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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.



 









 





     (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.



 









 





     (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.



 









 





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



 









 







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.



 









 





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



 









 







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



 









 







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



 









 







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;



 









 







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



 









 







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



 









 







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



 









 







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



 









 







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



 









 







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



 









 







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



 









 







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



 









 







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.