Exhibit 10.1


 


BENTLEY
PHARMACEUTICALS, INC.


 


AMENDED AND
RESTATED



2005 EQUITY AND INCENTIVE PLAN


 


1.                                      Establishment and Purpose


 


The Bentley Pharmaceuticals, Inc.
Amended and Restated 2005 Equity and Incentive Plan (the “Plan”) is a successor
to the following equity compensation plans:


 


(i)                                     Bentley
Pharmaceuticals, Inc. Amended and Restated 1991 Stock Option Plan (the “1991 Plan”);


 


(ii)                                  2001 Employee Stock
Option Plan of Bentley Pharmaceuticals, Inc. (the “2001 Plan”);
and


 


(iii)                               2001 Directors’ Stock
Option Plan of Bentley Pharmaceuticals, Inc. (the “Directors’
Plan”).


 


The 1991 Plan, the 2001 Plan, and the
Directors’ Plan are sometimes collectively referred to herein as the “Prior Plans”. Effective as of May 24, 2005, the date
the Plan was originally approved by the Company’s stockholders (the “Effective Date”), no further options shall be granted under
the Prior Plans. However, the provisions of the Prior Plans shall continue to
apply to options granted under the Prior Plans prior to the Effective Date.


 


The purpose of the Plan is to attract and
retain key employees, consultants, and directors of the Company and its
Affiliates, to provide an incentive for them to achieve long-range performance
goals, and to enable them to participate in the long-term growth of the Company.
The Plan seeks to achieve this purpose by providing Awards in the form of
Restricted Stock, Restricted Stock Units, Cash Awards, Options (which may constitute
Incentive Stock Options or Nonstatutory Stock Options) or Stock Appreciation Rights.


 


2.                                      Definitions


 


Capitalized terms are defined in the
provisions of the Plan or in Appendix 1 attached hereto, which is incorporated
in the Plan by this reference. Appendix 1 also contains a list of defined terms
and reference to where their definitions appear in the Plan.


 


3.                                      Administration


 


The Plan shall be administered by the
Committee. The Committee shall determine which eligible employees, consultants,
and directors will receive Awards. The Committee shall have authority to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the operation of the Plan as it shall from time to time consider advisable, to
interpret the provisions of the Plan and any Award agreement, and to remedy any
ambiguities or inconsistencies therein. The Committee’s decisions shall be
final and binding. To the extent


 


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permitted by applicable law, the Committee may delegate
to one or more executive officers of the Company the power to make Awards to
Participants who are not subject to Section 16 of the Exchange Act and all
determinations under the Plan with respect thereto, provided that the Committee
shall fix the maximum amount of such Awards for all such Participants and a
maximum for any one Participant, and such other features of the Awards as
required by applicable law.


 


4.                                      Eligibility


 


All employees, directors and consultants of
the Company or any Affiliate are eligible to be Participants in the Plan. Incentive
Stock Options may be granted only to eligible employees of the Company or
its Affiliates who are taxpayers for United States federal income tax purposes.


 


5.                                      Stock Available for Awards


 


(a)                                  Amount. Shares of Common Stock available for grants of
Awards under the Plan shall consist of (i) all shares of Common Stock
remaining available on the Effective Date for grant of options under the Prior
Plans, (ii) all shares of Common Stock subject to any outstanding option
under any of the Prior Plans or the Executive Options that after the Effective
Date expires, terminates unexercised, or is forfeited or settled in a manner
that results in fewer shares outstanding than were subject to the option as
originally granted, (iii) all additional shares that may become
available as a result of any adjustment under Section 5(b) and (iv) 750,000
additional shares approved at the 2006 Annual Meeting of Stockholders (the “2006 Shares”). Not more than 5,166,828 shares shall become
available under the Plan pursuant to clauses (i) and (ii) of the
preceding sentence. If any Award under the Plan expires, is terminated
unexercised, or is forfeited or settled in a manner that results in fewer
shares outstanding than were originally awarded, then any shares no longer
subject to such Award and not issued thereunder shall again be available for
Awards under the Plan. Common Stock issued through the assumption or
substitution of outstanding grants from an acquired company shall not reduce
the shares available for Awards under the Plan. Shares issued under the Plan may consist
in whole or in part of authorized but unissued shares or treasury shares. The
2006 Shares shall only be available for the grant of options, and therefore
shall not be available for grants of restricted stock, restricted stock units
or stock appreciation rights.


 


(b)                                  Adjustment. In the event that the Committee determines
that any stock dividend, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination,
exchange of shares, or other transaction affects the Common Stock such that an
adjustment is required in order to preserve the benefits intended to be
provided by the Plan, then the Committee (subject in the case of Incentive
Stock Options to any limitation required under the Code) shall equitably adjust
any or all of (i) the number and kind of shares in respect of which Awards
may be made under the Plan, (ii) the number and kind of shares
subject to outstanding Awards, and (iii) the exercise price with respect
to any of the foregoing, and if considered appropriate, the Committee may make
provision for a cash payment with respect to an outstanding Award, provided
that the number of shares subject to any Award shall always be a whole number.


 


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(c)                                  Limit on Individual Grants. The maximum number of shares
of Common Stock subject to all Awards that may be granted under the Plan
to any Participant in the aggregate in any calendar year shall not exceed
500,000 shares subject to adjustment under subsection (b). With respect to
any Award settled in cash that is intended to satisfy the requirements for “performance-based
compensation” (within the meaning of Section 162(m)(4)(C) of the
Code), no more than $5,000,000 may be paid to any one individual with
respect to each year of a Performance Period.


 


6.                                      Stock Options


 


(a)                                  Grant of Options. Subject to the provisions of the Plan,
the Committee may grant options (“Options”) to
purchase shares of Common Stock (i) complying with the requirements of Section 422
of the Code or any successor provision and any regulations thereunder (“Incentive Stock Options”), and (ii) not intended to
comply with such requirements (“Nonstatutory Stock Options”).
The Committee shall determine the number of shares subject to each Option and
the exercise price therefor, which shall not be less than 100% of the Fair
Market Value of the Common Stock on the date of grant.


 


(b)                                  Terms
and Conditions. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Committee may specify in
the applicable grant or thereafter; provided that (i) no Option shall be
exercisable after the expiration of ten years from the date the Option is
granted, and (ii) no Option may be granted with a reload feature
which provides for an automatic grant of additional or replacement options upon
the exercise of an Option. The Committee may impose such conditions with
respect to the exercise of Options, including conditions relating to applicable
securities laws, as it considers necessary or advisable.


 


(c)                                  Payment. No shares shall be delivered pursuant to any
exercise of an Option until payment in full of the exercise price therefor is
received by the Company. Such payment may be made in whole or in part in
cash or to the extent permitted by the Committee at or after the grant of the
Option, pursuant to any of the following methods:  (i) by actual delivery and transfer, or
attestation of ownership and delivery of a valid instrument of transfer, to the
Company of shares of Common Stock owned by the Participant, including vested
Restricted Stock, (ii) by retaining shares of Common Stock otherwise
issuable pursuant to the Option, (iii) for consideration received by the
Company under a broker-assisted cashless exercise program acceptable to the Company,
or (iv) for such other lawful consideration as the Committee may determine.


 


7.                                      Stock Appreciation Rights


 


(a)                                  Grant
of SARs. Subject to the provisions of the Plan, the Committee may grant
rights to receive any excess in value of shares of Common Stock over the
exercise price (“Stock Appreciation Rights” or “SARs”) in tandem with an Option (at or after the award of
the Option), or alone and unrelated to an Option. SARs in tandem with an Option
shall terminate to the extent that the related Option is exercised, and the
related Option shall terminate to the extent that the tandem SARs are exercised.
The Committee shall determine at the time of grant or thereafter whether SARs
are settled in cash, Common Stock or other securities of the Company, Awards or
other property.


 


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(b)                                  Exercise
Price. The Committee shall fix the exercise price of each SAR or
specify the manner in which the price shall be determined. An SAR granted in
tandem with an Option shall have an exercise price not less than the exercise
price of the related Option. An SAR granted alone and unrelated to an Option may not
have an exercise price less than 100% of the Fair Market Value of the Common
Stock on the date of the grant.


 


(c)                                  Limited
SARs. An SAR related to an Option, which SAR can only be
exercised upon or during limited periods following a change in control of the
Company, may entitle the Participant to receive an amount based upon the
highest price paid or offered for Common Stock in any transaction relating to
the change in control or paid during a specified period immediately preceding
the occurrence of the change in control in any transaction reported in the
stock market in which the Common Stock is normally traded.


 


8.                                      Restricted Stock and Restricted Stock Units


 


(a)                                  Grant
of Restricted Stock. Subject to the provisions of the Plan, the
Committee may grant shares of Common Stock subject to forfeiture (“Restricted Stock”) and determine the duration of the period
(the “Restricted Period”) during which, and
the conditions under which, the shares may be forfeited to the Company and
the other terms and conditions of such Awards. Shares of Restricted Stock may be
issued for no cash consideration or such minimum consideration as may be
required by applicable law.


 


(b)                                  Restrictions.
Shares of Restricted Stock may not be sold, assigned, transferred, pledged
or otherwise encumbered, except as permitted by the Committee, during the
Restricted Period. Shares of Restricted Stock shall be evidenced in such manner
as the Committee may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and unless otherwise determined by the Committee, deposited by the Participant,
together with a stock power endorsed in blank, with the Company. At the
expiration of the Restricted Period, the Company shall deliver such
certificates to the Participant or, if the Participant has died, to the
Participant’s Designated Beneficiary.


 


(c)                                  Restricted
Stock Units. Subject to the provisions of the Plan, the
Committee may grant the right to receive in the future shares of Common
Stock subject to forfeiture (“Restricted Stock Units”)
and determine the duration of the Restricted Period during which, and the conditions
under which, the Award may be forfeited to the Company and the other terms
and conditions of such Awards. Restricted Stock Unit Awards shall constitute an
unfunded and unsecured obligation of the Company, and shall be settled in
shares of Common Stock or cash, as determined by the Committee at the time of
grant or thereafter. Such Awards shall be made in the form of “units” with
each unit representing the equivalent of one share of Common Stock.


 


9.                                      General Provisions Applicable to Awards


 


(a)                                  Transferability.
Except as otherwise provided in this Section 9(a), an Award (i) shall
not be transferable other than as designated by the Participant by will or by
the laws of descent and distribution, and (ii) may be exercised
during the Participant’s lifetime only by the Participant or by the Participant’s
guardian or legal representative. In the discretion of the Committee, any Award
may be transferable upon such terms and conditions and to such extent as


 


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the Committee determines at or after grant,
provided that Incentive Stock Options may be transferable only to the
extent permitted by the Code.


 


(b)                                  Documentation.
Each Award under the Plan shall be evidenced by a writing delivered to the
Participant specifying the terms and conditions thereof and containing such
other terms and conditions not inconsistent with the provisions of the Plan as
the Committee considers necessary or advisable to achieve the purposes of the
Plan or to comply with applicable tax and regulatory laws and accounting
principles.


 


(c)                                  Committee
Discretion. Each type of Award may be made alone, in
addition to or in relation to any other Award. The terms of each type of Award
need not be identical, and the Committee need not treat Participants uniformly.
In addition to the authority granted to the Committee in Section 9(l) to
make Awards to Covered Employees which qualify as “performance-based
compensation” for purposes of Section 162(m) of the Code, the Company may grant
Awards subject to such performance conditions (including performance-based
vesting) as it shall determine in its discretion. Except as otherwise provided
by the Plan or a particular Award, any determination with respect to an Award may be
made by the Committee at the time of grant or at any time thereafter.


 


(d)                                  Dividends
and Cash Awards. In the discretion of the Committee, any Award
under the Plan may provide the Participant with (i) dividends or
dividend equivalents payable currently or deferred with or without interest,
and (ii) cash payments in lieu of or in addition to an Award.


 


(e)                                  Termination
of Employment or Service. The Committee shall determine and set
forth in the grant agreement evidencing the Award the effect on an Award of the
disability, death, retirement or other termination of employment or service of
a Participant and the extent to which, and the period during which, the
Participant’s legal representative, guardian or Designated Beneficiary may receive
payment of an Award or exercise rights thereunder. Unless the Committee
provides otherwise in any case, a Participant’s employment or service shall
have terminated for purposes of the Plan at the time the entity by which the
Participant is employed or to which the Participant renders service ceases to
be an Affiliate of the Company.


 


(f)                                    Change in Control. In order to preserve a Participant’s
rights under an Award in the event of a change in control of the Company as
defined by the Committee (a “Change in Control”), the Committee in its
discretion may, at the time an Award is made or at any time thereafter, take
one or more of the following actions:  (i) provide
for the acceleration of any time period relating to the exercise or payment of
the Award, (ii) provide for payment to the Participant of cash or other property
with a Fair Market Value equal to the amount that would have been received upon
the exercise or payment of the Award had the Award been exercised or paid upon
the Change in Control, (iii) adjust the terms of the Award in a manner
determined by the Committee to reflect the Change in Control, (iv) cause
the Award to be assumed, or new rights substituted therefor, by another entity,
or (v) make such other provision as the Committee may consider
equitable to Participants and in the best interests of the Company.


 


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(g)                                 Loans.
Except for loans to reporting Persons, which are not authorized hereunder, the
Committee may authorize the making of loans to Participants in connection
with the grant or exercise of any Award under the Plan.


 


(h)                                 Withholding
Taxes. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date
of the event creating the tax liability. In the Committee’s discretion, such
tax obligations may be paid in whole or in part in shares of Common
Stock, including shares retained from the Award creating the tax obligation,
valued at their Fair Market Value on the date of delivery. The Company and its
Affiliates may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to the Participant.


 


(i)                                    Foreign National Awards. Notwithstanding
anything to the contrary contained in the Plan, Awards may be made to
Participants who are foreign nationals or employed or performing services
outside the United States on such terms and conditions different from those
specified in the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or to comply with applicable laws.


 


(j)                                    Amendment of Award. Except as
provided in Section 9(k), the Committee may amend, modify or
terminate any outstanding Award, including substituting therefor another Award
of the same or a different type, changing the date of exercise or realization,
and converting an Incentive Stock Option to a Nonstatutory Stock Option,
provided that the Participant’s consent to such action shall be required unless
(i) the Committee determines that the action, taking into account any
related action, would not materially and adversely affect the Participant, or (ii) the
action is permitted by the terms of the Plan.


 


(k)                                No
Repricing of Options. Notwithstanding anything to the contrary in
the Plan, the Company shall not engage in any repricing of Options granted
under the Plan (including those granted under the Prior Plans and the Executive
Options) without further stockholder approval. For this purpose, the term “repricing”
shall mean any of the following or other action that has the same effect:  (i) lowering the exercise price of an
Option after it is granted, (ii) any other action that is treated as a
repricing under generally accepted accounting principles, or (iii) canceling
an Option at a time when its exercise price exceeds the fair market value of
the underlying stock in exchange for another Option, Restricted Stock, or other
equity of the Company, unless the cancellation and exchange occurs in
connection with a merger, acquisition, spin-off, or similar corporate
transaction.


 


(l)                                    Code Section 162(m) Provisions.
If the Committee determines at the time an Award is granted to a Participant
that such Participant is, or may be as of the end of the tax year for
which the Company would claim a tax deduction in connection with such Award, a
Covered Employee, then the Committee may provide that the Participant’s
right to receive cash, Shares, or other property pursuant to such Award shall
be subject to the satisfaction of Performance Goals during a Performance Period.
Prior to the payment of any Award subject to this Section 9(l), the
Committee shall certify in writing that the Performance Goals and other
material terms applicable to such Award were satisfied. Notwithstanding the
attainment of Performance Goals by a Covered Employee, the Committee shall have
the right to reduce (but not to increase) the


 


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amount payable at a given level of
performance to take into account additional factors that the Committee may deem
relevant. The Committee shall have the power to impose such other restrictions
on Awards subject to this Section 9(l) as it may deem necessary or
appropriate to ensure that such Awards satisfy all requirements for “performance-based
compensation” within the meaning of Section 162(m) of the Code.


 


10.                               Miscellaneous


 


(a)                                  No
Right To Employment. No person shall have any claim or right to
be granted an Award. Neither the Plan nor any Award hereunder shall be deemed
to give any employee the right to continued employment or service or to limit
the right of the Company to discharge any Participant at any time.


 


(b)                                  No
Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any
rights as a stockholder with respect to any shares of Common Stock to be
distributed under the Plan until he or she becomes the holder thereof. A
Participant to whom Common Stock is awarded shall be considered the holder of
the Stock at the time of the Award except as otherwise provided in the
applicable Award.


 


(c)                                  Effective
Date. The Plan shall become effective on the Effective Date.


 


(d)                                  Amendment
and Term of Plan. The Board may amend, suspend or terminate
the Plan or any portion thereof at any time, subject to such stockholder
approval as the Board determines to be necessary or advisable to comply with
any tax or regulatory requirement. Unless terminated earlier by the Board or
extended by subsequent approval of the Company’s stockholders, the term of the
Plan shall expire at the close of business on the date immediately preceding
the tenth anniversary of the date on which the Plan was originally approved by
stockholders, and no further Awards shall be made thereafter.


 


(e)                                  Governing
Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of Delaware.


 


The Plan
was adopted by the Board of Directors on March 30, 2005.


 


The Plan
was approved by the stockholders on May 24, 2005.


 


AN AMENDMENT AND RESTATEMENT OF THE PLAN WAS
ADOPTED BY THE BOARD OF DIRECTORS ON MARCH 31, 2006 AND APPROVED BY THE
STOCKHOLDERS ON MAY 23, 2006.


 


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APPENDIX 1


 


“1991 Plan” -
See Section 1.


 


“2001 Plan” -
See Section 1.


 


“2006 Shares” -
See Section 5(a).


 


“Affiliate”
means any business entity in which the Company owns directly or indirectly 50%
or more of the total voting power or has a significant financial interest as
determined by the Committee.


 


“Award” means
any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit,
Cash Award, or Foreign National Award granted under the Plan.


 


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


 


“Cash Award” -
See Section 9(d).


 


“Code” means the
Internal Revenue Code of 1986, as amended from time to time, or any successor
law.


 


“Committee”
means one or more committees each comprised of not less than three members of
the Board appointed by the Board to administer the Plan or a specified portion
thereof. If a Committee is authorized to grant Awards to a Reporting Person or
a Covered Employee, each member shall be a “disinterested person” or the
equivalent within the meaning of applicable Rule 16b-3 under the Exchange
Act or an “outside director” or the equivalent within the meaning of Section 162(m)
of the Code, respectively.


 


“Common Stock”
or “Stock” means the Common Stock, $.02 par
value, of the Company.


 


“Company” means
Bentley Pharmaceuticals, Inc.


 


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


 


“Designated Beneficiary”
means the beneficiary designated by a Participant, in a manner determined by
the Committee, to receive amounts due or exercise rights of the Participant in
the event of the Participant’s death. In the absence of an effective
designation by a Participant, “Designated Beneficiary”
means the Participant’s estate.


 


“Directors’ Plan”
- See Section 1.


 


“Effective Date”
- See Section 1.


 


“Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to time, or any
successor law.


 


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“Executive Options”
- means options granted and approved by Bentley stockholders in 1996 to Bentley’s
then executive officers, Messrs. Murphy, Price and Stote, outside of any
stock option plan.


 


“Fair Market Value”
means, with respect to Common Stock or any other property, the fair market
value of such property as determined by the Committee in good faith or in the
manner established by the Committee from time to time.


 


“Foreign National Award”
- See Section 9(i).


 


“Incentive Stock Option”
- See Section 6(a).


 


“Nonstatutory Stock Option”
- See Section 6(a).


 


“Option” - See Section 6(a).


 


“Participant”
means a person selected by the Committee to receive an Award under the Plan.


 


“Performance Goals”
means with respect to any Performance Period, one or more objective performance
goals based on one or more of the following objective criteria established by
the Committee prior to the beginning of such Performance Period or within such
period after the beginning of the Performance Period as shall meet the
requirements to be considered “pre-established performance goals” for purposes
of Code Section 162(m):  (i) increases
in the price of the Common stock, (ii) market share, (iii) sales, (iv) revenue,
(v) return on equity, assets, or capital, (vi) economic profit
(economic value added), (vii) total shareholder return, (viii) costs,
(ix) expenses, (x) margins, (xi) earnings or earnings per share, (xii)
cash flow, (xiii) customer satisfaction, (xiv) operating profit, (xv) research
and development, (xvi) product development, (xvii) manufacturing, or (xviii)
any combination of the foregoing, including without limitation, goals based on
any of such measures relative to appropriate peer groups or market indices. Such
Performance Goals may be particular to a Participant or may be based,
in whole or in part, on the performance of the Company generally or on the
performance of the division, department, line of business, subsidiary, or other
business unit, whether or not legally constituted, in which the Participant
works.


 


“Performance Period”
means the period of service designated by the Committee applicable to an Award
subject to Section 9(l) for which the Performance Goals will be measured.


 


“Plan” means the
Bentley Pharmaceuticals, Inc. 2005 Equity and Incentive Plan.


 


“Prior Plans” -
See Section 1.


 


“Reporting Person”
means a person subject to reporting under Section 16 of the Exchange Act.


 


“Restricted Period”
- See Section 8(a).


 


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“Restricted Stock”
- See Section 8(a).


 


“Restricted Stock Unit”
- See Section 8(c).


 


“Stock Appreciation Right”
or “SAR” - See Section 7(a).


 


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