2003 Stock Incentive Plan



 Exhibit 10.20 
  
 CERADYNE, INC. 
  
 2003 STOCK INCENTIVE PLAN 
  
 This 2003 STOCK INCENTIVE PLAN (the “Plan”) is hereby established by Ceradyne, Inc., a Delaware corporation (the “Company”), adopted
by its Board of Directors as of April 16, 2003 (the “Effective Date”). 
  
 ARTICLE 1. 
  
 PURPOSES
OF THE PLAN 
  
 1.1.    Purposes.    The purposes of the Plan are (a) to enhance the Company’s ability to attract and retain the services of qualified employees, officers and directors (including
non-employee officers and directors), and consultants and other service providers upon whose judgment, initiative and efforts the successful conduct and development of the Company’s business largely depends, and (b) to provide additional
incentives to such persons or entities to devote their utmost effort and skill to the advancement and betterment of the Company, by providing them an opportunity to participate in the ownership of the Company and thereby have an interest in the
success and increased value of the Company. 
  
 ARTICLE 2.

  
 DEFINITIONS 
  
 For purposes of this Plan, the following terms shall have the meanings
indicated: 
  
 2.1.    Administrator.    “Administrator” means the Board or, if the Board delegates responsibility for any matter to the Committee, the term Administrator shall mean the
Committee. 
  
 2.2.    Affiliated
Company.    “Affiliated Company” means any “parent corporation” or “subsidiary corporation” of the Company, whether now existing or hereafter created or acquired, as those terms are defined in
Sections 424(e) and 424(f) of the Code, respectively. 
  
 2.3.    Board.    “Board” means the Board of Directors of the Company. 
  
 2.4.    Change in Control.    “Change in Control” shall mean: 
  
           (a)    The acquisition, directly or indirectly, in one transaction or a series of related transactions, by any person or group (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of the beneficial ownership of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of all outstanding securities of the Company;

  
           (b)    A merger or consolidation in which the Company is not the surviving entity, except for a transaction in which the holders of the outstanding
voting securities of the Company immediately prior to such merger or consolidation hold as a result of holding Company securities prior to such transaction, in the aggregate, securities possessing more than fifty percent (50%) of the total combined
voting power of all outstanding voting securities of the surviving entity (or the parent of the surviving entity) immediately after such merger or consolidation; 
  
           (c)    A reverse merger in which the
Company is the surviving entity but in which the holders of the outstanding voting securities of the Company immediately prior to such merger hold, in the aggregate, securities possessing less than fifty percent (50%) of the total combined voting
power of all outstanding voting securities of the Company or of the acquiring entity immediately after such merger; 
  

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           (d)    The sale,
transfer or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, except for a transaction in which the holders of the outstanding voting securities of the Company
immediately prior to such transaction(s) receive as a distribution with respect to securities of the Company, in the aggregate, securities possessing more than fifty percent (50%) of the total combined voting power of all outstanding voting
securities of the acquiring entity immediately after such transaction(s); or 
  
           (e)    The approval by the stockholders of a plan or proposal for the liquidation or dissolution of the Company. 
  
 2.5.    Code.    “Code” means the Internal Revenue Code of 1986, as amended from time to time. 
  
 2.6.    Committee.    “Committee” means a committee of two
or more members of the Board appointed to administer the Plan, as set forth in Section 6.1 hereof. 
  
 2.7.    Common Stock.    “Common Stock” means the Common Stock of the Company, subject to
adjustment pursuant to Section 4.2 hereof. 
  
 2.8.    Disability.    “Disability” means permanent and total disability as defined in Section 22(e)(3) of the Code. The Administrator’s determination of a Disability or
the absence thereof shall be conclusive and binding on all interested parties. 
  
 2.9.    Effective Date.    “Effective Date” means the date on which the Plan is adopted by the Board, as set forth on the first page hereof. 

 
 2.10.  Exchange
Act.    “Exchange Act” means the Securities and Exchange Act of 1934, as amended. 
  
 2.11.  Exercise Price.    “Exercise Price” means the purchase price per share of Common Stock
payable upon exercise of an Option. 
  
 2.12.  Fair Market Value.    “Fair Market Value” on any given date means the value of one share of Common Stock, determined as follows: 
  
           (a)    If the Common Stock is then listed or admitted to trading on a Nasdaq market system or a stock exchange which reports closing sale prices, the
Fair Market Value shall be the closing sale price on the date of valuation on such Nasdaq market system or principal stock exchange on which the Common Stock is then listed or admitted to trading, or, if no closing sale price is quoted on such day,
then the Fair Market Value shall be the closing sale price of the Common Stock on such Nasdaq market system or such exchange on the next preceding day for which a closing sale price is reported. 
  
           (b)    If the Common Stock is not then listed or admitted to trading on a Nasdaq market system or a stock exchange which reports closing sale prices, the
Fair Market Value shall be the average of the closing bid and asked prices of the Common Stock in the over-the-counter market on the date of valuation. 
  
           (c)    If neither (a) nor (b) is applicable as of the date of
valuation, then the Fair Market Value shall be determined by the Administrator in good faith using any reasonable method of evaluation, which determination shall be conclusive and binding on all interested parties. 
  
 2.13.  Incentive
Option.    “Incentive Option” means any Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code. 
  
 2.14.  Incentive Option Agreement.    “Incentive Option Agreement”
means an Option Agreement with respect to an Incentive Option. 
  

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 2.15.  NASD Dealer.    “NASD Dealer” means a
broker-dealer that is a member of the National Association of Securities Dealers, Inc. 
  
 2.16.  Nonqualified Option.    “Nonqualified Option” means any Option that is not an Incentive Option. To the extent that any Option designated as an Incentive
Option fails in whole or in part to qualify as an Incentive Option, including, without limitation, for failure to meet the limitations applicable to a 10% Stockholder or because it exceeds the annual limit provided for in Section 5.6 below, it shall
to that extent constitute a Nonqualified Option. 
  
 2.17.  Nonqualified Option Agreement.    “Nonqualified Option Agreement” means an Option Agreement with respect to a Nonqualified Option. 
  
 2.18.  Option.    “Option” means any option to purchase Common Stock granted pursuant to the Plan. 
  
 2.19.  Option Agreement.    “Option Agreement” means the written
agreement entered into between the Company and the Optionee with respect to an Option granted under the Plan. 
  
 2.20.  Optionee.    “Optionee” means an individual or entity who holds an Option. 
  
 2.21.  Service
Provider.    “Service Provider” means a consultant or other natural person the Administrator authorizes to become an Optionee and who provides services to (i) the Company, (ii) an Affiliated Company, or (iii) any
other business venture designated by the Administrator in which the Company (or any entity that is a successor to the Company) or an Affiliated Company has a significant ownership interest. 
  
 2.22.  10%
Stockholder.    “10% Stockholder” means a person who, as of a relevant date, owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or of an Affiliated Company. 
  
 ARTICLE 3. 
  
 ELIGIBILITY 
  
 3.1.    Incentive Options.    Only employees of the Company or of an Affiliated Company (including officers of the Company and members of the Board if they are employees of the Company
or of an Affiliated Company) are eligible to receive Incentive Options under the Plan. 
  
 3.2.    Nonqualified Options.    Employees of the Company or of an Affiliated Company, officers of the Company and members of the Board (whether or not employed by
the Company or an Affiliated Company), and Service Providers are eligible to receive Nonqualified Options under the Plan. 
  
 3.3.    Section 162(m) Limitation.    In no event shall any Optionee be granted Options in any one
calendar year pursuant to which the aggregate number of shares of Common Stock that may be acquired thereunder exceeds two hundred fifty thousand (250,000) shares, subject to adjustment as to the number and kind of shares pursuant to Section 4.2
hereof. 
  
 ARTICLE 4. 
  
 PLAN SHARES 
  
 4.1.    Shares Subject to the
Plan.    The number of shares of Common Stock that may be issued under the Plan shall be five hundred thousand (500,000) shares, subject to adjustment as to the number and kind of shares pursuant to Section 4.2 hereof. For
purposes of this limitation, in the event that (a) all or any portion of any 

  

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Option granted under the Plan can no longer under any circumstances be exercised, or (b) any shares of Common Stock are reacquired by the Company pursuant to
an Option Agreement, the shares of Common Stock allocable to the unexercised portion of such Option or such other shares so reacquired shall again be available for issuance pursuant to Options under the Plan. 
  
 4.2.    Changes in Capital
Structure.    In the event that the outstanding shares of Common Stock are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of
a recapitalization, stock split, reverse stock split, reclassification, stock dividend, or other similar change in the capital structure of the Company, then appropriate adjustments shall be made by the Administrator to the aggregate number and kind
of shares subject to this Plan, the number and kind of shares and the price per share subject to outstanding Option Agreements and the limit on the number of shares under Section 3.3, all in order to preserve, as nearly as practical, but not to
increase, the benefits to Optionees. 
  
 ARTICLE 5.

  
 OPTIONS 
  
 5.1.    Option
Agreement.    Each Option granted pursuant to this Plan shall be evidenced by an Option Agreement which shall specify the number of shares subject thereto, vesting provisions relating to such Option, the Exercise Price per
share, and whether the Option is an Incentive Option or Nonqualified Option. As soon as is practical following the grant of an Option, an Option Agreement shall be duly executed and delivered by or on behalf of the Company to the Optionee to whom
such Option was granted. Each Option Agreement shall be in such form and contain such additional terms and conditions, not inconsistent with the provisions of this Plan, as the Administrator shall, from time to time, deem desirable. Each Option
Agreement may be different from each other Option Agreement. 
  
 5.2.    Exercise Price.    The Exercise Price per share of Common Stock covered by each Option shall be determined by the Administrator, subject to the following: (a) the Exercise Price
of an Incentive Option shall not be less than 100% of Fair Market Value on the date the Incentive Option is granted, (b) the Exercise Price of a Nonqualified Option shall not be less than 100% of Fair Market Value on the date the Nonqualified Option
is granted, and (c) if the person to whom an Incentive Option is granted is a 10% Stockholder on the date of grant, the Exercise Price shall not be less than 110% of Fair Market Value on the date the Incentive Option is granted. However, an Option
may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424 of the Code.

  
 5.3.    Payment of Exercise
Price.    Subject to any legal restrictions, payment of the Exercise Price shall be made upon exercise of an Option and may be made, in the discretion of the Administrator, by: (a) cash; (b) check; (c) the surrender of shares
of Common Stock owned by the Optionee (provided that if such shares were acquired pursuant to the exercise of options granted by the Company, such shares must have been held by the Optionee for at least six (6) months), which surrendered shares
shall be valued at Fair Market Value as of the date of such exercise; (d) the cancellation of indebtedness of the Company to the Optionee; (e) the waiver of compensation due or accrued to the Optionee for services rendered; (f) provided that a
public market for the Common Stock exists, a “same day sale” commitment from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to exercise the Option and to sell a portion of the shares so purchased to pay for the
Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt of such shares to forward the Exercise Price directly to the Company; (g) provided that a public market for the Common Stock exists, a “margin” commitment from the
Optionee and an NASD Dealer whereby the Optionee irrevocably elects to exercise the Option and to pledge the shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such shares to forward the Exercise Price directly to the Company; or (h) any combination of the foregoing methods of payment or any other consideration or method of payment as shall be
permitted by applicable law. 
  

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 5.4.    Term and Termination of Options.    The
term and provisions for termination of each Option shall be as fixed by the Administrator, but no Option may be exercisable more than ten (10) years after the date it is granted. An Incentive Option granted to a person who is a 10% Stockholder on
the date of grant shall not be exercisable more than five (5) years after the date it is granted. 
  
 5.5.    Vesting and Exercise of Options.    Each Option shall vest and become exercisable in one or
more installments at such time or times and subject to such conditions, including without limitation the achievement of specified performance goals or objectives, as shall be determined by the Administrator. 
  
 5.6.    Annual Limit on Incentive
Options.    To the extent required for “incentive stock option” treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the Common Stock with respect to which
Incentive Options granted under this Plan and any other plan of the Company or any Affiliated Company become exercisable for the first time by an Optionee during any calendar year shall not exceed $100,000. 
  
 5.7.    Nontransferability of
Options.    Options shall not be assignable or transferable except by will or the laws of descent and distribution, and during the life of the Optionee shall be exercisable only by such Optionee. 
  
 5.8.    Rights as
Stockholder.    An Optionee or permitted transferee of an Option shall have no rights or privileges as a stockholder with respect to any shares covered by an Option until such Option has been duly exercised and certificates
representing shares purchased upon such exercise have been issued to such person. 
  
 ARTICLE 6. 
  
 ADMINISTRATION OF THE PLAN 
  
 6.1.    Administrator.    Authority to control and manage the operation and administration of the Plan shall be vested in the Board, which may delegate such responsibilities in whole or
in part to a committee consisting of two (2) or more members of the Board (the “Committee”). Members of the Committee may be appointed from time to time by, and shall serve at the pleasure of, the Board. The Board may limit the composition
of the Committee to those persons necessary to comply with the requirements of Section 162(m) of the Code and Section 16 of the Exchange Act. As used herein, the term “Administrator” means the Board or, with respect to any matter as to
which responsibility has been delegated to the Committee, the term Administrator shall mean the Committee. 
  
 6.2.    Powers of the Administrator.    In addition to any other powers or authority conferred upon
the Administrator elsewhere in the Plan or by law, the Administrator shall have full power and authority: (a) to determine the persons to whom, and the time or times at which, Incentive Options or Nonqualified Options shall be granted, the number of
shares to be represented by each Option, and the consideration to be received by the Company upon the exercise of such Options; (b) to interpret the Plan; (c) to create, amend or rescind rules and regulations relating to the Plan; (d) to determine
the terms, conditions and restrictions contained in, and the form of, Option Agreements; (e) to determine the identity or capacity of any persons who may be entitled to exercise an Optionee’s rights under any Option under the Plan; (f) to
correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Option Agreement; (g) to accelerate the vesting of any Option; (h) to amend outstanding Option Agreements to provide for, among other things, any change
or modification which the Administrator could have included in the original Agreement or in furtherance of the powers provided for herein; and (i) to make all other determinations necessary or advisable for the administration of the Plan, but only
to the extent not contrary to the express provisions of the Plan. Any action, decision, interpretation or determination made in good faith by the Administrator in the exercise of its authority conferred upon it under the Plan shall be final and
binding on the Company and all Optionees. 
  
 6.3.    Limitation on Liability.    No employee of the Company or member of the Board or Committee shall be subject to any liability with respect to duties under the Plan unless the
person acts fraudulently or in bad faith. 

  

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To the extent permitted by law, the Company shall indemnify each member of the Board or Committee, and any employee of the Company with duties under the
Plan, who was or is a party, or is threatened to be made a party, to any threatened, pending or completed proceeding, whether civil, criminal, administrative or investigative, by reason of such person’s conduct in the performance of duties
under the Plan. 
  
 ARTICLE 7. 
  
 CHANGE IN CONTROL 
  
 7.1.    Change in
Control.    In order to preserve an Optionee’s rights in the event of a Change in Control of the Company: 
  
           (a)    Vesting of all outstanding Options shall accelerate
automatically effective as of immediately prior to the consummation of the Change in Control unless the Options are to be assumed by the acquiring or successor entity (or parent thereof) or new options or New Incentives are to be issued in exchange
therefor, as provided in subsection (b) below. 
  
           (b)    Vesting of outstanding Options shall not accelerate if and to the extent that: (i) the Options (including the unvested portion thereof) are to be
assumed by the acquiring or successor entity (or parent thereof) or new options of comparable value are to be issued in exchange therefor pursuant to the terms of the Change in Control transaction, or (ii) the Options (including the unvested portion
thereof) are to be replaced by the acquiring or successor entity (or parent thereof) with other incentives of comparable value under a new incentive program (“New Incentives”) containing such terms and provisions as the Administrator in
its discretion may consider equitable. If outstanding Options are assumed, or if new options of comparable value are issued in exchange therefor, then each such Option or new option shall be appropriately adjusted, concurrently with the Change in
Control, to apply to the number and class of securities or other property that the Optionee would have received pursuant to the Change in Control transaction in exchange for the shares issuable upon exercise of the Option had the Option been
exercised immediately prior to the Change in Control, and appropriate adjustment also shall be made to the Exercise Price such that the aggregate Exercise Price of each such Option or new option shall remain the same as nearly as practicable.

  
           (c)    If any Option is assumed by an acquiring or successor entity (or parent thereof) or a new option of comparable value or New Incentive is issued in
exchange therefor pursuant to the terms of a Change in Control transaction, then if so provided in an Option Agreement, the vesting of the Option, the new option or the New Incentive shall accelerate if and at such time as the Optionee’s
service as an employee, director, officer, consultant or other service provider to the acquiring or successor entity (or a parent or subsidiary thereof) is terminated involuntarily or voluntarily under certain circumstances within a specified period
following consummation of the Change in Control, pursuant to such terms and conditions as shall be set forth in the Option Agreement. 
  
           (d)    If vesting of outstanding Options will accelerate pursuant
to subsection (a) above, the Administrator in its discretion may provide, in connection with the Change in Control transaction, for the purchase or exchange of each Option for an amount of cash or other property having a value equal to the
difference (or “spread”) between: (x) the value of the cash or other property that the Optionee would have received pursuant to the Change in Control transaction in exchange for the shares issuable upon exercise of the Option had the
Option been exercised immediately prior to the Change in Control, and (y) the Exercise Price of the Option. 
  
           (e)    The Administrator shall have the discretion to provide in
each Option Agreement other terms and conditions that relate to (i) vesting of such Option in the event of a Change in Control, and (ii) assumption of such Options or issuance of comparable securities or New Incentives in the event of a Change in
Control. The aforementioned terms and conditions may vary in each Option Agreement, and may be different from and have precedence over the provisions set forth in Sections 7.1(a)—7.1(d) above. 
  
  

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           (f)    Outstanding
Options shall terminate and cease to be exercisable upon consummation of a Change in Control except to the extent that the Options are assumed by the successor entity (or parent thereof) pursuant to the terms of the Change in Control transaction.

  
           (g)    If outstanding Options will not be assumed by the acquiring or successor entity (or parent thereof), the Administrator shall cause written notice
of a proposed Change in Control transaction to be given to Optionees not less than fifteen (15) days prior to the anticipated effective date of the proposed transaction. 
  
 ARTICLE 8. 
  
 AMENDMENT AND TERMINATION OF THE PLAN 
  
 8.1.    Amendments.    The Board may from time to time alter, amend, suspend or terminate the Plan
in such respects as the Board may deem advisable. No such alteration, amendment, suspension or termination shall be made which shall substantially affect or impair the rights of any Optionee under an outstanding Option Agreement without such
Optionee’s consent. The Board may alter or amend the Plan to comply with requirements under the Code relating to Incentive Options or other types of options which give Optionees more favorable tax treatment than that applicable to Options
granted under this Plan as of the date of its adoption. Upon any such alteration or amendment, any outstanding Option granted hereunder may, if the Administrator so determines and if permitted by applicable law, be subject to the more favorable tax
treatment afforded to an Optionee pursuant to such terms and conditions. 
  
 8.2.    Plan Termination.    Unless the Plan shall theretofore have been terminated, the Plan shall terminate on the tenth (10th) anniversary of the Effective Date
and no Options may be granted under the Plan thereafter, but Options then outstanding shall continue in effect in accordance with their respective terms. 
  
 ARTICLE 9. 
  
 TAX WITHHOLDING 
  
 9.1.    Withholding.    The Company shall have the power to withhold, or require an Optionee to remit to the Company, an amount sufficient to satisfy any
applicable Federal, state, and local tax withholding requirements with respect to any Options exercised under the Plan. To the extent permissible under applicable tax, securities and other laws, the Administrator may, in its sole discretion and upon
such terms and conditions as it may deem appropriate, permit an Optionee to satisfy his or her obligation to pay any such tax, in whole or in part, up to an amount determined on the basis of the highest marginal tax rate applicable to such Optionee,
by (a) directing the Company to apply shares of Common Stock to which the Optionee is entitled as a result of the exercise of an Option or (b) delivering to the Company shares of Common Stock owned by the Optionee. The shares of Common Stock so
applied or delivered in satisfaction of the Optionee’s tax withholding obligation shall be valued at their Fair Market Value as of the date of measurement of the amount of income subject to withholding. 
  
 ARTICLE 10. 
  
 MISCELLANEOUS 
  
 10.1.    Benefits Not
Alienable.    Other than as provided above, benefits under the Plan may not be assigned or alienated, whether voluntarily or involuntarily. Any unauthorized attempt at assignment, transfer, pledge or other disposition shall
be without effect. 
  
 10.2.    No
Enlargement of Employee Rights.    This Plan is strictly a voluntary undertaking on the part of the Company and shall not be deemed to constitute a contract between the Company and any Optionee to be 

  

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consideration for, or an inducement to, or a condition of, the employment of any Optionee. Nothing contained in the Plan shall be deemed to give the right to
any Optionee to be retained as an employee of the Company or any Affiliated Company or to interfere with the right of the Company or any Affiliated Company to discharge any Optionee at any time. 
  
 10.3.    Application of
Funds.    The proceeds received by the Company from the sale of Common Stock pursuant to Option Agreements, except as otherwise provided herein, will be used for general corporate purposes. 
  
 10.4.    Annual
Reports.    During the term of this Plan, the Company will furnish to each Optionee who does not otherwise receive such materials, copies of all reports, proxy statements and other communications that the Company distributes
generally to its stockholders. 
  

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