Exhibit 10.6


 


VIASYS HEALTHCARE INC.


 


EQUITY INCENTIVE PLAN


(As Amended on May
5, 2004)


 


1.               PURPOSE


 


The purpose of this
Equity Incentive Plan (the “Plan”) is to secure for VIASYS Healthcare Inc. (the
“Company”) and its stockholders (the “Stockholders”) the benefits arising from
capital stock ownership by employees, officers and directors of, and
consultants to, the Company and its subsidiaries or other persons who are
expected to make significant contributions to the future growth and success of
the Company and its subsidiaries. The Plan is intended to accomplish these
goals by enabling the Company to offer such persons equity-based interests,
equity-based incentives or performance-based stock incentives in the Company,
or any combination thereof (collectively, “Awards”).


 


2.               ADMINISTRATION


 


The Plan will be
administered by the Board of Directors of the Company (the “Board”). The Board
shall have full power to interpret and administer the Plan, to prescribe, amend
and rescind rules and regulations relating to the Plan and Awards, and full
authority to select the persons to whom Awards will be granted
(“Participants”), determine the type and amount of Awards to be granted to
Participants (including, without limitation, any combination of Awards),
determine the terms and conditions of Awards granted under the Plan (including,
without limitation, terms and conditions relating to events of merger,
consolidation, dissolution and liquidation, change of control, vesting,
forfeiture, restrictions, dividends and interest, if any, on deferred amounts),
waive compliance by a participant with any obligation to be performed by him or
her under an Award, waive any term or condition of an Award, cancel an existing
Award in whole or in part with the consent of a Participant, grant replacement
Awards, accelerate the vesting or lapse of any restrictions of any Award,
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or in any Award and adopt the form of instruments evidencing Awards under
the Plan and change such forms from time to time. Any interpretation by the
Board of the terms and provisions of the Plan or any Award thereunder and the
administration thereof, and all action taken by the Board, shall be final,
binding and conclusive on all parties and any person claiming under or through
any party. No Director shall be liable for any action or determination made in
good faith. The Board may, to the full extent permitted by law, delegate any or
all of its responsibilities under the Plan to a committee (the “Committee”)
appointed by the Board and consisting of members of the Board, and such
Committee may delegate any or all of its responsibilities to one or more
officers of the Company to the extent authorized by the Board (a “Delegated
Officer”).  All reference in the Plan to
the “Board” shall mean the Board, a Committee of the Board, or a Delegated
Officer to the extent that the Board’s powers or authority under the Plan have
been validly delegated to such person.


 


3.               EFFECTIVE DATE


 


The Plan was approved by
the Board and the Stockholders on September 24, 2001 and was subsequently
amended on February 14, 2002.


 

















 


4.               SHARES SUBJECT TO
THE PLAN


 


Subject to adjustment as
provided in Section 10.6, the total number of shares of common stock of
the Company, par value $.01 per share (“Common Stock”), reserved and available
for distribution under the Plan is 6,680,000 shares.  Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares.


 


If any Award of shares of
Common Stock requiring exercise by the Participant for delivery of such shares
expires or terminates without having been exercised in full, or if any Award is
forfeited or is otherwise terminated without a payment being made to the
Participant in the form of Common Stock, or if any shares of Common Stock
subject to restrictions are repurchased by the Company pursuant to the terms of
any Award or are otherwise reacquired by the Company to satisfy obligations
arising by virtue of any Award, such shares shall be available for distribution
in connection with future Awards under the Plan.


 


5.               ELIGIBILITY


 


Employees, officers and
Directors of, and consultants to, the Company and its subsidiaries, or other
persons who are expected to make significant contributions to the future growth
and success of the Company and its subsidiaries shall be eligible to receive
Awards under the Plan. The Board, or other appropriate committee or person to
the extent permitted pursuant to the last sentence of Section 2, shall
from time to time select from among such eligible persons those who will
receive Awards under the Plan.


 


6.               TYPES OF AWARDS


 


The Board may offer
Awards under the Plan in any form of equity-based interest, equity-based
incentive or performance-based stock incentive in Common Stock of the Company
or any combination thereof. The type, terms and conditions and restrictions of
an Award shall be determined by the Board at the time such Award is made to a
Participant; provided however that the maximum number of shares permitted to be
subject to Awards or combination of Awards to any Participant during any one
calendar year may not exceed 1,800,000 shares of Common Stock, subject to
adjustment as provided under Section 10.6.


 


An Award shall be made at
the time specified by the Board and shall be subject to such conditions or
restrictions as may be imposed by the Board and shall conform to the general
rules applicable under the Plan as well as any special rules then applicable
under United States or foreign tax laws, securities laws, other applicable law
or relevant rules of any stock exchange or quotation system on what the Common
Stock is traded.


 


Without limiting the
foregoing, Awards may take the following forms and shall be subject to the
following rules and conditions:


 


6.1  OPTIONS. 
An option is an Award that entitles the holder on exercise thereof to
purchase Common Stock at a specified exercise price. Options granted under the
Plan may be either incentive stock options (“incentive stock options”) that
meet the requirements of Section 422 of the Internal Revenue Code of 1986,
as amended (the “Code”), or options that are not intended to meet the
requirements of Section 422 (“non-statutory options”).


 


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6.1.1 OPTION PRICE.  The price at which Common Stock may be
purchased upon exercise of an option shall be determined by the Board, provided
however, the exercise price shall not be less than the par value per share of
Common Stock.  To the extent that the
option exercise price is intended to equal the fair market value of Common
stock on the relevant date, such term means, as of such date, the value of
Common Stock determined as follows:


 


 (i)                                  If the Common Stock
is listed on any established stock exchange or a national market system,
including without limitation the Nasdaq National Market or The Nasdaq SmallCap
Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or system as of the date of grant, as reported in The
Wall Street Journal or such other source as the Board deems reliable;


 


 (ii)                               If the Common Stock is
regularly quoted by a recognized securities dealer but selling prices are not
reported as of the date of grant, the Fair Market Value of a Share of Common
Stock shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of determination,
as reported in The Wall Street Journal or such other source as the Board deems
reliable;


 


 (iii)                            In the absence of an
established market for the Common Stock, the Fair Market Value shall be
determined in good faith by the Board.


 


6.1.2 OPTION GRANTS.  The granting of an option shall take place at
the time specified by the Board. Options shall be evidenced by option
agreements. Such agreements shall conform to the requirements of the Plan, and
may contain such other provisions (including, without limitation, to vesting
and forfeiture provisions, acceleration, change of control, protection in the
event of merger, consolidations, dissolutions and liquidations) as the Board
shall deem advisable. Option agreements shall expressly state whether an option
grant is intended to qualify as an incentive stock option or non-statutory
option.


 


6.1.3 OPTION PERIOD.  An option will become exercisable at such
time or times (which may be immediately or in such installments as the Board
shall determine) and on such terms and conditions as the Board shall specify. The
option agreements shall specify the terms and conditions applicable in the
event of an option holder’s termination of employment during the option’s
term.  The option term shall be
determined by the Board and may extend as long as ten (10) years.


 


Any exercise of an option
must be in writing, signed by the proper person and delivered or mailed to the
Company, accompanied by (1) any additional documents required by the Board and
(2) payment in full in accordance with Section 6.1.4 for the number of
shares for which the option is exercised.


 


6.1.4 PAYMENT OF EXERCISE
PRICE. Stock purchased on exercise of an option shall be paid for as follows:
(1) in cash or by check (subject to such guidelines as the Company may
establish for this purpose), bank draft or money order payable to the order of
the Company or (2) if so permitted by the instrument evidencing the option (or
in the case of a non-statutory option, by the Board at or after grant of the
option), (i) through the delivery of shares of Common Stock


 


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that have been
outstanding for at least six months (unless the Board expressly approves a
shorter period) and that have a fair market value (determined in accordance
with procedures prescribed by the Board) equal to the exercise price, (ii) by
delivery of a promissory note of the option holder to the Company, payable on
such terms as are specified by the Board, (iii) in cash, on the T+3 settlement
date that occurs after the exercise date specified in the notice of exercise,
provided that the Participant exercises the option through an irrevocable
agreement with a registered broker and the payment is made in accordance with
procedures permitted by Regulation T of the Federal Reserve Board and such
procedures do not violate applicable law, or (iv) by any combination of the
foregoing permissible forms of payment.


 


6.1.5 BUYOUT PROVISION.
The Board may at any time offer to buy out for a payment in cash, shares of
Common Stock, deferred stock or restricted stock, an option previously granted,
based on such terms and conditions as the Board shall establish and communicate
to the option holder at the time that such offer is made.


 


6.1.6 SPECIAL RULES FOR
INCENTIVE STOCK OPTIONS. Each provision of the Plan and each option agreement
evidencing an incentive stock option shall be construed so that each incentive
stock option shall be an incentive stock option as defined in Section 422
of the Code or any statutory provision that may replace such Section, and any
provisions thereof that cannot be so construed shall be disregarded.
Instruments evidencing incentive stock options shall contain such provisions as
are required under applicable provisions of the Code.


 


Incentive stock options
may be granted only to employees of the Company and its subsidiaries. The
exercise price of an incentive stock option shall not be less than 100% (110%
in the case of an incentive stock option granted to a more than ten percent
Stockholder of the Company) of the fair market value of the Common Stock on the
date of grant, as determined by the Board. An incentive stock option may not be
granted after the tenth anniversary of the date on which the Plan was adopted
by the Board and the latest date on which an incentive stock option may be
exercised shall be the tenth anniversary (fifth anniversary, in the case of any
incentive stock option granted to a more than ten percent Stockholder of the
Company) of the date of grant, as determined by the Board.  In the event that an incentive stock options
loses its status as such, the option shall be treated as a non-statutory
option.


 


6.1.7 RELOAD OPTIONS. In
the event that shares of Common Stock are used to exercise an option, the terms
of such option may provide for a Grant of additional options, or the Committee
may grant additional options, to purchase a number of shares of Common Stock
equal to the number of whole shares used to exercise the option and the number
of whole shares, if any, withheld in payment of any taxes.  Such options shall be granted with an
exercise price equal to the Fair Market Value of the Common Stock at the date
of grant of such additional options, or at such other exercise price as the
Board may establish, for a term not longer than the unexpired term of the
exercised option and on such other terms as the Board shall determine.


 


6.2   RESTRICTED AND UNRESTRICTED STOCK


 


An Award of restricted
stock entitles the recipient thereof to acquire shares of Common Stock upon
payment of the purchase price subject to restrictions specified in the
instrument evidencing the Award.


 


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6.2.1 RESTRICTED STOCK
AWARDS. Awards of restricted stock shall be evidenced by restricted stock
agreements. Such agreements shall conform to the requirements of the Plan, and
may contain such other provisions (including, without limitation, restriction
and forfeiture provisions, change of control, protection in the event of
mergers, consolidations, dissolutions and liquidations) as the Board shall deem
advisable.


 


6.2.2 RESTRICTIONS. Until
the restrictions specified in a restricted stock agreement shall lapse,
restricted stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of, and upon certain conditions specified in the
restricted stock agreement, must be resold to the Company for the price, if
any, specified in such agreement. The restrictions shall lapse at such time or
times, and on such conditions, as the Board may specify. The Board may at any
time accelerate the time at which the restrictions on all or any part of the
shares shall lapse.


 


6.2.3 RIGHTS AS A
STOCKHOLDER. A Participant who acquires shares of restricted stock will have
all of the rights of a Stockholder with respect to such shares including,
without limitation, the right to receive dividends and to vote such
shares.  Unless the Board otherwise
determines, certificates evidencing shares of restricted stock will remain in
the possession of the Company until such shares are free of all restrictions
under the Plan.


 


6.2.4 PURCHASE PRICE. The
purchase price of shares of restricted stock shall be determined by the Board,
in its sole discretion, but such price may not be less than the par value of
such shares.


 


6.2.5 OTHER AWARDS
SETTLED WITH RESTRICTED STOCK. The Board may provide that any or all the Common
Stock delivered pursuant to an Award will be restricted stock.


 


6.2.6 UNRESTRICTED STOCK.
The Board may, in its sole discretion, sell to any Participant shares of Common
Stock free of restrictions under the Plan for a price determined by the Board,
but which may not be less than the par value per share of the Common Stock.


 


6.3                                 STOCK
UNIT AWARDS


 


6.3.1  STOCK UNIT AWARDS.  A Stock Unit Award shall represent the right of the recipient to
receive a share of Common Stock subject to restrictions specified in the
instrument evidencing the Award.  All
Stock Unit Awards shall be credited to accounts on the Company’s records for
purposes of the Plan.


 


6.3.2  TERMS OF STOCK UNIT AWARDS.  The Board may grant Stock Unit Awards that
are deliverable if specified performance goals or other conditions are met, or
under other circumstances, including, without limitation, those terms and
conditions described in Section 6.2 above.  Stock Unit Awards may be delivered at the end of a specified period,
or delivery may be deferred to a date authorized by the Board.  The Board shall determine the number of
Stock Unit Awards to be granted and the requirements applicable to such Stock
Unit Awards.


 


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6.3.3  DELIVERY WITH RESPECT TO STOCK UNIT
AWARDS.  Delivery with respect to Stock
Unit Awards shall be made in Common Stock.


 


6.3.4  REQUIREMENT OF EMPLOYMENT, SERVICE OR OTHER
ACTION.  If a recipient ceases to
provide Service to the Company, or if other conditions established by the Board
are not met, the recipient’s unvested or contingent Stock Unit Awards shall be
forfeited.  The Board may grant Stock
Unit Awards contingent upon the recipient’s taking certain specified actions as
the Board sees fit.  The Board may
provide for complete or partial exceptions to this requirement as it deems
appropriate.


 


6.4   DEFERRED STOCK


 


6.4.1 DEFERRED STOCK
AWARD. A deferred stock Award entitles the recipient to receive shares of
deferred stock, which is Common Stock to be delivered in the future. Delivery
of the Common Stock will take place at such time or times, and on such
conditions, as the Board may specify. The Board may at any time accelerate the
time at which delivery of all or any part of the Common Stock will take place.


 


6.4.2 OTHER AWARDS
SETTLED WITH DEFERRED STOCK. The Board may, at the time any Award described in
this Section 6 is granted, provide that, at the time Common Stock would
otherwise be delivered pursuant to the Award, the Participant will instead
receive an instrument evidencing the right to future delivery of deferred
stock.


 


6.5                                 PERFORMANCE
AWARDS


 


6.5.1 PERFORMANCE AWARDS.
A performance Award entitles the recipient to receive, without payment, an
amount, in cash or Common Stock or a combination thereof (such form to be
determined by the Board), following the attainment of performance goals.
Performance goals may be related to personal performance, corporate
performance, departmental performance or any other category of performance
deemed by the Board to be important to the success of the Company.  The Board will determine the performance
goals, the period or periods during which performance is to be measured and all
other terms and conditions applicable to the Award.


 


6.5.2 OTHER AWARDS
SUBJECT TO PERFORMANCE CONDITIONS. The Board may, at the time any Award
described in this Section 6 is granted, impose a condition or conditions
(in addition to any conditions specified or authorized in this Section 6
of the Plan) that performance goals be met prior to the Participant’s
realization of any payment or benefit under the Award.


 


7.               PURCHASE PRICE AND
PAYMENT


 


Except as otherwise
provided in the Plan, the purchase price of Common Stock to be acquired
pursuant to an Award shall be the price determined by the Board, provided that
such price shall not be less than the par value of the Common Stock. Except as
otherwise provided in the Plan, the Board may determine the method of payment
of the exercise price or purchase price of an Award granted under the Plan and
the form of payment. The Board may determine that all or any part of the
purchase price of Common Stock pursuant to an Award has been satisfied by past


 


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services rendered by the
Participant. The Board may agree at any time, upon request of the Participant,
to defer the date on which any payment under an Award will be made.


 


8.               LOANS AND
SUPPLEMENTAL GRANTS


 


The Company may make a
loan to a Participant, either on or after the grant to the Participant of any
Award, in connection with the purchase of Common Stock under the Award or with
the payment of any obligation incurred or recognized as a result of the Award.
The Board will have full authority to decide whether the loan is to be secured
or unsecured or with or without recourse against the borrower, the terms on
which the loan is to be repaid and the conditions, if any, under which it may
be forgiven.


 


In connection with any
Award, the Board may at the time such Award is made or at a later date, provide
for and make a cash payment to the participant not to exceed an amount equal to
(a) the amount of any federal, state and local income tax or ordinary income
for which the Participant will be liable with respect to the Award, plus (b) an
additional amount on a grossed-up basis necessary to make him or her whole
after tax, discharging all the participant’s income tax liabilities arising
from all payments under the Plan.


 


9.               CHANGE IN CONTROL


 


9.1   IMPACT OF EVENT.  In the event of a “Change in Control” as defined in
Section 9.2, the following provisions shall apply, unless the agreement
evidencing the Award otherwise provides (by specific explicit reference to
Section 9.2 below).  If a Change in
Control occurs while any Awards are outstanding, then, upon termination by the
Company of the Participant’s employment without cause within one-year after the
Change in Control:  (i) each outstanding
stock option or other stock-based Award awarded under the Plan that was not previously
exercisable and vested shall become immediately exercisable in full and will no
longer be subject to a right of repurchase by the Company, (ii) each
outstanding restricted stock award or other stock-based Award subject to
restrictions and to the extent not fully vested, shall be deemed to be fully
vested, free of restrictions and conditions and no longer subject to a right of
repurchase by the Company, and (iii) deferral limitations and conditions that
relate solely to the passage of time, continued employment or affiliation will
be waived and removed as to deferred stock Awards and performance Awards;
provided, however, that performance of other conditions (other than conditions
relating solely to the passage of time, continued employment or affiliation)
will continue to apply unless otherwise provided in the agreement evidencing
the Award or in any other agreement between the Participant and the Company or
unless otherwise agreed by the Board.


 


9.2   DEFINITION OF “CHANGE IN CONTROL” means an
event or occurrence set forth in any one or more of subsections (a) through (d)
below (including an event or occurrence that constitutes a Change in Control
under one of such subsections but is specifically exempted from another such
subsection):


 


 (a)                               the acquisition by an
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) (a “Person”) of beneficial ownership of any capital stock of the Company
if, after such


 


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acquisition, such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) forty percent (40%) or more of either (i) the then-outstanding
shares of common stock of the Company (the “Outstanding Company Common Stock”),
or (ii) the combined voting power of the then-outstanding securities of the
Company entitled to vote generally in the election of directors (the
“Outstanding Company Voting Securities”); provided, however, that for purposes
of this subsection (a), the following acquisitions shall not constitute a
Change in Control:


 


 (i)                                  any acquisition by
the Company,


 


 (ii)                               any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or


 


 (iii)                            any acquisition by any
corporation pursuant to a transaction that complies with clauses (i) and (ii)
of subsection (c) of this Section 9.2;


 


 (b)                              the Continuing Directors
(as defined below) do not constitute a majority of the Board (or, if
applicable, the Board of Directors of a successor corporation to the Company),
where the term “Continuing Director” means at any date a member of the Board
(i) who was a member of the Board on the date of the amendment of this Plan by
the Board or (ii) who was nominated or elected subsequent to such date by at
least a majority of the directors who were Continuing Directors at the time of
such nomination or election or whose election to the Board was recommended or
endorsed by at least a majority of the directors who were Continuing Directors
at the time of such nomination or election; provided, however, that there shall
be excluded from this clause (ii) any individual whose initial assumption of
office occurred as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Board;


 


 (c)                               the consummation of a
merger, consolidation, reorganization, recapitalization or statutory share
exchange involving the Company or a sale or other disposition of all or
substantially all of the assets of the Company in one or a series of
transactions (a “Business Combination”), unless, immediately following such
Business Combination, each of the following two conditions is satisfied: (i)
all or substantially all of the individuals and entities who were the
beneficial owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than fifty percent (50%) of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
Business Combination (which shall include, without limitation, a corporation
which as a result of such transaction owns the Company or substantially all of
the Company’s assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the “Acquiring
Corporation”) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, respectively; and (ii)
no Person (excluding the Acquiring Corporation or any employee benefit plan (or
related trust) maintained or sponsored by the Company or by the Acquiring
Corporation) beneficially owns, directly or indirectly, forty


 


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percent (40%) or more of
the then outstanding shares of common stock of the Acquiring Corporation, or of
the combined voting power of the then-outstanding securities of such
corporation entitled to vote generally in the election of directors; or


 


 (d)                              approval by the
stockholders of the Company of a complete liquidation or dissolution of the
Company.


 


10.         GENERAL PROVISIONS


 


10.1  DOCUMENTATION OF AWARDS


 


Awards will be evidenced
by written instruments (an “Award Agreement”), which may differ among
Participants, prescribed by the Board from time to time. Such Award Agreements
may be in the form of agreements to be executed by both the Participant and the
Company or certificates, letters or similar instruments which need not be
executed by the participant but acceptance of which will evidence agreement to
the terms thereof.  Such Award
Agreements shall conform to the requirements of the Plan and may contain such
other provisions (including, without limitation, provisions relating to events
of merger, consolidation, dissolution and liquidations, change of control and
restrictions affecting either the agreement or the Common Stock issued thereunder),
as the Board deems advisable.


 


10.2  RIGHTS AS A STOCKHOLDER


 


Except as specifically
provided by the Plan or the Award Agreement, the receipt of an Award will not
give a Participant rights as a Stockholder with respect to any shares covered
by an Award until the date of issue of a stock certificate to the participant
for such shares.


 


10.3  CONDITIONS ON DELIVERY OF STOCK


 


The Company will not be
obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove any restriction from shares previously delivered under the Plan (a)
until all conditions of the Award have been satisfied or removed, (b) until, in
the opinion of the Company’s counsel, all applicable federal and state laws and
regulations have been complied with, (c) if the outstanding Common Stock is at
the time listed on any stock exchange, until the shares have been listed or
authorized to be listed on such exchange upon official notice of issuance, and
(d) until all other legal matters in connection with the issuance and delivery
of such shares have been approved by the Company’s counsel. If the sale of
Common Stock has not been registered under the Securities Act of 1933, as
amended, the Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such act and may require that the
certificates evidencing such Common Stock bear an appropriate legend
restricting transfer.


 


If an Award is exercised
by the participant’s legal representative, the Company will be under no
obligation to deliver Common Stock pursuant to such exercise until the Company
is satisfied as to the authority of such representative.


 


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10.4  TAX WITHHOLDING


 


The Company will withhold
from any cash payment made pursuant to an Award the minimum amount sufficient
to satisfy all federal, state and local withholding tax requirements (the
“withholding requirements”).


 


In the case of an Award
pursuant to which Common Stock may be delivered, the Board will have the right
to require that the participant or other appropriate person remit to the
Company an amount sufficient to satisfy the withholding requirements, or make
other arrangements satisfactory to the Board with regard to such requirements,
prior to the delivery of any Common Stock. If and to the extent that such
withholding is required, the Board may permit the participant or such other
person to elect at such time and in such manner as the Board provides to have
the Company hold back from the shares to be delivered, or to deliver to the
Company, Common Stock having a value calculated to satisfy the withholding
requirement.


 


10.5  TRANSFERABILITY OF AWARDS


 


Except as may be
authorized by the Board, in its sole discretion, no Award (other than an Award
in the form of an outright transfer of cash or Common Stock not subject to any
restrictions) may be sold, assigned, transferred, pledged or otherwise
encumbered other than by will or the laws of descent and distribution, and
during a Participant’s lifetime an Award requiring exercise may be exercised
only by him or her (or in the event of incapacity, the person or persons
properly appointed to act on his or her behalf). The Board may, in its
discretion, determine the extent to which Awards granted to a Participant shall
be transferable, and such provisions permitting or acknowledging transfer shall
be set forth in the written agreement evidencing the Award executed and
delivered by or on behalf of the Company and the Participant.


 


10.6  ADJUSTMENTS IN THE EVENT OF CERTAIN
TRANSACTIONS


 


 (a) 
In the event of a stock dividend, stock split or combination of shares,
or other distribution with respect to holders of Common Stock other than normal
cash dividends, the Board will make (i) appropriate adjustments to the maximum
number of shares that may be delivered under the Plan under Section 4
above and the participant limit set forth in Section 6, and (ii)
appropriate adjustments to the number and kind of shares of stock or securities
subject to Awards then outstanding or subsequently granted, any exercise prices
relating to Awards and any other provisions of Awards affected by such change.


 


 (b) 
In the event of any recapitalization, merger or consolidation involving
the Company, any transaction in which the Company becomes a subsidiary of
another entity, any sale or other disposition of all or a substantial portion
of the assets of the Company or any similar transaction, as determined by the
Board, the Board in its discretion may make appropriate adjustments to
outstanding Awards to avoid distortion in the operation of the Plan.


 


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10.7  EMPLOYMENT RIGHTS


 


Neither the adoption of
the Plan nor the grant of Awards will confer upon any person any right to
continued employment with the Company or any subsidiary or interfere in any way
with the right of the Company or subsidiary to terminate any employment
relationship at any time or to increase or decrease the compensation of such
person. Except as specifically provided by the Board in any particular case,
the loss of existing or potential profit in Awards granted under the Plan will
not constitute an element of damages in the event of termination of an
employment relationship even if the termination is in violation of an
obligation of the Company to the employee.


 


Whether an authorized
leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Board at the time.
For purposes of this Plan, transfer of employment between the Company and its
subsidiaries shall not be deemed termination of employment.


 


10.8  OTHER EMPLOYEE BENEFITS


 


The value of an Award
granted to a Participant who is an employee, and the amount of any compensation
deemed to be received by an employee as a result of any exercise or purchase of
Common Stock pursuant to an Award or sale of shares received under the Plan,
will not constitute “earnings” or “compensation” with respect to which any other
employee benefits of such employee are determined, including without limitation
benefits under any pension, stock ownership, stock purchase, life insurance,
medical, health, disability or salary continuation plan.


 


10.9  LEGAL HOLIDAYS


 


If any day on or before
which action under the Plan must be taken falls on a Saturday, Sunday or legal
holiday, such action may be taken on the next succeeding day not a Saturday,
Sunday or legal holiday.


 


10.10  FOREIGN NATIONALS


 


Without amending the
Plan, Awards may be granted to persons who are foreign nationals or employed
outside the United States or both, on such terms and conditions different from
those specified in the Plan, as may, in the judgment of the Board, be necessary
or desirable to further the purpose of the Plan.


 


10.11  GOVERNING LAW


 


The provisions of the
Plan and all Awards made hereunder shall be governed by and interpreted in
accordance with the laws of the State of Delaware, without regard to any
applicable conflicts of law.


 


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11.         TERMINATION AND AMENDMENT


 


The Plan shall terminate
upon the earlier of (i) the close of business on the day next preceding the
tenth anniversary of the date of its adoption by the Board (or approval by the
Corporation’s Stockholders if earlier), or (ii) the date on which all shares
available for issuance under the Plan shall have been issued pursuant to the
exercise or cancellation of options granted under the Plan. If the date of
termination is determined under (i) above, then the options outstanding on such
date shall continue to have full force and effect in accordance with the
provisions of the option agreements evidencing such options.  Subject to the last sentence of this Section 11,
the Board may at any time or times amend the Plan or any outstanding Award for
any purpose that may at the time be permitted by law, or may at any time
terminate the Plan as to any further grants of Awards. No amendment of the Plan
or any agreement evidencing Awards under the Plan may adversely affect the
rights of any participant under any Award previously granted without such
participant’s consent.


 


12.         CANCELLATION AND
RESCISSION OF AWARDS


 


 (a) Unless the Award Agreement specifies
otherwise, the Board may cancel, rescind, suspend, withhold or otherwise limit
or restrict any unexpired, unpaid, or deferred Awards at any time if the
Participant is not in compliance with all applicable provisions of the Award
Agreement and the Plan, or if the Participant engages in any “Detrimental
Activity.” For purposes of this Section 12, “Detrimental Activity” shall
include: (i) the rendering of services for any organization or engaging
directly or indirectly in any business which is or becomes competitive with the
Company, or which organization or business, or the rendering of services to
such organization or business, is or becomes otherwise prejudicial to or in
conflict with the interests of the Company; (ii) the disclosure to anyone
outside the Company, or the use in other than the Company’s business, without
prior written authorization from the Company, of any confidential information
or material, as defined in the Company’s applicable agreements or policies
relating to Confidentiality and nondisclosure, relating to the business of the
Company, acquired by the Participant either during or after employment with the
Company; (iii) the failure or refusal to disclose promptly and to assign to the
Company, pursuant to the Company’s applicable agreements or policies relating
to ownership of intellectual property, all right, title and interest in any
invention or idea, patentable or not, made or conceived by the Participant
during employment by the Company, relating in any manner to the actual or
anticipated business, research or development work of the Company or the
failure or refusal to do anything reasonably necessary to enable the Company to
secure a patent where appropriate in the United States and in other countries;
(iv) activity that results or, had such activity been discovered prior to the
Participant’s termination, would have constituted grounds for termination of
the Participant’s employment for cause; (v) a violation of any rules, policies,
procedures or guidelines of the Company, including, without limitation, to the
Company’s business conduct guidelines; (vi) any attempt directly or indirectly
to induce any employee of the Company to be employed or perform services
elsewhere or any attempt directly or indirectly to solicit the trade or
business of any current or prospective customer, supplier or partner of the
Company; (vii) the Participant being convicted of, or entering a guilty plea
with respect to, a crime, whether or not connected with the Company; or (viii)
any other conduct or act determined by the Board to be injurious, detrimental
or prejudicial to any interest of the Company.


 


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 (b) Upon exercise, payment or delivery
pursuant to an Award, the Participant shall certify in a manner acceptable to
the Company that he or she is in compliance with the terms and conditions of
the Plan. In the event a Participant fails to comply with the provisions of
paragraphs (a)(i)-(viii) of this Section 12 prior to, or during the six
months after, any exercise, payment or delivery pursuant to an Award, such exercise,
payment or delivery may be rescinded within two years thereafter. In the event
of any such rescission, the Participant shall pay to the Company the amount of
any gain realized or payment received as a result of the rescinded exercise,
payment or delivery, in such manner and on such terms and conditions as may be
required, and the Company shall be entitled to set-off against the amount of
any such gain any amount owed to the Participant by the Company.


 


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