Document:

Exhibit
10.1

 

STAPLES, INC.

 

AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

 

1.                                       Purpose

 

The purpose of this Amended and Restated 2004 Stock
Incentive Plan (the “Plan”) of Staples, Inc., a Delaware corporation (the “Company”),
is to advance the interests of the Company’s stockholders by enhancing the
Company’s ability to attract, retain and motivate persons who make (or are
expected to make) important contributions to the Company by providing such
persons with equity ownership opportunities and performance-based incentives
and thereby better aligning the interests of such persons with those of the
Company’s stockholders.  Except where the
context otherwise requires, the term “Company” shall include any of the Company’s
present or future parent or subsidiary corporations as defined in
Sections 424(e) or (f) of the Internal Revenue Code of 1986, as
amended, and any regulations promulgated thereunder (the “Code”), and any other
business venture (including, without limitation, joint venture or limited
liability company) in which the Company has a controlling interest, as
determined by the Board of Directors of the Company (the “Board”).

 

2.                                       Eligibility

 

All of the Company’s employees, officers, directors,
consultants, advisors, and other service providers (including persons who have
entered into an agreement with the Company under which they will be employed by
the Company in the future) are eligible to be granted options, restricted
stock, restricted stock units, stock appreciation rights or other stock-based
awards (each, an “Award”) under the Plan. 
Each person who has been granted an Award under the Plan shall be deemed
a “Participant”.

 

3.                                       Administration and Delegation

 

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

 

(b)                                 Appointment
of Committees.  To the extent permitted by
applicable law, the Board may delegate any or all of its powers under the Plan
to one or more committees or subcommittees of the Board (a “Committee”).  All references in the Plan to the “Board”
shall mean the Board or a Committee of the Board or the officers referred to in
Section 3(c) to the extent that the Board’s powers or authority under
the Plan have been delegated to such Committee or officers.

 

 

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

 

4.                                       Available for Awards

 

(a)                                  Number
of Shares.

 

(1)                                  Subject
to adjustment under Section 9, Awards may be made under the Plan for up to
62,330,000 shares of common stock, $.0006 par value per share, of the Company
(the “Common Stock”).  For purposes of
counting the number of shares available for the grant of Awards under the Plan,
(i) shares of Common Stock covered by independent SARs shall be counted
against the number of shares available for the grant of Awards under the Plan; (ii) if
any Award (A) expires or is terminated, surrendered or canceled without
having been fully exercised or is forfeited in whole or in part (including as
the result of shares of Common Stock subject to such Award being repurchased by
the Company at the original issuance price pursuant to a contractual repurchase
right) or (B) results in any Common Stock not being issued because the
Award (other than a SAR) is settled for cash, the unused Common Stock covered
by such Award (other than a SAR) shall again be available for the grant of
Awards under the Plan; provided, however, in the case of Incentive Stock
Options (as hereinafter defined), the foregoing shall be subject to any
limitations under the Code; and (iii) shares of Common Stock tendered to
the Company by a Participant to (A) purchase shares of Common Stock upon
the exercise of an Award or (B) satisfy tax withholding obligations
(including shares retained from the Award creating the tax obligation) shall
not be added back to the number of shares available for the future grant of
Awards under the Plan.

 

(2)                                  In
addition, if any option or restricted stock award granted under the 1992 Plan
expires, is terminated, surrendered or canceled without having been fully
exercised, is forfeited in whole or in part (including as the result of shares
of Common Stock subject to such restricted stock award being repurchased by the
Company at the original issuance price pursuant to a contractual repurchase
right), then in each such case the unused Common Stock covered by such option
or restricted stock award shall be available for the grant of Awards under the
Plan, subject, however, in the case of Incentive Stock Options, to any
limitations under the Code; and further provided that shares of Common Stock
tendered to the Company to (A) purchase shares of Common Stock upon the
exercise of any such option or (B) satisfy tax withholding obligations
(including shares retained from the option or restricted stock award creating
the tax obligation) shall not be added back to the number of shares available
for the future grant of Awards under the Plan and that the aggregate number of
shares of Common Stock available for grant of Awards pursuant to this sentence
shall not exceed 51,000,000.  Shares
issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.

 

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(b)                                 Sub-limits.  Subject to adjustment under Section 9,
the following sub-limits on the number of shares of Common Stock subject to
Awards shall apply:

 

(1)                                  Section 162(m)
Per-Participant Limit.  The maximum
number of shares of Common Stock with respect to which Awards may be granted to
any Participant under the Plan in any calendar year shall be 3,450,000.  The
per-Participant limit described in this Section 4(b)(1) shall be
construed and applied consistently with Section 162(m) of the Code (“Section 162(m)”).

 

(2)                                  Limit
on Awards other than Options and SARs. 
The maximum number of shares with respect to which Awards other than
Options and SARs may be granted shall be one-half of the total number of shares
of Common Stock covered by the Plan (including any shares that may become
available under this Plan pursuant to Section 4(a)(2) hereof).

 

(3)                                  Limits
on Awards to Directors.  The maximum
number of shares with respect to which Awards may be granted during the term of
the Plan to directors who are not employees of the Company shall be 2,000,000
and the maximum number of shares of Common stock with respect to which Awards
may be granted in any calendar year to any director who is not an employee of
the Company shall be 150,000.

 

5.                                       Stock Options

 

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

 

(b)                                 Incentive
Stock Options.  An Option that the
Board intends to be an “incentive stock option” as defined in Section 422
of the Code (an “Incentive Stock Option”) shall only be granted to employees of
Staples, Inc., any of Staples, Inc.’s present or future parent or
subsidiary corporations as defined in Sections 424(e) or (f) of the
Code, and any other entities the employees of which are eligible to receive
Incentive Stock Options under the Code, and shall be subject to and shall be
construed consistently with the requirements of Section 422 of the
Code.  The Company shall have no
liability to a Participant, or any other party, if an Option (or any part
thereof) that is intended to be an Incentive Stock Option is not an Incentive
Stock Option.

 

(c)                                  Exercise
Price.  The Board shall establish the
exercise price at the time each Option is granted and specify it in the
applicable option agreement; provided, however, that the exercise price shall
be not less than 100% of the fair market value (the “Fair Market Value”) of the
Common Stock, as determined by the Board, at the time the Option is granted.

 

(d)                                 No
Reload Rights.  Options granted under
this Plan shall not contain any provision entitling the optionee to the
automatic grant of additional Options in connection with any exercise of the
original Option.

 

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(e)                                  No
Repricing.  Unless such action is
approved by the Company’s stockholders: (i) no outstanding Option granted
under the Plan may be amended to provide an exercise price per share that is
lower than the then-current exercise price per share of such outstanding Option
(other than adjustments pursuant to Section 9), and (ii) the Board
may not cancel any outstanding Option and grant in substitution therefor new
Options under the Plan covering the same or a different number of shares of
Common Stock and having an exercise price per share lower than the then-current
exercise price per share of the cancelled Option.

 

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

 

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

 

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

 

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

 

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

 

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

 

(4)                                  if
provided for in the option agreement or approved by the Company, in its sole
discretion,  by payment of such other lawful consideration as the Board
may determine, but in no event may such consideration include delivery of a
promissory note of the Participant to the Company; or

 

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

 

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(i)                                     Substitute
Options.  In connection with a merger
or consolidation of an entity with the Company or the acquisition by the
Company of property or stock of an entity, the Board may grant Options in
substitution for any options or other stock or stock-based awards granted by
such entity or an affiliate thereof. 
Substitute Options may be granted pursuant to this Section 5(i) on
such terms as the Board deems appropriate in the circumstances, notwithstanding
any limitations on Options contained in the other sections of this Section 5
or in Section 2.

 

(j)                                     Amendment
of Options.  Subject to the provisions
of Section 10(f), the Board may amend an Option to convert it into a Stock
Appreciation Right.

 

6.                                       Stock Appreciation Rights

 

(a)                                  Nature of Stock Appreciation Rights.
A Stock Appreciation Right, or SAR, is an Award entitling the holder on
exercise to receive an amount in cash or Common Stock or a combination thereof
(such form to be determined by the Board) determined in whole or in part by
reference to appreciation, from and after the date of grant, in the fair market
value of a share of Common Stock. SARs may be based solely on appreciation in
the fair market value of Common Stock or on a comparison of such appreciation
with some other measure of market growth such as (but not limited to)
appreciation in a recognized market index. The date as of which such
appreciation or other measure is determined shall be the exercise date unless
another date is specified by the Board.

 

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

 

(1)                                  Rules Applicable to Tandem Awards. When Stock Appreciation Rights are
granted in tandem with Options, (a) the Stock Appreciation Right will be
exercisable only at such time or times, and to the extent, that the related
Option is exercisable (except to the extent designated by the Board in
connection with an Acquisition Event or a Change in Control Event) and will be
exercisable in accordance with the procedure required for exercise of the
related Option; (b) the Stock Appreciation Right will terminate and no
longer be exercisable upon the termination or exercise of the related Option,
except to the extent designated by the Board in connection with an Acquisition
Event or a Change in Control Event and except that a Stock Appreciation Right
granted with respect to less than the full number of shares covered by an
Option will not be reduced until the number of shares as to which the related
Option has been exercised or has terminated exceeds the number of shares not
covered by the Stock Appreciation Right; (c) the Option will terminate and
no longer be exercisable upon the exercise of the related Stock Appreciation
Right; and (d) the Stock Appreciation Right will be transferable only with
the related Option.

 

(2)                                  Exercise of Independent Stock Appreciation Rights. A Stock Appreciation Right not granted
in tandem with an Option will become exercisable at such time or times, and on
such conditions, as the Board may specify. The Board may at any time accelerate
the time at which all or any part of the Right may be exercised.

 

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(c)                                  Exercise
of Stock Appreciation Rights.  Stock
Appreciation Rights may be exercised by delivery to the Company of a written
notice of exercise signed by the proper person or by any other form of notice
(including electronic notice) approved by the Company.

 

7.                                       Restricted Stock; Restricted Stock Units

 

(a)                                  Grants.  The Board may grant Awards entitling
recipients to acquire shares of Common Stock (“Restricted Stock”), subject to
the right of the Company to repurchase all or part of such shares at their
issue price or other stated or formula price (or to require forfeiture of such
shares if issued at no cost) from the recipient in the event that conditions
specified by the Board in the applicable Award are not satisfied prior to the
end of the applicable restriction period or periods established by the Board
for such Award.  Instead of granting
Awards for Restricted Stock, the Board may grant Awards entitling the recipient
to receive shares of Common Stock to be delivered in the future (“Restricted
Stock Units”) subject to such terms and conditions on the delivery of the
shares of Common Stock as the Board shall determine (each Award for Restricted
Stock or Restricted Stock Units, a “Restricted Stock Award”). The Board may
also permit an exchange of unvested shares of Common Stock that have already
been delivered to a Participant for an instrument evidencing the right to
future delivery of Common Stock at such time or times, and on such conditions,
as the Board shall specify.

 

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

 

(c)                                  Limitations
on Vesting.

 

(1)                                  Restricted
Stock Awards that vest based on the passage of time alone shall be zero percent
vested prior to the first anniversary of the date of grant, no more than 33-1/3%
vested after the said first anniversary of the date of grant and before the
second anniversary of the date of grant, and no more than 66-2/3% vested
after the second anniversary of the date of grant and before the third
anniversary of the date of grant. 
Restricted Stock Awards that vest based on performance alone shall not
vest earlier than the first anniversary of the date of grant.  Restricted Stock Awards that vest upon the
passage of time and provide for accelerated vesting based on performance shall
not vest earlier than the first anniversary of the date of grant.  Notwithstanding the preceding provisions of
this Section 7(c)(1), the Board may grant Restricted Stock Awards that are
not subject to any limitations on vesting with respect to up to 5% of the total
number of shares of Common Stock covered by the Plan (excluding any shares that
may become available under this Plan pursuant to Section 4(a)(2) hereof).

 

(2)                                  Notwithstanding
any other provision of this Plan, the Board may, in its discretion, either at
the time a Restricted Stock Award is made or at any time thereafter, waive its
right to repurchase shares of Common Stock (or waive the forfeiture thereof) or
remove or modify any part or all of the restrictions applicable to the
Restricted Stock Award, provided that the Board may only exercise such rights
in extraordinary circumstances which shall include, without limitation, death
or disability of the Participant; estate planning needs of the Participant; a
merger, consolidation, sale, reorganization, recapitalization, or change in
control of the 

 

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Company; or any other
nonrecurring significant event affecting the Company, a Participant or the
Plan.

 

8.                                       Other Stock-Based Awards

 

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

 

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

 

(a)                                  Changes
in Capitalization.  In the event of
any stock split, reverse stock split, stock dividend, recapitalization,
combination of shares, reclassification of shares, spin-off or other similar
change in capitalization or event, or any distribution to holders of Common
Stock other than an ordinary cash dividend, (i) the number and class of
securities available under this Plan, (ii) the sub-limits set forth in Section 4(b),
(iii) the number and class of securities and exercise price per share
subject to each outstanding Option, (iv) the repurchase price per share
subject to each outstanding Restricted Stock Award and (v) the terms of
each other outstanding stock-based Award shall be appropriately adjusted by the
Company (or substituted Awards may be made, if applicable) to the extent the
Board shall determine, in good faith, that such an adjustment (or substitution)
is necessary and appropriate.  If this Section 9(a) applies
and Section 9(c) also applies to any event, Section 9(c) shall
be applicable to such event, and this Section 9(a) shall not be
applicable.

 

(b)                                 Liquidation
or Dissolution.  In the event of a
proposed liquidation or dissolution of the Company, the Board shall upon
written notice to the Participants provide that all then unexercised Options
will (i) become exercisable in full as of a specified time at least 10
business days prior to the effective date of such liquidation or dissolution
and (ii) terminate effective upon such liquidation or dissolution, except
to the extent exercised before such effective date.  The Board may specify the effect of a
liquidation or dissolution on any Restricted Stock Award granted under the Plan
at the time of the grant.

 

(c)                                  Reorganization
Events.

 

(1)                                  Definition.  A “Reorganization Event” shall mean:  (a) any merger or consolidation of the
Company with or into another entity as a result of which all of the outstanding
shares of Common Stock are converted into or exchanged for the right to receive
cash, securities or other property or (b) any exchange of all of the
Common Stock for cash, securities or other property pursuant to a share
exchange transaction.

 

(2)                                  Consequences
of a Reorganization Event on Awards. 
In connection with a Reorganization Event, the Board shall take any one
or more of the following actions as to all or 

 

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any outstanding Awards on
such terms as the Board determines:  (i) provide
that Awards shall be assumed, or substantially equivalent Awards shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), (ii) upon written notice to a Participant, provide that the
Participant’s unexercised Options or other unexercised Awards shall become
exercisable in full and will terminate immediately prior to the consummation of
such Reorganization Event unless exercised by the Participant within a
specified period following the date of such notice, (iii) in the event of
a Reorganization Event under the terms of which holders of Common Stock will
receive upon consummation thereof a cash payment for each share surrendered in
the Reorganization Event (the “Acquisition Price”), make or provide for a cash
payment to a Participant equal to (A) the Acquisition Price times the
number of shares of Common Stock subject to the Participant’s Options or other
Awards (to the extent the exercise price does not exceed the Acquisition Price)
minus (B) the aggregate exercise price of all such outstanding Options or
other Awards, in exchange for the termination of such Options or other Awards, (iv) provide
that outstanding Awards shall become exercisable or realizable, or restrictions
applicable to a Restricted Stock Award or other Award shall lapse, in whole or
in part, prior to or upon such Reorganization Event, (v) provide that, in
connection with a liquidation or dissolution of the Company, Awards shall
convert into the right to receive liquidation proceeds (if applicable, net of
the exercise price thereof) and (vi) any combination of the
foregoing.  To the extent all or any
portion of an Award becomes exercisable solely as a result of clause (ii) above,
the Board may provide that upon exercise of such Award the Participant shall
receive shares subject to a right of repurchase by the Company or its successor
at the Award exercise price; such repurchase right (A) shall lapse at the
same rate as the Award would have become exercisable under its terms and (B) shall
not apply to any shares subject to the Award that were exercisable under its
terms without regard to clause (ii) above.

 

10.                                 General Provisions Applicable to Awards

 

(a)                                  Transferability
of Awards.  Awards shall not be sold,
assigned, transferred, pledged or otherwise encumbered by the person to whom
they are granted, either voluntarily or by operation of law, except by will or
the laws of descent and distribution or, other than in the case of an Incentive
Stock Option, pursuant to a qualified domestic relations order, and, during the
life of the Participant, shall be exercisable only by the Participant; provided,
however, that the Board may permit or provide in an Award for the gratuitous
transfer of the Award by the Participant to or for the benefit of any immediate
family member, family trust or family partnership established solely for the
benefit of the Participant and/or an immediate family member thereof if, with
respect to such proposed transferee, the Company would be eligible to use a Form S-8
for the registration of the sale of the Common Stock subject to such Award
under the Securities Act of 1933, as amended; provided, further, that the
Company shall not be required to recognize any such transfer until such time as
the Participant and such permitted transferee shall, as a condition to such
transfer, deliver to the Company a written instrument in form and substance
satisfactory to the Company confirming that such transferee shall be bound by
all of the terms and conditions of the Award. 
References to a Participant, to the extent relevant in the context,
shall include references to authorized transferees.

 

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

 

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

 

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

 

(e)                                  Withholding.  The Company may require each Participant to
pay to the Company, or make provision satisfactory to the Company for payment
of, an amount sufficient to pay any taxes, social security contributions, or
other similar amounts required by law to be withheld in connection with an
Award to such Participant.  If provided
for in an Award or approved by the Company, in its sole discretion, a
Participant may satisfy such tax obligations in whole or in part by delivery of
shares of Common Stock, including shares retained from the Award creating the
tax obligation, valued at their Fair Market Value; provided, however, that
except as otherwise provided by the Board, the total tax withholding where
stock is being used to satisfy such tax obligations cannot exceed the Company’s
minimum statutory withholding obligations (based on minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes,
that are applicable to such supplemental taxable income).  Shares surrendered to satisfy tax withholding
requirements cannot be subject to any repurchase, forfeiture, unfulfilled
vesting or other similar requirements. 
The Company may, to the extent permitted by law, deduct any such tax
obligations from any payment of any kind otherwise due to a Participant.

 

(f)                                    Amendment
of Award.  Except as prohibited by Section 5(e),
the Board may amend, modify or terminate any outstanding Award, including but
not limited to, substituting therefor another Award of the same or a different
type, changing the date of exercise or realization, converting an Incentive
Stock Option to a Nonstatutory Stock Option and converting an Option into a
SAR, provided that, in each such case, the Participant’s consent to such action
shall be required unless the Board determines that the action, taking into
account any related action, would not materially and adversely affect the
Participant.

 

(g)                                 Conditions
on Delivery of Stock.  The Company
will not be obligated to deliver any shares of Common Stock pursuant to the
Plan or to remove restrictions from shares previously delivered under the Plan
until (i) all conditions of the Award have been met or removed to the
satisfaction of the Company, (ii) in the opinion of the Company’s counsel,
all other legal matters in connection with the issuance and delivery of such
shares have been satisfied, including any applicable securities laws and any
applicable stock exchange or stock market rules and regulations, and (iii) the
Participant has executed and delivered to the Company such representations or
agreements as the Company may consider appropriate to satisfy the requirements
of any applicable laws, rules or regulations.

 

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

 

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shall apply to a
Restricted Stock Award only to the extent consistent with Sections 7(c)(2) and
10(j).

 

(i)                                     Deferral.  The Board may provide in an Award or in an amendment
to an Award that the Participant may elect to defer the delivery of shares of
Common Stock that would otherwise be delivered pursuant to such Award.  The Board may establish such conditions on
the Participant’s election as it deems appropriate.

 

(j)                                     Performance
Conditions.

 

(1)                                  Notwithstanding
any other provision of the Plan, if the Committee determines at the time a
Restricted Stock Award or an Other Stock-Based Award is granted to a
Participant who is then an officer, that such Participant is, or is likely to
be as of the end of the tax year in which the Company would claim a tax
deduction in connection with such Award, a Covered Employee (as defined in Section 162(m)
of the Code), then the Committee may provide that this Section 10(j) is
applicable to such Award.

 

(2)                                  If
a Restricted Stock Award or an Other Stock-Based Award is subject to this Section 10(j),
then the lapsing of restrictions thereon and the distribution of Shares
pursuant thereto, as applicable, shall be subject to the achievement of one or
more objective performance goals established by the Committee, which shall be
based on one or more of the following measures: sales, earnings per share,
return on net assets, return on equity, and customer service levels.  The Committee may determine that special
one-time or extraordinary gains and/or losses and/or other one-time or
extraordinary events should or should not be included or considered in the
calculation of such measures.  In
addition, customer service target levels will be based on predetermined tests
of customer service levels such as scores on blind test (“mystery”) shopping,
customer comment card statistics, customer relations statistics (e.g., number
of customer complaints), and delivery response levels.  The Committee believes that disclosure of
further detail concerning the performance criteria may be confidential
commercial or business information, the disclosure of which would adversely
affect the Company.  Such performance
goals may vary by Participant and may be different for different Awards.  Such performance goals shall be set by the
Committee within the time period prescribed by, and shall otherwise comply with
the requirements of, Section 162(m) of the Code, or any successor
provision thereto, and the regulations thereunder.

 

(3)                                  The
Committee shall have the power to impose such other restrictions on Awards
subject to this Section

10(j) as it may deem necessary or appropriate to ensure that such Awards
satisfy all requirements for “performance-based compensation” within the
meaning of Section 162(m)(4)(C) of the Code, or any successor
provision thereto.

 

11.                                 Miscellaneous

 

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

 

10

 

relationship with a
Participant free from any liability or claim under the Plan, except as
expressly provided in the applicable Award.

 

(b)                                 No
Rights As Stockholder.  Subject to
the provisions of the applicable Award, no Participant shall have any rights as
a stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.  Notwithstanding the foregoing, in the event
the Company effects a split of the Common Stock by means of a stock dividend
and the exercise price of and the number of shares subject to such Option are
adjusted as of the date of the distribution of the dividend (rather than as of
the record date for such dividend), then an optionee who exercises an Option
between the record date and the distribution date for such stock dividend shall
be entitled to receive, on the distribution date, the stock dividend with
respect to the shares of Common Stock acquired upon such Option exercise,
notwithstanding the fact that such shares were not outstanding as of the close
of business on the record date for such stock dividend.

 

(c)                                  Effective
Date and Term of Plan.  The Plan
shall become effective on the date on which it is approved by stockholders of
the Company and shall remain in full force and effect until terminated by the
Board.  No Awards shall be granted under
the Plan after the completion of ten years from the date on which the Plan is
adopted or was approved by the Company’s stockholders, whichever is earlier,
but Awards previously granted may extend beyond that date.

 

(d)                                 Amendment
of Plan.  The Board may amend,
suspend or terminate the Plan or any portion thereof at any time, provided that
no amendment requiring the approval of the Company’s stockholders under any
applicable tax requirement, including without limitation Sections 162(m) and
422 of the Code, shall become effective until such approval of the Company’s
stockholders is obtained and provided further that without approval of the
Company’s stockholders, no amendment may (i) increase the number of shares
authorized under the Plan (other than pursuant to Section 9), (ii) materially
increase the benefits provided under the Plan, (iii) materially expand the
class of participants eligible to participate in the Plan, (iv) expand the
types of Awards provided under the Plan or (v) make any other changes
which require stockholder approval under the rules of the Nasdaq National
Market, Inc.  No Award shall be made
that is conditioned on the approval of the Company’s stockholders of any
amendment to the Plan.

 

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

 

(f)                                    Compliance
With Code Section 409A.  No
Award shall provide for deferral of compensation that does not comply with Section 409A
of the Code, unless the Board, at the time of grant, specifically provides that
the Award is not intended to comply with Section 409A of the Code.

 

11

 

(g)                                 Governing
Law.  The provisions of the Plan and
all Awards made hereunder shall be governed by and interpreted in accordance
with the laws of the State of Delaware, without regard to any applicable
conflicts of law.

 

Adopted
by the Board, subject to stockholder approval, on March 2, 2004; approved
by the stockholders on June 17, 2004; amended by the Board on September 8,
2004; amended and restated by the Board, subject to stockholder approval, on April 27,
2005; and approved by the stockholders on June 13, 2005.

 

12Exhibit 10.1

 

SEPARATION AND SETTLEMENT AGREEMENT AND RELEASE

 

AGREEMENT made as of the 15 day of June, 2005 by and
between BioSphere Medical, Inc. (the “Company”) and Jonathan McGrath (the “Employee”).

 

WHEREAS, the parties have differing views of their rights
and obligations under Employee’s March 25, 2004 Employment Agreement with
the Company, and wish to resolve amicably all issues arising out of Employee’s
separation from the Company without resort to litigation;

 

NOW, THEREFORE, in consideration of the promises and
conditions set forth herein, the sufficiency of which is hereby acknowledged,
the Company and the Employee agree as follows:

 

1.                                       Termination
Date.  The Employee’s effective date
of termination from the Company is March 31, 2005, which is the date you
received March 30, 2005 letter from the Company (the “Termination Date”).

 

2.                                       Consideration.  In return for the execution of the instant
Separation and Settlement Agreement and Release, the Company agrees to provide
the Employee with the following consideration:

 

a.                                       Monetary Consideration.  The
Company agrees to pay the Employee Sixty-Five Thousand Dollars ($65,000) less
all applicable state and federal taxes. 
This monetary consideration will be paid to the Employee in a lump-sum
eight (8) days after the date of execution of this Agreement provided
that, Employee has not revoked his acceptance of the Agreement during the seven
(7) day revocation period.

 

b.                                      Exercise of Vested Stock Option.  The
Company agrees that the Employee may exercise vested portions of the Option to
Purchase shares of the common stock of the Company granted to him pursuant to
the Incentive Stock Option Agreement dated July 29, 1999 on the eighth day
after the execution of this Agreement provided the Employee has not revoked acceptance
of the Agreement during the seven (7) day revocation period.  Accordingly, the 

 

 

Employee
may exercise a total of 210,000 shares of common stock, $.01 par value per
share, of the Company at $1.016 per share pursuant to the terms of the Company’s
1997 Stock Incentive Plan.

 

3.                                       Release
of Claims.

 

By the Employee.  In consideration of the payment of the
above-described consideration, which the Employee acknowledges are disputed and
he would not otherwise be entitled to receive, he hereby fully, forever,
irrevocably and unconditionally releases, remises and discharges the Company,
its officers, directors, stockholders, corporate affiliates, subsidiaries,
parent companies, plan administrators, agents and employees (each in their
individual and corporate capacities) (hereinafter, the “Released Parties”) from
any and all claims, charges, complaints, demands, actions, causes of action,
suits, rights, debts, sums of money, costs, accounts, reckonings, covenants,
contracts, agreements, promises, doings, omissions, damages, executions,
obligations, liabilities, and expenses (including attorneys’ fees and costs),
of every kind and nature which he ever had or now has against the Released
Parties arising out of his employment with and/or separation from the Company,
including, but not limited to, all employment discrimination claims under Title
VII of the Civil Rights Act of 1964, 42 U.S.C. §2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C. § 621

et  seq., the Americans With Disabilities Act of 1990, 42 U.S.C.,
§12101 et  seq., the Family and Medical Leave Act, 29 U.S.C. § 2601
et  seq., and the Massachusetts Fair Employment Practices Act.,
M.G.L. c.151B, §1 et seq., all as amended;
all claims arising out of the Fair Credit Reporting Act, 15 U.S.C. §1681 et  seq.,
the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §1001 et  seq.,
the Massachusetts Civil Rights Act, M.G.L. c.12 §§11H and 11I, the
Massachusetts Equal Rights Act, M.G.L. c.93, §102 and M.G.L. c.214, §1C, the
Massachusetts 

 

2

 

Labor and Industries Act, M.G.L. c.149, §1 et  seq.,
the Massachusetts Privacy Act, M.G.L. c. 214, §1B, and the Massachusetts
Maternity Leave Act, M.G.L. c. 149, §105(d), all as amended; all common law
claims including, but not limited to, actions in tort, defamation and breach of
contract; all claims to any non-vested
ownership interest in the Company, contractual or otherwise, including but not
limited to claims to stock or stock options; all claims arising out of the March 25,
2004 Employment and Executive Retention Agreements between the Employee and the
Company; and any claim or damage arising out of his employment with or
separation from the Company (including a claim for retaliation) under any
common law theory or any federal, state or local statute or ordinance not
expressly referenced above.

 

By the Company.  In consideration of the undertakings, transactions and consideration recited
in this Agreement, the Company hereby unconditionally and irrevocably remises,
releases and forever discharges the Employee, his heirs and administrators, or
any of them, of and from any and all suits, claims, demands, interest, costs
(including attorney fees and costs actually incurred), expenses, actions and causes
of action, rights, liabilities, obligations, promises, agreements,
controversies, losses and debts, of any nature whatsoever, which the Company
now has, or at any time heretofore ever had, or could have had, whether known
or unknown, suspected or unsuspected, arising out of the Employee’s employment
with the Company.

 

4.                                       Non-Disclosure,
Non-Competition and Non-Solicitation. 
The Employee acknowledges his obligation to keep confidential all
non-public information concerning the Company which he acquired during the
course of his employment with the Company, as stated more fully in Paragraph 7
of the March 25, 2004 Employment Agreement between the Employee and the
Company, which paragraph remains in full force and effect.  The Employee further acknowledges and
reaffirms his obligations with respect to non-competition and non-solicitation 

 

3

 

as stated in Paragraph 6 of the Employment Agreement, which paragraph
also remains in full force and effect.

 

5.                                       Return
of Company Property.  The Employee
confirms that he has returned to the Company all keys, files, records (and
copies thereof), equipment and other Company-owned property in his possession.

 

6.                                       Business Expenses and Compensation. The Employee acknowledges that he
has been reimbursed by the Company for all business expenses incurred in
conjunction with the performance of his employment and that no other
reimbursements are owed to him.  He
further acknowledges that he has received payment in full for all services
rendered in conjunction with his employment by the Company and that no other
compensation is owed to him.

 

7.                                       Non-disparagement.  The Employee understands and agrees that as a
condition for payment to him of the consideration described herein, he will not
make any false, disparaging or derogatory statements to any media outlet,
industry group, financial institution or current or former employee,
consultant, client or customer of the Company regarding the Company or any of
its directors, officers, employees, agents or representatives or about the
Company’s business affairs and financial condition.  Likewise, the Company agrees to instruct its
officers, directors and employees who have knowledge of this Agreement not to
make any false, disparaging or derogatory statements regarding the Employee or
the Employee’s business or financial affairs in public or private.

 

8.                                       Employment
Inquiries.  The Company agrees that
all employment inquiries made with respect to the Employee will be referred to
Richard J. Faleschini, the Company’s President and Chief Executive Officer, who
shall respond to the effect that the Company’s policy is to 

 

4

 

refrain from discussing the work its former employees performed while
they worked for the Company, and confirm that the Employee was employed at
Biosphere Medical from July 1999 until March 2005, as Vice President,
Research & Development.

 

9.                                       Confidentiality.  To the extent permitted by law, the Employee
understands and agrees that as a condition for payment to him of the
consideration herein described, the terms and contents of this Agreement, and
the contents of the negotiations and discussions resulting in this Agreement,
shall be maintained as confidential by the Employee, his family members, his
agents and representatives and none of the above shall be disclosed except to
the extent required by federal or state law or as otherwise agreed to in
writing by the Company.  Likewise, the
Company agrees to instruct its officers, directors and employees who have
knowledge of this Agreement to maintain as confidential the terms and contents
of this Agreement, and the contents of the negotiations and discussions
resulting in this Agreement, except to the extent required by federal or state
law or as determined by the Company to be reasonably necessary to the Company’s
business.  

 

10.                                 Nature
of Agreement.  The Employee
understands and agrees that this Agreement is a separation and settlement
agreement and does not constitute an admission of liability or wrongdoing on
the part of the Company.

 

11.                                 Amendment. 
This Agreement shall be binding upon the parties and may not be
abandoned, supplemented, changed or modified in any manner, orally or
otherwise, except by an instrument in writing of concurrent or subsequent date
signed by a duly authorized representative of the parties hereto.  This Agreement is binding upon and shall
inure to the benefit of the parties and their respective agents, assigns,
heirs, executors, successors and administrators.

 

5

 

12.                                 Waiver
of Rights.  No delay or omission by
either party in exercising any rights under this Agreement shall operate as a
waiver of that or any other right.  A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any
right on any other occasion.

 

13.                                 Validity. 
Should any provision of this Agreement be declared or be determined by
any court of competent jurisdiction to be illegal or invalid, the validity of
the remaining parts, terms, or provisions shall not be affected thereby and
said illegal or invalid part, term or provision shall be deemed not to be a
part of this Agreement.

 

14.                                 Applicable
Law.  This Agreement shall be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.  The
Employee hereby irrevocably submits to the jurisdiction of the courts of the
Commonwealth of Massachusetts, or if appropriate, a federal court located in
Massachusetts (which courts, for purposes of this Agreement, are the only
courts of competent jurisdiction), over any suit, action or other proceeding
arising out of, under, or in connection with this Agreement or its subject matter.

 

15.                                 Acknowledgments.  The Employee acknowledges that he has been
given twenty-one (21) days to consider this Agreement and that the Company
advised him to consult with an attorney of his own choosing prior to signing
this Agreement.  Further, the Employee
acknowledges he may revoke this Agreement, with regard to his release of age
discrimination claims only, for a period of seven (7) days after the
execution of this Agreement, and the Agreement shall not be effective or
enforceable, with respect to the Employee’s release of age discrimination
claims, until the expiration of this seven (7) day revocation period.

 

6

 

16.                                 Voluntary
Assent.  The Employee affirms that no
other promises or agreements of any kind have been made to or with him by any
person or entity whatsoever to cause him to sign this Agreement, and that he
fully understands the meaning and intent of this Agreement.  The Employee states and represents that he
has had an opportunity to fully discuss and review the terms of this Agreement
with an attorney.  The Employee further
states and represents that he has carefully read this Agreement, understands
the contents herein, freely and voluntarily assents to all of the terms and
conditions hereof, and signs his name of his own free act.

 

17.                                 Entire
Agreement.  This Agreement contains
and constitutes the entire understanding and agreement between the parties
hereto with respect to the separation and settlement and supercedes all
previous oral and written negotiations, agreements, commitments, and writings
in connection therewith.  Nothing in this Section 17 shall, however, modify, cancel or
supercede the Employee’s obligations described in Section 4.

 

18.                                 Counterparts. 
This Agreement may be executed in two (2) signature counterparts,
each of which shall constitute an original, but all of which taken together
shall constitute but one and the same instrument.

 

IN WITNESS WHEREOF, all parties have set their hand
and seal to this Agreement as of the date written above.

 

	
  By:

  	
  /s/ Richard J.
  Faleschini

  	
   

  	
  Date: 

  	
  6-15-05

  	
   

  
	
   

  	
  Richard J. Faleschini

  	
   

  
	
   

  	
  President and Chief
  Executive Officer

  	
   

  
	
   

  	
  BioSphere Medical, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Jonathan
  McGrath

  	
   

  	
  Date: 

  	
  6-15-05

  	
   

  
	
   

  	
  Jonathan McGrath

  	
   

  
							

 

7

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