Document:

Exhibit

Exhibit 10.10
HOOPER HOLMES, INC.
2011 OMNIBUS EMPLOYEE INCENTIVE PLAN

OPTION AWARD AGREEMENT
(Non-Qualified Stock Option)

Hooper Holmes, Inc., a New York corporation (the “Company”), hereby grants to the individual listed below (the “Grantee”) an Option, subject to the terms, conditions and restrictions of the Hooper Holmes, Inc. 2011 Omnibus Employee Incentive Plan (the “Plan”) and this Option Award Agreement, including the attached Appendix A (the Option Award Agreement and Appendix A are collectively referred to as the “Award Agreement”).  The capitalized terms not specifically defined in this Award Agreement shall have the meanings specified in the Plan.

Name of Employee:                Steven Balthazor

Number of Options:                250,000

		
	Grant Date:
	May 11, 2017        

		
	Option Price (per share):
	$0.65

                
Term/Expiration Date:            May 11, 2027

		
	Vesting Schedule:
	All Options granted under this Award Agreement are conditioned on shareholder approval at the Company’s annual meeting of shareholders for 2017 (the “Annual Meeting”) of an amendment to the Plan to add 3,000,000 shares to the number of shares issuable under the Plan (the “Amendment”). If the Amendment is not approved at the Annual Meeting, while all Options granted under this Award Agreement will be cancelled and forfeited, the Board will work to find an equivalent alternative.

125,000 shares subject to the Option (the “Time-Based Options”) shall vest in 25% tranches, rounded down to the nearest whole number of shares, on each of the first, second, third and fourth anniversaries of the Grant Date, all subject to the provisions of this Award Agreement.

125,000 of the shares subject to the Option (the “Performance Options”) vest and become exercisable only if the Company achieves certain run rate 

        

synergies totaling $7,000,000 for the calendar year ending December 31, 2017 as follows: 
    
100% achieved:  100% vested
90% achieved:      80% vested
		
	 
	80% achieved:          60% vested

70% achieved:      20% vested

Special Provisions/Restrictions Not
		
	Stated in the Plan (if any):
	None

By accepting this Award Agreement as indicated below, the Grantee agrees to be bound by the terms and conditions of the Plan (as presently in effect or later amended), the rules and regulations under the Plan adopted from time to time and this Award Agreement.  The Grantee has reviewed the Plan and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Award Agreement and is familiar with the terms and provisions of the Plan and this Award Agreement.  The Grantee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or this Award Agreement.  The Grantee understands that this Option has been granted to provide a means to acquire and/or expand an ownership position in Hooper Holmes, Inc., and it is expected that any stock acquired upon exercise of this Option will be retained consistent with the Company’s stock ownership guidelines in effect at the time of exercise of this Award.  

The Grantee acknowledges and agrees that the exercise of any portion of this Option and the sales of Stock will be subject to applicable laws and regulations and the Company’s policy regulating trading by employees.  The Grantee further agrees to notify the Company upon any change in his or her residence address.

HOOPER HOLMES, INC.                

By:                   /s/ Henry E. Dubois           
Name:  Henry E. Dubois        
Title:    Chief Executive Officer
                            
Address:    560 N. Rogers Road            
Olathe, Kansas 66062

APPENDIX A
TERMS AND CONDITIONS OF THE OPTION

ARTICLE I
GRANT OF OPTION

1.1    Grant of Option.  In consideration of your past and/or continued employment with the Company and for other good and valuable consideration, effective as of the Grant Date set forth in this Award Agreement (the “Grant Date”), the Company grants to you an Option to purchase any part or all of the number of shares of Stock set forth in this Award Agreement, upon the terms and conditions set forth in the Plan and this Award Agreement.

1.2    Nature of the Option.  This Option shall be a Nonqualified Stock Option (NQSO).  This Option is not an incentive stock option as defined under Section 422 of the Internal Revenue Code of 1986, as amended.

1.3    Option Price.  The Option Price of the shares of Stock subject to the Option shall be as set forth in this Award Agreement, without commission or other charge.

ARTICLE II
PERIOD OF EXERCISABILITY

2.1    Vesting.  Subject to Sections 2.2, 2.3, 2.5, 5.4, 5.5 and 5.6 of this Award Agreement and your continued employment by the Company or an Affiliate or Subsidiary, the Option shall become vested and exercisable in such amounts and at such times as are set forth in this Award Agreement. 

2.2    Forfeiture and Cancelation.  Subject to Sections 2.4 and 2.7 of this Award Agreement, any portion of the Option that has not vested at or before the date on which you have a Termination of Employment shall be canceled and forfeited, unless otherwise determined by the Committee. “Termination of Employment” means the occurrence of any event if immediately thereafter you are no longer an Employee of the Company or an Affiliate or Subsidiary.  Such an event could include the disposition of an Affiliate or Subsidiary or business unit by the Company or an Affiliate or Subsidiary.  The following events shall not be deemed a Termination of Employment:

		
	1.
	A transfer of you from the Company to an Affiliate or Subsidiary, or vice versa, or from one Affiliate or Subsidiary to another; and

		
	2.
	A leave of absence, duly authorized in writing by the Company or an Affiliate or Subsidiary, for military service or sickness or for any other purpose approved by the Company or an Affiliate or Subsidiary including, but not limited to, a leave of absence where your right to reemployment is guaranteed either by statute or by contract.  

However, your failure to return to active service for the Company or an Affiliate or Subsidiary at the end of an approved leave of absence shall be deemed a Termination of Employment.  Although you will be considered to have been continuously employed by the Company or an Affiliate or Subsidiary and not to have incurred a Termination of Employment under this Article 2 during a leave of absence as set forth in Section 2.2(2) above, the Committee may specify that such leave period shall not be counted in determining the period of employment for purposes of the vesting of this Option.  In such case, to the extent permissible by applicable law, the vesting dates for the unvested portions of the Option shall be extended by the length of any such leave of absence.
2.3    Duration of Exercisability.  The vesting schedule installments of the Option provided for in the vesting schedule of this Award Agreement are cumulative.  Each such installment which becomes vested and exercisable in accordance with the vesting schedule shall remain vested and exercisable until it ceases to be exercisable in accordance with Section 2.5 of this Award Agreement.  

2.4    Acceleration of Vesting upon Cessation Due to Death, Long-Term Disability or Retirement.  In the event you cease to be an Employee by reason of your death, your participation in the Company’s long-term disability plan (“Long-Term Disability”) or Retirement, the Option (or any portion of the Option) that is not then fully vested and exercisable shall become vested and exercisable in full as of the date you cease to be an Employee because of your death, Long-Term Disability or Retirement.

2.5    Expiration of Option.  The vested portion of the Option may not be exercised to any extent by anyone after the earliest occurrence of any one of the following events:

(a)    the expiration of ten (10) years from the Grant Date;

(b)    except as set forth in a written agreement with the Company, the expiration of thirty (30) days following the date of your ceasing to be an Employee, unless such cessation was by reason of your death, Long-Term Disability or Retirement;

(c)    if you die while an Employee or within three (3) months after ceasing to be an Employee because of Long-Term Disability, the Option shall expire on the earlier of (i) the Expiration Date specified in this Award Agreement, or (ii) thirty-six (36) months after your death; or

(d)    if you cease to be an Employee because of Long-Term Disability (and you do not die within three (3) months after ceasing to be an Employee) or Retirement, the Option shall expire on the earlier of (i) the Expiration Date specified in this Award Agreement, or (ii) twelve (12) months after you cease to be an Employee.

2.6    Changes in Capital Structure.  If the number of outstanding shares of Stock is increased or decreased, or the shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company, on account of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares, effected without receipt of consideration by the Company, the number and kind of shares that are then subject to the Option shall be adjusted proportionately and accordingly by the Committee in such manner and form as determined by the Committee so that your proportionate interest immediately following such adjustment shall, to the extent practicable, be the same as immediately before such event.  Any such adjustment shall not change the aggregate Option Price of the Option.      
  
2.7    Consequence of a Change of Control.  If a Change of Control of the Company occurs, the provisions of either Section 12.3 or 12.4 of the Plan shall apply to this Award, as applicable.

ARTICLE III
EXERCISE OF OPTION

3.1    Persons Eligible to Exercise Option.  During your lifetime only you (or, in the event of your legal incapacity or incompetency, your guardian or legal representative) may exercise the Option or any portion of the Option.  After your death, but prior to the time the Option ceases to be exercisable, any exercisable portion of the Option may be exercised by your personal representative or by any person empowered to do so under your will or under the then applicable laws of descent and distribution.

3.2    Partial Exercise.  Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised at any time prior to the time the Option (or that portion of the Option) ceases to be exercisable in accordance with Section 2.5 of this Award Agreement.    An exercise of the Option in part will not exhaust or terminate the Option as to any remaining shares of Stock subject to the Option.

3.3    Manner of Exercise.  The Option, or any exercisable portion of such Option, may be exercised as set forth below, or as may otherwise be prescribed by the Committee in the future:

(a)    delivery to the Company’s designated outsourced administrator of a notice of exercise on any business day, such notice to be delivered in the form specified by the administrator (or such other form as is prescribed by the Committee), and to reflect (i) the election to exercise some or all of the then-exercisable portion of the Option, (ii) the number of shares of Stock in respect of which the Option is being exercised, and (iii) such other representations and agreements as may be required by the Company under the provisions of the Plan; and

(b)    payment in full of the Option Price with respect to the shares of Stock for which the Option is being exercised, together with the amount (if any) of federal and/or other taxes which the Company may, in its judgment, be required to withhold with respect to the exercise of the Option (or the portion of the Option being exercised).

3.4    Form of Payment Upon Exercise of Option.  The Option Price applicable to the exercise of the Option (or any portion of the Option), together with any withholding taxes (as described in Section 3.5 of this Award Agreement), shall be paid to the Company by any of the following methods, at your election and, with respect to paragraph (c) below, if available from the Company’s designated outsourced administrator:

(a)    in cash or cash equivalents acceptable to the Company.

(b)    by a net exercise of the Option, such that you shall be entitled to the number of shares of Stock in accordance with the following formula:

            Y(A-B)                                                         
 X=
               FMV of the Stock on date of exercise

		
	where:
	X    =    the number of shares of Stock to be issued to you* 

Y     =    the number of shares of Stock with respect to which the Option is to be exercised, as designated in the notice of exercise
A    =    the FMV of the Stock on the date of exercise
B    =    the Option Price

*    The actual number of shares of Stock to be issued will be reduced by the amount of any withholding taxes with respect to the exercise of the Option (with any shares held back to cover payment of such taxes being valued at the FMV on the date of exercise), if arrangements are not made to pay such taxes in cash or otherwise outside of the net exercise of the Option.
 
Any fractional amount resulting from application of this subsection shall be settled in cash equal to such fraction multiplied by the FMV of a share of Stock on the date of exercise.

(c)    in the event you are in compliance with the Company’s share retention and ownership guidelines as of the March 31st preceding your date of exercise of the Option, if the following method of exercise is then available from the Company’s designated outsourced administrator, and to the extent provided in this Award Agreement, you shall be entitled to do a net exercise of the Option such that you will receive cash in accordance with the following formula:

X = Y(A-B)

		
	where:
	X    =    the cash to be paid to you* 

Y     =    the number of shares of Stock with respect to which the Option is to be exercised, as designated in the notice of exercise
A    =    the FMV of the Stock on the date of exercise
B    =    the Option Price

*    The actual cash to be paid to you will be reduced by the amount of any withholding taxes with respect to the exercise of the Option (with any cash held back to cover payment of such taxes), if arrangements are not made to pay such taxes in cash or otherwise outside of the net exercise of the Option.  The actual cash to be paid to you may also be reduced by the amount of any fees or other expenses charged by the Company’s designated outsourced administrator with respect to the net exercise of the Option.
 
(d)    by any other method approved or accepted by the Committee in its sole discretion, subject to such rules and regulations as the Committee may establish.

In the event the Option (or any portion thereof) is exercised by any person or persons other than you, the Company may require appropriate proof of the right of such person(s) to exercise the Option.

No Stock will be issued pursuant to the exercise of an Option unless such issuance and such exercise have complied with all relevant provisions of law and requirements of any stock exchange upon which the Stock may then be listed.  As a condition to the exercise of the Option, the Company may require you to make any representation or warranty to the Company as may be required under any applicable law or regulation. 
3.5    Tax Withholding.  The Company will assess its requirements regarding federal, state and local income taxes, FICA taxes, and other applicable taxes in connection with the Option.  These requirements may change from time to time as laws or interpretations change.  The Company’s obligation to issue shares of Stock upon exercise of any portion of the Option shall be conditioned upon your payment, or making provision satisfactory to the Company for the payment, of any taxes which the Company is obligated to withhold or collect with respect to such exercise or otherwise respect to the Option.  The Company will withhold any such taxes as required by law.  Regardless of the Company’s actions in this regard, you acknowledge and agree that the ultimate liability for any such taxes is your responsibility.  You acknowledge and agree that the Company (i) makes no representations or undertakings regarding the treatment of any such taxes in connection with any aspect of the Option, including the subsequent sale of shares of Stock acquired under the Plan, and (ii) does not commit to structure the terms of the Option or any aspect of the Option to reduce or eliminate your liability for such taxes.

ARTICLE IV
RESTRICTIONS ON TRANSFER OF THE OPTION

4.1    Restrictions on Transfer.  The Option may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.

ARTICLE V
ACKNOWLEDGEMENTS AND UNDERTAKINGS BY GRANTEE
 
5.1    No Acquired Rights.  You acknowledge and agree that:

(a)     The grant of this Award is voluntary and occasional and does not create any contractual or other right to receive future grants of Awards or benefits in lieu of any Awards, even if Awards have been granted repeatedly in the past and regardless of any reasonable notice period mandated under local law;

(b)    This Award is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating termination, severance, resignation, redundancy, end-of-service payments, bonuses, long-term service awards, pension, retirement benefits or similar payments;

(c)    The future value of the shares of Stock that may be purchased by exercise of this Award is unknown and cannot be predicted;

(d)    No claim or entitlement to compensation or damages arises from the expiration or termination of this Award, or the diminution in value of this Award (or any shares of Stock issued upon exercise of this Award), and you irrevocably release the Company from any such claim; and

(e)    Participation in the Plan shall not create a right to further employment with the Company, any Affiliate or any Subsidiary and shall not interfere with the ability of the Company to terminate the employment relationship with you at any time, with or without cause. 

5.2    No Rights as a Shareholder.  You acknowledge and agree that the holder of this Award shall not be, nor have any of the rights or privileges of, a shareholder of the Company in respect of any shares of Stock purchasable upon the exercise of any part of this Award unless and until shares shall have been issued by the Company to such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).

5.3    Conformity to Securities Laws.

(a)    You acknowledge that the Plan and this Award Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act, and any and all regulations and rules promulgated under such Acts by the Securities and Exchange Commission (“SEC”), and state securities laws and regulations.  Notwithstanding anything in this Award Agreement to the contrary, the Plan shall be administered, and this Award is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law, the Plan and the Award Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

(b)    The Company intends to have an effective registration statement on file with the SEC with respect to the shares of Stock underlying the Option granted under the terms of this Award.  The Company intends to maintain this registration statement but has no obligation to do so.  If the registration statement is not filed or ceases to be effective, you will not be able to transfer or sell shares issued upon exercise of the Option unless an exemption from registration under applicable securities laws is available.  You agree that any resale by you of the shares of Stock issued under this Award will comply in all respects with the requirements of applicable securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act, the Exchange Act, and the respective rules and regulations promulgated under such Acts) and any other law, rule or regulation applicable thereto.  The Company will not be obligated either to issue the shares or permit the resale of any shares if such issuance or resale would violate any such laws, rules or regulations.

5.4    Investment Representation.  If demanded by the Committee, you (or your beneficiary) shall deliver to the Committee at any time the Option (or any portion of the Option) is exercised, a representation that the shares of Stock to be acquired upon the exercise of the Option are being acquired for investment and not with a view toward resale or with a view to distribution thereof, and that you (or your beneficiary) will comply with such restrictions as may be necessary to satisfy the requirements of federal or state securities laws.  This representation shall be a condition precedent to your (or your beneficiary’s) right to acquire any shares of Stock through the exercise of the Option (or any portion thereof).    

5.5    Compliance with Company Insider Trading and Other Applicable Policies.  You agree to be bound by the Company’s policies regarding the purchase and transfer of the Company’s securities and understand that there may be certain times during the year in which you will be prohibited from selling, transferring, pledging, donating, assigning, hypothecating or encumbering any shares of Stock received upon exercise of this Award.

5.6    Potential Termination of Award; Forfeiture of Any Gain Realized.

You acknowledge that your continued employment and the grant of the Options herein is sufficient consideration for this Award Agreement, including, without limitation, the restrictions imposed upon you by this Section 5.6.  

(a)    You acknowledge that:

(i)     the Company may in its sole and absolute discretion annul this Award (including any vested portion of this Award not yet exercised) if you cease to be an Employee as a result of a termination for Cause and such determination shall be made by the Company and shall be conclusive and binding on all interested persons; and

(ii)    the Company retains the right to cause a forfeiture of the gain realized by you in connection with this Award, including its exercise, on account of actions you take that are in violation of or in conflict with the provisions of this Award Agreement, or any (i) employment agreement, (ii) non-competition agreement, (iii) agreement prohibiting solicitation of Employees or clients of the Company or any Affiliate or Subsidiary, or (iv) any confidentiality obligation with respect to the Company or any Affiliate or Subsidiary.

(b)    In addition, in accordance with the Plan, if (A) the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under applicable securities laws, and (B) you are either an individual who is subject to the automatic forfeiture provisions of Section 304 of the Sarbanes-Oxley Act of 2002 or are determined by the Committee to have knowingly engaged or failed to prevent the misconduct or have been grossly negligent in engaging in or failing to prevent the misconduct, you shall be obligated to reimburse the Company for (i) any equity-based compensation you have received from the Company during the 12-month period following the first public issuance or filing with the SEC of the financial document(s) embodying the financial reporting requirement, and (ii) any profits realized from the sale of securities of the Company during that 12-month period.  Any determination by the Committee with respect to the foregoing shall be final, conclusive and binding on all interested persons.

(c)    (i)    Forfeiture Events.  A “Forfeiture Event” shall have occurred if, during the Restricted Period (as defined below), and as set forth below, without the prior written consent of the Company, you commit any of the following acts or permit any of the following conditions to exist:
1.    During the Restricted Period and at any point after the Restricted Period ends, you directly or indirectly disclose or reveal to any person Confidential Information (as defined below) relating to the Company or any Subsidiary or Affiliate except as necessary to the performance of your duties to the Company, any Subsidiary or Affiliate or as required by law.  You agree that the Confidential Information constitutes the exclusive property of the Company.
2.    You directly or indirectly (including by causing, advising or assisting any individual, corporation or partnership or other entity to do so) recruit, solicit or entice any employee(s) of the Company or any Subsidiary or Affiliate to leave his/her employment with such entity, whether for employment with or as a consultant, contractor or subcontractor to any other company or entity, or for any other reason.
3.    You directly or indirectly (including by causing, advising or assisting any individual, corporation, partnership or other entity to do so) approach any Customer (as defined below), seek Business (as defined below) from any Customer, or refer Business from any Customer other than on behalf and for the benefit of the Company and any and all Subsidiaries and Affiliates, or be paid commissions or other consideration based on Business offered by or received from any Customer by any enterprise or entity other than the Company or any Subsidiary or Affiliate.  This paragraph “3” shall not apply, and shall be of no force or effect, in the event that the Company or any Subsidiary or Affiliate, as the case may be, gives its written consent to your employment in accordance with paragraph “4” below. 
4.    You accept employment within the United States in any capacity or engage, either directly or indirectly, for the benefit of any person, firm, corporation, partnership, association or other entity in competition with the Company or any Subsidiary or Affiliate in any business in which the Company or any Subsidiary or Affiliate is engaged during your tenure with the Company or any Subsidiary or Affiliate, provided that the Company shall give its written consent upon your reasonable demonstration that you can fully perform such employment or engagement without violating any of the provisions of paragraphs “1”, “2”, and “3” hereof.   This paragraph “4” shall not apply, and shall be of no force or effect, in the event that this restriction is not permissible under the rules of professional conduct applicable to the position you hold with the Company.  
    
(ii)    Forfeiture.  If the Committee determines that a Forfeiture Event has occurred or is ongoing, then the following forfeitures and related actions as determined by the Committee will occur:
1.    Any portion of the Option (whether or not vested) that has not been exercised as of the date of such determination shall be immediately canceled and forfeited;
2.    You shall automatically forfeit any rights you may have with respect to the Option as of the date of such determination;
3.    If you have exercised all or any part of the Option within the 12-month period immediately preceding the earliest Forfeiture Event (or following the date of the earliest Forfeiture Event), upon the Company’s demand, you shall immediately deliver to it a certificate or certificates for Stock with a Fair Market Value (determined on the date of such demand) equal to the gain realized by you upon such exercise; and/or
4.    You shall be obligated to pay the Company any amounts realized from the sale of any or part of the Stock Award.
(iii)    Definitions.  For purposes of this Section 5.6(c), the following definitions shall apply:
1.    “Business” means any of the products or services that the Company or any Subsidiary or Affiliate provided or sold to its customers or offered or considered offering for sale to its customers at any time during the Restricted Period.
2.    “Confidential Information” means confidential and proprietary information of the Company and Subsidiaries and Affiliates, and financial information, trade secrets, technical data, business methods and procedures, names of customers, sales records, customer billing data, software details, operations workflows of customers businesses, training and operational manuals, and other materials and information which constitute the property of the Company, Subsidiaries and/or Affiliates and which enable the Company to compete successfully in its business.
3.    “Customer” means any person, firm, corporation, partnership, limited liability company, association or other entity as to which you engaged, participated or assisted in efforts to evaluate, plan, propose or implement the offering of products or services by the Company, any Subsidiary or Affiliate, or any of its successors or assigns, during the Restricted Period.
4.    “Restricted Period” means the period during which you are employed by the Company or an Affiliate or Subsidiary and twelve (12) months following the date that you cease to be employed by the Company or an Affiliate or Subsidiary for any reason whatsoever.
(iv)    Severability.  You acknowledge and agree that the period, scope and geographic areas of restriction imposed upon you by the provisions of Section 5.6(c) are fair and reasonable and are reasonably required for the protection of the Company, Affiliates and Subsidiaries.  In the event that any part of this Award Agreement, including, without limitation, Section 5.6(c), is held to be unenforceable or invalid, the remaining parts of this Award Agreement and Section 5.6(c) shall nevertheless continue to be valid and enforceable as though the invalid portions were not a part of this Award Agreement.  If any one of the provisions in Section 5.6(c) is held to be excessively broad as to period, scope or geographic area, any such provision shall be construed by limiting it to the extent necessary to be enforceable under applicable law.
(v)    Additional Remedies.  You acknowledge that breach by you of this Award Agreement would cause irreparable harm to the Company, Affiliates and Subsidiaries, and that in the event of such breach, the Company shall have, in addition to monetary damages and other remedies at law, the right to an injunction, specific performance and other equitable relief (without the need to post a bond) to prevent violations of your obligations hereunder.  In the event of any action to enforce the provisions of this Section 5.6(c), whether by suit in a court of law, arbitration, mediation, alternative dispute resolution or the like, if the Company prevails, you shall pay all the Company’s expenses thereof, including, but not limited to, reasonable attorneys’ fees.

ARTICLE VI
LIMITATIONS APPLICABLE TO EXCHANGE ACT SECTION 16 PERSONS

6.1    Limitations Applicable to Exchange Act Section 16 Persons.  Notwithstanding any provision of the Plan or any other provision of this Award Agreement to the contrary, if you are subject to Section 16 of the Exchange Act, the Plan, this Award Agreement and the Option shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 under the Exchange Act) that are requirements for the application of such exemptive rule.  To the extent permitted by applicable law, this Award Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

ARTICLE VII
MISCELLANEOUS

7.1    Designation of Beneficiary.  You may, from time to time, designate any beneficiary or beneficiaries to whom any benefit under this Award Agreement is to be paid in case of your death prior to the receipt of all such benefits.  Each designation shall revoke all prior designations, shall be in a form prescribed by the Committee or its designee, and will be effective only when filed with the Committee or its designee.  In the absence of any such designation, any benefits remaining unpaid at the time of your death shall be paid to your estate.
   
7.2    Notices.  Except as may be otherwise provided in the Plan, any written notices provided for in the Plan or this Award Agreement shall be in writing and shall be deemed sufficiently given if either hand-delivered or if sent by fax or overnight courier, or by postage-paid first-class mail.  Notices sent by mail shall be deemed received three (3) business days after mailed but in no event later than the date of actual receipt.  Notice may also be provided by electronic submission, if and to the extent permitted by the Committee.  Notices shall be directed, if to you, at your address indicated by the Company’s records, or, if to the Company, at the Company’s principal office, attention: Corporate Secretary.

7.3    Data Privacy.  By entering into this Award Agreement, you (a) authorize the Company and any agent of the Company administering the Plan or providing Plan recordkeeping services to disclose to the Company or any Affiliate or Subsidiary such information and data as the Company or any such Affiliate or Subsidiary shall request in order to facilitate the grant of options and the administration of the Plan; (b) waive any data privacy rights you may have with respect to such information; and (c) authorize the Company to store and transmit such information in electronic form.
7.4    Waiver.  The waiver by the Company or an Affiliate or Subsidiary of any provision of this Award Agreement shall not operate as or be construed to be a subsequent waiver of the same provision or waiver of any other provision hereof.
7.5    Severability.  The provisions of this Award Agreement are severable and if any one or more provisions may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

7.6    Counterparts; Further Instruments.  This Award Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  The parties to this Award Agreement agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Award Agreement.

7.7    Amendment, Suspension and Termination.  To the extent permitted by the Plan, this Award Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee, provided, that, except as may otherwise be provided in the Plan, no amendment, modification, suspension or termination of this Award Agreement shall adversely affect the Option in any material way without your prior written consent.

7.8    Entire Agreement.  The Plan and this Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and you with respect to the subject matter hereof.  In the event of any contradiction, distinction or difference between this Award Agreement and the terms of the Plan, the terms of the Plan will control.

7.9    Governing Law.  This Award Agreement shall be administered, interpreted and enforced under the laws of the State of New York, without regard to the conflicts of law principles of the State of New York.

7.10    Captions.  Captions provided in this Award Agreement are for convenience only and are not to serve as a basis for interpretation or construction of this Award Agreement.

7.11    Successors and Assigns.  The Company may assign any of its rights under this Award Agreement to single or multiple assignees, and this Award Agreement shall inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer set forth in the Plan and/or this Award Agreement, this Award Agreement shall be binding upon you and your heirs, executors, administrators, successors and assigns.ntri-ex101_111.htm

 

 

Exhibit 10.1

Second Amended and Restated
Nutrisystem, Inc.
2008 Long-Term Incentive Plan

	
1.
	
Purpose

The purpose of the Second Amended and Restated NutriSystem, Inc. 2008 Long-Term Incentive Plan (the “Plan”) is to provide designated (i) employees of NutriSystem, Inc. (the “Company”) and its subsidiaries, (ii) non-employee members of the Board of Directors of the Company, and (iii) consultants and advisors who perform services for the Company and its subsidiaries with the opportunity to receive grants of stock options, stock units, stock awards, stock appreciation rights, other stock-based awards and performance-based cash bonuses, as set forth herein.  The Company believes that the Plan will encourage the participants to contribute materially to the growth of the Company, thereby benefiting the Company’s stockholders, and will align the economic interests of the participants with those of the stockholders.   

 

	
2.
	
Definitions

Whenever used in this Plan, the following terms will have the respective meanings set forth below:

 

(a)“Board” means the Company’s Board of Directors.

(b)“Bonus” means a cash payment made pursuant to the Plan.

(c)“Change of Control” shall be deemed to have occurred if:

(i)Any “person” (as such term is used in sections 13(d) and 14(d) of the Exchange Act) becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the voting power of the then outstanding securities of the Company; provided that a “Change of Control” shall not be deemed to occur as a result of a transaction in which the Company becomes a subsidiary of another corporation and in which the stockholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such stockholders to more than 50% of all votes to which all stockholders of the parent corporation would be entitled in the election of directors;

(ii)The consummation of (A) a merger or consolidation of the Company with another corporation where the stockholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling such stockholders to more than 50% of all votes to which all stockholders of the surviving corporation would be entitled in the election of directors, (B) a sale or other disposition of all or substantially all of the assets of the Company, or (C) a liquidation or dissolution of the Company; or

(iii)After the Effective Date, directors are elected such that a majority of the members of the Board shall have been members of the Board for less than one year, unless the election or nomination 

 

 

for election of each new director who was not a director at the beginning of such one‐year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period.  

Notwithstanding the foregoing, in the case of a distribution under the Plan of an amount which is subject to section 409A of the Code, no event set forth above shall be a “Change of Control” unless such event also constitutes a “change in control event” as defined under section 409A of the Code

(d) “Code” means the Internal Revenue Code of 1986, as amended.

(e)“Committee” means (i) with respect to Grants to Employees and Consultants, the Compensation Committee of the Board or another committee appointed by the Board to administer the Plan, (ii) with respect to Grants made to Non-Employee Directors, the Board, and (iii) with respect to Grants that are intended to be “qualified performance-based compensation” under section 162(m) of the Code, a committee that consists of two or more persons appointed by the Board, all of whom shall be “outside directors” as defined under section 162(m) of the Code and related Treasury regulations.

(f)“Company” means NutriSystem, Inc. or any successor thereto.

(g)“Company Stock” means the common stock of the Company, par value $0.001 per share.

(h)“Consultant” means an advisor or consultant who performs services for the Employer.

(i)“Dividend Equivalent” means an amount calculated with respect to a Stock Unit, which is determined by multiplying the number of shares of Company Stock subject to the Stock Unit by the per-share cash dividend, or the per-share fair market value (as determined by the Committee) of any dividend in consideration other than cash, paid by the Company on its Company Stock.  If interest is credited on accumulated dividend equivalents, the term “Dividend Equivalent” shall include the accrued interest.  Notwithstanding anything to the contrary contained in this Plan, (i) with respect to Grants that are intended to be “qualified performance-based compensation” under section 162(m) of the Code, Dividend Equivalents may accrue on such Grants but may only be paid to Participants based on the achievement of specific performance goals established by the Committee and shall not be paid currently, and (ii) Dividend Equivalents may not be granted in connection with SARs or Options.

(j)“Effective Date” means May 10, 2017.

(k)“Employee” means an employee of the Employer (including an officer or director who is also an employee), but excluding any person who is classified by the Employer as a “contractor” or “consultant,” no matter how characterized by the Internal Revenue Service, other governmental agency or a court.  Any change of characterization of an individual by the Internal Revenue Service or any court or government agency shall have no effect upon the classification of an individual as an Employee for purposes of this Plan, unless the Committee determines otherwise.

(l)“Employer” means the Company and its subsidiaries.

(m)“Exchange Act” means the Securities Exchange Act of 1934, as amended.

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(n)“Exercise Price” means the per share price at which shares of Company Stock may be purchased under an Option, as designated by the Committee.

(o)“Fair Market Value” of Company Stock means, unless the Committee determines otherwise with respect to a particular Grant, (i) if the principal trading market for the Company Stock is a national securities exchange, the last reported sale price of Company Stock on the relevant date or (if there were no trades on that date) the latest preceding date upon which a sale was reported, (ii) if the Company Stock is not principally traded on such exchange, the mean between the last reported “bid” and “asked” prices of Company Stock on the relevant date, as reported on the OTC Bulletin Board, or (iii) if the Company Stock is not publicly traded or, if publicly traded, is not so reported, the Fair Market Value per share shall be as determined by the Committee.

(p)“Grant” means an Option, Stock Unit, Stock Award, SAR, Other Stock-Based Award or Bonus granted under the Plan.

(q)“Grant Agreement” means the written instrument that sets forth the terms and conditions of a Grant, including all amendments thereto.

(r)“Incentive Stock Option” means an Option that is intended to meet the requirements of an incentive stock option under section 422 of the Code.

(s)“Non-Employee Director” means a member of the Board who is not an Employee. 

(t)“Nonqualified Stock Option” means an Option that is not intended to be taxed as an incentive stock option under section 422 of the Code.

(u)“1933 Act” means the Securities Act of 1933, as amended.

(v)“Option” means an option to purchase shares of Company Stock, as described in Section 7.

(w)“Other Stock-Based Award” means a grant that is based on, measured by or payable in Company Stock (other than an Option, Stock Unit, Stock Award or SAR), as described in Section 11.

(x)“Participant” means an Employee, Consultant or Non-Employee Director designated by the Committee to participate in the Plan.

(y)“Plan” means this Second Amended and Restated NutriSystem, Inc. 2008 Long-Term Incentive Plan, as may be amended from time to time.

(z)“SAR” means a stock appreciation right as described in Section 10.

(aa)“Stock Award” means an award of Company Stock as described in Section 9.

(bb)“Stock Unit” means an award of a phantom unit representing a share of Company Stock, as described in Section 8.

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3.
	
Administration

(a)Committee.  The Plan shall be administered and interpreted by the Committee.  Ministerial functions may be performed by an administrative committee comprised of Company employees appointed by the Committee.  

(b)Committee Authority.  The Committee shall have the sole authority to (i) determine the Participants to whom Grants shall be made under the Plan, (ii) determine the type, size and terms and conditions of the Grants to be made to each such Participant, (iii) determine the time when the Grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability, (iv) amend the terms and conditions of any previously issued Grant, subject to the provisions of Section 18 below, and (v) deal with any other matters arising under the Plan.  

(c)Committee Determinations.  The Committee shall have full power and express discretionary authority to administer and interpret the Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing the Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion.  The Committee’s interpretations of the Plan and all determinations made by the Committee pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in the Plan or in any awards granted hereunder.  All powers of the Committee shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Plan and need not be uniform as to similarly situated Participants.

	
4.
	
Grants

(a)Grants under the Plan may consist of Options as described in Section 7, Stock Units as described in Section 8, Stock Awards as described in Section 9, SARs as described in Section 10, Other Stock-Based Awards as described in Section 11 or Bonuses granted in accordance with Section 12.  All Grants shall be subject to such terms and conditions as the Committee deems appropriate and as are specified in writing by the Committee to the Participant in the Grant Agreement.  

(b)All Grants shall be made conditional upon the Participant’s acknowledgement, in writing or by acceptance of the Grant, that all decisions and determinations of the Committee shall be final and binding on the Participant, his or her beneficiaries and any other person having or claiming an interest under such Grant.  Grants under a particular Section of the Plan need not be uniform as among the Participants.

	
5.
	
Shares Subject to the Plan

(a)Shares Authorized.  Subject to adjustment as described in Section 5(d) below, the total aggregate number of shares of Company Stock that may be issued under the Plan is 7,400,000 shares of Company Stock, which amount is comprised of (i) 2,700,000 shares of Common Stock authorized for issuance by stockholders on May 13, 2008, plus (ii) 2,700,000 additional shares of Common Stock authorized for issuance by stockholders on September 5, 2012, plus (iii) 2,000,000 additional shares of Common Stock authorized for issuance by stockholders on May 10, 2017.  Subject to adjustment as described in Section 5(d) below, all 7,400,000 shares of Company Stock authorized for issuance hereunder may be issued as Incentive Stock Options.

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(b)Source of Shares; Share Counting.  Shares issued under the Plan may be authorized but unissued shares of Company Stock or reacquired shares of Company Stock, including shares purchased by the Company on the open market for purposes of this Plan. If and to the extent Options or SARs granted under the Plan terminate, expire, are canceled, or are otherwise forfeited or surrendered without being exercised and, if and to the extent that any Stock Awards, Stock Units, or Other Stock-Based Awards are forfeited or terminated, or otherwise settled without the issuance of shares, the shares reserved for such Grants shall again be available for purposes of this Plan. If shares subject to a Grant (other than a Grant of Options or SARs) are withheld or remitted back to the Company in satisfaction of tax withholding obligations arising in connection with that Grant, the withheld or remitted shares will become available again for purposes of this Plan.  Shares subject to a Grant that are settled in cash will become available again for purposes of this Plan; provided that underlying shares from a net settlement of an SAR Award will not be again available for future award under the Plan.  For the avoidance of doubt, shares tendered as payment of the exercise price of an Option and shares repurchased by the Company using proceeds from the exercise of an Option will not be again available for future award under the Plan.

(c)Individual Limits.  The maximum aggregate number of shares of Company Stock with respect to which Grants denominated in shares of Common Stock may be made under the Plan to any individual during any calendar year shall be 1,000,000 shares, subject to adjustment as described in Section 5(d) below.  The maximum amount of any Bonus paid to any individual under the Plan shall be limited to $5,000,000 per each twelve (12)-month period (or portion thereof) included within the applicable performance period.  The aggregate number of shares of Company Stock that may be issued under the Plan as Incentive Stock Options is the total number of shares available for issuance hereunder, as stated above in Section 5(a), subject to adjustment as described below in Section 5(d).  Additionally, no non-employee Director other than the non-employee chair of the Board may be granted Awards having an aggregate Fair Market Value (measured, for each Award, as of the date of Grant of such Award) in excess of $500,000 in any calendar year.

(d)Adjustments.  If there is any change in the number or kind of shares of Company Stock outstanding (i) by reason of a stock dividend, spinoff, recapitalization, stock split, or combination or exchange of shares, (ii) by reason of a merger, reorganization or consolidation, (iii) by reason of a reclassification or change in par value, or (iv) by reason of any other extraordinary or unusual event affecting the outstanding Company Stock as a class without the Company’s receipt of consideration, or if the value of outstanding shares of Company Stock is substantially reduced as a result of a spinoff or the Company’s payment of an extraordinary dividend or distribution, the maximum number of shares of Company Stock available for issuance under the Plan, the maximum number of shares of Company Stock for which any individual may receive Grants in any year, the kind and number of shares covered by outstanding Grants, the kind and number of shares issued and to be issued under the Plan, and the price per share or the applicable market value of such Grants shall be equitably adjusted by the Committee, in such manner as the Committee deems appropriate, to reflect any increase or decrease in the number of, or change in the kind or value of, the issued shares of Company Stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under the Plan and such outstanding Grants; provided, however, that any fractional shares resulting from such adjustment shall be eliminated.  In addition, in the event of a Change of Control of the Company, the provisions of Section 16 of the Plan shall apply.  Any adjustments to outstanding Grants shall be consistent with section 409A or 422 of the Code, to the extent applicable.  Any adjustments determined by the Committee shall be final, binding and conclusive.

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6.
	
Eligibility for Participation

(a)Eligible Persons.  All Employees and Non-Employee Directors shall be eligible to participate in the Plan.  Consultants are eligible to participate in the Plan if they perform bona fide services for the Employer, the services are not in connection with the offer or sale of securities in a capital-raising transaction, and the Consultants do not directly or indirectly promote or maintain a market for the Company’s securities.

(b)Selection of Participants.  The Committee shall select the Employees, Consultants and Non-Employee Directors to receive Grants and shall determine the number of shares of Company Stock subject to each Grant.  

	
7.
	
Options

(a)General Requirements. The Committee may grant Options to an Employee, Consultant or Non-Employee Director upon such terms and conditions as the Committee deems appropriate under this Section 7.  The Committee shall determine the number of shares of Company Stock that will be subject to each Grant of Options to Employees, Consultants and Non-Employee Directors.  

(b)Type of Option, Price and Term.

(i)The Committee may grant Incentive Stock Options or Nonqualified Stock Options or any combination of the two, all in accordance with the terms and conditions set forth herein.  Incentive Stock Options may be granted only to Employees of the Company or its parents or subsidiaries, as defined in section 424 of the Code.  Nonqualified Stock Options may be granted to Employees, Consultants or Non‐Employee Directors.

(ii)The Exercise Price of Company Stock subject to an Option shall be determined by the Committee and may be equal to or greater than the Fair Market Value of a share of Company Stock on the date the Option is granted.  However, an Incentive Stock Option may not be granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary, as defined in section 424 of the Code, unless the Exercise Price per share is not less than 110% of the Fair Market Value of the Company Stock on the date of grant.

(iii)The Committee shall determine the term of each Option, which shall not exceed 10 years from the date of grant.  However, an Incentive Stock Option that is granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary, as defined in section 424 of the Code, may not have a term that exceeds five years from the date of grant.

(c)Exercisability of Options.  

(i)Options shall become exercisable in accordance with such terms and conditions as may be determined by the Committee and specified in the Grant Agreement.  The Committee may grant Options that are subject to achievement of performance goals or other conditions.  The Committee may accelerate the exercisability of any or all outstanding Options at any time for any reason.  

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(ii)The Committee may provide in a Grant Agreement that the Participant may elect to exercise part or all of an Option before it otherwise has become exercisable.  Any shares so purchased shall be restricted shares and shall be subject to a repurchase right in favor of the Company during a specified restriction period, with the repurchase price equal to the lesser of (A) the Exercise Price or (B) the Fair Market Value of such shares at the time of repurchase, or such other restrictions as the Committee deems appropriate.  

(iii)Options granted to persons who are non‐exempt employees under the Fair Labor Standards Act of 1938, as amended, may not be exercisable for at least six months after the date of grant (except that such Options may become exercisable, as determined by the Committee, upon the Participant’s death, disability or retirement, or upon a Change of Control or other circumstances permitted by applicable regulations).

(d)Termination of Employment or Service.  Except as provided in the Grant Agreement, an Option may only be exercised while the Participant is employed as an Employee or providing service as a Non-Employee Director or Consultant.  The Committee shall determine in the Grant Agreement under what circumstances and during what time periods a Participant may exercise an Option after termination of employment or service. 

(e)Exercise of Options.  A Participant may exercise an Option that has become exercisable, in whole or in part, by delivering a notice of exercise to the Company.  The Participant shall pay the Exercise Price for the Option (i) in cash or certified check, (ii) if permitted by the Committee, by delivering shares of Company Stock owned by the Participant and having a Fair Market Value on the date of exercise equal to the Exercise Price or by attestation to ownership of shares of Company Stock having an aggregate Fair Market Value on the date of exercise equal to the Exercise Price, (iii) by payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, or (iv) by such other method as the Committee may approve, to the extent permitted by applicable law.  Shares of Company Stock used to exercise an Option shall have been held by the Participant for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option.  Payment for the shares pursuant to the Option, and any required withholding taxes, must be received by the time specified by the Committee depending on the type of payment being made, but in all cases prior to the issuance of the Company Stock.

(f)Limits on Incentive Stock Options.  Each Incentive Stock Option shall provide that, if the aggregate Fair Market Value of the stock on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year, under the Plan or any other stock option plan of the Company or a parent or subsidiary, as defined in section 424 of the Code, exceeds $100,000, then the Option, as to the excess, shall be treated as a Nonqualified Stock Option.  An Incentive Stock Option shall not be granted to any person who is not an Employee of the Company or a parent or subsidiary, as defined in section 424 of the Code.

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8.
	
Stock Units

(a)General Requirements.  The Committee may grant Stock Units to an Employee, Consultant or Non-Employee Director, upon such terms and conditions as the Committee deems appropriate under this Section 8.  Each Stock Unit shall represent the right of the Participant to receive a share of Company Stock or an amount based on the value of a share of Company Stock.  All Stock Units shall be credited to bookkeeping accounts on the Company’s records for purposes of the Plan.  

(b)Terms of Stock Units.  The Committee may grant Stock Units that are payable on terms and conditions determined by the Committee, which may include payment based on achievement of performance goals.  Stock Units may be paid at the end of a specified vesting or performance period, or payment may be deferred to a date authorized by the Committee.  The Committee shall determine the number of Stock Units to be granted and the requirements applicable to such Stock Units.  

(c)Payment With Respect to Stock Units.  Payment with respect to Stock Units shall be made in cash, in Company Stock, or in a combination of the two, as determined by the Committee.  The Grant Agreement shall specify the maximum number of shares that can be issued under the Stock Units.

(d)Requirement of Employment or Service.  The Committee shall determine in the Grant Agreement under what circumstances a Participant may retain Stock Units after termination of the Participant’s employment or service, and the circumstances under which Stock Units may be forfeited.

(e)Dividend Equivalents.  The Committee may grant Dividend Equivalents in connection with Stock Units, under such terms and conditions as the Committee deems appropriate.  Dividend Equivalents may be paid to Participants currently or may be deferred.  All Dividend Equivalents that are not paid currently shall be credited to bookkeeping accounts on the Company’s records for purposes of the Plan.  Dividend Equivalents may be accrued as a cash obligation, or may be converted to additional Stock Units for the Participant, and deferred Dividend Equivalents may accrue interest, all as determined by the Committee.  The Committee may provide that Dividend Equivalents shall be payable based on the achievement of specific performance goals.  Dividend Equivalents may be payable in cash or shares of Company Stock or in a combination of the two, as determined by the Committee.  

	
9.
	
Stock Awards

(a)General Requirements. The Committee may issue shares of Company Stock to an Employee, Consultant or Non-Employee Director under a Stock Award, upon such terms and conditions as the Committee deems appropriate under this Section 9.  Shares of Company Stock issued pursuant to Stock Awards may be issued for cash consideration or for no cash consideration, and subject to restrictions or no restrictions, as determined by the Committee.  The Committee may establish conditions under which restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as the Committee deems appropriate, including restrictions based upon the achievement of specific performance goals.  The Committee shall determine the number of shares of Company Stock to be issued pursuant to a Stock Award.

(b)Requirement of Employment or Service.  The Committee shall determine in the Grant Agreement under what circumstances a Participant may retain Stock Awards after termination of the Participant’s employment or service, and the circumstances under which Stock Awards may be forfeited.

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(c)Restrictions on Transfer.  While Stock Awards are subject to restrictions, a Participant may not sell, assign, transfer, pledge or otherwise dispose of the shares of a Stock Award except upon death as described in Section 15(a).  If certificates are issued, each certificate for a share of a Stock Award shall contain a legend giving appropriate notice of the restrictions in the Grant.  The Participant shall be entitled to have the legend removed when all restrictions on such shares have lapsed.  The Company may retain possession of any certificates for Stock Awards until all restrictions on such shares have lapsed.

(d)Right to Vote and to Receive Dividends.  The Committee shall determine to what extent, and under what conditions, the Participant shall have the right to vote shares of Stock Awards and to receive any dividends or other distributions paid on such shares during the restriction period.  The Committee may determine that dividends on Stock Awards shall be withheld while the Stock Awards are subject to restrictions and that the dividends shall be payable only upon the lapse of the restrictions on the Stock Awards, or on such other terms as the Committee determines.  Dividends that are not paid currently shall be credited to bookkeeping accounts on the Company’s records for purposes of the Plan.  Accumulated dividends may accrue interest, as determined by the Committee, and shall be paid in cash, shares of Company Stock, or in such other form as dividends are paid on Company Stock, as determined by the Committee.  

	
10.
	
Stock Appreciation Rights 

(a)General Requirements.  The Committee may grant SARs to an Employee, Consultant or Non‐Employee Director separately or in tandem with an Option.  The Committee shall establish the number of shares, the terms and the base amount of the SAR at the time the SAR is granted.  The Committee shall also determine the term of each SAR, which shall not exceed 10 years from the date of grant.  The base amount of each SAR shall be not less than the Fair Market Value of a share of Company Stock as of the date of grant of the SAR.

(b)Tandem SARs.  The Committee may grant tandem SARs either at the time the Option is granted or at any time thereafter while the Option remains outstanding; provided, however, that, in the case of an Incentive Stock Option, SARs may be granted only at the date of the grant of the Incentive Stock Option.  In the case of tandem SARs, the number of SARs granted to a Participant that shall be exercisable during a specified period shall not exceed the number of shares of Company Stock that the Participant may purchase upon the exercise of the related Option during such period.  Upon the exercise of an Option, the SARs relating to the Company Stock covered by such Option shall terminate.  Upon the exercise of SARs, the related Option shall terminate to the extent of an equal number of shares of Company Stock.

(c)Exercisability.  A SAR shall become exercisable in accordance with such terms and conditions as may be specified.  The Committee may grant SARs that are subject to achievement of performance goals or other conditions.  The Committee may accelerate the exercisability of any or all outstanding SARs at any time for any reason.  The Committee shall determine in the Grant Agreement under what circumstances and during what periods a Participant may exercise a SAR after termination of employment or service.  A tandem SAR shall be exercisable only while the Option to which it is related is exercisable.

(d)Grants to Non‐Exempt Employees.  SARs granted to persons who are non‐exempt employees under the Fair Labor Standards Act of 1938, as amended, may not be exercisable for at least six months after the date of grant (except that such SARs may become exercisable, as determined by the 

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Committee, upon the Participant’s death, Disability or retirement, or upon a Change of Control or other circumstances permitted by applicable regulations).

(e)Exercise of SARs.  When a Participant exercises SARs, the Participant shall receive in settlement of such SARs an amount equal to the value of the stock appreciation for the number of SARs exercised.  The stock appreciation for a SAR is the amount by which the Fair Market Value of the underlying Company Stock on the date of exercise of the SAR exceeds the base amount of the SAR as specified in the Grant Agreement.

(f)Form of Payment.  The Committee shall determine whether the stock appreciation for a SAR shall be paid in the form of shares of Company Stock, cash or a combination of the two.  For purposes of calculating the number of shares of Company Stock to be received, shares of Company Stock shall be valued at their Fair Market Value on the date of exercise of the SAR.  If shares of Company Stock are to be received upon exercise of a SAR, cash shall be delivered in lieu of any fractional share.

	
11.
	
Other Stock-Based Awards

The Committee may grant other awards not specified in Sections 7, 8, 9 or 10 above that are based on or measured by Company Stock to Employees, Consultants and Non-Employee Directors, on such terms and conditions as the Committee deems appropriate.  Other Stock-Based Awards may be granted subject to achievement of performance goals or other conditions and may be payable in Company Stock or cash, or in a combination of the two, as determined by the Committee in the Grant Agreement.  

	
12.
	
Qualified Performance-Based Compensation

(a)Designation as Qualified Performance-Based Compensation.  The Committee may determine that Stock Units, Stock Awards, Dividend Equivalents, Other Stock-Based Awards or Bonuses granted to an Employee shall be considered “qualified performance-based compensation” under section 162(m) of the Code, in which case the provisions of this Section 12 shall apply.

(b)Performance Goals.  When Grants are made under this Section 12, the Committee shall establish in writing (i) the objective performance goals that must be met, (ii) the period during which performance will be measured, (iii) the maximum amounts that may be paid if the performance goals are met, and (iv) any other conditions that the Committee deems appropriate and consistent with the requirements of section 162(m) of the Code for “qualified performance-based compensation.”  The performance goals shall satisfy the requirements for “qualified performance-based compensation,” including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the performance goals be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goals have been met.  The Committee shall not have discretion to increase the amount of compensation that is payable, but may reduce the amount of compensation that is payable, pursuant to Grants identified by the Committee as “qualified performance-based compensation.”

(c)Criteria Used for Objective Performance Goals.  The Committee shall use objectively determinable performance goals based on one or more of the following criteria:  stock price, stock performance, financial ratios, earnings per share, adjusted earnings per share, gross profits, gross margins, net earnings, operating earnings, operating margins, return on assets, stockholder return, return on equity, 

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return on invested capital, growth in assets, unit volume, sales, market share, earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted EBITDA margins, or strategic business criteria consisting of one or more objectives based on meeting specified revenue goals, market penetration goals, geographic business expansion goals, corporate culture goals, employee retention goals, organizational development goals, clinical achievements, strategic partnerships, business growth initiatives, cost targets, goals relating to acquisitions or divestitures, customer acquisition, customer retention or first-time orders (whether from all or only certain sales channels).  The performance goals may relate to one or more business units or the performance of the Company and its subsidiaries as a whole, or any combination of the foregoing.  Performance goals need not be uniform as among Participants.

(d)Timing of Establishment of Goals.  The Committee shall establish the performance goals in writing either before the beginning of the performance period or during a period ending no later than the earlier of (i) 90 days after the beginning of the performance period or (ii) the date on which 25% of the performance period has been completed, or such other date as may be required or permitted under applicable regulations under section 162(m) of the Code.

(e)Certification of Results.  The Committee shall certify the performance results for the performance period specified in the Grant Agreement after the performance period ends.  The Committee shall determine the amount, if any, to be paid pursuant to each Grant based on the achievement of the performance goals and the satisfaction of all other terms of the Grant Agreement.  

(f)Death, Disability or Other Circumstances.  The Committee may provide in the Grant Agreement that Grants under this Section 12 shall be payable, in whole or in part, in the event of the Participant’s death or disability, a Change of Control or under other circumstances consistent with the Treasury regulations and rulings under section 162(m) of the Code.

	
13.
	
Deferrals

The Committee may permit or require a Participant to defer receipt of the payment of cash or the delivery of shares that would otherwise be due to the Participant in connection with any Grant.  The Committee shall establish rules and procedures for any such deferrals, consistent with applicable requirements of section 409A of the Code.

	
14.
	
Withholding of Taxes

(a)Required Withholding.  All Grants under the Plan shall be subject to applicable federal (including FICA), state and local tax withholding requirements.  The Company may require that the Participant or other person receiving or exercising Grants pay to the Company the amount of any federal, state or local taxes that the Company is required to withhold with respect to such Grants, or the Company may deduct from other wages paid by the Company the amount of any withholding taxes due with respect to such Grants.

(b)Election to Withhold Shares.  If the Committee so permits, shares of Company Stock may be withheld to satisfy the Company’s tax withholding obligation with respect to Grants paid in Company Stock, at the time such Grants become taxable, up to an amount equal to the maximum statutory tax rate(s) (including the employee’s share of payroll or similar taxes) prevailing in the jurisdiction(s) applicable to the relevant Participant (determined without regard to whether such maximum rate(s) exceed the actual 

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taxes that may ultimately be payable by that Participant) and based on the Fair Market Value of such shares at the time of withholding.  

	
15.
	
Transferability of Grants

(a)Restrictions on Transfer.  Except as described in Section 15(b) below, only the Participant may exercise rights under a Grant during the Participant’s lifetime, and a Participant may not transfer those rights except by will or by the laws of descent and distribution.  When a Participant dies, the personal representative or other person entitled to succeed to the rights of the Participant may exercise such rights.  Any such successor must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Participant’s will or under the applicable laws of descent and distribution.

(b)Transfer of Nonqualified Stock Options to or for Family Members.  Notwithstanding the foregoing, the Committee may provide, in a Grant Agreement, that a Participant may transfer Nonqualified Stock Options to family members, or one or more trusts or other entities for the benefit of or owned by family members, consistent with applicable securities laws, according to such terms as the Committee may determine; provided that the Participant receives no consideration for the transfer of a Nonqualified Stock Option and the transferred Nonqualified Stock Option shall continue to be subject to the same terms and conditions as were applicable to the Nonqualified Stock Option immediately before the transfer.

	
16.
	
Consequences of a Change of Control  

In the event of a Change of Control, the Committee may take any one or more of the following actions with respect to any or all outstanding Grants, without the consent of any Participant: (i) the Committee may determine that outstanding Options and SARs shall be fully exercisable, and restrictions on outstanding Stock Awards and Stock Units shall lapse, as of the date of the Change of Control or at such other time as the Committee determines, (ii) the Committee may require that Participants surrender their outstanding Options and SARs in exchange for one or more payments by the Company, in cash or Company Stock as determined by the Committee, in an amount equal to the amount, if any, by which the then Fair Market Value of the shares of Company Stock subject to the Participant’s unexercised Options and SARs exceeds the Exercise Price, and on such terms as the Committee determines; provided, however, that if the per share Exercise Price of any such Options or SARs equals or exceeds the Fair Market Value of one share of Company Stock, such Options or SARs, as the case may be, shall be canceled with no payment due the Participant, (iii) after giving Participants an opportunity to exercise their outstanding Options and SARs, the Committee may terminate any or all unexercised Options and SARs at such time as the Committee deems appropriate, (iv) with respect to Participants holding Stock Units and Other Stock-Based Awards, the Committee may determine that such Participants shall receive one or more payments in settlement of such Stock Units and Other Stock-Based Awards, in such amount and form and on such terms as may be determined by the Committee, or (v) determine that all outstanding Options and SARs that are not exercised shall be assumed by, or replaced with comparable options or rights by the surviving corporation (or a parent or subsidiary of the surviving corporation), and other outstanding Grants that remain in effect after the Change of Control shall be converted to similar grants of the surviving corporation (or a parent or subsidiary of the surviving corporation).  Such acceleration, surrender, termination, settlement or conversion shall take place as of the date of the Change of Control or such other date as the Committee may specify.  The Committee may provide in a Grant Agreement that a sale or other transaction involving a subsidiary or other business unit of the Company shall be considered a Change of Control for purposes of a Grant, or the Committee may establish other provisions that shall be applicable in the event of a specified transaction.

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17.
	
Requirements for Issuance of Shares

No Company Stock shall be issued in connection with any Grant hereunder unless and until all legal requirements applicable to the issuance of such Company Stock have been complied with to the satisfaction of the Committee.  The Committee shall have the right to condition any Grant made to any Participant hereunder on such Participant’s undertaking in writing to comply with such restrictions on his or her subsequent disposition of such shares of Company Stock as the Committee shall deem necessary or advisable, and certificates representing such shares may be legended to reflect any such restrictions.  Certificates representing shares of Company Stock issued under the Plan will be subject to such stop-transfer orders and other restrictions as may be required by applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon.  No Participant shall have any right as a stockholder with respect to Company Stock covered by a Grant until shares have been issued to the Participant.

	
18.
	
Amendment and Termination of the Plan

(a)Amendment.  The Board may amend or terminate the Plan at any time; provided, however, that the Board shall not amend the Plan without approval of the stockholders of the Company if such approval is required in order to comply with the Code or applicable laws, or to comply with applicable stock exchange requirements.  No amendment or termination of this Plan shall, without the consent of the Participant, materially impair any rights or obligations under any Grant previously made to the Participant under the Plan, unless such right has been reserved in the Plan or the Grant Agreement, or except as provided in Section 19(b) below.  Notwithstanding anything in the Plan to the contrary, the Board may amend the Plan in such manner as it deems appropriate in the event of a change in applicable law or regulations.

(b)No Repricing Without Stockholder Approval.  Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Grants may not be amended to reduce the exercise price of outstanding Options or SARs or cancel outstanding Options or SARS in exchange for cash, other Grants or Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs without stockholder approval.  

(c)Duration of the Plan.  No further Grants will be made under the Plan after the day immediately preceding the tenth anniversary of its Effective Date, provided that Grants under Section 12 may be made only until the first stockholders’ meeting that occurs in the fifth year following the Effective Date.

	
19.
	
Miscellaneous

(a)Effective Date.  The Plan shall be effective as of the Effective Date. 

(b)Grants in Connection with Corporate Transactions and Otherwise.  Nothing contained in this Plan shall be construed to (i) limit the right of the Committee to make Grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees thereof who become 

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Employees, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options or make other stock-based awards outside of this Plan.  Without limiting the foregoing, the Committee may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company in substitution for a grant made by such corporation.  The terms and conditions of the Grants may vary from the terms and conditions required by the Plan and from those of the substituted stock incentives, as determined by the Committee.

(c)Compliance with Law.  The Plan, the exercise of Options and the obligations of the Company to issue or transfer shares of Company Stock under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required.  With respect to persons subject to section 16 of the Exchange Act, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act.  In addition, it is the intent of the Company that Incentive Stock Options comply with the applicable provisions of section 422 of the Code, that Grants of “qualified performance-based compensation” comply with the applicable provisions of section 162(m) of the Code and that, to the extent applicable, Grants comply with the requirements of section 409A of the Code or an exception from such requirements.  To the extent that any legal requirement of section 16 of the Exchange Act or section 422, 162(m) or 409A of the Code as set forth in the Plan ceases to be required under section 16 of the Exchange Act or section 422, 162(m) or 409A of the Code, that Plan provision shall cease to apply.  The Committee may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation.  The Committee may also adopt rules regarding the withholding of taxes on payments to Participants.  The Committee may, in its sole discretion, agree to limit its authority under this Section 19.

(d)Enforceability.  The Plan shall be binding upon and enforceable against the Company and its successors and assigns.

(e)Funding of the Plan; Limitation on Rights.  This Plan shall be unfunded.  The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan.  Nothing contained in the Plan and no action taken pursuant hereto shall create or be construed to create a fiduciary relationship between the Company and any Participant or any other person.  No Participant or any other person shall under any circumstances acquire any property interest in any specific assets of the Company.  To the extent that any person acquires a right to receive payment from the Company hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company.

(f)Rights of Participants.  Nothing in this Plan shall entitle any Employee, Consultant, Non-Employee Director or other person to any claim or right to receive a Grant under this Plan.  Neither this Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employment or service of the Employer.

(g)No Fractional Shares.  No fractional shares of Company Stock shall be issued or delivered pursuant to the Plan or any Grant.  The Committee shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

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(h)Employees Subject to Taxation Outside the United States.  With respect to Participants who are subject to taxation in countries other than the United States, the Committee may make Grants on such terms and conditions as the Committee deems appropriate to comply with the laws of the applicable countries, and the Committee may create such procedures, addenda and subplans and make such modifications as may be necessary or advisable to comply with such laws.

(i)Forfeiture for Dishonesty.  Notwithstanding anything to the contrary in the Plan, if the Committee finds, by a majority vote, after full consideration of the facts presented on behalf of both the Employer and any Participant, that the Participant has been engaged in fraud, embezzlement, theft, commission of a felony or dishonest conduct in the course of his employment or service with the Employer that damaged the Company or any other Employer or that the Participant has disclosed trade secrets of the Company or any other Employer, the Participant shall forfeit all unexercised Grants and all exercised Grants with respect to which the Company has not yet delivered share certificates or payment, as the case may be. The decision of the Committee in interpreting and applying the provisions of this Section 19(i) shall be final. No decision of the Committee shall affect the finality of the discharge or termination of such Participant by the Employer in any manner.

(j)Governing Law. The validity, construction, interpretation and effect of the Plan and Grant Agreements issued under the Plan shall be governed and construed by and determined in accordance with the laws of the State of Delaware, without giving effect to the conflict of laws provisions thereof. 

#####

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