Document:

Exhibit 10.1

 

EXHIBIT 10.1

2007 Incentive Plan

 

Somaxon Pharmaceuticals, Inc.

2007 Incentive Plan

The Somaxon Pharmaceuticals, Inc. (Somaxon) 2007 Incentive Plan (the “Plan”) is designed to offer
incentive compensation to eligible Employees by rewarding the achievement of corporate goals and
specifically measured individual goals that are consistent with and support overall corporate
goals. The Plan will create an environment which will focus Employees on the achievement of
objectives. Since cooperation between departments and Employees will be required to achieve
corporate objectives that represent a significant portion of the Plan, the Plan should help foster
improved teamwork and a more cohesive management team.

Purpose of the Plan

The Plan is designed to:

	•	 	Provide an incentive program to achieve overall corporate objectives and to enhance shareholder value
	 
	•	 	Reward those individuals who significantly impact corporate results
	 
	•	 	Encourage increased teamwork among all disciplines within the Company
	 
	•	 	Incorporate an incentive program in the Somaxon overall compensation program to help attract and retain Employees
	 
	•	 	Incentivize eligible Employees to remain employed by Somaxon throughout the Plan year and until the time incentive
awards are paid

Plan Governance

The Plan will be governed by the Compensation Committee of the Board of Directors. The President
and CEO of Somaxon will be responsible for administration of the Plan. The Compensation Committee
of the Board will be responsible for approving any compensation or incentive awards to officers of
the Company and any other employees with an annual base salary greater than or equal to $200,000.

Eligibility

All full time (40 hours/week) exempt Employees Level 6 (Manager) or higher are eligible to
participate in the Plan. To receive an incentive award, a participant: (a) must have been in an
eligible position for at least three (3) consecutive months prior to the end of the Plan year and
remain employed through the end of the Plan year and

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until incentive awards are paid; and (b) must not be on probation at the time bonus determinations
are made.

Notwithstanding the foregoing or anything else to the contrary contained in this Plan, if (a) a
Change of Control Transaction occurs prior to the date that bonus determinations have been made
under the Plan and (b) the employment of an Employee that is eligible to participate in the Plan is
thereafter involuntarily terminated, then, at the discretion of the Board of Directors, such
Employee may be awarded an annual bonus for the year in which such Employee’s employment is
terminated, based on the good-faith estimate of the Board of Directors of the actual amount, if
any, that would have been payable for such year under the Plan (assuming such Employee had remained
employed by the Company through the end of such year). A “Change of Control Transaction” shall be
defined as (i) a sale, lease, or other disposition of all or substantially all of the assets of the
Company, (ii) any consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization involving the Company, in each case
in which the capital stock of the Company immediately prior to such consolidation, merger or
reorganization represents less than fifty percent (50%) of the voting power of the surviving entity
(or, if the surviving entity is a majority-owned subsidiary, its parent) immediately after such
consolidation, merger or reorganization; or (iii) any transaction or series of related transactions
to which the Company is a party in which at least fifty percent (50%) of the Company’s voting power
is transferred; provided, that a “Change of Control” shall not include (A) any consolidation or
merger effected exclusively to change the domicile of the Company, or (B) any transaction or series
of transactions principally for bona fide equity financing purposes in which cash is received by
the Company or indebtedness of the Company is cancelled or converted, or a combination thereof.

Section 1: Bonus Incentive Awards (“Bonus”)

Form of Incentive Award Payments

Incentive award payments may be made in cash, through the issuance of stock or stock options, or by
a combination of cash, stock and/or stock options, at the discretion of the Company’s Compensation
Committee, subject to the approval of the Company’s Board of Directors. In the event that the
Compensation Committee and the Board of Directors elect to pay incentive awards in stock or stock
options, the Compensation Committee, in its sole discretion, will make a determination of the
number of shares of stock or stock options to be issued to each Plan participant based, in part,
upon each participant’s Corporate and Individual Performance, as described below. The issuance of
stock and stock options may also be subject to the approval of the Company’s stockholders, and any
stock options issued will be subject to the terms and conditions of the Company’s 2005 Equity
Incentive Award Plan, as amended from time to time by the Company.

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Corporate and Individual Performance

Prior to the beginning of the Plan year, the President and CEO will present to the Board of
Directors a list of the overall corporate objectives for the coming year, which are subject to
approval by the Board. All participants in the Plan will then develop a list of key individual
objectives, which must be approved by the responsible Vice President and by the President and CEO.

The Plan calls for incentive awards based on the achievement of annual corporate and individual
objectives that have been approved as indicated above.

The relative weight between corporate and individual performance factors may vary based on the
individual’s level within the organization. The weighting will be reviewed annually and may be
adjusted, as necessary or appropriate. The weighting for 2007 will be as follows:

	 	 	 	 	 	 	 	 	 
	 	 	Corporate	 	Individual
	President
and CEO (Grade 12)
	 	 	100	%	 	 	 	 
	Vice Presidents/Executive Directors (Grades 10-11)
	 	 	75	%	 	 	25	%
	All Others (Grades 6-9)
	 	 	50	%	 	 	50	%

Bonus Percentage

Incentive Awards will be determined by applying a “bonus percentage” to the base salary of
participants in the Plan. The following bonus percentages will be used for this purpose:

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	Grade Level	 	Position Title	 	Bonus Percentage
	12	 	President & CEO
	 	 	40	%
	10 - 11	 	Officers, Sr. VP, CMO, VP
	 	 	30	%
	8 - 9	 	Sr. Director, Director
	 	 	20	%
	6 – 7	 	Sr. Manager, Manager
	 	 	15	%

Performance Measurement

The following scale will be used to determine the actual award multiplier for incentive award
calculations based upon measurement of corporate and individual performance versus objectives.
Separate payment multipliers will be established for both the individual and the corporate
components of each award. The same payment multiplier for the corporate component of each
participant’s annual award shall be used for all Plan participants in any given year. The award
multiplier for the corporate component shall be determined by the Board of Directors.

	 	 	 	 	 
	 	 	Performance Category	 	Award Multiplier
	1.	 	Performance for the year met or exceeded objectives
or was excellent in view of prevailing conditions
	 	75% - 150%
	 	 	 
	 	 
	2.	 	Performance generally met the year’s objectives or
was very acceptable in view of prevailing conditions
	 	50% -  75%
	 	 	 
	 	 
	3.	 	Performance for the year met some, but not all, objectives
	 	25% -  50%
	 	 	 
	 	 
	4.	 	Performance for the year was not acceptable in view of
prevailing conditions
	 	0%

Calculation of Cash Incentive Award

The example below shows sample cash incentive award calculations under the Somaxon
compensation and Incentive Plan. First, a total bonus potential is calculated by multiplying the
Employee’s base salary by the bonus percentage. This dollar figure is then divided between its
corporate component and its individual component based on the performance factor mix for that
specific position. This calculation establishes specific dollar potential awards for the
performance period for both the individual and corporate components of the award.

At the end of the performance period, corporate and individual award multipliers will be
established using the criteria described above. The corporate award multiplier, which is based on
overall corporate performance, is used to calculate corporate performance awards for all Plan
participants. This is accomplished by multiplying the bonus percentage established for each
individual at the beginning

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of the performance period by the actual corporate award multiplier. The individual award
multiplier, which is based on an individual’s performance against objectives, is used in the same
way to calculate the actual individual performance award.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Example:	 	Cash Award Calculation
	 	 	 	 	 	 	 	 
	 	 	 	 	Position:
	 	 	 	 	 	Manager
	 	 	 	 	Base Salary:
	 	 	 	 	 	$	75,000	 
	 	 	 	 	Bonus percentage:
	 	 	 	 	 	 	15	%
	 	 	 	 	Potential bonus dollars:
	 	 	 	 	 	$	11,250	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Potential bonus components (based on performance factor mix):
	 	 	 	 	Potential corporate performance bonus (50%): 	$	5,625	 
	 	 	 	 	Potential individual performance bonus (50%):	$	5,625	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Actual Cash Award Calculation
	 	 	 	 	 	 	 	 
	 	 	 	 	Assumed payment multipliers based on assessment of corporate and individual performance:
	 	 	 	 	Corporate multiplier	 	75%-performance generally met year’s objectives
	 	 	 	 	Individual multiplier	 	125%-performance generally exceeded objectives
	 	 	 	 	Cash Award:
	 	 	 	 	 	 	 	 
	 	 	 	 	Corporate component
	 	$	4,218.75	 	 	 	($5,625 x 75	%)
	 	 	 	 	Individual component
	 	$	7,031.25	 	 	 	($5,625 x 125	%)

Payment of the Incentive Award

Payment of incentive awards will be made as soon as practicable after the end of the Plan year but
not before the completion and issuance of the Company’s year-end audited Financial Statements.
Incentive award calculations will be based on the participant’s base salary earned during the year
ending December 31, 2007. Participants’ entitlement to an incentive award under this Plan does not
vest until the awards are actually paid.

Participants who have been in an eligible position for less than a year, but who hold an eligible
position for at least three months prior to the end of the Plan year and remain continuously
employed through the end of the Plan year, will receive a pro-rata bonus based on the portion of
the Plan year they hold an eligible position. Participants promoted during the year from one
“Bonus percentage” level to another will have their Incentive Award calculated using their base
salary earned during the year ending December 31, 2007. Providing the promotion occurred prior to
October 1, 2007, the calculation will be pro-rated, based on the number on months at each Bonus
Percentage level. If the promotion occurred after October 1, 2007, the entire calculation will be
based on the Bonus Percentage applicable prior to the promotion. Other than as stated above,
incentive awards will not be prorated for partial year service.

Termination

A Plan participant whose employment terminates voluntarily prior to the payment of the incentive
awards, will not be eligible to receive an incentive award.

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Continued employment until payment of the incentive award is a condition of vesting. If a
participant’s employment is terminated involuntarily during the calendar year, or prior to payment
of awards, it will be at the absolute discretion of the Company whether or not an award payment is
made.

Board of Director’s Absolute Right to Alter or Abolish the Plan

The Somaxon Board of Directors reserves the right in its absolute discretion to abolish the Plan at
any time or to alter the terms and conditions under which incentive compensation will be paid.
Such discretion may be exercised any time before, during, and after the Plan year is completed. No
participant shall have any vested right to receive any compensation hereunder until actual delivery
of such compensation.

Employment Duration/Employment Relationship

This Plan does not, and Somaxon’s policies and practices in administering this Plan do not,
constitute an express or implied contract or other agreement concerning the duration of any
participant’s employment with the Company. The employment relationship of each participant is “at
will” and may be terminated at any time by Somaxon or by the participant, with or without cause.

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Somaxon Pharmaceuticals, Inc.

2007 Incentive Plan

This is to acknowledge that I have received a copy of the 2007 Incentive Plan.

	 	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Date:	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	(print)	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	(signature)	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Please return signed copy to Stacy Leppert.Exhibit 10.1

    Exhibit
      10.1            

    STANDARD
      TERMS OF AWARDS GRANTED UNDER

    THE
      2007 EXECUTIVE LONG-TERM INCENTIVE PROGRAM

    OF
      THE 2004 SYPRIS EQUITY PLAN

    

    

    
      	1.  	
              Purpose
                of the Program.
                The Company’s Executive Long-Term Incentive Program (“ELTIP”) under the
                2004 Sypris Equity Plan (“Plan”) shall be effective for all Awards
                incorporating these Terms on or after March 1, 2007, to advance the
                Company’s growth and prosperity by providing long-term financial
                incentives to its executives, and to further the Company’s philosophy of
                equity ownership by the Company’s officers in accordance with the
                Company’s Equity Ownership
                Guidelines.

            

    

     

    
      	2.  	
              Awards.
                Each ELTIP Participant will be eligible to receive an annual Award
                of
                Restricted Shares and an annual Award of Performance-Vesting Restricted
                Shares as determined by the
                Committee.

            

    

     

    
      	3.  	
              Restricted
                Shares.
                Each “Restricted Share” is one Share of the Common Stock (subject to
                adjustments per the Plan) which
                is subject to forfeiture before its
                Vesting Date, as
                set forth below.

            

    

     

    
      	3.1.  	
              Restricted
                Share Vesting.
                Unless otherwise determined by the Committee, grants of Restricted
                Shares
                will vest approximately 33% on the third anniversary of its Grant
                Date,
                33% on the fifth anniversary of its Grant Date and 34% on the seventh
                anniversary of its Grant Date (each such anniversary, a “Vesting Date”),
                unless forfeited before such Vesting
                Date.

            

    

     

    
      	3.2.  	
              Performance-Vesting
                Restricted Shares.
                Unless otherwise determined by the Committee, grants of
                Performance-Vesting Restricted Shares will vest 25% on each of the
                first,
                second, third and fourth anniversaries of the Vesting Trigger Date
                as
                defined in the Award (each such anniversary, a “Vesting Date”), unless
                forfeited by the failure to achieve a Vesting Trigger Date before
                the
                third anniversary of the Grant
                Date.

            

    

     

    
      	3.3.  	
              Distribution.
                All Restricted Shares will be held by the Company until their Vesting
                Dates, and physically distributed to the Participant thereafter,
                with any
                legends required by applicable Rules. Participants may vote and receive
                cash dividends on such Restricted Shares, as applicable, after the
                Grant
                Date.

            

    

     

    
      	4.  	
              Annual
                Review.
                The Committee will review the terms and conditions of the ELTIP annually
                in February of each year. The Committee will also review and approve
                of
                the Award to be granted to each Participant for the then current
                year,
                taking into consideration the (i) Participant’s contribution to the
                Company, (ii) results of the most recent national compensation survey
                data, and (iii) Company’s performance with respect to the achievement of
                its long-term strategic goals, including those relating to market
                and
                customer share, geographic expansion, portfolio mix, capital structure
                and
                financial strength, managerial development, capital markets, financial
                variability and risk profile.

            

    

     

    
      	5.  	
              Reduction
                in Job Responsibilities.
                If a Participant’s job responsibilities are reduced in scope or otherwise
                altered, the Participant shall automatically cease to participate
                in the
                ELTIP with respect to future Awards, unless otherwise determined
                by the
                Committee.

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	6.  	
              Retirement
                or Disability.
                In the event of any retirement after age 65 or qualification to receive
                long-term disability benefits under the Company’s then current policies,
                such retirement or disability period shall be treated as a period
                of
                employment for purposes of the accrual of rights hereunder, including
                any
                vesting or exercise rights.

            

    

     

    
      	7.  	
              Leaves
                of Absence.
                The Committee may in its discretion treat all or any portion of any
                period
                during which a Participant is on military or other approved leave
                of
                absence as a period of employment for purposes of the accrual of
                rights
                hereunder.

            

    

     

    
      	8.  	
              Other
                Terminations.
                If employment is terminated other than for retirement, death or
                disability, each unvested Option or Restricted Share will be forfeited
                immediately and the Participant will have up to thirty (30) days
                in which
                to exercise any vested Options. In the event of death, all unvested
                Awards
                will be immediately vested, and the Participant’s representative or estate
                shall have one (1) year in which to exercise any
                Options.

            

    

     

    9.  Administration.
      The
      Committee shall have complete authority to administer or interpret the ELTIP
      or
      any Award, to prescribe, amend and rescind rules and regulations relating
      thereto, and to make all other determinations necessary or 

     

    advisable
      for the administration of the ELTIP or any Award Agreements (including to
      establish or amend any rules regarding the ELTIP that are necessary or advisable
      to comply with, or qualify under, any applicable law, listing requirement,
      regulation or policy of any entity, agency, organization, governmental entity,
      or the Company, in the Committee’s sole discretion (“Rule”)). In addition, with
      respect to any future grants or the unvested portion of any Awards, the
      Committee may amend or terminate these Terms or any Awards, in its sole
      discretion without the consent of any employee or beneficiary, subject to
      applicable Rules, at any time and from time-to-time. With respect to any
      amendment, action or approval hereunder, the Committee may require the approval
      of any other persons or entities, pursuant to applicable Rules. The decisions
      of
      the Committee in interpreting and applying the ELTIP will be final.

     

    
      	10.  	
              Miscellaneous.
                Unless otherwise specified, all capitalized terms herein shall have
                the
                meanings assigned to them in the Plan or in the Award
                Agreement.

            

    

     

    
      	10.1.  	
              No
                Other Rights.
                The Awards include no other rights beyond those expressly provided
                in the
                Plan, the ELTIP or the Award Agreement. Awards are non-assignable
                and
                non-transferable except by will or the laws of descent and distribution,
                unless otherwise approved by the
                Committee.

            

    

     

    
      	10.2.  	
              Taxes.
                The Participant must pay in cash, surrender Shares or Options of
                then-equivalent value, or otherwise arrange (to the Committee’s
                satisfaction) for all tax withholding obligations related to any
                Award.

            

    

     

    
      	10.3.  	
              Delegation.
                The Committee may delegate any portion of their responsibilities
                and
                powers to one or more persons selected by them, subject to applicable
                Rules. Such delegation may be revoked by the Committee at any
                time.

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