EXHIBIT 10.1
SURMODICS, INC.
2003 EQUITY INCENTIVE PLAN
(AS AMENDED AND RESTATED DECEMBER 13, 2005)
SECTION 1.
DEFINITIONS
     As used herein, the following terms shall have the meanings indicated
below:
     (a) “Administrator” shall mean the Board of Directors of the Company, or
one or more Committees appointed by the Board, as the case may be.
     (b) “Affiliate(s)” shall mean a Parent or Subsidiary of the Company.
     (c) “Award” shall mean any grant of an Option, Restricted Stock Award,
Restricted Stock Unit Award, Stock Appreciation Right or Performance Award.
     (d) “Committee” shall mean a Committee of two or more directors who shall
be appointed by and serve at the pleasure of the Board. To the extent necessary
for compliance with Rule 16b-3, or any successor provision, each of the members
of the Committee shall be a “non-employee director.” Solely for purposes of this
Section 1(d), “non-employee director” shall have the same meaning as set forth
in Rule 16b-3, or any successor provision, as then in effect, of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended.
Further, to the extent necessary for compliance with the limitations set forth
in Internal Revenue Code Section 162(m), each of the members of the Committee
shall be an “outside director” within the meaning of Code Section 162(m) and the
regulations issued thereunder.
     (e) The “Company” shall mean SurModics, Inc., a Minnesota corporation.
     (f) “Fair Market Value” as of any date shall mean (i) if such stock is
listed on the Nasdaq National Market, Nasdaq SmallCap Market, or an established
stock exchange, the price of such stock at the close of the regular trading
session of such market or exchange on such date, as reported by The Wall Street
Journal or a comparable reporting service, or, if no sale of such stock shall
have occurred on such date, on the next preceding date on which there was a sale
of stock; (ii) if such stock is not so listed on the Nasdaq National Market,
Nasdaq SmallCap Market, or an established stock exchange, the average of the
closing “bid” and “asked” prices quoted by the OTC Bulletin Board, the National
Quotation Bureau, or any comparable reporting service on such date or, if there
are no quoted “bid” and “asked” prices on such date, on the next preceding date
for which there are such quotes; or (iii) if such stock is not publicly traded
as of such date, the per share value as determined by the Board, or the
Committee, in its sole discretion by applying principles of valuation with
respect to the Company’s Common Stock.
     (g) The “Internal Revenue Code” or “Code” is the Internal Revenue Code of
1986, as amended from time to time.

 

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     (h) “Option” means an incentive stock option or nonqualified stock option
granted pursuant to the Plan.
     (i) “Parent” shall mean any corporation which owns, directly or indirectly
in an unbroken chain, fifty percent (50%) or more of the total voting power of
the Company’s outstanding stock.
     (j) The “Participant” means (i) a key employee of the Company or any
Affiliate to whom an incentive stock option has been granted pursuant to
Section 9; (ii) a consultant or advisor to, or director, key employee or
officer, of the Company or any Affiliate to whom a nonqualified stock option has
been granted pursuant to Section 10; (iii) a consultant or advisor to, or
director, key employee or officer, of the Company or any Affiliate to whom a
Restricted Stock Award or Restricted Stock Unit Award has been granted pursuant
to Section 11; (iv) a consultant or advisor to, or director, key employee or
officer, of the Company or any Affiliate to whom a Performance Award has been
granted pursuant to Section 12; or (v) a consultant or advisor to, or director,
key employee or officer, of the Company or any Affiliate to whom a Stock
Appreciation Right has been granted pursuant to Section 13.
     (k) “Performance Award” shall mean any Performance Shares or Performance
Units granted pursuant to Section 12 hereof.
     (l) “Performance Objective(s)” shall mean one or more performance
objectives established by the Administrator, in its sole discretion, for Awards
granted under this Plan. For any Awards that are intended to qualify as
“performance-based compensation” under Code Section 162(m), the Performance
Objectives shall be limited to any one, or a combination of, (i) revenue,
(ii) net income, (iii) stockholders’ equity, (iv) earnings per share, (v) return
on equity, (vi) return on assets, (vii) total shareholder return, (viii) net
operating income, (ix) cost controls, (x) cash flow, (xi) increase in revenue,
(xii) economic value added, (xiii) increase in share price or earnings,
(xiv) return on investment, (xv) department or business unit performance goals,
(xvi) client contracting goals, (xvii) technological and business development
milestones and contracting goals, (xviii) increase in market share,
(xix) regulatory, clinical or commercial milestones, and (xx) quality control,
in all cases including, if selected by the Administrator, threshold, target and
maximum levels.
     (m) “Performance Period” shall mean the period, established at the time any
Performance Award is granted or at any time thereafter, during which any
Performance Objectives specified by the Administrator with respect to such
Performance Award are to be measured.
     (n) “Performance Share” shall mean any grant pursuant to Section 12 hereof
of an award, which value, if any, shall be paid to a Participant by delivery of
shares of Common Stock of the Company upon achievement of such Performance
Objectives during the Performance Period as the Administrator shall establish at
the time of such grant or thereafter.

 

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     (o) “Performance Unit” shall mean any grant pursuant to Section 12 hereof
of an award, which value, if any, shall be paid to a Participant by delivery of
cash upon achievement of such Performance Objectives during the Performance
Period as the Administrator shall establish at the time of such grant or
thereafter.
     (p) The “Plan” means the SurModics, Inc. 2003 Equity Incentive Plan, as
amended hereafter from time to time, including the form of Agreements as they
may be modified by the Administrator from time to time.
     (q) “Restricted Stock Award” or “Restricted Stock Unit Award” shall mean
any grant of restricted shares of Stock of the Company or the grant of any
restricted stock units pursuant to Section 11 hereof.
     (r) “Stock,” “Option Stock” or “Common Stock” shall mean Common Stock of
the Company (subject to adjustment as described in Section 14) reserved for
Options and Awards pursuant to this Plan.
     (s) “Stock Appreciation Right” shall mean a grant pursuant to Section 13
hereof.
     (t) A “Subsidiary” shall mean any corporation of which fifty percent (50%)
or more of the total voting power of the Company’s outstanding Stock is owned,
directly or indirectly in an unbroken chain, by the Company.
SECTION 2.
PURPOSE
     The purpose of the Plan is to promote the success of the Company and its
Affiliates by facilitating the employment and retention of competent personnel
and by furnishing incentive to officers, directors, employees, consultants, and
advisors upon whose efforts the success of the Company and its Affiliates will
depend to a large degree.
     It is the intention of the Company to carry out the Plan through the
granting of Options which will qualify as “incentive stock options” under the
provisions of Section 422 of the Internal Revenue Code, or any successor
provision, pursuant to Section 9 of this Plan; through the granting of
“nonqualified stock options” pursuant to Section 10 of this Plan; through the
granting of Restricted Stock Awards and Restricted Stock Unit Awards pursuant to
Section 11 of this Plan; through the granting of Performance Awards pursuant to
Section 12 of this Plan; and through the granting of Stock Appreciation Rights
pursuant to Section 13 of this Plan. Adoption of this Plan shall be and is
expressly subject to the condition of approval by the shareholders of the
Company within twelve (12) months before or after the adoption of the Plan by
the Board of Directors. In no event shall any Awards be granted prior to the
date this Plan is approved by the shareholders of the Company.

 

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SECTION 3.
EFFECTIVE DATE OF PLAN
     The Plan shall be effective as of the date of adoption by the Board of
Directors, subject to approval by the shareholders of the Company as required in
Section 2.
SECTION 4.
ADMINISTRATION
     The Plan shall be administered by the Board of Directors of the Company
(hereinafter referred to as the “Board”) or by a Committee which may be
appointed by the Board from time to time to administer the Plan (hereinafter
collectively referred to as the “Administrator”). Except as otherwise provided
herein, the Administrator shall have all of the powers vested in it under the
provisions of the Plan, including but not limited to exclusive authority to
determine, in its sole discretion, whether an Award shall be granted; the
individuals to whom, and the time or times at which, Awards shall be granted;
the number of shares subject to each Award; the option price; and the
performance criteria, if any, and any other terms and conditions of each Award.
The Administrator shall have full power and authority to administer and
interpret the Plan, to make and amend rules, regulations and guidelines for
administering the Plan, to prescribe the form and conditions of the respective
agreements evidencing each Award (which may vary from Participant to
Participant), and to make all other determinations necessary or advisable for
the administration of the Plan. The Administrator’s interpretation of the Plan,
and all actions taken and determinations made by the Administrator pursuant to
the power vested in it hereunder, shall be conclusive and binding on all parties
concerned.
     No member of the Board or the Committee shall be liable for any action
taken or determination made in good faith in connection with the administration
of the Plan. In the event the Board appoints a Committee as provided hereunder,
any action of the Committee with respect to the administration of the Plan shall
be taken pursuant to a majority vote of the Committee members or pursuant to the
written resolution of all Committee members.
SECTION 5.
PARTICIPANTS
     The Administrator shall from time to time, at its discretion and without
approval of the shareholders, designate those employees, officers, directors,
consultants, and advisors of the Company or of any Affiliate to whom Awards
shall be granted under this Plan; provided, however, that consultants or
advisors shall not be eligible to receive Awards hereunder unless such
consultant or advisor renders bona fide services to the Company or any Affiliate
and such services are not in connection with the offer or sale of securities in
a capital raising transaction and do not directly or indirectly promote or
maintain a market for the Company’s securities. The Administrator shall, from
time to time, at its discretion and without approval of the shareholders,
designate those employees of the Company or any Affiliate to whom Awards,
including incentive stock options shall be granted under this Plan. The
Administrator may grant additional Awards, including incentive stock options,
under this Plan to some or all Participants then

 

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holding Awards, or may grant Awards solely or partially to new Participants. In
designating Participants, the Administrator shall also determine the number of
shares to be optioned or awarded to each such Participant and the performance
criteria applicable to each Performance Award. The Administrator may from time
to time designate individuals as being ineligible to participate in the Plan.
     Notwithstanding anything in the Plan to the contrary, the following limits
will apply to Awards granted under the Plan:
     (a) In no event shall a Participant be granted Options or Stock
Appreciation Rights during any fiscal year of the Company covering in the
aggregate more than Two Hundred Thousand (200,000) shares of Stock, subject to
adjustment as provided in Section 14; provided, however, that a share of Stock
subject to a Stock Appreciation Right that is granted in tandem with an Option
shall count as one share against this limitation.
     (b) In no event shall a Participant be granted Restricted Stock Awards or,
to the extent payable in or measured by the value of shares of Stock, Restricted
Stock Unit Awards during any fiscal year of the Company covering in the
aggregate more than Two Hundred Thousand (200,000) shares of Stock, subject to
adjustment as provided in Section 14.
     (c) To the extent payable in or measured by the value of shares of Stock,
in no event shall a Participant be granted Performance Awards during any fiscal
year of the Company covering in the aggregate more than Two Hundred Thousand
(200,000) shares of Stock, subject to adjustment as provided in Section 14.
SECTION 6.
STOCK
     The Stock to be optioned under this Plan shall consist of authorized but
unissued shares of Common Stock. Two Million Four Hundred Thousand (2,400,000)
shares of Common Stock shall be reserved and available for Awards under the
Plan; provided, however, that the total number of shares of Common Stock
reserved for Awards under this Plan shall be subject to adjustment as provided
in Section 14 of the Plan; and provided, further, that all shares of Stock
reserved and available under the Plan shall constitute the maximum aggregate
number of shares of Stock that may be issued through incentive stock options.
The following shares of Stock shall continue to be reserved and available for
Awards granted pursuant to the Plan: (i) any outstanding Award that expires for
any reason, (ii) any portion of an outstanding Option or Stock Appreciation
Right that is terminated prior to exercise, (iii) any portion of an Award that
is terminated prior to the lapsing of the risks of forfeiture on such Award,
(iv) shares of Stock used to pay the exercise price under any Award, (v) shares
of Stock used to satisfy any tax withholding obligation attributable to any
Award, whether such shares are withheld by the Company or tendered by the
Participant, and (vi) shares of Stock covered by an Award to the extent the
Award is settled in cash.

 

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SECTION 7.
DURATION OF PLAN
     Incentive stock options may be granted pursuant to the Plan from time to
time during a period of ten (10) years from the effective date as defined in
Section 3. Other Awards may be granted pursuant to the Plan from time to time
after the effective date of the Plan and until the Plan is discontinued or
terminated by the Administrator.
SECTION 8.
PAYMENT
     Participants may pay for shares upon exercise of Options granted pursuant
to this Plan with cash, personal check, certified check or, if approved by the
Administrator in its sole discretion, previously-owned shares of the Company’s
Common Stock, or any combination thereof. Any stock so tendered as part of such
payment shall be valued at such stock’s then Fair Market Value, or such other
form of payment as may be authorized by the Administrator. The Administrator
may, in its sole discretion, limit the forms of payment available to the
Participant and may exercise such discretion any time prior to the termination
of the Option granted to the Participant or upon any exercise of the Option by
the Participant. “Previously-owned shares” means shares of the Company’s Common
Stock which the Participant has owned for at least six (6) months prior to the
exercise of the Option, or for such other period of time as may be required by
generally accepted accounting principles.
     With respect to payment in the form of Common Stock of the Company, the
Administrator may require advance approval or adopt such rules as it deems
necessary to assure compliance with Rule 16b-3, or any successor provision, as
then in effect, of the General Rules and Regulations under the Securities
Exchange Act of 1934, if applicable.
SECTION 9.
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
     Each incentive stock option granted pursuant to this Section 9 shall be
evidenced by a written incentive stock option agreement (the “Option
Agreement”). The Option Agreement shall be in such form as may be approved from
time to time by the Administrator and may vary from Participant to Participant;
provided, however, that each Participant and each Option Agreement shall comply
with and be subject to the following terms and conditions:
     (a) Number of Shares and Option Price. The Option Agreement shall state the
total number of shares covered by the incentive stock option. Except as
permitted by Code Section 424(d), or any successor provision, the option price
per share shall not be less than one hundred percent (100%) of the per share
Fair Market Value of the Common Stock on the date the Administrator grants the
Option; provided, however, that if a Participant owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of its Parent or any Subsidiary, the option price per share of an
incentive stock

 

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option granted to such Participant shall not be less than one hundred ten
percent (110%) of the per share Fair Market Value of the Company’s Common Stock
on the date of the grant of the Option. The Administrator shall have full
authority and discretion in establishing the option price and shall be fully
protected in so doing.
     (b) Term and Exercisability of Incentive Stock Option. The term during
which any incentive stock option granted under the Plan may be exercised shall
be established in each case by the Administrator. Except as permitted by Code
Section 424(d), in no event shall any incentive stock option be exercisable
during a term of more than ten (10) years after the date on which it is granted;
provided, however, that if a Participant owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of its Parent or any Subsidiary, the incentive stock option granted
to such Participant shall be exercisable during a term of not more than five
(5) years after the date on which it is granted.
     The Option Agreement shall state when the incentive stock option becomes
exercisable and shall also state the maximum term during which the Option may be
exercised. In the event an incentive stock option is exercisable immediately,
the manner of exercise of the Option in the event it is not exercised in full
immediately shall be specified in the Option Agreement. The Administrator may
accelerate the exercisability of any incentive stock option granted hereunder
which is not immediately exercisable as of the date of grant.
     (c) Nontransferability. No incentive stock option shall be transferable, in
whole or in part, by the Participant other than by will or by the laws of
descent and distribution. During the Participant’s lifetime, the incentive stock
option may be exercised only by the Participant. If the Participant shall
attempt any transfer of any incentive stock option granted under the Plan during
the Participant’s lifetime, such transfer shall be void and the incentive stock
option, to the extent not fully exercised, shall terminate.
     (d) No Rights as Shareholder. A Participant (or the Participant’s successor
or successors) shall have no rights as a shareholder with respect to any shares
covered by an incentive stock option until the date of the issuance of a stock
certificate evidencing such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date
such stock certificate is actually issued (except as otherwise provided in
Section 14 of the Plan).
     (e) Withholding. The Company or its Affiliate shall be entitled to withhold
and deduct from future wages of the Participant all legally required amounts
necessary to satisfy any and all withholding and employment-related taxes
attributable to the Participant’s exercise of an incentive stock option or a
“disqualifying disposition” of shares acquired through the exercise of an
incentive stock option as defined in Code Section 421(b). In the event the
Participant is required under the Option Agreement to pay the Company, or make
arrangements satisfactory to the Company respecting payment of, such withholding
and employment-related taxes, the Administrator may, in its discretion and
pursuant to such rules as it may adopt, permit the Participant to satisfy such
obligation, in whole or in part, by electing to have the Company withhold shares
of Common Stock otherwise issuable to the Participant as a result of the
exercise of the incentive stock option having a Fair Market Value equal to the
minimum required tax

 

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withholding, based on the minimum statutory withholding rates for federal and
state tax purposes, including payroll taxes, that are applicable to the
supplemental income resulting from such exercise. In no event may the Company or
any Affiliate withhold shares having a Fair Market Value in excess of such
statutory minimum required tax withholding. The Participant’s election to have
shares withheld for this purpose shall be made on or before the date the
incentive stock option is exercised or, if later, the date that the amount of
tax to be withheld is determined under applicable tax law. Such election shall
be approved by the Administrator and otherwise comply with such rules as the
Administrator may adopt to assure compliance with Rule 16b-3, or any successor
provision, as then in effect, of the General Rules and Regulations under the
Securities Exchange Act of 1934, if applicable.
     (f) Other Provisions. The Option Agreement authorized under this Section 9
shall contain such other provisions as the Administrator shall deem advisable.
Any such Option Agreement shall contain such limitations and restrictions upon
the exercise of the Option as shall be necessary to ensure that such Option will
be considered an “incentive stock option” as defined in Section 422 of the
Internal Revenue Code or to conform to any change therein.
SECTION 10.
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
     Each nonqualified stock option granted pursuant to this Section 10 shall be
evidenced by a written nonqualified stock option agreement (the “Option
Agreement”). The Option Agreement shall be in such form as may be approved from
time to time by the Administrator and may vary from Participant to Participant;
provided, however, that each Participant and each Option Agreement shall comply
with and be subject to the following terms and conditions:
     (a) Number of Shares and Option Price. The Option Agreement shall state the
total number of shares covered by the nonqualified stock option. Unless
otherwise determined by the Administrator, the option price per share shall be
one hundred percent (100%) of the per share Fair Market Value of the Common
Stock on the date the Administrator grants the Option.
     (b) Term and Exercisability of Nonqualified Stock Option. The term during
which any nonqualified stock option granted under the Plan may be exercised
shall be established in each case by the Administrator. The Option Agreement
shall state when the nonqualified stock option becomes exercisable and shall
also state the maximum term during which the Option may be exercised. In the
event a nonqualified stock option is exercisable immediately, the manner of
exercise of the Option in the event it is not exercised in full immediately
shall be specified in the Option Agreement. The Administrator may accelerate the
exercisability of any nonqualified stock option granted hereunder which is not
immediately exercisable as of the date of grant.
     (c) Transferability. The Administrator may, in its sole discretion, permit
the Participant to transfer any or all nonqualified stock options to any member
of the Participant’s “immediate family” as such term is defined in Rule 16a-1(e)
promulgated under the Securities Exchange Act of 1934, or any successor
provision, or to one or more trusts whose beneficiaries are members of such
Participant’s “immediate family” or partnerships in which such family

 

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members are the only partners; provided, however, that the Participant cannot
receive any consideration for the transfer and such transferred nonqualified
stock option shall continue to be subject to the same terms and conditions as
were applicable to such nonqualified stock option immediately prior to its
transfer.
     (d) No Rights as Shareholder. A Participant (or the Participant’s successor
or successors) shall have no rights as a shareholder with respect to any shares
covered by a nonqualified stock option until the date of the issuance of a stock
certificate evidencing such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date
such stock certificate is actually issued (except as otherwise provided in
Section 14 of the Plan).
     (e) Withholding. The Company or its Affiliate shall be entitled to withhold
and deduct from future wages of the Participant all legally required amounts
necessary to satisfy any and all withholding and employment-related taxes
attributable to the Participant’s exercise of a nonqualified stock option. In
the event the Participant is required under the Option Agreement to pay the
Company, or make arrangements satisfactory to the Company respecting payment of,
such withholding and employment-related taxes, the Administrator may, in its
discretion and pursuant to such rules as it may adopt, permit the Participant to
satisfy such obligation, in whole or in part, by delivering shares of the
Company’s Common Stock or by electing to have the Company withhold shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
of the nonqualified stock option having a Fair Market Value equal to the minimum
required tax withholding, based on the minimum statutory withholding rates for
federal and state tax purposes, including payroll taxes, that are applicable to
the supplemental income resulting from such exercise. In no event may the
Company or any Affiliate withhold shares having a Fair Market Value in excess of
such statutory minimum required tax withholding. The Participant’s election to
deliver shares or to have shares withheld for this purpose shall be made on or
before the date the nonqualified stock option is exercised or, if later, the
date that the amount of tax to be withheld is determined under applicable tax
law. Such election shall be approved by the Administrator and otherwise comply
with such rules as the Administrator may adopt to assure compliance with
Rule 16b-3, or any successor provision, as then in effect, of the General Rules
and Regulations under the Securities Exchange Act of 1934, if applicable.
     (f) Other Provisions. The Option Agreement authorized under this Section 10
shall contain such other provisions as the Administrator shall deem advisable.
SECTION 11.
RESTRICTED STOCK AND RESTRICTED STOCK UNIT AWARDS
     Each Restricted Stock Award or Restricted Stock Unit Award granted pursuant
to the Plan shall be evidenced by a written restricted stock or restricted stock
unit agreement (the “Restricted Stock Agreement” or “Restricted Stock Unit
Agreement,” as the case may be). The Restricted Stock Agreement or Restricted
Stock Unit Agreement shall be in such form as may be approved from time to time
by the Administrator and may vary from Participant to Participant;

 

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provided, however, that each Participant and each Restricted Stock Agreement or
Restricted Stock Unit Agreement shall comply with and be subject to the
following terms and conditions:
     (a) Number of Shares. The Restricted Stock Agreement or Restricted Stock
Unit Agreement shall state the total number of shares of Stock covered by the
Restricted Stock Award or Restricted Stock Unit Award.
     (b) Risks of Forfeiture. The Restricted Stock Agreement or Restricted Stock
Unit Agreement shall set forth the risks of forfeiture, if any, including risks
of forfeiture based on Performance Objectives, which shall apply to the shares
of Stock covered by the Restricted Stock Award or Restricted Stock Unit Award,
and shall specify the manner in which such risks of forfeiture shall lapse. The
Administrator may, in its sole discretion, modify the manner in which such risks
of forfeiture shall lapse but only with respect to those shares of Stock which
are restricted as of the effective date of the modification.
     (c) Issuance of Shares; Rights as Shareholder.
     (i) With respect to a Restricted Stock Award, the Company shall cause to be
issued a stock certificate representing such shares of Stock in the
Participant’s name, and shall deliver such certificate to the Participant;
provided, however, that the Company shall place a legend on such certificate
describing the risks of forfeiture and other transfer restrictions set forth in
the Participant’s Restricted Stock Agreement and providing for the cancellation
and return of such certificate if the shares of Stock subject to the Restricted
Stock Award are forfeited. Until the risks of forfeiture have lapsed or the
shares subject to such Restricted Stock Award have been forfeited, the
Participant shall be entitled to vote the shares of Stock represented by such
stock certificates and shall receive all dividends attributable to such shares,
but the Participant shall not have any other rights as a shareholder with
respect to such shares.
     (ii) With respect to a Restricted Stock Unit Award, as the risks of
forfeiture on the restricted stock units lapse, the Participant shall be
entitled to payment of the Restricted Stock Units. The Administrator may, in its
sole discretion, pay Restricted Stock Units in cash, shares of Stock or any
combination thereof. If payment is made in shares of Stock, the Administrator
shall cause to be issued one or more stock certificates in the Participant’s
name and shall deliver such certificates to the Participant in satisfaction of
such restricted stock units. Until the risks of forfeiture on the restricted
stock units have lapsed, the Participant shall not be entitled to vote any
shares of stock which may be acquired through the restricted stock units, shall
not receive any dividends attributable to such shares, and shall not have any
other rights as a shareholder with respect to such shares.
     (d) Withholding Taxes. The Company or its Affiliate shall be entitled to
withhold and deduct from future wages of the Participant all legally required
amounts necessary to satisfy any and all withholding and employment-related
taxes attributable to the Participant’s Restricted Stock Award or Restricted
Stock Unit Award. In the event the Participant is required under the Restricted
Stock Agreement or Restricted Stock Unit Agreement to pay the Company, or make
arrangements satisfactory to the Company respecting payment of, such withholding
and employment-related taxes, the Administrator may, in its discretion and
pursuant to such rules as

 

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it may adopt, require the Participant to satisfy such obligations, in whole or
in part, by delivering shares of Stock received pursuant to the Restricted Stock
Award or Restricted Stock Unit Award on which the risks of forfeiture have
lapsed or to permit the Participant to satisfy such obligations, in whole or in
part, by delivering shares of Common Stock, including shares of Stock received
pursuant to the Restricted Stock Award or Restricted Stock Unit Award on which
the risks of forfeiture have lapsed. Such shares shall have a Fair Market Value
equal to the minimum required tax withholding, based on the minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes,
that are applicable to the supplemental income resulting from the lapsing of the
risks of forfeiture on such restricted stock or restricted stock unit. In no
event may the Participant deliver shares having a Fair Market Value in excess of
such statutory minimum required tax withholding. The Participant’s election to
deliver shares of Common Stock for this purpose shall be made on or before the
date that the amount of tax to be withheld is determined under applicable tax
law. Such election shall be approved by the Administrator and otherwise comply
with such rules as the Administrator may adopt to assure compliance with Rule
16b-3, or any successor provision, as then in effect, of the General Rules and
Regulations under the Securities Exchange Act of 1934, if applicable.
     (f) Nontransferability. No Restricted Stock Award or Restricted Stock Unit
Award shall be transferable, in whole or in part, by the Participant, other than
by will or by the laws of descent and distribution, prior to the date the risks
of forfeiture described in the Restricted Stock Agreement or Restricted Stock
Unit Agreement have lapsed. If the Participant shall attempt any transfer of any
Restricted Stock Award or Restricted Stock Unit Award granted under the Plan
prior to such date, such transfer shall be void and the Restricted Stock Award
or Restricted Stock Unit Award shall terminate.
     (g) Delay of Payment for Section 162(m). In the event the Administrator
reasonably anticipates that the Company’s income tax deduction with respect to
the vesting of any Restricted Stock Award or any payment or issuance of shares
of Stock required by a Restricted Stock Unit Award would be limited or
eliminated by Code Section 162(m), the Administrator may, subject to such terms
and conditions as determined by the Administrator, delay all or a portion of
such payment or the vesting or issuance of all or a portion of such shares of
Stock until the earlier of (i) the date at which the Administrator reasonably
anticipates that the corresponding income tax deduction will not be so limited
or eliminated, and (ii) the Participant’s separation from service, as such term
is defined in Code Section 409A and the regulations, notices and other guidance
of general applicability issued thereunder.
     (h) Other Provisions. The Restricted Stock Agreement or Restricted Stock
Unit Agreement authorized under this Section 11 shall contain such other
provisions as the Administrator shall deem advisable.
SECTION 12.
PERFORMANCE AWARDS
     Each Performance Award granted pursuant to this Section 12 shall be
evidenced by a written performance award agreement (the “Performance Award
Agreement”). The Performance

 

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Award Agreement shall be in such form as may be approved from time to time by
the Administrator and may vary from Participant to Participant; provided,
however, that each Participant and each Performance Award Agreement shall comply
with and be subject to the following terms and conditions:
     (a) Awards. Performance Awards in the form of Performance Units or
Performance Shares may be granted to any Participant in the Plan. Performance
Units shall consist of monetary awards which may be earned or become vested in
whole or in part if the Company or the Participant achieves certain Performance
Objectives established by the Administrator over a specified Performance Period.
Performance Shares shall consist of shares of Stock or other Awards denominated
in shares of Stock that may be earned or become vested in whole or in part if
the Company or the Participant achieves certain Performance Objectives
established by the Administrator over a specified Performance Period.
     (b) Performance Objectives, Performance Period and Payment. The Performance
Award Agreement shall set forth:
     (i) the number of Performance Units or Performance Shares subject to the
Performance Award, and the dollar value of each Performance Unit;
     (ii) one or more Performance Objectives established by the Administrator;
     (iii) the Performance Period over which Performance Units or Performance
Shares may be earned or may become vested;
     (iv) the extent to which partial achievement of the Performance Objectives
may result in a payment or vesting of the Performance Award, as determined by
the Administrator; and
     (v) the date upon which payment of Performance Units will be made or
Performance Shares will be issued, as the case may be, and the extent to which
such payment or the receipt of such Performance Shares may be deferred.
     (c) Withholding Taxes. The Company or its Affiliates shall be entitled to
withhold and deduct from future wages of the Participant all legally required
amounts necessary to satisfy any and all withholding and employment-related
taxes attributable to the Participant’s Performance Award. In the event the
Participant is required under the Performance Award Agreement to pay the Company
or its Affiliates, or make arrangements satisfactory to the Company or its
Affiliates respecting payment of, such withholding and employment-related taxes,
the Administrator may, in its discretion and pursuant to such rules as it may
adopt, permit the Participant to satisfy such obligations, in whole or in part,
by delivering shares of Common Stock. Such shares shall have a Fair Market Value
equal to the minimum required tax withholding, based on the minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes.
In no event may the Participant deliver shares having a Fair Market Value in
excess of such statutory minimum required tax withholding. The Participant’s
election to deliver shares of Common Stock for this purpose shall be made on or
before the date

 

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that the amount of tax to be withheld is determined under applicable tax law.
Such election shall be approved by the Administrator and otherwise comply with
such rules as the Administrator may adopt to assure compliance with Rule 16b-3,
or any successor provision, as then in effect, of the General Rules and
Regulations under the Securities Exchange Act of 1934, if applicable.
     (d) Nontransferability. No Performance Award shall be transferable, in
whole or in part, by the Participant, other than by will or by the laws of
descent and distribution. If the Participant shall attempt any transfer of any
Performance Award granted under the Plan, such transfer shall be void and the
Performance Award shall terminate.
     (e) No Rights as Shareholder. A Participant (or the Participant’s successor
or successors) shall have no rights as a shareholder with respect to any shares
covered by a Performance Award until the date of the issuance of a stock
certificate evidencing such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date
such stock certificate is actually issued (except as otherwise provided in
Section 14 of the Plan).
     (f) Delay of Payment for Section 162(m). In the event the Administrator
reasonably anticipates that the Company’s income tax deduction with respect to
any payment or issuance of shares of Stock required by a Performance Award would
be limited or eliminated by Code Section 162(m), the Administrator may, subject
to such terms and conditions as determined by the Administrator, delay all or a
portion of such payment or the issuance of all or a portion of such shares of
Stock, as the case may be, until the earlier of (i) the date at which the
Administrator reasonably anticipates that the corresponding income tax deduction
will not be so limited or eliminated, and (ii) the Participant’s separation from
service, as such term is defined in Code Section 409A and the regulations,
notices and other guidance of general applicability issued thereunder.
     (g) Other Provisions. The Performance Award Agreement authorized under this
Section 12 shall contain such other provisions as the Administrator shall deem
advisable.
SECTION 13.
STOCK APPRECIATION RIGHTS
     Each Stock Appreciation Right granted pursuant to this Section 13 shall be
evidenced by a written stock appreciation right agreement (the “Stock
Appreciation Right Agreement”). The Stock Appreciation Right Agreement shall be
in such form as may be approved from time to time by the Administrator and may
vary from Participant to Participant; provided, however, that each Participant
and each Stock Appreciation Right Agreement shall comply with and be subject to
the following terms and conditions:
     (a) Awards. A Stock Appreciation Right shall entitle the Participant to
receive, upon exercise, cash, shares of Stock, or any combination thereof,
having a value equal to the excess of (i) the Fair Market Value of a specified
number of shares of Stock on the date of such exercise, over (ii) a specified
exercise price. Unless otherwise determined by the Administrator, the

 

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specified exercise price shall not be less than 100% of the Fair Market Value of
such shares of Stock on the date of grant of the Stock Appreciation Right. A
Stock Appreciation Right may be granted independent of or in tandem with a
previously or contemporaneously granted Option.
     (b) Term and Exercisability. The term during which any Stock Appreciation
Right granted under the Plan may be exercised shall be established in each case
by the Administrator. The Stock Appreciation Right Agreement shall state when
the Stock Appreciation Right becomes exercisable and shall also state the
maximum term during which such Stock Appreciation Right may be exercised. In the
event a Stock Appreciation Right is exercisable immediately, the manner of
exercise of such Stock Appreciation Right in the event it is not exercised in
full immediately shall be specified in the Stock Appreciation Right Agreement.
The Administrator may accelerate the exercisability of any Stock Appreciation
Right granted hereunder which is not immediately exercisable as of the date of
grant. If a Stock Appreciation Right is granted in tandem with an Option, the
Stock Appreciation Right Agreement shall set forth the extent to which the
exercise of all or a portion of the Stock Appreciation Right shall cancel a
corresponding portion of the Option, and the extent to which the exercise of all
or a portion of the Option shall cancel a corresponding portion of the Stock
Appreciation Right.
     (c) Withholding Taxes. The Company or its Affiliate shall be entitled to
withhold and deduct from future wages of the Participant all legally required
amounts necessary to satisfy any and all withholding and employment-related
taxes attributable to the Participant’s Stock Appreciation Right. In the event
the Participant is required under the Stock Appreciation Right to pay the
Company or its Affiliate, or make arrangements satisfactory to the Company or
its Affiliate respecting payment of, such withholding and employment-related
taxes, the Administrator may, in its discretion and pursuant to such rules as it
may adopt, permit the Participant to satisfy such obligations, in whole or in
part, by delivering shares of Common Stock. Such shares shall have a Fair Market
Value equal to the minimum required tax withholding, based on the minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes. In no event may the Participant deliver shares having a Fair
Market Value in excess of such statutory minimum required tax withholding. The
Participant’s election to deliver shares of Common Stock for this purpose shall
be made on or before the date that the amount of tax to be withheld is
determined under applicable tax law. Such election shall be approved by the
Administrator and otherwise comply with such rules as the Administrator may
adopt to assure compliance with Rule 16b-3, or any successor provision, as then
in effect, of the General Rules and Regulations under the Securities Exchange
Act of 1934, if applicable.
     (d) Nontransferability. No Stock Appreciation Right shall be transferable,
in whole or in part, by the Participant, other than by will or by the laws of
descent and distribution. If the Participant shall attempt any transfer of any
Stock Appreciation Right granted under the Plan, such transfer shall be void and
the Stock Appreciation Right shall terminate.
     (e) No Rights as Shareholder. A Participant (or the Participant’s successor
or successors) shall have no rights as a shareholder with respect to any shares
covered by a Stock Appreciation Right until the date of the issuance of a stock
certificate evidencing such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities

 

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or other property), distributions or other rights for which the record date is
prior to the date such stock certificate is actually issued (except as otherwise
provided in Section 14 of the Plan).
     (f) Other Provisions. The Stock Appreciation Right Agreement authorized
under this Section 13 shall contain such other provisions as the Administrator
shall deem advisable, including but not limited to any restrictions on the
exercise of the Stock Appreciation Right which may be necessary to comply with
Rule 16b-3 of the Securities Exchange Act of 1934, as amended.
SECTION 14.
RECAPITALIZATION, SALE, MERGER, EXCHANGE
OR LIQUIDATION
     In the event of an increase or decrease in the number of shares of Common
Stock resulting from a stock dividend, stock split, reverse split, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company, the Board may, in its sole discretion, adjust the
number of shares of Stock reserved under Section 6 hereof, the number of shares
of Stock covered by each outstanding Award, and, if applicable, the price per
share thereof to reflect such change. Additional shares which may become covered
by the Award pursuant to such adjustment shall be subject to the same
restrictions as are applicable to the shares with respect to which the
adjustment relates.
     Unless otherwise provided in the agreement evidencing an Award, in the
event of an acquisition of the Company through the sale of substantially all of
the Company’s assets and the consequent discontinuance of its business or
through a merger, consolidation, exchange, reorganization, reclassification,
extraordinary dividend, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise (collectively
referred to as a “transaction”), the Board may provide for one or more of the
following:
     (a) the equitable acceleration of the exercisability of any outstanding
Options or Stock Appreciation Rights, the vesting and payment of any Performance
Awards, or the lapsing of the risks of forfeiture on any Restricted Stock Awards
or Restricted Stock Unit Awards;
     (b) the complete termination of this Plan, the cancellation of outstanding
Options or Stock Appreciation Rights not exercised prior to a date specified by
the Board (which date shall give Participants a reasonable period of time in
which to exercise such Option or Stock Appreciation Right prior to the
effectiveness of such transaction), the cancellation of any Performance Award
and the cancellation of any Restricted Stock Awards or Restricted Stock Unit
Awards for which the risks of forfeiture have not lapsed;
     (c) that Participants holding outstanding Options and Stock Appreciation
Rights shall receive, with respect to each share of Stock subject to such Option
or Stock Appreciation Right, as of the effective date of any such transaction,
cash in an amount equal to the excess of the Fair Market Value of such Stock on
the date immediately preceding the effective date of such

 

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transaction over the price per share of such Options or Stock Appreciation
Rights; provided that the Board may, in lieu of such cash payment, distribute to
such Participants shares of Common Stock of the Company or shares of stock of
any corporation succeeding the Company by reason of such transaction, such
shares having a value equal to the cash payment herein;
     (d) that Participants holding outstanding Restricted Stock Awards,
Restricted Stock Unit Awards and Performance Share Awards shall receive, with
respect to each share of Stock subject to such Awards, as of the effective date
of any such transaction, cash in an amount equal to the Fair Market Value of
such Stock on the date immediately preceding the effective date of such
transaction; provided that the Board may, in lieu of such cash payment,
distribute to such Participants shares of Common Stock of the Company or shares
of stock of any corporation succeeding the Company by reason of such
transaction, such shares having a value equal to the cash payment herein;
     (e) the continuance of the Plan with respect to the exercise of Options or
Stock Appreciation Rights which were outstanding as of the date of adoption by
the Board of such plan for such transaction and the right to exercise such
Options and Stock Appreciation Rights as to an equivalent number of shares of
stock of the corporation succeeding the Company by reason of such transaction;
and
     (f) the continuance of the Plan with respect to Restricted Stock Awards or
Restricted Stock Unit Awards for which the risks of forfeiture have not lapsed
as of the date of adoption by the Board of such plan for such transaction and
the right to receive an equivalent number of shares of stock of the corporation
succeeding the Company by reason of such transaction.
     (g) the continuance of the Plan with respect to Performance Awards and, to
the extent applicable, the right to receive an equivalent number of shares of
stock of the corporation succeeding the Company by reason for such transaction.
The Board may restrict the rights of or the applicability of this Section 14 to
the extent necessary to comply with Section 16(b) of the Securities Exchange Act
of 1934, the Internal Revenue Code or any other applicable law or regulation.
The grant of an Award pursuant to the Plan shall not limit in any way the right
or power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure or to merge, exchange or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
SECTION 15.
INVESTMENT PURPOSE
     No shares of Stock shall be issued pursuant to the Plan unless and until
there has been compliance, in the opinion of Company’s counsel, with all
applicable legal requirements, including without limitation, those relating to
securities laws and stock exchange listing requirements. As a condition to the
issuance of Stock to Participant, the Administrator may require Participant to
(a) represent that the shares of Stock are being acquired for investment and not
resale and to make such other representations as the Administrator shall deem
necessary or

 

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appropriate to qualify the issuance of the shares as exempt from the Securities
Act of 1933 and any other applicable securities laws, and (b) represent that
Participant shall not dispose of the shares of Stock in violation of the
Securities Act of 1933 or any other applicable securities laws.
     As a further condition to the grant of any Option or the issuance of Stock
to Participant, Participant agrees to the following:
     (a) In the event the Company advises Participant that it plans an
underwritten public offering of its Common Stock in compliance with the
Securities Act of 1933, as amended, and the underwriter(s) seek to impose
restrictions under which certain shareholders may not sell or contract to sell
or grant any option to buy or otherwise dispose of part or all of their stock
purchase rights of the Common Stock underlying Awards, Participant will not, for
a period not to exceed 180 days from the prospectus, sell or contract to sell or
grant an option to buy or otherwise dispose of any Option granted to Participant
pursuant to the Plan or any of the underlying shares of Common Stock without the
prior written consent of the underwriter(s) or its representative(s).
     (b) In the event the Company makes any public offering of its securities
and determines in its sole discretion that it is necessary to reduce the number
of issued but unexercised stock purchase rights so as to comply with any state’s
securities or Blue Sky law limitations with respect thereto, the Board of
Directors of the Company shall have the right (i) to accelerate the
exercisability of any Option and the date on which such Option must be
exercised, provided that the Company gives Participant prior written notice of
such acceleration, and (ii) to cancel any Options or portions thereof which
Participant does not exercise prior to or contemporaneously with such public
offering.
     (c) In the event of a transaction (as defined in Section 14 of the Plan),
Participant will comply with Rule 145 of the Securities Act of 1933 and any
other restrictions imposed under other applicable legal or accounting principles
if Participant is an “affiliate” (as defined in such applicable legal and
accounting principles) at the time of the transaction, and Participant will
execute any documents necessary to ensure compliance with such rules.
     The Company reserves the right to place a legend on any stock certificate
issued in connection with an Award pursuant to the Plan to assure compliance
with this Section 15.
SECTION 16.
AMENDMENT OF THE PLAN
     The Board may from time to time, insofar as permitted by law, suspend or
discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment, except as is authorized in Section 14, shall
impair the terms and conditions of any Award which is outstanding on the date of
such revision or amendment to the material detriment of the Participant without
the consent of the Participant. Notwithstanding the foregoing, no such revision
or amendment shall (i) materially increase the number of shares subject to the
Plan except as provided in Section 14 hereof, (ii) change the designation of the
class of employees

 

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eligible to receive Awards, (iii) decrease the price at which Options may be
granted, or (iv) materially increase the benefits accruing to Participants under
the Plan without the approval of the shareholders of the Company if such
approval is required for compliance with the requirements of any applicable law
or regulation. Furthermore, the Plan may not, without the approval of the
shareholders, be amended in any manner that will cause incentive stock options
to fail to meet the requirements of Section 422 of the Internal Revenue Code.
SECTION 17.
NO OBLIGATION TO EXERCISE OPTION
     The granting of an Option shall impose no obligation upon the Participant
to exercise such Option. Further, the granting of an Award hereunder shall not
impose upon the Company or any Affiliate any obligation to retain the
Participant in its employ for any period.