, changes
in applicable laws, regulations, accounting principles, or business conditions
provided however, that the Administrator may not exercise such discretion in a
manner that would increase the Performance-Based Award granted to a Covered
Employee. The performance criteria used in performance goals governing
Performance-based Awards granted to Covered Employees may include any or all of
the following: (i) return on equity, assets, capital or investment; (ii) pre-tax
or after-tax profit levels; (iii) cash flow, funds from operations or similar
measure; (iv) total shareholder return; (v) changes in the market price of the
Stock; (vi) revenues, sales or market share; (vii) net income (loss) or earnings
per share; (viii) expense margins or operating efficiency (including budgeted
spending limits) or (ix) project development milestones, any of which may be
measured either in absolute terms or as compared to any incremental increase or
as compared to results of a peer group and, for financial measures, may be based
on numbers calculated in accordance with U.S. generally accepted accounting
principles or on an as adjusted basis.

 

 11 

 

 

(b) Grant of Performance-based Awards. With respect to each Performance-based
Award granted to a Covered Employee, the Committee shall select, within the
first 90 days of a Performance Cycle (or, if shorter, within the maximum period
allowed under Section 162(m) of the Code) the performance criteria for such
grant, and the achievement targets with respect to each performance criterion
(including a threshold level of performance below which no amount will become
payable with respect to such Award). Each Performance-based Award will specify
the amount payable, or the formula for determining the amount payable, upon
achievement of the various applicable performance targets. The performance
criteria established by the Committee may be (but need not be) different for
each Performance Cycle and different goals may be applicable to
Performance-based Awards to different Covered Employees.

 

(c) Payment of Performance-based Awards. Following the completion of a
Performance Cycle, the Committee shall meet to review and certify in writing
whether, and to what extent, the performance criteria for the Performance Cycle
have been achieved and, if so, to also calculate and certify in writing the
amount of the Performance-based Awards earned for the Performance Cycle. The
Committee shall then determine the actual size of each Covered Employee’s
Performance-based Award, and, in doing so, may reduce or eliminate the amount of
the Performance-based Award for a Covered Employee if, in its sole judgment,
such reduction or elimination is appropriate.

 

(d) Maximum Award Payable. The maximum Performance-based Award payable to any
one Covered Employee under the Plan for a Performance Cycle is 1,000,000 Shares
(subject to adjustment as provided in Section 3(b) hereof) or $2,000,000 in the
case of a Performance-based Award that is a Cash-Based Award; provided, however,
that such limits shall not otherwise limit the Administrator’s ability to grant
awards not intended to qualify as Performance-based Awards.

 

13.    DIVIDEND EQUIVALENT RIGHTS

 

(a) Dividend Equivalent Rights. A Dividend Equivalent Right is an Award
entitling the grantee to receive credits based on cash dividends that would have
been paid on the shares of Stock specified in the Dividend Equivalent Right (or
other award to which it relates) if such shares had been issued to and held by
the grantee. A Dividend Equivalent Right may be granted hereunder to any grantee
only as a component of Unrestricted Stock Awards, Restricted Stock Awards,
Deferred Stock Awards or Performance Share Awards. The terms and conditions of
Dividend Equivalent Rights shall be specified in the Award agreement. Dividend
equivalents credited to the holder of a Dividend Equivalent Right may be paid
currently or may be deemed to be reinvested in additional shares of Stock, which
may thereafter accrue additional equivalents. Any such reinvestment shall be at
Fair Market Value on the date of reinvestment or such other price as may then
apply under a dividend reinvestment plan sponsored by the Company, if any.
Dividend Equivalent Rights may be settled in cash or shares of Stock or a
combination thereof, in a single installment or installments. A Dividend
Equivalent Right granted as a component of another Award may provide that such
Dividend Equivalent Right shall be settled upon exercise, settlement, or payment
of, or lapse of restrictions on, such other award, and that such Dividend
Equivalent Right shall expire or be forfeited or annulled under the same
conditions as such other award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from
such other award.

 

(b) Interest Equivalents. Any Award under this Plan that is settled in whole or
in part in cash on a deferred basis may provide in the grant for interest
equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.

 

(c) Termination. Except as may otherwise be provided by the Administrator either
in the Award agreement or, subject to Section 17 below, in writing after the
Award agreement is issued, a grantee’s rights in all Dividend Equivalent Rights
or interest equivalents shall automatically terminate upon the grantee’s
termination of employment (or cessation of service relationship) with the
Company and its Subsidiaries for any reason.

 

 12 

 

 

14.    TAX WITHHOLDING

 

(a) Payment by Grantee. Each grantee shall, no later than the date as of which
the value of an Award or of any Stock or other amounts received thereunder first
becomes includable in the gross income of the grantee for Federal income tax
purposes, pay to the Company, or make arrangements satisfactory to the
Administrator regarding payment of, any Federal, state, or local taxes of any
kind required by law to be withheld by the Company with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
grantee. The Company’s obligation to deliver evidence of book entry (or stock
certificates) to any grantee is subject to and conditioned on tax withholding
obligations being satisfied by the grantee.

 

(b) Payment in Stock. Subject to approval by the Administrator, a grantee may
elect to have the Company’s minimum required tax withholding obligation
satisfied, in whole or in part, by (i) authorizing the Company to withhold from
shares of Stock to be issued pursuant to any Award a number of shares with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the withholding amount due, or (ii) transferring to the Company
shares of Stock owned by the grantee with an aggregate Fair Market Value (as of
the date the withholding is effected) that would satisfy the withholding amount
due.

 

15.    SECTION 409A AWARDS.

 

To the extent that any Award is determined to constitute “nonqualified deferred
compensation” within the meaning of Section 409A (a “409A Award”), the Award
shall be subject to such additional rules and requirements as specified by the
Administrator from time to time in order to comply with Section 409A. In this
regard, if any amount under a 409A Award is payable upon a “separation from
service” (within the meaning of Section 409A) to a grantee who is then
considered a “specified employee” (within the meaning of Section 409A), then no
such payment shall be made prior to the date that is the earlier of (i) six
months and one day after the grantee’s separation from service, or (ii) the
grantee’s death, but only to the extent such delay is necessary to prevent such
payment from being subject to interest, penalties and/or additional tax imposed
pursuant to Section 409A. Further, the settlement of any such Award may not be
accelerated except to the extent permitted by Section 409A.

 

16.    TRANSFER, LEAVE OF ABSENCE, ETC.

 

For purposes of the Plan, the following events shall not be deemed a termination
of employment:

 

(a) a transfer to the employment of the Company from a Subsidiary or from the
Company to a Subsidiary, or from one Subsidiary to another; or

 

(b) an approved leave of absence for military service or sickness, or for any
other purpose approved by the Company, if the employee’s right to re-employment
is guaranteed either by a statute or by contract or under the policy pursuant to
which the leave of absence was granted or if the Administrator otherwise so
provides in writing.

 

17.    AMENDMENTS AND TERMINATION

 

The Board may, at any time, amend or discontinue the Plan and the Administrator
may, at any time, amend or cancel any outstanding Award for the purpose of
satisfying changes in law or for any other lawful purpose, but no such action
shall adversely affect rights under any outstanding Award without the holder’s
consent. Except as provided in Section 3(b) or 3(c), in no event may the
Administrator exercise its discretion to reduce the exercise price of
outstanding Stock Options or Stock Appreciation Rights or effect repricing
through cancellation and regrants or by exchanging a Stock Option or Stock
Appreciation Right for any other Award, without stockholder approval. If and to
the extent determined by the Administrator to be required by the Code to ensure
that Incentive Stock Options granted under the Plan are qualified under
Section 422 of the Code or to ensure that compensation earned under Awards
qualifies as performance-based compensation under Section 162(m) of the Code, if
and to the extent intended to so qualify, and to the extent required under the
applicable rules of The NASDAQ Stock Market, or such other securities exchange
or market system on which the Stock is then principally listed, Plan amendments
shall be subject to approval by the Company stockholders entitled to vote at a
meeting of stockholders. Nothing in this Section 17 shall limit the
Administrator’s authority to take any action permitted pursuant to Section 3(c).

 

 13 

 

 

18.    STATUS OF PLAN

 

With respect to the portion of any Award that has not been exercised and any
payments in cash, Stock or other consideration not received by a grantee, a
grantee shall have no rights greater than those of a general creditor of the
Company unless the Administrator shall otherwise expressly determine in
connection with any Award or Awards. In its sole discretion, the Administrator
may authorize the creation of trusts or other arrangements to meet the Company’s
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the foregoing sentence.

 

19.    CHANGE OF CONTROL PROVISIONS

 

Upon the occurrence of a Change of Control as defined in this Section 19:

 

(a) Except as otherwise provided in the applicable Award agreement, each
outstanding Stock Option and Stock Appreciation Right shall automatically become
fully exercisable.

 

(b) Except as otherwise provided in the applicable Award Agreement, conditions
and restrictions on each outstanding Restricted Stock Award, Deferred Stock
Award and Performance Share Award which relate solely to the passage of time and
continued employment will be removed. Performance or other conditions (other
than conditions and restrictions relating solely to the passage of time and
continued employment) will continue to apply unless otherwise provided in the
applicable Award agreement.

 

(c) “Change of Control” shall mean the occurrence of any one of the following
events:

 

(i) any “Person,” as such term is used in Sections 13(d) and 14(d) of the Act
(other than the Parent, the Company, any of its Subsidiaries, or any trustee,
fiduciary or other person or entity holding securities under any employee
benefit plan or trust of the Company or any of its Subsidiaries), together with
all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under
the Exchange Act) of such person, shall become the “beneficial owner” (as such
term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing twenty five percent (25%) or more of
the combined voting power of the Company’s then outstanding securities having
the right to vote in an election of the Company’s Board of Directors (“Voting
Securities”) (in such case other than as a result of an acquisition of
securities directly from the Company); or

 

(ii) persons who, as of the Effective Date, constitute the Company’s Board of
Directors (the “Incumbent Directors”) cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board; provided that any
person becoming a director of the Company subsequent to the Effective Date shall
be considered an Incumbent Director if such person’s election was approved by or
such person was nominated for election by either (A) a vote of at least a
majority of the Incumbent Directors or (B) a vote of at least a majority of the
Incumbent Directors who are members of a nominating committee comprised, in the
majority, of Incumbent Directors; but provided further, that any such person
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of members of the Board of Directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board, including by reason of agreement
intended to avoid or settle any such actual or threatened contest or
solicitation, shall not be considered an Incumbent Director; or

 

(iii) the consummation of a consolidation, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
“Corporate Transaction”); excluding, however, a Corporate Transaction in which
the stockholders of the Company immediately prior to the Corporate Transaction,
would, immediately after the Corporate Transaction, beneficially own (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly, shares
representing in the aggregate more than 50 percent of the voting shares of the
corporation issuing cash or securities in the Corporate Transaction (or of its
ultimate parent corporation, if any); or

 

 14 

 

 

(iv) the approval by the stockholders of any plan or proposal for the
liquidation or dissolution of the Company.

 

Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have
occurred for purposes of the foregoing clause (i) solely as the result of an
acquisition of securities by the Company which, by reducing the number of shares
of Voting Securities outstanding, increases the proportionate number of shares
of Voting Securities beneficially owned by any person to 25 percent or more of
the combined voting power of all then outstanding Voting Securities; provided,
however, that if any person referred to in this sentence shall thereafter become
the beneficial owner of any additional shares of Voting Securities (other than
pursuant to a stock split, stock dividend, or similar transaction or as a result
of an acquisition of securities directly from the Company) and immediately
thereafter beneficially owns 25 percent or more of the combined voting power of
all then outstanding Voting Securities, then a “Change of Control” shall be
deemed to have occurred for purposes of the foregoing clause (i).

 

20.    GENERAL PROVISIONS

 

(a) No Distribution; Compliance with Legal Requirements. The Administrator may
require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.

 

No shares of Stock shall be issued pursuant to an Award until all applicable
securities law and other legal and stock exchange or similar requirements have
been satisfied. The Administrator may require the placing of such stop-orders
and restrictive legends on certificates for Stock and Awards as it deems
appropriate.

 

The Plan, the granting and exercising of Awards hereunder, and any obligations
of the Company under the Plan, shall be subject to all applicable federal, state
and foreign country laws, rules and regulations, and to such approvals by any
regulatory or governmental agency as may be required, and to any rules or
regulations of any exchange on which the Stock is listed. The Company, in its
discretion, may postpone the granting and exercising of Awards, the issuance or
delivery of Stock under any Award or any other action permitted under the Plan
to permit the Company, with reasonable diligence, to complete such stock
exchange listing or registration or qualification of such Stock or other
required action under any federal, state or foreign country law, rule or
regulation and may require any grantee to make such representations and furnish
such information as it may consider appropriate in connection with the issuance
or delivery of Stock in compliance with applicable laws, rules and regulations.
The Company shall not be obligated by virtue of any provision of the Plan to
recognize the exercise of any Award or to otherwise sell or issue Stock in
violation of any such laws, rules or regulations, and any postponement of the
exercise or settlement of any Award under this provision shall not extend the
term of such Awards. Neither the Company nor its directors or officers shall
have any obligation or liability to a grantee with respect to any Award (or
Stock issuable thereunder) that shall lapse because of such postponement.

 

(b) Delivery of Stock Certificates. Stock certificates to grantees under this
Plan shall be deemed delivered for all purposes when the Company or a stock
transfer agent of the Company shall have mailed such certificates in the United
States mail, addressed to the grantee, at the grantee’s last known address on
file with the Company. Uncertificated Stock shall be deemed delivered for all
purposes when the Company or a Stock transfer agent of the Company shall have
given to the grantee by electronic mail (with proof of receipt) or by United
States mail, addressed to the grantee, at the grantee’s last known address on
file with the Company, notice of issuance and recorded the issuance in its
records (which may include electronic “book entry” records). Notwithstanding
anything herein to the contrary, the Company shall not be required to issue or
deliver any certificates evidencing shares of Stock pursuant to the exercise of
any Award, unless and until the Administrator has determined, with advice of
counsel (to the extent the Administrator deems such advice necessary or
advisable), that the issuance and delivery of such certificates is in compliance
with all applicable laws, regulations of governmental authorities and, if
applicable, the requirements of any exchange on which the shares of Stock are
listed, quoted or traded. All Stock certificates delivered pursuant to the Plan
shall be subject to any stop-transfer orders and other restrictions as the
Administrator deems necessary or advisable to comply with federal, state or
foreign jurisdiction, securities or other laws, rules and quotation system on
which the Stock is listed, quoted or traded. The Administrator may place legends
on any Stock certificate to reference restrictions applicable to the Stock. In
addition to the terms and conditions provided herein, the Administrator may
require that an individual make such reasonable covenants, agreements, and
representations as the Administrator, in its discretion, deems necessary or
advisable in order to comply with any such laws, regulations, or requirements.
The Administrator shall have the right to require any individual to comply with
any timing or other restrictions with respect to the settlement or exercise of
any Award, including a window-period limitation, as may be imposed in the
discretion of the Administrator.

 

 15 

 

 

(c) Stockholder Rights. Until Stock is deemed delivered in accordance with
Section 20(b), and subject to the provisions of the applicable Award contained
in the Plan and in an agreement evidencing such Award, no right to vote or
receive dividends or any other rights of a stockholder will exist with respect
to shares of Stock to be issued in connection with an Award, notwithstanding the
exercise of a Stock Option or any other action by the grantee or any permitted
transferee or designated beneficiary with respect to an Award.

 

(d) Other Compensation Arrangements; No Employment Rights. Nothing contained in
this Plan shall prevent the Board from adopting other or additional compensation
arrangements, including trusts, and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of this Plan and
the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Subsidiary.

 

(e) Trading Policy Restrictions. Option exercises and other Awards under the
Plan shall be subject to such Company’s insider trading policy, as in effect
from time to time.

 

(f) Forfeiture of Awards under Sarbanes-Oxley Act. If the Company is required to
prepare an accounting restatement due to the material noncompliance of the
Company, as a result of misconduct, with any financial reporting requirement
under the securities laws, then, to the extent required by law, any grantee who
is one of the individuals subject to automatic forfeiture under Section 304 of
the Sarbanes-Oxley Act of 2002 shall reimburse the Company for the amount of any
Award received by such individual under the Plan during the 12-month period
following the first public issuance or filing with the United States Securities
and Exchange Commission, as the case may be, of the financial document embodying
such financial reporting requirement.

 

(g) Designation of Beneficiary. Each grantee to whom an Award has been made
under the Plan may designate a beneficiary or beneficiaries to exercise any
Award or receive any payment under any Award payable on or after the grantee’s
death. Any such designation shall be on a form provided for that purpose by the
Administrator and shall not be effective until received by the Administrator. If
no beneficiary has been designated by a deceased grantee, or if the designated
beneficiaries have predeceased the grantee, the beneficiary shall be the
grantee’s estate.

 

(h) No Constraint on Corporate Action. Nothing in this Plan shall be construed
(i) to limit, impair or otherwise affect the Company’s right or power to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure, or to merge or consolidate, or dissolve, liquidate, sell or
transfer all or any part of its business or assets, or (ii) to limit the right
or power of the Company, or any Subsidiary, to take any action which such entity
deems to be necessary or appropriate.

 

21.    EFFECTIVE DATE OF PLAN

 

This Plan shall become effective on the later of the approval by the holders of
a majority of the votes cast at a meeting of stockholders at which a quorum is
present or by written consent of the stockholders, or the Distribution Date
immediately after the Distribution (the “Effective Date”). Subject to such
approval by the stockholders and to the requirement that no Stock may be issued
hereunder prior to such approval, Stock Options and other Awards may be granted
hereunder on and after adoption of this Plan by the Board. No Incentive Stock
Options may be granted under the Plan after the 10-year anniversary of the
Effective Date or of the most recent prior date on which the Plan was approved
by the Board (provided that the Plan was approved by stockholders within one
year of such date) and no other Award may be granted under the Plan after the
10-year anniversary of the most recent prior date on which the Plan was approved
by stockholders.  

 

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22.    GOVERNING LAW

 

This Plan and all Awards and actions taken hereunder shall be governed by, and
construed in accordance with, the laws of the State of Delaware, applied without
regard to conflict of law principles.

 

DATE APPROVED BY BOARD OF DIRECTORS:   October 11, 2013 DATE APPROVED BY
STOCKHOLDERS:   October 31, 2013

 

DATE FIRST AMENDMENT TO THE PLAN APPROVED BY BOARD OF DIRECTORS:   March 28,
2016

 

DATES SECOND AMENDMENT TO THE BIOSTAGE, INC. 2013 EQUITY INCENTIVE PLAN
APPROVED: (I) BY BOARD OF DIRECTORS:   March 28, 2016 AND (II) BY
STOCKHOLDERS:   May 26, 2016

 

DATES THIRD AMENDMENT TO THE BIOSTAGE, INC. 2013 EQUITY INCENTIVE PLAN APPROVED:
(I) BY BOARD OF DIRECTORS:   March 7, 2017 AND (II) BY STOCKHOLDERS:   April 26,
2017

 

DATES FOURTH AMENDMENT TO THE BIOSTAGE, INC. 2013 EQUITY INCENTIVE PLAN
APPROVED: (I) BY BOARD OF DIRECTORS:   April 8, 2018 AND (II) BY
STOCKHOLDERS:   May 23, 2018

 

DATE FIFTH AMENDMENT TO BIOSTAGE, INC. 2013 EQUITY INCENTIVE PLAN APPROVED BY
BOARD OF DIRECTORS: MAY 29, 2018.

 

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