Exhibit 10.40


STOCK
UNIT AWARD AGREEMENT


(Granted under the UFP
Technologies, Inc. 2003 Equity Incentive Plan)


This Stock Unit Award Agreement is entered into as of
the     day of         ,
20     by and between UFP Technologies, Inc. (hereinafter
the “Company”) and              
(the “Awardee”).  Capitalized terms used
but not defined herein shall have the meanings assigned to them in the Company’s
2003 Equity Incentive Plan (the “Plan”). 
Stock Unit Awards (SUA’s represent the Company’s unfunded and unsecured
promise to issue shares of Common Stock at a future date, subject to the terms
of this Award Agreement, including, without limitation, the performance
objectives set forth in Schedule A hereto, and the Plan.  Awardee has no rights under the SUAs other
than the rights of a general unsecured creditor of the Company.


1.                                     Grant
of Stock Unit Awards; Performance Objectives; Vesting.


(a)                                  The
Company, in the exercise of its sole discretion pursuant to the Plan, does
hereby award to the Awardee the number of SUAs set forth on Schedule A
hereto upon the terms and subject to the conditions hereinafter contained.  The SUA’s shall consist of a Threshold Award,
a Target Award and an Exceptional Award. 
The Threshold Award shall not be subject to Performance Objectives (as
defined below).  The Target Award and the
Exceptional Awards are each awarded subject to attainment during the
Performance Cycle described on Schedule A of the Performance Objectives
set forth on Schedule A .


(b)                                 Subject
to attainment of any applicable Performance Objectives, payment with respect to
vested SUA’s shall be made entirely in the form of shares of Common Stock of
the Company on each respective vesting date as set forth on Schedule A.


(c)                                  As
soon as possible after the end of the Performance Cycle, the Committee will
certify in writing whether and to what extent the Performance Objectives have
been met for the Performance Cycle.  The
date of the Committee’s certification pursuant to this subsection (c) shall
hereinafter be referred to as the “Certification Date”.  The Company will notify the Awardee of the
Committee’s certification following the Certification Date (such notice, the “Determination
Notice”).  The Determination Notice shall
specify (i) the Performance Objective, as derived from the Company’s audited
financial statements; and (ii) the extent, if any, to which the Performance
Objectives were satisfied with respect to the Target Award and the Exceptional
Award.


2.                                     Change
in Control.


(a)                                  Notwithstanding
the vesting schedule set forth in Schedule A: if there is a Change in
Control of the Company (as defined below) at any time, and the provisions of
Section 4 hereof shall have been satisfied immediately prior to the effective
date of such Change in Control, then any SUA’s representing the Threshold Award
which are not already vested shall become vested in full immediately prior to
the effective date of such Change in Control, subject, however, to the
provisions of Section 21 of this Award Agreement.









 



(b)                                 Notwithstanding
the vesting schedule set forth in Schedule A: if there is a Change in
Control of the Company (as defined below) following the end of the Performance
Cycle, and the provisions of Section 4 hereof shall have been satisfied
immediately prior to the effective date of such Change in Control, then subject
to attainment during the Performance Cycle described on Schedule A of
the Performance Objectives set forth on Schedule A, and subject to the
provisions of Section 21 of this Award Agreement, any SUA’s representing the
Target Award and the Exceptional Award, which are not already vested shall
become vested in full immediately prior to the effective date of such Change in
Control.


(c)                                  For
the purpose of this Agreement, a “Change
in Control” shall mean  (i) the
consummation of a reorganization, merger or consolidation or sale or
disposition of all or substantially all of the assets of the Company (a “Business
Combination”), unless, in each case following such Business Combination, (A)
all or substantially all of the individuals and entities who were the
beneficial owners of the Common Stock of the Company immediately before the
consummation of such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation that as a result of the transaction owns the
Company or all or substantially all of the assets of the Company either
directly or indirectly through one or more subsidiaries); and (B) no person or
group (as defined in Section 13(d) or 14(d)(2) of the Securities Exchange Act
of 1934) of the Company or the corporation resulting from the Business
Combination) beneficially owns, directly or indirectly, more than 50% of the
then outstanding shares of the common stock of the corporation resulting from
the Business Combination;  (ii)
Individuals who, as of the date of this Agreement, constitute the Board of
Directors of the Company (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
provided, however, that any individual’s becoming a director after the date of
this Agreement whose election, or nomination for election by the stockholders
of the Company, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board will be considered as though the individual
were a member of the Incumbent Board, but excluding, for this purpose, any
individual whose initial assumption of office occurs 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; or (iii) any person (as defined
in Section 13(d) or 14(d)(2) of the Securities Exchange Act of 1934) shall become
at any time or in any manner the beneficial owner of capital stock of the
Company representing more than 50% of the voting power of the Company.


3.                                     Termination.  
Unless terminated earlier under Section 4, 5 or 6 below, an Awardee’s rights
under this Award Agreement with respect to the SUAs issued under this Award
Agreement shall terminate at the time such SUAs are converted into shares of
Common Stock.


4.                                       Termination
of Awardee’s Continuous Status as an Employee.   Except as
otherwise specified in Section 5 and 6 below, in the event of termination of
Awardee’s Continuous Status as an employee of the Company, Awardee’s rights
under this Award



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Agreement
in any unvested SUAs shall terminate. 
For purposes of this Award Agreement, an Awardee’s Continuous Status as
an employee shall mean the absence of any interruption or termination of
service as an employee.  Continuous
Status as an employee shall not be considered interrupted in the case of sick
leave or leave of absence for which Continuous Status is not considered
interrupted as determined by the Company in its sole discretion.


5.                                     Disability
of Awardee.   Notwithstanding the provisions of Section 4 above,
in the event of termination of Awardee’s Continuous Status as an employee as a
result of disability (within the meaning of Section 409A of the Internal
Revenue Code, and hereinafter referred to as “Disability”), the SUAs which
would have vested during the twelve (12) months following the date of such
termination, set out in Schedule A, shall become vested as of the date
of such termination, subject, however, to the provisions of Section 21 of this
Award Agreement.  If Awardee’s Disability
originally required him or her to take a short-term disability leave which was
later converted into long-term disability, then for the purposes of the
preceding sentence the date on which Awardee ceased performing services shall
be deemed to be the date of commencement of the short-term disability
leave.  The Awardee’s rights in any
unvested SUAs that remain unvested after the application of this Section 5
shall terminate at the time Awardee ceases to be in Continuous Status as an
employee.


6.                                     Death
of Awardee.   Notwithstanding the provisions of Section 4 above,
in the event of the death of Awardee:


(a)                                  If
the Awardee is, at the time of death, in Continuous Status as an employee, the
SUAs which would have vested during the twelve (12) months following the date
of death of Awardee, set out in Schedule A, shall become vested as of
the date of death.


(b)                               The
Awardee’s rights in any unvested SUAs that remain after the application of
Section 6(a) shall terminate at the time of the Awardee’s death.


7.                                     Value
of Unvested SUAs.   In consideration of the award of these SUAs,
Awardee agrees that upon and following termination of Awardee’s Continuous
Status as an employee for any reason (whether or not in breach of applicable
laws), and regardless of whether Awardee is terminated with or without cause,
notice, or pre-termination procedure or whether Awardee asserts or prevails on
a claim that Awardee’s employment was terminable only for cause or only with
notice or pre-termination procedure, any unvested SUAs under this Award
Agreement shall be deemed to have a value of zero dollars ($0.00).


8.                                     Conversion
of SUAs to shares of Common Stock; Responsibility for Taxes.


(a)                                Provided
Awardee has satisfied the requirements of Section 8(b) below, and subject to
the provisions of Section 21 below, on the vesting of any SUAs, such vested
SUAs shall be converted into an equivalent number of shares of Common Stock
that will be distributed to Awardee or, in the event of Awardee’s death, to
Awardee’s legal representative, as soon as practicable.  The distribution to the Awardee, or in the
case of the Awardee’s death, to the Awardee’s legal representative, of shares
of Common Stock in respect of the vested SUAs shall be evidenced by a stock
certificate, appropriate entry on the books of the Company or of a duly



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authorized
transfer agent of the Company, or other appropriate means as determined by the Company.


(b)                                 Regardless
of any action the Company takes with respect to any or all income tax
(including federal, state and local taxes), social security, payroll tax or
other tax-related withholding (“Tax Related Items”), Awardee acknowledges that
the ultimate liability for all Tax Related Items legally due by Awardee is and
remains Awardee’s responsibility and that the Company (i) makes no
representations or undertakings regarding the treatment of any Tax Related
Items in connection with any aspect of the SUAs, including the grant of the
SUAs, the vesting of SUAs, the conversion of the SUAs into shares of Common
Stock, the subsequent sale of any shares of Common Stock acquired at vesting
and the receipt of any dividends; and (ii) does not commit to structure the
terms of the grant or any aspect of the SUAs to reduce or eliminate the Awardee’s
liability for Tax Related Items.  Prior
to the issuance of shares of Common Stock upon vesting of SUAs as provided in
Section 8(a) above, Awardee shall pay, or make adequate arrangements
satisfactory to the Company (in its sole discretion) to satisfy all withholding
obligations of the Company.  In this
regard, Awardee authorizes the Company to withhold all applicable Tax Related Items
legally payable by Awardee from Awardee’s wages or other cash compensation
payable to Awardee by the Company. 
Alternatively, or in addition, if permissible under applicable law, the
Company may, in its sole discretion, (i) sell or arrange for the sale of shares
of Common Stock to be issued on the vesting of SUAs to satisfy the withholding
obligation, and/or (ii) withhold in shares of Common Stock, provided that the
Company shall withhold only the amount of shares necessary to satisfy the
minimum withholding amount.  Awardee
shall pay to the Company any amount of Tax Related Items that the Company may
be required to withhold as a result of Awardee’s receipt of SUAs, the vesting
of SUAs, or the conversion of vested SUAs to shares of Common Stock that cannot
be satisfied by the means previously described. 
Except where applicable legal or regulatory provisions prohibit, the
standard process for the payment of an Awardee’s Tax Related Items shall be for
the Company to withhold in shares of Common Stock only to the amount of shares
necessary to satisfy the minimum withholding amount.  The Company may refuse to deliver shares of
Common Stock to Awardee if Awardee fails to comply with Awardee’s obligation in
connection with the Tax Related Items as described herein.


(c)                                In
lieu of issuing fractional shares of Common Stock, on the vesting of a fraction
of a SUA, the Company shall round the shares to the nearest whole share and any
such share which represents a fraction of a SUA will be included in a
subsequent vest date.


(d)                               Until
the distribution to Awardee of the shares of Common Stock in respect to the
vested SUAs is evidenced by a stock certificate, appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company, or other
appropriate means, Awardee shall have no right to vote or receive dividends or
any other rights as a shareholder with respect to such shares of Common Stock,
notwithstanding the vesting of SUAs. 
Subject to the provisions of Section 21 below, the Company shall cause
such distribution to Awardee to occur promptly upon the vesting of SUAs.  No adjustment will be made for a dividend or
other right for which the record date is prior to the date Awardee is recorded
as the owner of the shares of Common Stock, except as provided in Section 8 of
the Plan.



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(e)                                By
accepting the Award of SUAs evidenced by this Award Agreement, Awardee agrees
not to sell any of the shares of Common Stock received on account of vested
SUAs at a time when applicable laws or Company policies prohibit a sale.  This restriction shall apply so long as
Awardee is an Employee, Consultant or outside director of the Company or a
Subsidiary of the Company.


9.                                     Non-Transferability
of SUAs.   Awardee’s right in the SUAs awarded under this Award
Agreement and any interest therein may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner, other than by will or
by the laws of descent or distribution, prior to the distribution of the shares
of Common Stock in respect of such SUAs. 
SUAs shall not be subject to execution, attachment or other process.


10.                               Acknowledgment
of Nature of Plan and SUAs.   In accepting the Award, Awardee
acknowledges that:


(a)                                the
Plan is established voluntarily by the Company, it is discretionary in nature
and may be modified, amended, suspended or terminated by the Company at any
time, as provided in the Plan;


(b)                               the
Award of SUAs is voluntary and occasional and does not create any contractual
or other right to receive future awards of SUAs, or benefits in lieu of SUAs
even if SUAs have been awarded repeatedly in the past;


(c)                                all
decisions with respect to future awards, if any, will be at the sole discretion
of the Company;


(d)                               Awardee’s
participation in the Plan is voluntary;


(e)                                the
future value of the underlying shares of Common Stock is unknown and cannot be
predicted with certainty;


(f)                                    if
Awardee receives shares of Common Stock, the value of such shares of Common
Stock acquired on vesting of SUAs may increase or decrease in value;


(g)                               notwithstanding
any terms or conditions of the Plan to the contrary and consistent with Section
4 and Section 7 above, in the event of involuntary termination of Awardee’s
employment (whether or not in breach of applicable laws), Awardee’s right to
receive SUAs and vest under the Plan, if any, will terminate effective as of
the date that Awardee is no longer actively employed and will not be extended
by any notice period mandated under applicable law; furthermore, in the event
of involuntary termination of employment (whether or not in breach of
applicable laws), Awardee’s right to receive shares of Common Stock pursuant to
the SUAs after termination of employment, if any, will be measured by the date
of termination of Awardee’s active employment and will not be extended by any
notice period mandated under applicable law. 
The Committee shall have the exclusive discretion to determine when
Awardee is no longer actively employed for purposes of the award of SUAs; and



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(h)                                 Awardee
acknowledges and agrees that, regardless of whether Awardee is terminated with
or without cause, notice or pre-termination procedure or whether Awardee
asserts or prevails on a claim that Awardee’s employment was terminable only
for cause or only with notice or pre-termination procedure, Awardee has no
right to, and will not bring any legal claim or action for, (a) any damages for
any portion of the SUAs that have been vested and converted into Common Shares,
or (b) termination of any unvested SUAs under this Award Agreement.


11.                               No
Employment Right.   Awardee acknowledges that neither the fact of
this Award of SUAs nor any provision of this Award Agreement or the Plan or the
policies adopted pursuant to the Plan shall confer upon Awardee any right with
respect to employment or continuation of current employment with the Company,
or to employment that is not terminable at will.  Awardee further acknowledges and agrees that
neither the Plan nor this Award of SUAs makes Awardee’s employment with the
Company for any minimum or fixed period, and that such employment is subject to
the mutual consent of Awardee and the Company, and subject to any written
employment agreement that may be in effect from time to time between the
Company and the Awardee, may be terminated by either Awardee or the Company at
any time, for any reason or no reason, with or without cause or notice or any
kind of pre- or post-termination warning, discipline or procedure.


12.                               Administration.  
The authority to manage and control the operation and administration of this
Award Agreement shall be vested in the Committee (as such term is defined in
Section 2 of the Plan), and the Committee shall have all powers and discretion
with respect to this Award Agreement as it has with respect to the Plan.  Any interpretation of the Award Agreement by
the Committee and any decision made by the Committee with respect to the Award
Agreement shall be final and binding on all parties.


13.                               Plan
Governs.   Notwithstanding anything in this Award Agreement to
the contrary, the terms of this Award Agreement shall be subject to the terms
of the Plan, and this Award Agreement is subject to all interpretations,
amendments, rules and regulations promulgated by the Committee from time to
time pursuant to the Plan.


14.                                 Notices.  
Any written notices provided for in this Award Agreement which are sent by mail
shall be deemed received three business days after mailing, but not later than
the date of actual receipt.  Notices
shall be directed, if to Awardee, at the Awardee’s address indicated by the
Company’s records and, if to the Company, at the Company’s principal executive
office.


15.                                 Electronic
Delivery.   The Company may, in its sole discretion, decide to
deliver any documents related to SUAs awarded under the Plan or future SUAs
that may be awarded under the Plan by electronic means or request Awardee’s
consent to participate in the Plan by electronic means.  Awardee hereby consents to receive such
documents by electronic delivery and agrees to participate in the Plan through
an on-line or electronic system established and maintained by the Company or
another third party designated by the Company.


16.                               Acknowledgment.  
By Awardee’s acceptance as evidenced below, Awardee acknowledges that Awardee
has received and has read, understood and accepted all the terms, conditions
and restrictions of this Award Agreement and the Plan.  Awardee understands and



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agrees
that this Award Agreement is subject to all the terms, conditions, and
restrictions stated in this Award Agreement and the Plan, as the latter may be
amended from time to time in the Company’s sole discretion.  The Awardee further acknowledges that he or
she must accept this Award Agreement in the manner prescribed by the Company no
later than thirty (30) days following the date set forth above.


17.                               Board
Approval.   These SUAs have been awarded pursuant to the Plan and
accordingly this Award of SUAs is subject to approval by the Board of Directors
or an authorized committee of the Board of Directors.  If this Award of SUAs has not already been approved,
the Company agrees to submit this Award for approval as soon as practical.  If such approval is not obtained, this award
is null and void.


18.                               Governing
Law.   This Award Agreement shall be governed by the laws of the
State of Delaware, without regard to Delaware laws that might cause other law
to govern under applicable principles of conflicts of law.


19.                               Severability.  
If one or more of the provisions of this Award Agreement shall be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby and the invalid, illegal or unenforceable provisions shall be
deemed null and void; however, to the extent permissible by law, any provisions
which could be deemed null and void shall first be construed, interpreted or
revised retroactively to permit this Award Agreement to be construed so as to
foster the intent of this Award Agreement and the Plan.


20.                               Complete
Award Agreement and Amendment.   This Award Agreement and the
Plan constitute the entire agreement between Awardee and the Company regarding
SUAs.  Any prior agreements, commitments
or negotiations concerning these SUAs are superseded.  This Award Agreement may be amended only by
written agreement of Awardee and the Company, without consent of any other
person.  Awardee agrees not to rely on
any oral information regarding this Award of SUAs or any written materials not
identified in this Section 20.


21.                                 Section
409A of the Internal Revenue Code. 
This Award Agreement is intended to be in compliance with the provisions
of Section 409A of the Internal Revenue Code to the extent applicable, and any
interpretive guidance issued thereunder. 
If: (a)  the Awardee is a “specified
employee”, as such term is defined in Prop. Reg. Section 1.409A-1(i); and (b)
there occurs a separation of service (within the meaning of Section 409A of the
Internal Revenue Code) of the Awardee, for any reason, including, without
limitation, due to a Change in Control pursuant to Section 2(b) above or a
Disability pursuant to Section 5 above, then any shares of Common Stock that
would otherwise have been distributable to the Awardee upon such separation of
service, or within 6 months thereafter, shall instead be distributable on the
earlier to occur of (i) the date which is six (6) months following such
separation of service, or (ii) the date of death of the Awardee.  Notwithstanding anything set forth in this
Agreement to the contrary, in the event the issuance of Common Stock to the
Awardee as a result of the vesting of 
SUA’s would conflict with the provisions of said Section 409A or any
interpretive guidance issued thereunder, as the same may be amended, then such
issuance shall be deferred or otherwise modified to the extent



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deemed
necessary by the Company so as to remain in compliance with Section 409A and
any interpretive guidance issued thereunder.


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EXECUTED the day and year first above written.


	
  

  	
  UFP TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  



 


 


AWARDEE’S ACCEPTANCE:


I have
read and fully understood this Award Agreement and, as referenced in Section 16
above, I accept and agree to be bound by all of the terms, conditions and
restrictions contained in this Award Agreement and the other documents
referenced in it.


	
   

  	
   

  



 



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SCHEDULE A


The SUA’s issuable under
this Agreement shall consist of a Threshold Award, a Target Performance Award
and an Exceptional Performance Award, each in the amounts set forth below, each
such award issuable in                
increments on the vesting dates set forth below.


The Performance Objective
established by the Committee with respect to the Target Performance Award and
Exceptional Performance Award is                                                                                   .


 


	
  

  	
   

  	
  Performance

  	
   

  	
  Performance

  	
   

  	
  Number of

  Shares of

  Common

  	
   

  	
  Vesting

  
	
   

  	
   

  	
  Objective

  	
   

  	
  Cycle

  	
   

  	
  Stock

  	
   

  	
  (date)

  	
   

  	
  (date)

  	
   

  	
  (date)

  	
   

  	
  (date)

  
	
  a. Threshold Award

  	
   

  	
  No Performance Requirement

  	
   

  	
  N/A

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  b. Target Performance Award

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  (in addition to (a) above)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  c.
  Exceptional Performance Award

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  (in addition to (a) and (b) above)