Exhibit
10.1


 


BIOSPHERE
MEDICAL, INC.


 


2006
STOCK INCENTIVE PLAN


 


1.             Purpose


 


The purpose of this 2006 Stock Incentive Plan (the “Plan”) of BioSphere
Medical, Inc., a Delaware  corporation
(the “Company”), is to advance the interests of the Company’s stockholders by
enhancing the Company’s ability to attract, retain and motivate persons who are
expected to make important contributions to the Company and by providing such
persons with equity ownership opportunities and performance-based incentives
that are intended to align their interests with those of the Company’s
stockholders.  Except where the context
otherwise requires, the term “Company” shall include any of the Company’s
present or future parent or subsidiary corporations as defined in
Sections 424(e) or (f) of the Internal Revenue Code of 1986, as
amended, and any regulations promulgated thereunder (the “Code”) and any other
business venture (including, without limitation, joint venture or limited
liability company) in which the Company has a controlling interest, as
determined by the Board of Directors of the Company (the “Board”).


 


2.             Eligibility


 


All of the Company’s employees, officers, directors, consultants and
advisors are eligible to receive options, stock appreciation rights, restricted
stock, restricted stock units and other stock unit awards (each, an “Award”)
under the Plan.  Each person who receives
an Award under the Plan is deemed a “Participant”.


 


3.             Administration
and Delegation


 


(a)           Administration by
Board of Directors.  The Plan will be
administered by the Board.  The Board
shall have authority to grant Awards and to adopt, amend and repeal such
administrative rules, guidelines and practices relating to the Plan as it shall
deem advisable.  The Board may construe
and interpret the terms of the Plan and any Award agreements entered into under
the Plan.  The Board may correct any
defect, supply any omission or reconcile any inconsistency in the Plan or any
Award in the manner and to the extent it shall deem expedient to carry the Plan
into effect and it shall be the sole and final judge of such expediency.  All decisions by the Board shall be made in
the Board’s sole discretion and shall be final and binding on all persons
having or claiming any interest in the Plan or in any Award.  No director or person acting pursuant to the
authority delegated by the Board shall be liable for any action or
determination relating to or under the Plan made in good faith.


 


(b)           Appointment of
Committees.  To
the extent permitted by applicable law, the Board may delegate any or all of
its powers under the Plan to one or more committees or subcommittees of the
Board (a “Committee”).  During such time
as the common stock,  $0.01 par value per share, of the
Company (the “Common Stock”) is registered under the Securities Exchange Act of
1934 (the “Exchange Act”), the Board shall appoint one such Committee of not
less than two members, each member of which shall be an “outside director”
within the meaning of Section 162(m) of the Code and a “non-employee
director” as defined in Rule 16b-3 promulgated under the Exchange
Act.  All references in the Plan to the “Board”
shall mean the 


 

















 


Board or a
Committee of the Board or the officers referred to in Section 3(c) to
the extent that the Board’s powers or authority under the Plan have been
delegated to such Committee or officers.


 


(c)           Delegation to
Officers.  To the extent permitted by
applicable law, the Board may delegate to one or more officers of the Company
the power to grant Awards to employees or officers of the Company or any of its
present or future subsidiary corporations and to exercise such other powers
under the Plan as the Board may determine, provided that the Board shall fix
the terms of the Awards to be granted by such officers (including the exercise
price of such Awards, which may include a formula by which the exercise price
will be determined) and the maximum number of shares subject to Awards that the
officers may grant; provided further, however, that no officer shall be
authorized to grant Awards to any “executive officer” of the Company (as
defined by Rule 3b-7 under the Exchange Act of 1934) or to any “officer”
of the Company (as defined by Rule 16a-1 under the Exchange Act).


 


4.            Stock Available for
Awards


 


(a)           Number of Shares.  Subject to adjustment under Section 10,
Awards may be made under the Plan for up to 2,000,000 shares of Common
Stock.  If any Award expires or is
terminated, surrendered or canceled without having been fully exercised, is
forfeited in whole or in part (including as the result of shares of Common
Stock subject to such Award being repurchased by the Company at the original
issuance price pursuant to a contractual repurchase right), is settled in cash
or otherwise results in any Common Stock not being issued, the unused Common Stock
covered by such Award shall again be available for the grant of Awards under
the Plan.  However, in the case of
Incentive Stock Options (as hereinafter defined), the foregoing provisions
shall be subject to any limitations under the Code.  Shares issued under the Plan may consist in
whole or in part of authorized but unissued shares or treasury shares.


 


(b)           Sub-limits.  Subject to adjustment under Section 10,
the following sub-limits on the number of shares subject to Awards shall apply:


 


(1)           Section 162(m) Per-Participant
Limit.  The maximum number of shares
of Common Stock with respect to which Awards may be granted to any Participant
under the Plan shall be  600,000 per
calendar year.  For purposes of the
foregoing limit, the combination of an Option in tandem with an SAR (as each is
hereafter defined) shall be treated as a single Award.  The per-Participant limit described in this Section 4(b)(1) shall
be construed and applied consistently with Section 162(m) of the Code
or any successor provision thereto, and the regulations thereunder (“Section 162(m)”).


 


(2)           Limit
on Awards to Directors.  The maximum
number of shares with respect to which Awards may be granted to any director
who is not an employee of the Company at the time of grant shall be 50,000 per
calendar year.


 


(c)           Substitute Awards.  In connection with a merger or consolidation
of an entity with the Company or the acquisition by the Company of property or
stock of an entity, the Board may grant Awards in substitution for any options
or other stock or stock unit awards granted by such entity or an affiliate
thereof.  Substitute Awards may be
granted on such terms as the Board 


 


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deems appropriate
in the circumstances, notwithstanding any limitations on Awards contained in
the Plan.  Substitute Awards shall not count against the overall share limit set forth
in Section 4(a), except as may be required by reason of Section 422
and related provisions of the Code.


 


5.             Stock Options


 


(a)           General.  The Board may grant options to purchase
Common Stock (each, an “Option”) and determine the number of shares of Common
Stock to be covered by each Option, the exercise price of each Option and the
conditions and limitations applicable to the exercise of each Option, including
conditions relating to applicable federal or state securities laws, as it
considers necessary or advisable.  An
Option that is not intended to be an Incentive Stock Option (as hereinafter
defined) shall be designated a “Nonstatutory Stock Option.”


 


(b)           Incentive Stock
Options.  An Option that the Board
intends to be an “incentive stock option” as defined in Section 422 of the
Code (an “Incentive Stock Option”) shall only be granted to employees of
BioSphere Medical, Inc., any of BioSphere Medical, Inc.’s present or
future parent or subsidiary corporations as defined in Sections 424(e) or (f) of
the Code, and any other entities the employees of which are eligible to receive
Incentive Stock Options under the Code, and shall be subject to and shall be
construed consistently with the requirements of Section 422 of the
Code.  The Company shall have no
liability to a Participant, or any other party, if an Option (or any part
thereof) that is intended to be an Incentive Stock Option is not an Incentive
Stock Option or for any action taken by the Board, including without limitation
the conversion of an Incentive Stock Option to a Nonstatutory Stock Option.


 


(c)           Exercise Price.  The Board shall establish the exercise price
of each Option and specify such exercise price in the applicable option
agreement; provided, however, that the exercise price shall be not less than
100% of the Fair Market Value (as defined below) on the date the Option is
granted.


 


(d)           Duration of Options.  Each Option shall be exercisable at such
times and subject to such terms and conditions as the Board may specify in the
applicable option agreement, provided, however, that no Option will be granted
for a term in excess of 10 years.


 


(e)           Exercise of Option.  Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board,
together with payment in full as specified in Section 5(f) for the
number of shares for which the Option is exercised.  Shares of Common Stock subject to the Option
will be delivered by the Company following exercise either as soon as
practicable or, subject to such conditions as the Board shall specify, on a
deferred basis (with the Company’s obligation to be evidenced by an instrument
providing for future delivery of the deferred shares at the time or times
specified by the Board).


 


(f)            Payment Upon
Exercise.  Common Stock purchased
upon the exercise of an Option granted under the Plan shall be paid for as
follows:


 


(1)           in
cash or by check, payable to the order of the Company;


 


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(2)           except
as may otherwise be provided in the applicable option agreement, by (i) delivery
of an irrevocable and unconditional undertaking by a creditworthy broker to
deliver promptly to the Company sufficient funds to pay the exercise price and
any required tax withholding or (ii) delivery by the Participant to the
Company of a copy of irrevocable and unconditional instructions to a
creditworthy broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price and any required tax withholding;


 


(3)           to
the extent provided for in the applicable option agreement or approved by the
Board, in its sole discretion, by delivery (either by actual delivery or
attestation) of shares of Common Stock owned by the Participant valued at their
fair market value as determined by (or in a manner approved by) the Board (“Fair
Market Value”), provided (i) such method of payment is then permitted
under applicable law, (ii) such Common Stock, if acquired directly from
the Company, was owned by the Participant for such minimum period of time, if
any, as may be established by the Board in its discretion and (iii) such
Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting
or other similar requirements;


 


(4)           to
the extent permitted by applicable law and provided for in the applicable
option agreement or approved by the Board, in its sole discretion, by (i) delivery
of a promissory note of the Participant to the Company on terms determined by
the Board, or (ii) payment of such other lawful consideration as the Board
may determine; or


 


(5)           by
any combination of the above permitted forms of payment.


 


(g)           Limitation on
Repricing.  Unless such action is
approved by the Company’s stockholders:  (i) no
outstanding Option granted under the Plan may be amended to provide an exercise
price per share that is lower than the then-current exercise price per share of
such outstanding Option (other than adjustments pursuant to Section 10)
and (ii) the Board may not cancel any outstanding option (whether or not
granted under the Plan) and grant in substitution therefore new Awards under
the Plan covering the same or a different number of share of Common Stock and
having an exercise price per share lower than the then-current exercise price
per share of the cancelled option.


 


6.             Director
Awards.


 


(a)           Initial Grant.  Upon the commencement of service on the Board
by any individual who is not then an employee of the Company or any subsidiary
of the Company, the Company shall grant to such person a Nonstatutory Stock
Option to purchase 10,000 shares of Common Stock (subject to adjustment under Section 10).


 


(b)           Annual Grant.  On the date of each annual meeting of
stockholders of the Company, the Company shall grant to each member of the
Board of Directors of the Company who is both serving as a director of the
Company immediately prior to and immediately following such annual meeting and
who is not then an employee of the Company or any of its subsidiaries, (i) a
Nonstatutory Stock Option to purchase 5,000 shares of Common Stock and (ii) 2,500
shares of Restricted Stock (as defined in Section 8 below) (each subject
to adjustment under Section 10); provided, however, that a director shall
not be eligible to receive an option 


 


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grant or
restricted stock grant under this Section 6(b) until such director
has served on the Board for at least six months.


 


(c)           Terms of Director
Options.  Options granted under this Section 6
shall: (i) have an exercise price equal to the closing sale price (for the
primary trading session) of the Common Stock on The Nasdaq Stock Market (“NASDAQ”)
or the national securities exchange on which the Common Stock is then traded on
the trading date immediately prior to the date of grant (and if the Common
Stock is not then traded on NASDAQ or a national securities exchange, the fair
market value of the Common Stock on such date as determined by the Board), (ii) with
respect to Options granted under Section 6(a), vest in five equal annual
installments beginning on the first anniversary of the date of grant, (iii) with
respect to Options granted under Section 6(b), vest in full on the date of
grant, (iii) expire on the earlier of 10 years from the date of grant or
three months following cessation of service on the Board, and (iv) contain
such other terms and conditions as the Board shall determine.


 


(d)           Terms of Director
Restricted Stock.  Restricted Stock
granted under this Section 6 shall (i) have an exercise price equal
to $.01 per share, (ii) be subject to repurchase by the Company at a price
equal to the purchase price until the second anniversary of the date of grant
provided that the individual is serving on the Board on such date, and provided
that the Board may provide not to exercise such repurchase option in the case
of death, disability, attainment of mandatory retirement age or retirement following
at least 10 years of service, and (iii) contain such other terms and
conditions as the Board shall determine.


 


(e)           Board Discretion.  The Board retains the specific authority to
from time to time increase or decrease the number of shares subject to options
and restricted stock awards granted under this Section 6, subject to the
provisions of Section 4(b)(2).


 


7.             Stock
Appreciation Rights.


 


(a)           General.  The Board may grant Awards consisting of a
Stock Appreciation Right (“SAR”) entitling the holder, upon exercise, to
receive an amount in Common Stock or cash or a combination thereof (such form
to be determined by the Board) determined by reference to appreciation, from
and after the date of grant, in the fair market value of a share of Common
Stock.  The date as of which such
appreciation or other measure is determined shall be the exercise date.


 


(b)           Grants.  Stock Appreciation Rights may be granted in
tandem with, or independently of, Options granted under the Plan.


 


(1)           Tandem
Awards.  When Stock Appreciation
Rights are expressly granted in tandem with Options, (i) the Stock Appreciation
Right will be exercisable only at such time or times, and to the extent, that
the related Option is exercisable (except to the extent designated by the Board
in connection with an Acquisition Event) and will be exercisable in accordance
with the procedure required for exercise of the related Option; (ii) the Stock
Appreciation Right will terminate and no longer be exercisable upon the
termination or exercise of the related Option, except to the extent designated
by the Board in connection with an Acquisition Event and except that a Stock
Appreciation Right granted with respect to less than the full number of shares 


 


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covered
by an Option will not be reduced until the number of shares as to which the
related Option has been exercised or has terminated exceeds the number of
shares not covered by the Stock Appreciation Right; (iii) the Option will
terminate and no longer be exercisable upon the exercise of the related Stock
Appreciation Right; and (iv) the Stock Appreciation Right will be
transferable only with the related Option.


 


(2)           Independent
SARs.  A Stock Appreciation Right not
expressly granted in tandem with an Option will become exercisable at such time
or times, and on such conditions, as the Board may specify in the SAR Award.


 


 


(c)           Grant Price.  The grant price or exercise price of an SAR
shall not be less than 100% of the Fair Market Value per share of Common Stock
on the date of grant of the SAR.


 


(d)           Term.  The term of an SAR shall not be more than 10
years from the date of grant.


 


(e)           Exercise.  Stock Appreciation Rights may be exercised by
delivery to the Company of a written notice of exercise signed by the proper
person or by any other form of notice (including electronic notice) approved by
the Board, together with any other documents required by the Board.


 


8.            Restricted Stock;
Restricted Stock Units.


 


(a)           General.  The Board may grant Awards entitling recipients
to acquire shares of Common Stock (“Restricted Stock”), subject to the right of
the Company to repurchase all or part of such shares at their issue price or
other stated or formula price (or to require forfeiture of such shares if
issued at no cost) from the recipient in the event that conditions specified by
the Board in the applicable Award are not satisfied prior to the end of the
applicable restriction period or periods established by the Board for such
Award.  Instead of granting Awards for Restricted
Stock, the Board may grant Awards entitling the recipient to receive shares of
Common Stock to be delivered at the time such shares of Common Stock vest (“Restricted
Stock Units”) (Restricted Stock and Restricted Stock Units are each referred to
herein as a “Restricted Stock Award”).


 


(b)           Terms and Conditions
for all Restricted Stock Awards.  The
Board shall determine the terms and conditions of a Restricted Stock Award,
including the conditions for vesting and repurchase (or forfeiture) and the issue
price, if any.


 


(c)           Additional Provisions Relating to Restricted Stock.


 


(1)            Dividends.  Participants holding shares of Restricted
Stock will be entitled to all ordinary cash dividends paid with respect to such
shares, unless otherwise provided by the Board. 
If any such dividends or distributions are paid in shares, or consist of
a dividend or distribution to holders of Common Stock other than an
ordinary cash dividend, the shares, cash or
other property will be subject to the same restrictions on transferability and
forfeitability as the shares of Restricted Stock with respect to which they
were paid.   Each dividend payment will
be made no later than the end of the calendar year in which the dividends are
paid to shareholders of that class of stock or, if later, the 15th day of the
third month following the date the dividends are paid to shareholders of that
class of stock.


 


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(2)           Stock
Certificates.  The Company may
require that any stock certificates issued in respect of shares of Restricted
Stock shall be deposited in escrow by the Participant, together with a stock
power endorsed in blank, with the Company (or its designee).  At the expiration of the applicable
restriction periods, the Company (or such designee) shall deliver the
certificates no longer subject to such restrictions to the Participant or if
the Participant has died, to the beneficiary designated, in a manner determined
by the Board, by a Participant to receive amounts due or exercise rights of the
Participant in the event of the Participant’s death (the “Designated
Beneficiary”).  In the absence of an
effective designation by a Participant, “Designated Beneficiary” shall mean the
Participant’s estate.


 


(d)           Additional
Provisions Relating to Restricted Stock Units.


 


(1)           Settlement.  Upon the vesting of and/or lapsing of any
other restrictions (i.e., settlement) with respect to each Restricted Stock
Unit, the Participant shall be entitled to receive from the Company one share
of Common Stock or an amount of cash equal to the Fair Market Value of one
share of Common Stock, as provided in the applicable Award agreement.  The Board may, in its discretion, provide
that settlement of Restricted Stock Units shall be deferred, on a mandatory
basis or at the election of the Participant.


 


(2)           Voting
Rights.  A Participant shall have no
voting rights with respect to any Restricted Stock Units.


 


(3)           Dividend
Equivalents.  To the extent provided
by the Board, in its sole discretion, a grant of Restricted Stock Units may
provide Participants with the right to receive an amount equal to any dividends
or other distributions declared and paid on an equal number of outstanding
shares of Common Stock (“Dividend Equivalents”).  Dividend Equivalents may be paid currently or
credited to an account for the Participants, may be settled in cash and/or
shares of Common Stock and may be subject to the same restrictions on transfer
and forfeitability as the Restricted Stock Units with respect to which paid, as
determined by the Board in its sole discretion, subject in each case to such
terms and conditions as the Board shall establish, in each case to be set forth
in the applicable Award agreement.


 


9.             Other
Stock Unit Awards.


 


Other Awards of shares of Common Stock, and other Awards that are
valued in whole or in part by reference to, or are otherwise based on, shares
of Common Stock or other property, may be granted hereunder to Participants (“Other
Stock Unit Awards”), including without limitation Awards entitling recipients
to receive shares of Common Stock to be delivered in the future.  Such Other Stock Unit Awards shall also be
available as a form of payment in the settlement of other Awards granted under
the Plan or as payment in lieu of compensation to which a Participant is
otherwise entitled.  Other Stock Unit
Awards may be paid in shares of Common Stock or cash, as the Board shall
determine.  Subject to the provisions of
the Plan, the Board shall determine the terms and conditions of each Other
Stock Unit Award, including any purchase price applicable thereto.


 


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10.           Adjustments for Changes in Common Stock
and Certain Other Events.


 


(a)           Changes in Capitalization. 
In the event of any stock split, reverse stock split, stock dividend,
recapitalization, combination of shares, reclassification of shares, spin-off
or other similar change in capitalization or event, or any dividend or
distribution to holders of Common Stock other than an ordinary cash dividend, (i) the
number and class of securities available under this Plan, (ii) the
sub-limits set forth in Section 4(b), (iii) the number and class of
securities and exercise price per share of each outstanding Option and each
Option issuable under Section 6, (iv) the share- and per-share
provisions and the exercise price of each Stock Appreciation Right, (v) the
number of shares subject to and the repurchase price per share subject to each
outstanding Restricted Stock Award and (vi) the share- and
per-share-related provisions and the purchase price, if any, of each
outstanding Other Stock Unit Award, shall be appropriately adjusted by the
Company (or substituted Awards may be made, if applicable) to the extent
determined by the Board.  Without
limiting the generality of the foregoing, in the event the Company effects a
split of the Common Stock by means of a stock dividend and the exercise price
of and the number of shares subject to such Option are adjusted as of the date
of the distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.


 


(b)           Acquisition Events


 


(1)           Consequences Of Acquisition Events. Subject to Section 10(b)(2) below,
upon the occurrence of an Acquisition Event (as defined below), or the execution
by the Company of any agreement with respect to an Acquisition Event, the Board
shall take any one or more of the following actions with respect to then
outstanding Awards: (i) provide that outstanding Options shall be assumed,
or equivalent Options shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof), provided that any such Options
substituted for Incentive Stock Options shall satisfy, in the determination of
the Board, the requirements of Section 424(a) of the Code; (ii) upon
written notice to the Participants, provide that all then unexercised Options
will become exercisable in full as of a specified date (the “Acceleration Date”)
prior to the Acquisition Event and will terminate immediately prior to the consummation
of such Acquisition Event, except to the extent exercised by the Participants
between the Acceleration Date and the consummation of such Acquisition Event; (iii) in
the event of an Acquisition Event under the terms of which holders of Common
Stock will receive upon consummation thereof a cash payment for each share of
Common Stock surrendered pursuant to such Acquisition Event (the “Acquisition
Price”), provide that all outstanding Options shall terminate upon consummation
of such Acquisition Event and each Participant shall receive, in exchange
therefor, a cash payment equal to the amount (if any) by which (A) the
Acquisition Price multiplied by the number of shares of Common Stock subject to
such outstanding Options (whether or not then exercisable), exceeds (B) the
aggregate exercise price of such Options; (iv) provide that all Restricted
Stock Awards then outstanding shall become free of all restrictions prior to
the consummation of the Acquisition Event; and (v) provide that any other
stock-based Awards outstanding (A) shall become exercisable, realizable or
vested in full, 


 


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or
shall be free of all conditions or restrictions, as applicable to each such
Award, prior to the consummation of the Acquisition Event, or (B), if
applicable, shall be assumed, or equivalent Awards shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof).


 


An “Acquisition Event” shall be deemed to have occurred only if any of
the following events occur: (a) the stockholders of the Company approve a
merger or consolidation which results in the voting securities of the Company
outstanding immediately prior thereto representing thereafter (either by
remaining outstanding or by being converted into voting securities of the
surviving or acquiring entity) less than 50% of the combined voting power of
the voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation; (b) any sale
of all or substantially all of the assets of the Company; (c) the complete
liquidation of the Company; or (d) the acquisition of “beneficial
ownership” (as defined in Rule 13d-3 under the Exchange Act) of securities
of the Company representing 50% or more of the combined voting power of the
Company’s then outstanding securities (other than through a merger or
consolidation or an acquisition of securities directly from the Company) by any
“person”, as such term is used in Sections 13(d) and 14(d) of the Exchange
Act other than the Company, Sepracor Inc. (or its successor), any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company or any corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportion as their ownership of stock of
the Company; or (e) individuals who, on the date on which the Plan was
adopted by the Board of Directors, constituted the Board of Directors of the
Company, together with any new director whose election by the Board of
Directors or  nomination for election by
the Company’s stockholders was approved by a vote of at least a majority of the
directors then still in office who were directors on the date on which the Plan
was adopted by the Board of Directors or whose election or nomination was
previously so approved, cease for any reason to constitute at least a majority
of the Board of Directors.


 


(2)           Acceleration Upon An Acquisition Event. Except to the extent otherwise provided
in the instrument evidencing the Award or in any other agreement between the
Participant and the Company, upon the occurrence of an Acquisition Event or
with respect to Options or any other similar Awards only, upon the execution by
the Company of any agreement with respect to an Acquisition Event, (i) the
Board shall provide a written notice to the Participants that are directors or
employees of the Company that all Options then outstanding shall become
immediately exercisable in full as of a specified date (the “Acceleration Date”)
prior to the Acquisition Event and will terminate immediately prior to the
consummation of such Acquisition Event, except to the extent exercised by the
Participants between the Acceleration Date and the consummation of such
Acquisition Event; (ii) all Restricted Stock Awards then outstanding and
held by directors or employees of the Company shall become immediately free of
all restrictions; (iii) all other stock-based Awards that are held by
directors or employees of the Company shall become immediately exercisable,
realizable or vested in full, or shall be immediately free of all restrictions
or conditions, as the case may be.


 


11.           General Provisions Applicable to Awards


 


(a)           Transferability of Awards. 
Awards shall not be sold, assigned, transferred, pledged or otherwise
encumbered by the person to whom they are granted, either voluntarily or by
operation of law, except by will or the laws of descent and distribution or,
other than in the 


 


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case of an
Incentive Stock Option, pursuant to a qualified domestic relations order, and,
during the life of the Participant, shall be exercisable only by the
Participant; provided, however, that the Board may permit or provide in an
Award for the gratuitous transfer of the Award by the Participant to or for the
benefit of any immediate family member, family trust or other entity
established for the benefit of the Participant and/or an immediate family
member thereof if, with respect to such proposed transferee, the Company would
be eligible to use a Form S-8 for the registration of the sale of the
Common Stock subject to such Award under the Securities Act of 1933, as
amended; provided, further, that the Company shall not be required to recognize
any such transfer until such time as the Participant and such permitted
transferee shall, as a condition to such transfer, deliver to the Company a
written instrument in form and substance satisfactory to the Company confirming
that such transferee shall be bound by all of the terms and conditions of the
Award.  References to a Participant, to
the extent relevant in the context, shall include references to authorized
transferees.


 


(b)           Documentation.  Each Award
shall be evidenced in such form (written, electronic or otherwise) as the Board
shall determine.  Each Award may contain
terms and conditions in addition to those set forth in the Plan.


 


(c)           Board Discretion.  Except as
otherwise provided by the Plan, each Award may be made alone or in addition or
in relation to any other Award.  The
terms of each Award need not be identical, and the Board need not treat
Participants uniformly.


 


(d)           Termination of Status.  The Board
shall determine the effect on an Award of the disability, death, termination of
employment, authorized leave of absence or other change in the employment or
other status of a Participant and the extent to which, and the period during
which, the Participant, or the Participant’s legal representative, conservator,
guardian or Designated Beneficiary, may exercise rights under the Award.


 


(e)           Withholding.  The
Participant must satisfy all applicable federal, state, and local or other
income and employment tax withholding obligations before the Company will
deliver stock certificates or otherwise recognize ownership of Common Stock
under an Award.  The Company may decide
to satisfy the withholding obligations through additional withholding on salary
or wages.  If the Company elects not to
or cannot withhold from other compensation, the Participant must pay the
Company the full amount, if any, required for withholding or have a broker
tender to the Company cash equal to the withholding obligations.  Payment of withholding obligations is due
before the Company will issue any shares on exercise or release from forfeiture
of an Award or, if the Company so requires, at the same time as is payment of
the exercise price unless the Company determines otherwise.  If provided for in an Award or approved by
the Board in its sole discretion, a Participant may satisfy such tax obligations
in whole or in part by delivery of shares of Common Stock, including shares
retained from the Award creating the tax obligation, valued at their Fair
Market Value; provided, however, except as otherwise provided by the Board,
that the total tax withholding where stock is being used to satisfy such tax
obligations cannot exceed the Company’s minimum statutory withholding
obligations (based on minimum statutory withholding rates for federal and state
tax purposes, including payroll taxes, that are applicable to such supplemental
taxable income).  Shares surrendered to
satisfy tax withholding requirements cannot be subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements.


 


10

















 


(f)            Amendment of Award.  Except as
otherwise provided in Section 5(g), the Board may amend, modify or
terminate any outstanding Award, including but not limited to, 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 either (i) that the Participant’s
consent to such action shall be required unless the Board determines that the
action, taking into account any related action, would not materially and
adversely affect the Participant or (ii) that the change is permitted
under Section 10 hereof.


 


(g)           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 restrictions from shares previously delivered
under the Plan until (i) all conditions of the Award have been met or
removed to the satisfaction of the Company, (ii) in the opinion of the
Company’s counsel, all other legal matters in connection with the issuance and
delivery of such shares have been satisfied, including any applicable
securities laws and any applicable stock exchange or stock market rules and
regulations, and (iii) the Participant has executed and delivered to the
Company such representations or agreements as the Company may consider
appropriate to satisfy the requirements of any applicable laws, rules or
regulations.


 


(h)           Acceleration.  The Board may
at any time provide that any Award shall become immediately exercisable in full
or in part, free of some or all restrictions or conditions, or otherwise
realizable in full or in part, as the case may be.


 


(i)            Performance Awards.


 


(1)           Grants.  Restricted
Stock Awards and Other Stock Unit Awards under the Plan may be made subject to
the achievement of performance goals pursuant to this Section 11(i) (“Performance
Awards”), subject to the limit in Section 4(b)(1) on shares covered
by such grants.


 


(2)           Committee.  Grants of
Performance Awards to any Covered Employee intended to qualify as “performance-based
compensation” under Section 162(m) (“Performance-Based Compensation”)
shall be made only by a Committee (or subcommittee of a Committee) comprised
solely of two or more directors eligible to serve on a committee making Awards
qualifying as “performance-based compensation” under Section 162(m).  In the case of such Awards granted to Covered
Employees, references to the Board or to a Committee shall be deemed to be
references to such Committee or subcommittee. 
“Covered Employee” shall mean any person who is a “covered employee”
under Section 162(m)(3) of the Code.


 


(3)           Performance Measures. 
For any Award that is intended to qualify as Performance-Based
Compensation, the Committee shall specify that the degree of granting, vesting and/or
payout shall be subject to the achievement of one or more objective performance
measures established by the Committee, which shall be based on the relative or
absolute attainment of specified levels of one or any combination of the
following:  (a) net income, (b) earnings
before or after discontinued operations, interest, taxes, depreciation and/or
amortization, (c) operating profit before or after discontinued operations
and/or taxes, (d) sales, (e) sales growth, (f) earnings growth, (g) cash
flow or cash position, (h) gross margins, (i) stock price, (j) market
share, (k) return on sales, assets, equity or investment, (l) improvement
of financial 


 


11

















 


ratings,
(m) achievement of balance sheet or income statement objectives or (n) total
shareholder return, and may be absolute in their terms or measured against or
in relationship to other companies comparably, similarly or otherwise
situated.  Such performance measures may
be adjusted to exclude any one or more of (i) extraordinary items, (ii) gains
or losses on the dispositions of discontinued operations, (iii) the
cumulative effects of changes in accounting principles, (iv) the writedown
of any asset, and (v) charges for restructuring and rationalization
programs.  Such performance
measures:  (i) may vary by
Participant and may be different for different Awards; (ii) may be
particular to a Participant or the department, branch, line of business,
subsidiary or other unit in which the Participant works and may cover such
period as may be specified by the Committee; and (iii) shall be set by the
Committee within the time period prescribed by, and shall otherwise comply with
the requirements of, Section 162(m). 
Awards that are not intended to qualify as Performance-Based
Compensation may be based on these or such other performance measures as the
Board may determine.


 


(4)           Adjustments. 
Notwithstanding any provision of the Plan, with respect to any
Performance Award that is intended to qualify as Performance-Based
Compensation, the Committee may adjust downwards, but not upwards, the cash or
number of Shares payable pursuant to such Award, and the Committee may not
waive the achievement of the applicable performance measures except in the case
of the death or disability of the Participant.


 


(5)           Other.  The Committee
shall have the power to impose such other restrictions on Performance Awards as
it may deem necessary or appropriate to ensure that such Awards satisfy all
requirements for Performance-Based Compensation.


 


12.          Miscellaneous


 


(a)            No Right To Employment or Other Status. 
No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to
continued employment or any other relationship with the Company.  The Company expressly reserves the right at
any time to dismiss or otherwise terminate its relationship with a Participant
free from any liability or claim under the Plan, except as expressly provided
in the applicable Award.


 


(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 with respect to an Award until becoming
the record holder of such shares.


 


(c)            Effective Date and Term of Plan. 
The Plan shall become effective on the date the Plan is approved by the
Company’s stockholders (the “Effective Date”). 
No Awards shall be granted under the Plan after the completion of 10
years from the Effective Date, but Awards previously granted may extend beyond
that date.


 


(d)           Amendment of Plan. 
The Board may amend, suspend or terminate the Plan or any portion
thereof at any time provided that (i) to the extent required by Section 162(m),
no Award granted to a Participant that is intended to comply with Section 162(m) after
the date of such amendment shall become exercisable, realizable or vested, as
applicable to such Award, 


 


12

















 


unless and until
such amendment shall have been approved by the Company’s stockholders if
required by Section 162(m) (including the vote required under Section 162(m));
(ii) no amendment that would require stockholder approval under the rules of
NASDAQ may be made effective unless and until such amendment shall have been
approved by the Company’s stockholders; and (iii) if the NASDAQ amends its
corporate governance rules so that such rules no longer require
stockholder approval of material amendments to equity compensation plans, then,
from and after the effective date of such amendment to the NASDAQ rules, no
amendment to the Plan (A) materially increasing the number of shares
authorized under the Plan (other than pursuant to Section 10), (B) expanding
the types of Awards that may be granted under the Plan, or (C) materially
expanding the class of participants eligible to participate in the Plan shall
be effective unless stockholder approval is obtained.  In addition, if at any time the approval of the
Company’s stockholders is required as to any other modification or amendment
under Section 422 of the Code or any successor provision with respect to
Incentive Stock Options, the Board may not effect such modification or
amendment without such approval.  No
Award shall be made that is conditioned upon stockholder approval of any
amendment to the Plan.


 


(e)           Provisions for Foreign Participants. 
The Board may modify Awards or Options granted to Participants who are
foreign nationals or employed outside the United States or establish subplans
or procedures under the Plan to recognize differences in laws, rules,
regulations or customs of such foreign jurisdictions with respect to tax,
securities, currency, employee benefit or other matters.


 


(f)            Compliance With Code Section 409A. 
No Award shall provide for deferral of compensation that does not comply
with Section 409A of the Code, unless the Board, at the time of grant,
specifically provides that the Award is not intended to comply with Section 409A
of the Code.  The Company shall have no
liability to a Participant, or any other party, if an Award that is intended to
be exempt from, or compliant with, Section 409A is not so exempt or
compliant or for any action taken by the Board.


 


(g)           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, excluding choice-of-law
principles of the law of such state that would require the application of the
laws of a jurisdiction other than such state.


 


13

















 


BIOSPHERE
MEDICAL, INC.


 


AMENDMENT
NO. 1 TO


2006
STOCK INCENTIVE PLAN


 


Pursuant to Section 6(e) of
the 2006 Stock Incentive Plan (the “Plan”) of BioSphere Medical, Inc., a
Delaware corporation (the “Company”), the Plan be, and hereby is, amended as
set forth below.  Capitalized terms used
and not defined herein shall have the meanings ascribed to them in the Plan.


 


1.             Section 6(a) of the Plan is hereby deleted
in its entirety and the following is substituted in its place:


 


“(a)  Initial Grant.  Upon commencement of service on the Board by
any individual who is not then an employee of the Company or any subsidiary of
the Company, the Company shall grant to such person a Nonstatutory Stock Option
to purchase 15,000 shares of Common Stock (subject to adjustment under Section 10).”


 


2.             Section 6(c) of the Plan is hereby deleted
in its entirety and the following is substituted in its place:


 


“(c)  Terms of Director Options.  Options granted under this Section 6
shall: (i) have an exercise price equal to the closing price (for the
primary trading session) of the Common Stock on The Nasdaq Stock Market (“NASDAQ”)
or the national securities exchange on which the Common Stock is then traded on
the date of grant (and if the Common Stock is not then traded on NASDAQ or a
national securities exchange, the Fair Market Value on the date the Option is
granted), (ii) with respect to Options granted under Section 6(a),
vest in five equal annual installments beginning on the first anniversary of
the date of grant, (iii) with respect to Options granted under Section 6(b),
vest in full on the date of grant, (iii) expire on the earlier of 10 years
from the date of grant or three months following cessation of services on the
Board, and (iv) contain such other terms and conditions as the Board shall
determine.”


 


3.             This amendment shall be effective as of the date
approved by the Board of Directors of the Company.


 


 


Approved by the Board of
Directors on August 3, 2006


 


14

















 


AMENDMENT
NO. 2


 


TO


 


BIOSPHERE
MEDICAL, INC.


 


2006
STOCK INCENTIVE PLAN


 


This Amendment No. 2
(the “Amendment”) is made to the 2006 Stock Incentive Plan (the “Plan”) of
BioSphere Medical, Inc., a Delaware corporation (the “Company).


 


Section 4(a) of
the Plan is hereby deleted in its entirety and the following is substituted in
its place:


 


“(a)  Number of
Shares.   Subject to adjustment under
Section 10, Awards may be made under the Plan for up to 2,500,000 shares
of Common Stock. If any Award expires or is terminated, surrendered or canceled
without having been fully exercised, is forfeited in whole or in part
(including as the result of shares of Common Stock subject to such Award being
repurchased by the Company at the original issuance price pursuant to a
contractual repurchase right), is settled in cash or otherwise results in any
Common Stock not being issued, the unused Common Stock covered by such Award
shall again be available for the grant of Awards under the Plan. However, in
the case of Incentive Stock Options (as hereinafter defined), the foregoing
provisions shall be subject to any limitations under the Code. Shares issued
under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares.”


 


Except to the extent
amended hereby, the Plan is in all respects hereby ratified and confirmed and
shall continue in full force and effect.


 


Approved by the Board of
Directors, March 25, 2008


 


Approved by the Shareholders,
May 14, 2008


 


15
















 


AMENDMENT NO. 3


 


TO


 


BIOSPHERE MEDICAL, INC.


 


2006 STOCK
INCENTIVE PLAN


 


This Amendment No. 3
(the “Amendment”) is made to the 2006 Stock Incentive Plan (the “Plan”) of
BioSphere Medical, Inc., a Delaware corporation (the “Company).


 


Section 4(a) of the
Plan is hereby deleted in its entirety and the following is inserted in lieu
thereof:


 


“(a)  Number of Shares.   Subject to adjustment under Section 10,
Awards may be made under the Plan for up to 3,000,000 shares of Common Stock.
If any Award expires or is terminated, surrendered or canceled without having
been fully exercised, is forfeited in whole or in part (including as the result
of shares of Common Stock subject to such Award being repurchased by the
Company at the original issuance price pursuant to a contractual repurchase
right), is settled in cash or otherwise results in any Common Stock not being
issued, the unused Common Stock covered by such Award shall again be available
for the grant of Awards under the Plan. However, in the case of Incentive Stock
Options (as hereinafter defined), the foregoing provisions shall be subject to
any limitations under the Code. Shares issued under the Plan may consist in
whole or in part of authorized but unissued shares or treasury shares.”


 


Except to the extent amended
hereby, the Plan is in all respects hereby ratified and confirmed and shall
continue in full force and effect.


 


Approved
by the Board of Directors, February 25, 2009


 


Approved
by the Shareholders, May 14, 2009


 


16