Document:

Exhibit 10.1

 

ENDOCARDIAL SOLUTIONS, INC.

2003 STOCK INCENTIVE PLAN

 

Section 1.                                          Purpose

 

The purpose of
the Plan is to promote the interests of the Company and its stockholders by
aiding the Company in attracting and retaining employees, officers, consultants,
independent contractors and directors capable of assuring the future success of
the Company, to offer such persons incentives to put forth maximum efforts for
the success of the Company’s business and to afford such persons an opportunity
to acquire a proprietary interest in the Company.

 

Section 2.                                          Definitions

 

As used in the
Plan, the following terms shall have the meanings set forth below:

 

(a)                                  “Affiliate”
shall mean (i) any entity that, directly or indirectly through one or more
intermediaries, is controlled by the Company and (ii) any entity in which
the Company has a significant equity interest, in each case as determined by
the Committee.

 

(b)                                 “Award”
shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted
Stock Unit, Performance Award, Dividend Equivalent, Other Stock Grant or Other
Stock-Based Award granted under the Plan.

 

(c)                                  “Award
Agreement” shall mean any written agreement, contract or other instrument or
document evidencing any Award granted under the Plan.  Each Award Agreement shall be subject to the applicable terms and
conditions of the Plan and any other terms and conditions (not inconsistent
with the Plan) determined by the Committee.

 

(d)                                 “Board”
shall mean the Board of Directors of the Company.

 

(e)                                  “Code”
shall mean the Internal Revenue Code of 1986, as amended from time to time, and
any regulations promulgated thereunder.

 

(f)                                    “Committee”
shall mean a committee of Directors designated by the Board to administer the
Plan, which shall initially be the Company’s compensation committee.  The Committee shall be comprised of not less
than such number of Directors as shall be required to permit Awards granted
under the Plan to qualify under Rule 16b-3 and Section 162(m) of the
Code, and each member of the Committee shall be a “Non-Employee Director.”

 

(g)                                 “Company”
shall mean Endocardial Solutions, Inc., a Delaware corporation, and any
successor corporation.

 

(h)                                 “Director”
shall mean a member of the Board, including any Non-Employee Director.

 

(i)                                     “Dividend
Equivalent” shall mean any right granted under Section 6(e) of the Plan.

 

(j)                                     “Eligible
Person” shall mean any employee, officer, consultant, independent contractor or
director providing services to the Company or any Affiliate who the Committee
determines to be an Eligible Person.

 

(k)                                  “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.

 

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(l)                                     “Fair
Market Value” shall mean, with respect to any property (including, without
limitation, any Shares or other securities), the fair market value of such
property determined by such methods or procedures as shall be established from
time to time by the Committee. 
Notwithstanding the foregoing and unless otherwise determined by the
Committee, the Fair Market Value of a Share as of a given date shall
be, if the Shares are then listed on the Nasdaq National Market, the
average of the high and low sales price of one Share as reported on the Nasdaq
National Market on such date or, if the Nasdaq National Market is not open for
trading on such date, on the most recent preceding date when it is open for
trading.

 

(m)                               “Incentive
Stock Option” shall mean an option granted under Section 6(a) of the Plan
that is intended to qualify as an “incentive stock option” in accordance with
the terms of Section 422 of the Code or any successor provision.

 

(n)                                 “Non-Employee
Director” shall mean any Director who is not also an employee of the Company or
an Affiliate within the meaning of Rule 16b-3 and an “outside director” within
the meaning of Section 162(m) of the Code.

 

(o)                                 “Non-Qualified
Stock Option” shall mean an option granted under Section 6(a) of the Plan
that is not an Incentive Stock Option.

 

(p)                                 “Option”
shall mean an Incentive Stock Option or a Non-Qualified Stock Option.

 

(q)                                 “Other
Stock Grant” shall mean any right granted under Section 6(f) of the Plan.

 

(r)                                    “Other
Stock-Based Award” shall mean any right granted under Section 6(g) of the
Plan.

 

(s)                                  “Participant”
shall mean an Eligible Person designated to be granted an Award under the Plan.

 

(t)                                    “Performance
Award” shall mean any right granted under Section 6(d) of the Plan.

 

(u)                                 “Person”
shall mean any individual or entity, including a corporation, partnership,
limited liability company, association, joint venture or trust.

 

(v)                                 “Plan”
shall mean the Endocardial Solutions, Inc. 2003 Stock Incentive Plan, as
amended from time to time, the provisions of which are set forth herein.

 

(w)                               “Reload
Option” shall mean any Option granted under Section 6(a)(v) of the Plan.

 

(x)                                   “Restricted
Stock” shall mean any Share granted under Section 6(c) of the Plan.

 

(y)                                 “Restricted
Stock Unit” shall mean any unit granted under Section 6(c) of the Plan
evidencing the right to receive a Share (or a cash payment equal to the Fair
Market Value of a Share) at some future date.

 

(z)                                   “Rule 16b-3”
shall mean Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, or any
successor rule or regulation.

 

(aa)                            “Securities
Act” shall mean the Securities Act of 1933, as amended.

 

(bb)                          “Share”
or “Shares” shall mean a share or shares of common stock, $0.01 par value per
share, of the Company or such other securities or property as may become
subject to Awards pursuant to an adjustment made under Section 4(c) of the
Plan.

 

(cc)                            “Stock
Appreciation Right” shall mean any right granted under Section 6(b) of the
Plan.

 

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Section 3.                                          Administration

 

(a)                                  Power
and Authority of the Committee.  The
Plan shall be administered by the Committee. 
Subject to the express provisions of the Plan and to applicable law, the
Committee shall have full power and authority to:  (i) designate Participants; (ii) determine the type or
types of Awards to be granted to each Participant under the Plan;
(iii) determine the number of Shares to be covered by (or the method by
which payments or other rights are to be determined in connection with) each
Award; (iv) determine the terms and conditions of any Award or Award Agreement;
(v) amend the terms and conditions of any Award or Award Agreement and
accelerate the exercisability of any Option or waive any restrictions relating
to any Award; (vi) determine whether, to what extent and under what
circumstances Awards may be exercised in cash, Shares, promissory notes (provided,
however, that the par value of any Shares to be issued pursuant to
such exercise shall be paid in the form of cash, services rendered, personal
property, real property or a combination thereof, and provided, further that the acceptance of
such promissory notes does not conflict with Section 402 of the
Sarbanes-Oxley Act of 2002), other securities, other Awards or other property,
or canceled, forfeited or suspended; (vii) determine whether, to what
extent and under what circumstances cash, Shares, promissory notes (provided, however, that the acceptance of
such promissory notes does not conflict with Section 402 of the
Sarbanes-Oxley Act of 2002),  other
securities, other Awards, other property and other amounts payable with respect
to an Award under the Plan shall be deferred either automatically or at the
election of the holder thereof or the Committee (provided, however,
that the par value of any Shares and Restricted Stock shall be paid in the form
of cash, services rendered, personal property, real property or a combination
thereof prior to their issuance); (viii) interpret and administer the Plan
and any instrument or agreement, including an Award Agreement, relating to the
Plan; (ix) establish, amend, suspend or waive such rules and regulations
and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (x) make any other determination and take
any other action that the Committee deems necessary or desirable for the
administration of the Plan.  Unless
otherwise expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at any
time and shall be final, conclusive and binding upon any Eligible Person and
any holder or beneficiary of any Award.

 

(b)                                 Power
and Authority of the Board. 
Notwithstanding anything to the contrary contained herein, the Board
may, at any time and from time to time, without any further action of the
Committee, exercise the powers and duties of the Committee under the Plan.

 

Section 4.                                          Shares
Available for Awards

 

(a)                                  Shares
Available.  Subject to adjustment as
provided in Section 4(c) of the Plan, the aggregate number of Shares that
may be issued under the Plan shall be 1,250,000.  Shares to be issued
under the Plan may be either authorized but unissued Shares or Shares
re-acquired and held in treasury.

 

(b)                                 Accounting
for Awards.  For purposes of this
Section 4, if an Award entitles the holder thereof to receive or purchase
Shares, the number of Shares covered by such Award or to which such Award
relates shall be counted on the date of grant of such Award against the
aggregate number of Shares available for granting Awards under the Plan.  Any Shares that are used by a Participant as
full or partial payment to the Company of the purchase price relating to an
Award, including Shares tendered in connection with the grant of a Reload
Option, or in connection with the satisfaction of tax obligations relating to
an Award, shall again be available for granting Awards (other than Incentive
Stock Options) under the Plan.  In
addition, if any Shares covered by an Award or to which an Award relates are
not purchased or are forfeited, or if an Award otherwise terminates without
delivery of any Shares, then the number of Shares counted against the aggregate
number of Shares available under the Plan with respect to such Award, to the
extent of any such forfeiture or termination, shall again be available for
granting Awards under the Plan.

 

(c)                                  Adjustments.  In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Shares, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities

 

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of the Company or other similar
corporate transaction or event affects the Shares such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (i) the number and type of Shares (or
other securities or other property) that thereafter may be made the subject of
Awards, (ii) the number and type of Shares (or other securities or other
property) subject to outstanding Awards and (iii) the purchase price or
exercise price with respect to any Award; provided, however, that the number of
Shares covered by any Award or to which such Award relates shall always be a
whole number.  Notwithstanding the
above, in the event (i) of any reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase or exchange of Shares or other securities of
the Company or any other similar corporate transaction or event or (ii) the
Company shall enter into a written agreement to undergo such a transaction or
event, the Committee may, in its sole discretion, cancel any or all outstanding
Awards and pay to the holders of any such Awards that are otherwise vested, in
cash, the value of such Awards based upon the price per share of capital stock
received or to be received by other stockholders of the Company in such event.

 

(d)                                 Award
Limitations Under the Plan.  No
Eligible Person may be granted any Award or Awards under the Plan, the value of
which Award or Awards is based solely on an increase in the value of the Shares
after the date of grant of such Award or Awards, for more than 300,000 Shares
(subject to adjustment as provided for in Section 4(c) of the Plan), in
the aggregate in any taxable year.  The
foregoing annual limitation specifically includes the grant of any Award or
Awards representing “qualified performance-based compensation” within the
meaning of Section 162(m) of the Code.

 

Section 5.                                          Eligibility

 

Any Eligible
Person shall be eligible to be designated a Participant.  In determining which Eligible Persons shall
receive an Award and the terms of any Award, the Committee may take into
account the nature of the services rendered by the respective Eligible Persons,
their present and potential contributions to the success of the Company or such
other factors as the Committee, in its discretion, shall deem relevant.  Notwithstanding the foregoing, an Incentive
Stock Option may only be granted to full-time or part-time employees (which
term as used herein includes, without limitation, officers and directors who
are also employees), and an Incentive Stock Option shall not be granted to an
employee of an Affiliate unless such Affiliate is also a “subsidiary
corporation” of the Company within the meaning of Section 424(f) of the
Code or any successor provision.

 

Section 6.                                          Awards

 

(a)                                  Options.  The Committee is hereby authorized to grant
Options to Eligible Persons with the following terms and conditions and with
such additional terms and conditions not inconsistent with the provisions of
the Plan as the Committee shall determine:

 

(i)                                     Exercise
Price.  The purchase price per Share
purchasable under an Option shall be determined by the Committee; provided,
however,
that such purchase price shall not be less than 100% of the Fair Market Value
of a Share on the date of grant of such Option.

 

(ii)                                  Option
Term.  The term of each Option shall
be fixed by the Committee at the time of grant.

 

(iii)                               Time
and Method of Exercise.  The
Committee shall determine the time or times at which an Option may be exercised
in whole or in part and the method or methods by which, and the form or forms
(including, without limitation, cash, Shares, promissory notes (provided,
however, that the par value of any Shares to be issued pursuant to
such exercise shall be paid in the form of cash, services rendered, personal
property, real property or a combination thereof, and provided, further, the acceptance of such
promissory notes does not conflict with Section 402 of the Sarbanes-Oxley
Act of 2002),  other securities,
other Awards or other property, or any combination thereof, having a Fair
Market Value on the exercise date equal to the applicable exercise price) in
which, payment of the exercise price with respect thereto may be made or deemed
to have been made.

 

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(iv)                              Incentive
Stock Options.  Notwithstanding anything
in the Plan to the contrary, the following additional provisions shall apply to
the grant of stock options which are intended to qualify as Incentive Stock
Options:

 

(A)                              The
Committee will not grant Incentive Stock Options in which the aggregate Fair
Market Value (determined as of the time the option is granted) of the Shares
with respect to which Incentive Stock Options are exercisable for the first
time by any Participant during any calendar year (under this Plan and all other
plans of the Company and its Affiliates) shall exceed $100,000.

 

(B)                                All
Incentive Stock Options must be granted within ten years from the earlier of
the date on which this Plan was adopted by the Board or the date this Plan was
approved by the stockholders of the Company.

 

(C)                                Unless
sooner exercised, all Incentive Stock Options shall expire and no longer be
exercisable no later than 10 years after the date of grant; provided,
however,
that in the case of a grant of an Incentive Stock Option to a Participant who,
at the time such Option is granted, owns (within the meaning of
Section 422 of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of its
Affiliate, such Incentive Stock Option shall expire and no longer be
exercisable no later than 5 years from the date of grant.

 

(D)                               The
purchase price per Share for an Incentive Stock Option shall be not less than
100% of the Fair Market Value of a Share on the date of grant of the Incentive
Stock Option; provided, however, that, in the case of the grant of
an Incentive Stock Option to a Participant who, at the time such Option is
granted, owns (within the meaning of Section 422 of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or of its Affiliate, the purchase price per Share
purchasable under an Incentive Stock Option shall be not less than 110% of the
Fair Market Value of a Share on the date of grant of the Inventive Stock
Option.

 

(E)                                 Any
Incentive Stock Option authorized under the Plan shall contain such other
provisions as the Committee shall deem advisable, but shall in all events be
consistent with and contain all provisions required in order to qualify the
Option as an Incentive Stock Option.

 

(v)                                 Reload
Options.  The Committee may grant
Reload Options, separately or together with another Option and subject to the
terms and conditions established by the Committee, pursuant to which the
Participant would be granted a new Non-Qualified Stock Option when the payment
of the exercise price of a previously granted option for common stock is made
by the delivery of Shares owned by the Participant pursuant to Section
6(a)(iii) hereof or the relevant provisions of another plan of the Company,
when Shares are tendered or withheld as payment of the amount to be withheld
under applicable income tax laws in connection with the exercise of an Option,
which new Non-Qualified Stock Option would be a Non-Qualified Stock Option to
purchase the number of Shares not exceeding the sum of (A) the number of
Shares so provided as consideration upon the exercise of the previously granted
option to which such Reload Option relates and (B) the number of Shares,
if any, tendered or withheld as payment of the amount to be withheld under
applicable tax laws in connection with the exercise of the option to which such
Reload Option relates pursuant to the relevant provisions of the plan or
agreement relating to such option. 
Reload Options may be granted with respect to options previously granted
under the Plan or any other stock option plan of the Company or any Affiliate
or may be granted in connection with any option granted under the Plan or any
other stock option plan of the Company or any Affiliate at the time of such
grant.  Such Reload Options shall have a
per share exercise price equal to the Fair Market Value of one Share as of the
date of grant of the new Non-Qualified Stock Option.  Any Reload Option shall be subject to availability of sufficient
Shares for grant under the Plan.  Shares
surrendered as part or all of the exercise price of the Non-Qualified Stock
Option to which it relates that have been owned by the optionee less than six
months

 

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will not be
counted for purposes of determining the number of Shares that may be purchased
pursuant to a Reload Option.

 

(b)                                 Stock
Appreciation Rights.  The Committee
is hereby authorized to grant Stock Appreciation Rights to Eligible Persons
subject to the terms of the Plan.  Each
Stock Appreciation Right granted under the Plan shall confer on the holder upon
exercise the right to receive, as determined by the Committee, cash or a number
of Shares equal to the excess of (a) the Fair Market Value of one Share on
the date of exercise (or, if the Committee shall so determine, at any time
during a specified period before or after the date of exercise) over
(b) the grant price of the Stock Appreciation Right as determined by the
Committee, which grant price shall not be less than 100% of the Fair Market
Value of one Share on the date of grant of the Stock Appreciation Right.  Subject to the terms of the Plan, the grant
price, term, methods of exercise, dates of exercise, methods of settlement and
any other terms and conditions (including conditions or restrictions on the
exercise thereof) of any Stock Appreciation Right shall be as determined by the
Committee.

 

(c)                                  Restricted
Stock and Restricted Stock Units. 
The Committee is hereby authorized to grant Restricted Stock and
Restricted Stock Units to Eligible Persons with the following terms and
conditions and with such additional terms and conditions not inconsistent with
the provisions of the Plan as the Committee shall determine:

 

(i)                                     Restrictions.  Shares of Restricted Stock and Restricted
Stock Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, a restriction on or prohibition against the
right to receive any dividend or other right or property with respect thereto),
which restrictions may lapse separately or in combination at such time or
times, in such installments or otherwise as the Committee may deem appropriate.

 

(ii)                                  Stock
Certificates.  Any Restricted Stock
granted under the Plan shall be evidenced by the issuance of a stock certificate
or certificates, which shall be held by the Company.  Such certificate or certificates shall be registered in the name
of the Participant and shall bear an appropriate legend referring to the
applicable Award Agreement and possible forfeiture of such shares of Restricted
Stock.

 

(iii)                               Forfeiture.  Except as otherwise determined by the
Committee, upon a Participant’s termination of employment (as determined under
criteria established by the Committee) during the applicable restriction
period, all applicable Shares of Restricted Stock and Restricted Stock Units at
such time subject to restriction shall be forfeited and reacquired by the
Company; provided,
however,
that the Committee may, when it finds that a waiver would be in the best
interest of the Company, waive in whole or in part any or all remaining
restrictions with respect to Shares of Restricted Stock or Restricted Stock
Units.

 

(d)                                 Performance
Awards.  The Committee is hereby
authorized to grant Performance Awards to Eligible Persons subject to the terms
of the Plan.  A Performance Award
granted under the Plan (i) may be denominated or payable in cash, Shares
(including, without limitation, Restricted Stock and Restricted Stock Units),
other securities, other Awards or other property and (ii) shall confer on
the holder thereof the right to receive payments, in whole or in part, upon the
achievement of such performance goals during such performance periods as the
Committee shall establish.  Subject to
the terms of the Plan, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted, the amount of any payment or transfer to be made
pursuant to any Performance Award and any other terms and conditions of any Performance
Award shall be determined by the Committee.

 

(e)                                  Dividend
Equivalents.  The Committee is
hereby authorized to grant Dividend Equivalents to Eligible Persons under which
the Participant shall be entitled to receive payments (in cash, Shares, other
securities, other Awards or other property as determined in the discretion of
the Committee) equivalent to the amount of cash dividends paid by the Company
to holders of Shares with respect to a number of Shares determined by the
Committee.  Subject to the terms of the
Plan, such Dividend Equivalents may have such terms and conditions as the
Committee shall determine.

 

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(f)                                    Other
Stock Grants.  The Committee is
hereby authorized, subject to the terms of the Plan, to grant to Eligible
Persons Shares without restrictions thereon as are deemed by the Committee to
be consistent with the purpose of the Plan.

 

(g)                                 Other
Stock-Based Awards.  The Committee
is hereby authorized to grant to Eligible Persons, subject to the terms of the
Plan, such other Awards that are denominated or payable in, valued in whole or
in part by reference to, or otherwise based on or related to, Shares
(including, without limitation, securities convertible into Shares), as are
deemed by the Committee to be consistent with the purpose of the Plan.  Shares or other securities delivered
pursuant to a purchase right granted under this Section 6(g) shall be
purchased for such consideration, which may be paid by such method or methods
and in such form or forms (including, without limitation, cash, Shares,
promissory notes (provided, however, that the par value of any Shares
to be issued pursuant to such exercise shall be paid in the form of cash,
services rendered, personal property, real property or a combination thereof,
and provided, further, the
acceptance of such promissory notes does not conflict with Section 402 of
the Sarbanes-Oxley Act of 2002), other securities, other Awards or other
property or any combination thereof), as the Committee shall determine, the
value of which consideration, as established by the Committee, shall not be
less than 100% of the Fair Market Value of such Shares or other securities as
of the date such purchase right is granted.

 

(h)                                 General.

 

(i)                                     Consideration
for Awards.  Awards may be granted
for no cash consideration or for any cash or other consideration as determined
by the Committee and required by applicable law.

 

(ii)                                  Awards
May Be Granted Separately or Together. 
Awards may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with or in substitution for any other Award or any
award granted under any plan of the Company or any Affiliate.  Awards granted in addition to or in tandem with
other Awards or in addition to or in tandem with awards granted under any such
other plan of the Company or any Affiliate may be granted either at the same
time as or at a different time from the grant of such other Awards or awards.

 

(iii)                               Forms
of Payment under Awards.  Subject to
the terms of the Plan, payments or transfers to be made by the Company or an
Affiliate upon the grant, exercise or payment of an Award may be made in such
form or forms as the Committee shall determine (including, without limitation,
cash, Shares, promissory notes (provided,
however, that the acceptance of such promissory notes does not
conflict with Section 402 of the Sarbanes-Oxley Act of 2002), other
securities, other Awards or other property or any combination thereof), and may
be made in a single payment or transfer, in installments or on a deferred
basis, in each case in accordance with rules and procedures established by the
Committee.  Such rules and procedures
may include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of Dividend Equivalents with respect to installment or deferred
payments.

 

(iv)                              Limits
on Transfer of Awards.  No Award
(other than Other Stock Grants) and no right under any such Award shall be transferable
by a Participant otherwise than by will or by the laws of descent and
distribution and the Company shall not be required to recognize any attempted
assignment of such rights by any Participant; provided, however,
that, if so determined by the Committee, a Participant may, in the manner
established by the Committee, designate a beneficiary or beneficiaries to
exercise the rights of the Participant and receive any property distributable
with respect to any Award upon the death of the Participant; provided,
further,
that, if so determined by the Committee, a Participant may transfer a
Non-Qualified Stock Option to any Family Member (as such term is defined in the
General Instructions to Form S-8 (or successor to such Instructions or such
Form)) at any time that such Participant holds such Option, provided that the Participant may not
receive any consideration for such transfer, the Family Member may not make any
subsequent transfers other than by will or by the laws of descent and
distribution and the Company receives written notice of such transfer, provided,
further,
that, if so determined by the Committee and except in the case of an Incentive
Stock Option, Awards may be transferable as determined by the Committee.  Except as otherwise determined by the
Committee, each 

 

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Award (other than an Incentive Stock Option) or right
under any such Award shall be exercisable during the Participant’s lifetime
only by the Participant or, if permissible under applicable law, by the
Participant’s guardian or legal representative.  Except as otherwise determined by the Committee, no Award (other
than an Incentive Stock Option) or right under any such Award may be pledged, alienated,
attached or otherwise encumbered, and any purported pledge, alienation,
attachment or other encumbrance thereof shall be void and unenforceable against
the Company or any Affiliate.

 

(v)                                 Term
of Awards.  Subject to Section
6(a)(iv)(C), the term of each Award shall be for such period as may be
determined by the Committee.

 

(vi)                              Restrictions;
Securities Exchange Listing.  All
Shares or other securities delivered under the Plan pursuant to any Award or
the exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan, applicable
federal or state securities laws and regulatory requirements, and the Committee
may direct appropriate stop transfer orders and cause other legends to be
placed on the certificates for such Shares or other securities to reflect such
restrictions.  If the Shares or other
securities are traded on a securities exchange, the Company shall not be
required to deliver any Shares or other securities covered by an Award unless
and until such Shares or other securities have been admitted for trading on
such securities exchange.

 

(vii)                           Prohibition
on Option Repricing.  Except as
provided in Section 4(c) hereof, no Option may be amended to reduce its
initial exercise price and no Option shall be canceled and replaced with an
Option or Options having a lower exercise price, without the approval of the
stockholders of the Company or unless there would be no material adverse effect
on the Company’s financial statements as prepared in accordance with Generally
Accepted Accounting Principles.

 

Section 7.                                          Amendment
and Termination; Adjustments

 

(a)                                  Amendments
to the Plan.  The Board may amend,
alter, suspend, discontinue or terminate the Plan at any time; provided,
however,
that, notwithstanding any other provision of the Plan or any Award Agreement,
without the approval of the stockholders of the Company, no such amendment,
alteration, suspension, discontinuation or termination shall be made that,
absent such approval:

 

(i)                                     violates
the rules or regulations of the National Association of Securities Dealers,
Inc. or any other securities exchange that are applicable to the Company;

 

(ii)                                  causes
the Company to be unable, under the Code, to grant Incentive Stock Options
under the Plan;

 

(iii)                               increases
the number of shares authorized under the Plan as specified in
Section 4(a);

 

(iv)                              permits
the award of Options or Stock Appreciation Rights at a price less than 100% of
the Fair Market Value of a Share on the date of grant of such Option or Stock
Appreciation Right, as prohibited by Sections 6(a)(i) and 6(b)(ii) of the Plan
or the repricing of Options or Stock Appreciation Rights, as prohibited by
Section 3(a)(v) of the Plan; or

 

(v)                                 would
prevent the grant of Options or Stock Appreciation Rights that would qualify
under Section 162(m) of the Code.

 

(b)                                 Amendments
to Awards.  The Committee may waive
any conditions of or rights of the Company under any outstanding Award,
prospectively or retroactively.  Except
as otherwise provided herein or in an Award Agreement, the Committee may not
amend, alter, suspend, discontinue or terminate any outstanding Award,
prospectively or retroactively, if such action would adversely affect the
rights of the holder of such Award, without the consent of the Participant or
holder or beneficiary thereof.

 

8

 

(c)                                  Correction
of Defects, Omissions and Inconsistencies. 
The Committee may correct any defect, supply any omission or reconcile
any inconsistency in the Plan or any Award in the manner and to the extent it
shall deem desirable to carry the Plan into effect.

 

Section 8.                                          Income
Tax Withholding

 

In order to
comply with all applicable federal, state or local income tax laws or
regulations, the Company may take such action as it deems appropriate to ensure
that all applicable federal, state or local payroll, withholding, income or
other taxes, which are the sole and absolute responsibility of a Participant,
are withheld or collected from such Participant.  In order to assist a Participant in paying all or a portion of
the federal, state and local taxes to be withheld or collected upon exercise or
receipt of (or the lapse of restrictions relating to) an Award, the Committee,
in its discretion and subject to such additional terms and conditions as it may
adopt, may permit the Participant to satisfy such tax obligation by
(i) electing to have the Company withhold a portion of the Shares
otherwise to be delivered upon exercise or receipt of (or the lapse of
restrictions relating to) such Award with a Fair Market Value equal to the
amount of such taxes (but only to the extent of the minimum amount required to
be withheld under applicable laws or regulations) or (ii) delivering to
the Company Shares other than Shares issuable upon exercise or receipt of (or the
lapse of restrictions relating to) such Award with a Fair Market Value equal to
the amount of such taxes.  The election,
if any, must be made on or before the date that the amount of tax to be
withheld is determined.

 

Section 9.                                          General
Provisions

 

(a)                                  No
Rights to Awards.  No Eligible
Person or other Person shall have any claim to be granted any Award under the
Plan, and there is no obligation for uniformity of treatment of Eligible
Persons or holders or beneficiaries of Awards under the Plan.  The terms and conditions of Awards need not
be the same with respect to any Participant or with respect to different
Participants.

 

(b)                                 Award
Agreements.  No Participant will
have rights under an Award granted to such Participant unless and until an
Award Agreement shall have been duly executed on behalf of the Company and, if
requested by the Company, signed by the Participant.

 

(c)                                  Plan
Provisions Control.  In the event
that any provision of an Award Agreement conflicts with or is inconsistent in
any respect with the terms of the Plan as set forth herein or subsequently
amended, the terms of the Plan shall control.

 

(d)                                 No
Rights of Stockholders.  Except with
respect to Shares of Restricted Stock as to which the Participant has been
granted the right to vote, neither a Participant nor the Participant’s legal
representative shall be, or have any of the rights and privileges of, a
stockholder of the Company with respect to any Shares issuable to such
Participant upon the exercise or payment of any Award, in whole or in part,
unless and until such Shares have been issued in the name of such Participant
or such Participant’s legal representative without restrictions thereto.

 

(e)                                  No
Limit on Other Compensation Arrangements. 
Nothing contained in the Plan shall prevent the Company or any Affiliate
from adopting or continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally applicable or
applicable only in specific cases.

 

(f)                                    No
Right to Employment.  The grant of
an Award shall not be construed as giving a Participant the right to be
retained in the employ, or us giving a director of the Company or an Affiliate
the right to continue as a director or an Affiliate of the Company or any
Affiliate, nor will it affect in any way the right of the Company or an
Affiliate to terminate such employment at any time, with or without cause.  In addition, the Company or an Affiliate may
at any time dismiss a Participant from employment, or terminate the term of a
director of the Company or an Affiliate, free from any liability or any claim
under the Plan or any Award, unless otherwise expressly provided in the Plan or
in any Award Agreement.  Nothing in this
Plan shall confer on any person any legal or equitable right against the Company
or any Affiliate, directly or indirectly, or give rise to any cause of action
at law or in equity against the Company or an Affiliate.  The Awards granted hereunder shall not form
any part of the wages or salary of any Eligible Person for purposes of severance
pay or termination indemnities, irrespective of the

 

9

 

reason for termination of
employment.  Under no circumstances
shall any person ceasing to be an employee of the Company or any Affiliate be
entitled to any compensation for any loss of any right or benefit under the
Plan which such employee might otherwise have enjoyed but for termination of
employment, whether such compensation is claimed by way of damages for wrongful
or unfair dismissal, breach of contract or otherwise.  By participating in the Plan, each Participant shall be deemed to
have accepted all the conditions of the Plan and the terms and conditions of
any rules and regulations adopted by the Committee and shall be fully bound
thereby.

 

(g)                                 Governing
Law.  The validity, construction and
effect of the Plan or any Award, and any rules and regulations relating to the
Plan or any Award, shall be determined in accordance with the internal laws,
and not the law of conflicts, of the State of Delaware.

 

(h)                                 Severability.  If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be so construed or
deemed amended without, in the determination of the Committee, materially
altering the purpose or intent of the Plan or the Award, such provision shall
be stricken as to such jurisdiction or Award, and the remainder of the Plan or
any such Award shall remain in full force and effect.

 

(i)                                     No
Trust or Fund Created.  Neither the
Plan nor any Award shall create or be construed to create a trust or separate
fund of any kind or a fiduciary relationship between the Company or any
Affiliate and an Eligible Person or any other Person.  To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.

 

(j)                                     Other
Benefits.  No compensation or
benefit awarded to or realized by any Participant under the Plan shall be
included for the purpose of computing such Participant’s compensation under any
compensation-based retirement, disability, or similar plan of the Company
unless required by law or otherwise provided by such other plan.

 

(k)                                  No
Fractional Shares.  No fractional
Shares shall be issued or delivered pursuant to the Plan or any Award, and the
Committee shall determine whether cash shall be paid in lieu of any fractional
Shares or whether such fractional Shares or any rights thereto shall be
canceled, terminated or otherwise eliminated.

 

(l)                                     Headings.  Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way
material or relevant to the construction or interpretation of the Plan or any
provision thereof.

 

(m)                               Section 16
Compliance; Section 162(m) Administration.  The Plan is intended to comply in all respects with
Rule 16b-3 or any successor provision, as in effect from time to time, and
in all events the Plan shall be construed in accordance with the requirements
of Rule 16b-3.  If any Plan
provision does not comply with Rule 16b-3 as hereafter amended or
interpreted, the provision shall be deemed inoperative.  The Board of Directors, in its absolute
discretion, may bifurcate the Plan so as to restrict, limit or condition the
use of any provision of the Plan with respect to persons who are officers or
directors subject to Section 16 of the Exchange Act without so
restricting, limiting or conditioning the Plan with respect to other Eligible
Persons.  With respect to Options and
Stock Appreciation Rights, the Company intends to have the Plan administered in
accordance with the requirements for the award of “qualified performance-based
compensation” within the meaning of Section 162(m) of the Code.

 

(n)                                 Conditions
Precedent to Issuance of Shares. 
Shares shall not be issued pursuant to the exercise or payment of the
purchase price relating to an Award unless such exercise or payment and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act,
the Exchange Act, the rules and regulations promulgated thereunder, the
requirements of any applicable Stock Exchange and the Delaware General
Corporation Law.  As a condition to the
exercise or payment of the purchase price relating to such Award, the Company
may require that the person exercising or paying the purchase price represent
and warrant that the Shares are being purchased only for investment and without
any 

 

10

 

present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation and warranty is required by law.

 

Section 10.                                   Effective
Date of the Plan

 

The Plan shall
be effective upon its adoption by the Board, provided,
however, that in the event the
Plan is not approved by the stockholders of the Company within one year
thereafter, the Plan will be terminated and all Awards granted under the Plan
will be terminated and deemed null and void,and provided, further,
that no Award may vest and no Shares (including Shares of Restricted Stock) may
be issued under the Plan prior to approval of the Plan by the stockholders of
the Company.

 

Section 11.                                   Term
of the Plan

 

No Award shall
be granted under the Plan after ten
years from earlier of date of adoption of the Plan by the Board or date of
stockholder approval or any earlier date of discontinuation or
termination established pursuant to Section 7(a) of the Plan.  However, unless otherwise expressly provided
in the Plan or in an applicable Award Agreement, any Award theretofore granted
may extend beyond such date, and the authority of the Committee provided for
hereunder with respect to the Plan and any Awards, and the authority of the
Board to amend the Plan, shall extend beyond the termination of the Plan.

 

11Exhibit 10.1

 

EXECUTION COPY

 

 

STOCK PURCHASE AGREEMENT

 

 

by and between

 

 

ERGO SCIENCE CORPORATION

 

 

and

 

 

COURT SQUARE CAPITAL LIMITED

 

 

dated as of

 

August 1, 2003

 

 

STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (the
“Agreement”), dated as of August 1, 2003, is by and between Ergo Science
Corporation, a Delaware corporation (the “Company”), and Court Square Capital
Limited (the “Stockholder”), a stockholder of the Company.

 

RECITALS:

 

A.                                   The Stockholder is
the owner of 1,335,722 shares of the common stock, $0.01 par value, of the
Company (the “Shares”).

 

B.                                     The Company
desires to purchase from the Stockholder and the Stockholder desires to sell to
the Company the Shares pursuant to the terms and conditions hereof.

 

AGREEMENTS:

 

NOW, THEREFORE, in consideration of the
premises and of the mutual covenants contained herein, the parties hereto agree
as follows:

 

1.                                       Purchase and
Sale of Shares.  Subject to the
terms and conditions hereof, the Stockholder hereby sells, and the Company
hereby purchases, the Shares.

 

2.                                       Payment of
Purchase Price.  The purchase price
shall be $1.81 in cash per
Share, or an aggregate of $2,417,656.82 (such aggregate price being referred to
herein as the “Purchase Price”). 
Concurrently with the execution of this Agreement, the Company shall pay
the Purchase Price by means of wire transfer or official bank check payable to
the order of the Stockholder.

 

3.                                       Actions by
the Stockholder.  Concurrently
herewith Stockholder shall deliver to the Company certificates representing the
Shares duly endorsed to the Company or accompanied by stock powers duly
executed by the Stockholder, in form and substance reasonably satisfactory to
the Company, or shall have arranged for the book-entry delivery of the Shares
by causing The Depository Trust Company (“DTC”) to transfer the Shares into the
account of a financial institution identified by the Company that is a
participant in the DTC in accordance with DTC’s procedures for such transfer.

 

4.                                       Representations
and Warranties.

 

(a)                                  The Stockholder
hereby represents and warrants to the Company that:

 

(i)                                     The Stockholder
has the capacity to enter into this Agreement and to sell, assign, transfer and
deliver to the Company, pursuant to the terms and conditions of this Agreement,
the Shares;

 

(ii)                                  Except for this
Agreement, there are no outstanding options, warrants or rights to purchase or
acquire, or agreements (whether voting or otherwise) relating to, the Shares;

 

 

(iii)                               The Shares are the only
shares of capital stock of the Company owned of record or beneficially by the
Stockholder, and the Stockholder owns no options or other rights to acquire any
capital stock of the Company;

 

(iv)                              The Stockholder owns of
record and beneficially all of the Shares, free and clear of all liens, claims,
encumbrances and security interests of any nature whatsoever.  Upon purchase of the Shares pursuant to this
Agreement, the Company shall receive good and marketable title to the Shares,
free and clear of all liens, claims, encumbrances and security interests of any
nature whatsoever;

 

(v)                                 The execution and
delivery of this Agreement by the Stockholder does not, and the performance by
the Stockholder of the transactions contemplated hereby will not,
(A) violate, conflict with or result in the violation or breach of, or
constitute a default under, the terms, conditions or provisions of any
agreement to which the Stockholder is a party, or (B) violate any order,
writ, judgment, injunction, decree, statute, rule or regulation of any court or
federal, state or local administrative agency or commission or other
governmental authority or instrumentality (a “Governmental Entity”) applicable
to the Stockholder; and

 

(vi)                              This Agreement is a
legal, valid and binding agreement of the Stockholder enforceable against the
Stockholder in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, moratorium or other similar laws relating to
creditors’ rights generally and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought;

 

(b)                                 The
Company hereby represents and warrants to the Stockholder that:

 

(i)                                     The Company has
the capacity to enter into this Agreement and to buy the Shares from the
Stockholder pursuant to the terms and conditions of this Agreement, and will
not sell, offer to sell or otherwise dispose of any of the Shares in violation
of the Securities Act of 1933.

 

(ii)                                  This Agreement is a
legal, valid and binding agreement of the Company enforceable against it in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, moratorium or other similar laws relating to creditors’ rights
generally and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which
any proceeding therefor may be brought.

 

5.                                       Resales.  The Company agrees that it will not resell
the Shares or any portion thereof to any current member of the board of
directors of the Company (the “Board”) or any affiliate or relative of any
current member of the Board unless pursuant to an offering open ratably to all
stockholders of the Company.

 

2

 

6.                                       Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally or on the second business day after such notice or
communication has been sent by registered or certified mail, postage prepaid,
with return receipt requested, as follows:

 

If to the
Company, to:

 

Mr. David R.
Burt

President

790 Turnpike
Street

North Andover,
Massachusetts 01845

Telecopy:  (978) 945-5992

 

with a copy
to:

 

Vinson &
Elkins L.L.P.

3700 Trammell
Crow Center

2001 Ross
Avenue

Dallas, Texas
75201

Attention:  Michael D. Wortley, Esquire

Telecopy:  (214) 999-7732

 

If to the
Stockholder:

 

Mr. Tom
McWilliams

Court Square
Capital Limited

399 Park
Avenue

New York, New
York  10043

 

7.                                       Waiver and
Amendment.  Any provision of this
Agreement may be waived at any time by the party that is entitled to the
benefits thereof, and this Agreement may be amended or supplemented at any time
by the written consent of the parties hereto.

 

8.                                       No Prior
Agreements.  This Agreement (a) contains
the entire agreement, and supersedes all other prior agreements and
understandings, both written and oral, between the parties hereto with respect
to the subject matter hereof, and (b) is not intended to confer upon any other
person any rights or remedies hereunder.

 

9.                                       Successors
and Assigns.  This Agreement shall
be binding upon, inure to the benefit of and be enforceable by and against the
parties hereto and their successors and assigns.

 

10.                                 Expenses.  Each of the parties shall pay its own expenses
in connection with the negotiation, execution and performance of the
Agreement.  No party has incurred any
broker’s or finder’s fee in connection with this Agreement that the other party
will be obligated to pay.

 

3

 

11.                                 Counterparts.  This Agreement and any amendments hereto may
be executed in two or more counterparts, each of which shall be considered to
be an original, but all of which together shall constitute the same instrument.

 

12.                                 Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to its conflict of laws doctrine.  The
parties hereto consent to being subject to the jurisdiction of any federal or
state court located in the State of Delaware.

 

13.                                 Severability.
If any term, provision or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.

 

14.                                 Effect of Headings.
The section headings herein are for convenience only and shall not affect the
meaning or interpretation of this Agreement.

 

15.                                 Survival.  All representations, warranties, covenants
and other agreements and assignments of the parties hereto shall survive the
closing of the transactions contemplated by this Agreement.

 

16.                                 Public Statement.  Each party agrees that it will make no press
release or other public statement or announcement of the terms of this
Agreement or other matters, past, present, or future, relating to the Company’s
or the Stockholder’s dealings with the Company without the consent of the other
party; provided, however, that nothing contained herein shall prohibit any
party from disclosing the terms of this Agreement or such other matters if
required by law, rule or regulation.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

4

 

IN WITNESS WHEREOF, the parties have executed this Agreement to as of
the date set forth above.

 

 

	
   

  	
  STOCKHOLDER:

  
	
   

  	
   

  
	
   

  	
  COURT SQUARE
  CAPITAL LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Thomas
  F. McWilliams

  
	
   

  	
  Name:

  	
  Thomas F.
  McWilliams

  
	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  ERGO SCIENCE
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ David R.
  Burt

  
	
   

  	
  Name:

  	
  David R.
  Burt

  
	
   

  	
  Title:

  	
  President

  
						

 

S-1

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