Document:

Exhibit 10.2

 

ADOLOR CORPORATION

AMENDED AND RESTATED 1994 EQUITY COMPENSATION PLAN

AS AMENDED DECEMBER 31, 2002

AS AMENDED MAY 13, 2003

AS AMENDED DECEMBER 13, 2006 EFFECTIVE JANUARY 1, 2007

AS AMENDED FEBRUARY 21, 2008

AS AMENDED EFFECTIVE AS OF MAY 12, 2009

 

Adolor
Corporation, a Delaware corporation, wishes to attract employees and
consultants to the Company, to induce employees, Directors and consultants to
remain with the Company, to encourage them to increase their efforts to make
the Company’s business more successful and to enhance stockholder value.  In furtherance thereof, the Adolor Amended
and Restated 1994 Equity Compensation Plan is designed to provide incentive and
non-qualified stock options to employees, Directors and consultants of the Company.

 

1.             DEFINITIONS.

 

Whenever
used herein and unless otherwise provided in the Optionee’s Grant Letter, the
following terms shall have the meanings set forth below:

 

“Administrator”
means the Board, or a committee, the members of which shall be appointed by the
Board as described in Section 3.

 

“Approved
Sale” means the approval, prior to the consummation of a Public Offering, by
the holders of at least 50% of the Common Stock (including voting and nonvoting
shares voting as a single class) of (i) the merger or consolidation of the
Company, (ii) the sale of all or substantially all of its assets or (iii) the
sale of all or a majority of the outstanding capital stock or my other similar
transaction.

 

“Board”
means the Board of Directors of the Company.

 

“Cause”
means the Optionee’s (i) conviction for committing a felony under federal
law or of the state in which such action occurred, (ii) dishonesty in the
course of fulfilling his or her employment duties or (iii) willful and
deliberate failure to perform his or her employment duties in any material
respect, or such other events as shall be determined by the Administrator.  The Administrator shall have the sole
discretion to determine whether “Cause” exists, and its determination shall be
final.

 

“Change
of Control” means the happening of any of the following after the consummation
of a Public Offering:

 

(i)            any
Person, other than (a) the Company or any of its Subsidiaries, (b) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Subsidiaries, (c) an underwriter temporarily
holding securities pursuant to an offering of such securities, (d) a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportion as their ownership of stock of the
Company, or

 

 

(e) an
Optionee or any “group” (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) which includes the Optionee), becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company (not including in the securities beneficially
owned by such Person any securities acquired directly from the Company or its
Subsidiaries) representing more than 25% of either the then outstanding shares
of Stock of the Company or the combined voting power of the Company’s then
outstanding securities;

 

(ii)           the
individuals who serve on the Board as of the effective date hereof (the “Incumbent
Directors”) cease for any reason to constitute at least a majority of the
Board; provided, however, any person who becomes a director subsequent to the
effective date hereof, whose election or nomination for election was approved
by a vote of at least a majority of the directors then constituting the
Incumbent Board, shall for purposes of this clause (ii) be considered an
Incumbent Director;

 

(iii)          the consummation of a merger or consolidation
of the Company in which the stockholders of the Company immediately prior to
such merger or consolidation, would not, immediately after the merger or
consolidation, beneficially own (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, shares representing in the
aggregate 50% or more of the combined voting power of the securities of the corporation
issuing cash or securities in the merger or consolidation (or of its ultimate
parent corporation, if any); or

 

(iv)          the
stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company, or there is consummated an agreement for the sale
or disposition by the Company of all or substantially all of the Company’s
assets, other than a sale or disposition by the Company of all or substantially
all of the Company’s assets to an entity, at least 50% of the combined voting
power of the voting securities of which are owned by Persons in substantially
the same proportion as their ownership of the Company immediately prior to such
sale.

 

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

 

“Common
Stock” means the Common Stock of the Company, par value $.0001 per share,
either currently existing or authorized hereafter.

 

“Company”
means Adolor Corporation, a Delaware corporation.

 

“Director”
means a member of the Board who is not an employee of the Company or its
Subsidiaries.

 

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

 

“Exercise
Price” means the exercise price per Share of an Option.

 

“Fair
Market Value” per Share as of a particular date means (i) if Shares are
then listed on a national stock exchange, the closing sales price per share of
Common Stock on the exchange for the last preceding date on which there was a
sale of shares of Common Stock on such exchange, as determined by the
Administrator, (ii) if Shares are then listed on the Nasdaq 

 

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National Market or the Nasdaq SmallCap Market, the
closing sales price (or the closing bid price if no sales were reported) per
share of Common Stock on the Nasdaq National Market or the Nasdaq SmallCap Market,
as applicable, for the last preceding date on which there was a sale of shares
of Common Stock on the Nasdaq National Market or the Nasdaq SmallCap Market, as
applicable, as determined by the Administrator, (iii) if Shares are not
then listed on a national stock exchange, the Nasdaq National Market or the
Nasdaq SmallCap Market  but are then
traded on an over-the-counter market, the average of the closing bid and asked
prices for the shares of Common Stock in such over-the-counter market for the
last preceding date on which there was a sale of such shares of Common Stock in
such market, as determined by the Administrator, or (iv) if Shares are not
then listed on a national stock exchange or traded on an over-the-counter
market, or if the Administrator determines that the value as determined
pursuant to Section (i), (ii) or (iii) above does not reflect
fair market value, the Administrator shall determine fair market value after
taking into account such factors that it deems appropriate. Notwithstanding the
foregoing, if Shares are listed on a national stock exchange or traded on an
over-the-counter market, solely for purposes of determining the Exercise Price
of any Option granted hereunder, the Fair Market Value per Share shall be the
closing sales price on the applicable exchange or market on the date such
Option is granted.

 

“Grant
Letter” means a written agreement in a form approved by the Administrator to be
entered into by the Company and the Optionee as provided in Section 3.

 

“Incentive
Stock Option” means “incentive stock option” within the meaning of Section 422(b) of
the Code.

 

“Non-Qualified
Option” means an Option which is not intended to be an “incentive stock option”
within the meaning of Section 422(b) of the Code.

 

“Option”
means the right to purchase, at the price and for the term fixed by the
Administrator in accordance with the Plan, and subject to such other
limitations and restrictions in the Plan and the applicable Grant Letter, a
number of Shares determined by the Administrator.

 

“Optionee”
means an employee or Director of or consultant to, the Company to whom an
Option is granted, or the Successors of the Optionee, as the context so
requires.

 

“Person”
means any individual, partnership, corporation, company, limited liability
company, association, trust, joint venture, unincorporated organization, entity
or division, or any government, governmental department or agency or political
subdivision thereof.

 

“Plan”
means this Adolor Corporation Amended and Restated 1994 Equity Compensation
Plan as amended from time to time.

 

“Public
Offering” means a successfully completed firm-commitment underwritten public
offering (other than a Unit Offering, as hereinafter defined) pursuant to an
effective registration statement under the Securities Act in respect to the
offer and sale of shares of Common Stock for the account of the Company
resulting in aggregate net proceeds to the Company and any stockholder selling
shares of Common Stock in such offering of not less than $25 million.

 

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

 

“Shares”
means shares of Common Stock of the Company.

 

“Subsidiary”
means any corporation (other than the Company) that is a “subsidiary
corporation” with respect to the Company under Section 424(f) of the
Code.  In the event the Company becomes a
subsidiary of another company, the provisions hereof applicable to subsidiaries
shall, unless otherwise determined by the Administrator, also be applicable to
any company that is a “parent corporation” with respect to the Company under Section 424(e) of
the Code.

 

“Successor
of the Optionee” means:  (i) the
legal representative of the estate of a deceased Optionee or the person, (ii) persons
who shall acquire the right to exercise an Option by bequest or inheritance or
other transfer or by reason of the death of the Optionee, (iii) if
permitted by the Administrator in its sole discretion, any person who shall
acquire the right to exercise an Option pursuant to any other transfer of the
Option either pursuant to Section 12 hereof or pursuant to Court Order or (iv) persons
who shall acquire the right to exercise an Option on behalf of the Optionee as
the result of a determination by a court or other governmental agency of the
incapacity of the Optionee.

 

“Termination
of Service” means an Optionee’s termination of employment or other service, as
applicable, with the Company and its Subsidiaries.  Cessation of service as an officer, employee,
director or consultant shall not be treated as a Termination of Service if the
Optionee continues without interruption to serve thereafter in a material
manner in another one (or more) of such other capacities, as determined by the
Administrator in its sole discretion.

 

“Unit
Offering” means an underwritten public offering of a combination of debt
securities and Common Stock (or warrants or exchange rights to purchase Common
Stock) of the Company in which not more than 15% of the gross proceeds received
for the sale of such securities is attributed to Common Stock.

 

2.             EFFECTIVE DATE AND
TERMINATION OF PLAN.

 

The
effective date of the amendment and restatement of the Plan is August 28,
2001.  The Plan shall terminate on, and
no Option shall be granted hereunder on or after, the 10-year anniversary of
the earlier of the approval of the Plan by (i) the Board or (ii) the
stockholders of the Company; provided, however, that the Board may at any time
prior to that date terminate the Plan.

 

3.             ADMINISTRATION OF
PLAN.

 

(a)           The Plan
shall be administered by the Administrator, which shall be either the Board, or
a Committee appointed by the Board, who shall, on behalf of the Board, have
full responsibility and authority to administer the Plan.  The Administrator shall consist of at least
two individuals each of whom shall be a “nonemployee director” as defined in Rule 16b-3
as promulgated by the Securities and Exchange Commission under the Exchange Act
and shall, at such times as the Company is subject to Section 162(m) of
the Code (to the extent relief from the limitation of Section 162(m) of
the Code is sought), qualify as “outside directors” for purposes of

 

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Section 162(m) of
the Code and related Treasury regulations. 
Notwithstanding the foregoing, the Board may designate one or more of
its members or officers of the Company to serve as a secondary committee and
delegate to the secondary committee authority to grant Options to eligible
individuals who are not subject to the requirements of Rule 16b-3 under
the Exchange Act or Section 162(m) of the Code.  The secondary committee shall have the same
authority with respect to selecting the individuals to whom such Options are
granted and establishing the terms and conditions of such Options as the Administrator
has under the terms of the Plan.

 

(b)           The acts
of a majority of the members present at any meeting of the Administrator at
which a quorum is present, or acts approved in writing by a majority of the
entire Administrator, shall be the acts of the Administrator for purposes of
the Plan.  If and to the extent
applicable, no member of the Administrator may act as to matters under the Plan
specifically relating to such member.

 

(c)           Subject
to the provisions of the Plan, the Administrator shall in its discretion as
reflected by the terms of the Grant Letters (i) authorize the granting of
Incentive Stock Options and Non-Qualified Options to employees, Directors and
consultants of the Company and its Subsidiaries; and (ii) determine the
eligibility of an employee, Director or consultant to receive an Option subject
to Section 4 hereof, (iii) specify whether such Option is an
Incentive Stock Option or Non-Qualified Option and (iv) determine the
number of Shares to be covered under any Grant Letter, considering the position
and responsibilities of the employee, Director or consultant, the nature and
value to the Company of the employee’s, Director’s or consultant’s present and
potential contribution to the success of the Company whether directly or
through a Subsidiaries and such other factors as the Administrator may deem
relevant.

 

(d)           The Grant
Letter shall contain such other terms, provisions and conditions not
inconsistent herewith as determined by the Administrator.  The Optionee shall take whatever additional
actions and execute whatever additional documents the Administrator may in its
reasonable judgment deem necessary or advisable in order to carry out or effect
one or more of the obligations or restrictions imposed on the Optionee pursuant
to the express provisions of the Plan and the Grant Letter .

 

4.             ELIGIBILITY.

 

Any
employee, Director or consultant of the Company or a Subsidiary who is
designated by the Administrator as eligible to participate in the Plan shall be
eligible to receive an Option under the Plan.

 

5.             SHARES AND UNITS
SUBJECT TO THE PLAN.

 

(a)           Subject
to adjustments as provided in Section 16, the total number of Shares
subject to Options granted under the Plan, in the aggregate, may not exceed
5,350,000 Shares distributed under the Plan may be treasury Shares or
authorized but unissued Shares.  Any
Shares that have been reserved for distribution in payment for Options but are
later forfeited or for any other reason are not payable under the Plan may
again be made the subject of Options under the Plan.

 

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(b)           The
certificates for Shares issued hereunder may include any legend which the
Administrator deems appropriate to reflect any restrictions on transfer
hereunder or under the Grant Letter , or as the Administrator may otherwise
deem appropriate.

 

(c)           In no
event may any Optionee receive Options for more than 200,000 shares in any
calendar year.  The aggregate fair market
value of the shares on the date of the grant with respect to which Incentive
Stock Options are exercisable for the first time by an Optionee during any
calendar year under the Plan and under any other stock option plan of the
Company shall not exceed $100,000.

 

6.             GRANT OF OPTION.

 

Subject
to the other terms of the Plan, the Administrator shall, in its discretion as
reflected by the terms of the applicable Grant Letter:  (i) determine and designate from time to
time those eligible employees, Directors and consultants of the Company and its
Subsidiaries to whom Options are to be granted and the number of Shares to be
optioned to each employee and consultant (provided that Incentive Stock Options
may only be granted to employees); (ii) determine the time or times when
and the manner and condition in which each Option shall be exercisable and the
duration of the exercise period; and (iii) determine or impose other
conditions to the grant or exercise of Options under the Plan as it may deem
appropriate.

 

7.             OPTION PRICE.

 

The Exercise Price shall
not be less than 100% (or 110% for Incentive Stock Options with respect to
individuals described in Section 422(b)(6) of the Code (relating to
10% owners)) of the Fair Market Value of a Share on the day the Option is
granted.

 

8.             TERM OF OPTIONS;
VESTING AND EXERCISABILITY.

 

(a)           The Administrator
shall establish the term of each Option, as set forth in the Grant Letter;
provided that in no event shall any Option have a term greater than 10 years
from the date of grant (except that, in the case of an individual described in Section 422(b)(6) of
the Code (relating to 10% owners), the term of any Incentive Stock Option shall
be no more than five years from the date of grant).  Unless earlier expired, forfeited or
otherwise terminated, each Option shall expire in its entirety upon the day
after the last day of its term.  The
Option shall also expire, be forfeited and terminate at such times and in such
circumstances as otherwise provided hereunder or under the Grant Letter.

 

(b)           Each
Option, to the extent that the Optionee has not had a Termination of Service
and the Option has not otherwise lapsed, expired, terminated or been forfeited,
shall vest according to the vesting schedule which shall be determined in the
sole and absolute discretion of the Administrator as set forth in the Grant
Letter

 

(c)           The Grant
Letter may, but need not, include a provision whereby the Optionee may elect at
any time while still an employee of or a consultant to the Company to exercise
a Non-Qualified Option as to any part or all of the Shares subject to the
Option prior to the full vesting of the Option. 
Any Shares so purchased (i) shall vest in accordance with the
vesting schedule otherwise applicable to the Option, (ii) shall be subject
to a repurchase right in

 

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favor of the
Company as provided in Section 9 below, and (iii) shall be subject to
any other restriction the Company determines to be appropriate.

 

(d)           Notwithstanding
the foregoing provisions of this Section 8, Options exercisable pursuant
to the schedule set forth by the Administrator at the time of grant may be
fully or more rapidly exercisable or vested, and Shares subject to such
schedule may be fully or more rapidly vested, at any time in the discretion of
the Administrator.  Upon and after the
death of an Optionee, such Optionee’s Options, if and to the extent otherwise
exercisable hereunder or under the applicable Grant Letter after the Optionee’s
death, may be exercised by the Successors of the Optionee.

 

9.             EXERCISABILITY
UPON AND AFTER TERMINATION OF OPTIONEE.

 

9.1.          Termination
on Retirement, Disability, Death or without Cause.

 

Unless
otherwise provided in the applicable Grant Letter, if an Optionee has a
Termination of Service other than a Termination of Service due to death or for
cause, the unexercised and vested portion of such Optionee’s Option will remain
exercisable by the Optionee, the Optionee’s estate, the persons who acquired
the right to exercise the Option by bequest or inheritance, as applicable, for
a period of 90 days following such Termination of Service, but in no event
later than the last day of the term of the Option.  Such portion of the Option shall terminate to
the extent not exercised within such period. 
Unless otherwise provided in the Grant Letter, upon such a Termination of
Service, any unvested portion of an Option will terminate and will be
forfeited, and any Shares purchased pursuant to Section 8(c) above
which are unvested at the time of such Termination of Service shall be subject
to a repurchase right in favor of the Company for a price equal to the lesser
of (x) the Exercise Price of the Shares or (y) the Fair Market Value
of such Shares on the date of repurchase, which right must be exercised by the
Company within 90 days of such Termination of Service; provided that if the
Company does not exercise such right within such 90-day period, the Optionee
shall become fully and immediately vested in such Shares.

 

9.2.          Termination for Cause.

 

If an
Optionee has a Termination of Service on account of a termination for Cause, any
Option held by the Optionee will immediately expire on the date of such
Termination of Service, and the Company has the right (but not the obligation
to) repurchase any unvested or vested Shares held by the Optionee for a price
equal to the lesser of (x) the Option Price of the Shares or (y) the
Fair Market Value of the Shares on the date of repurchase; provided such right
must be exercised within six months of the applicable Termination of Service,
and provided, further, that if the Company does not exercise such right within
such six-month period, the Optionee shall become fully and immediately vested
in such Shares.

 

9.3.          Termination due to
Optionee’s Death.

 

Unless
otherwise provided in the applicable Grant Letter, if an Optionee has a
Termination of Service due to the Optionee’s death or if the Optionee dies
within the 90-day period following any Termination of Service other than a
Termination for Cause, the unexercised and vested portion of such Optionee’s
Option will remain exercisable by the Optionee’s estate or

 

7

 

the persons who acquired the right to exercise the
Option by bequest or inheritance, as applicable, until one year from the date
of death but in no event later than the last day of the term of the
Option.  Such portion of the Option shall
terminate to the extent not exercised within such period.  Unless otherwise provided in the Grant Letter
, upon such Termination of Service, any unvested portion of an Option will
terminate and will be forfeited, and any Shares purchased pursuant to Section 8(c) above
which are unvested at the time of such Termination of Service shall be subject
to a repurchase right in favor of the Company for a price equal to the lesser
of (x) the Exercise Price of the Shares or (y) the Fair Market Value
of such Shares on the date of repurchase, which right must be exercised by the
Company within 90 days of such Termination of Service; provided that if the
Company does not exercise such right within such 90-day period, the Optionee
shall become fully and immediately vested in such Shares.

 

9.4.          In
General.

 

Except
as may otherwise be expressly set forth in Section 8 or this Section 9
or as may otherwise be expressly provided under the Grant Letter, no provision
of this Section 9 is intended to or shall permit the exercise of the
Option to the extent the Option was not exercisable upon the Termination of
Service.

 

10.           EXERCISE OF OPTIONS;
PAYMENT.

 

10.1.        Notice of Exercise.

 

(a)           Subject
to vesting and other restrictions provided for hereunder or otherwise imposed
in accordance herewith, an Option may be exercised, and payment in full of the
aggregate Exercise Price made, by an Optionee only by written notice (in the
form prescribed by the Administrator) to the Company specifying the number of
Shares to be purchased.

 

(b)           Without
limiting the scope of the Administrator’s discretion hereunder, the
Administrator may impose such other restrictions on the exercise of Incentive
Stock Options (whether or not in the nature of the foregoing restrictions) as
it may deem necessary or appropriate.

 

(c)           If Shares
acquired upon the exercise of an Incentive Stock Option are disposed of in a
disqualifying disposition within the meaning of Section 422 of the Code by
an Optionee prior to the expiration of either two years from the date of grant
of such Option or one year from the transfer of Shares to the Optionee pursuant
to the exercise of such Option, or in any other disqualifying disposition
within the meaning of Section 422 of the Code, such Optionee shall notify
the Company in writing as soon as practicable thereafter of the date and terms
of such disposition and, if the Company (or any affiliate thereof) thereupon
has a tax withholding obligation, shall pay to the company (or such affiliate)
an amount equal to any withholding tax the Company (or affiliate) is required
to pay as a result of the disqualifying disposition.

 

10.2.        Form of Payment.

 

(a)           The
aggregate Exercise Price shall be paid in full upon the exercise of the
Option.  Payment must be made by one of
the following methods:

 

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(i)            cash or
a certified or bank cashier’s check;

 

(ii)           the
proceeds of a Company loan program or third party sale program or a note
acceptable to the Administrator given as consideration under such a program, in
each case if permitted by the Administrator in its discretion, if such a
program has been established and the Optionee is eligible to participate
therein;

 

(iii)          if
approved by the Administrator in its discretion Shares of previously owned
Common Stock having an aggregate Fair Market Value on the date of exercise
equal to the aggregate Option Price;

 

(iv)          if
approved by the Administrator in its discretion, by assigning to the Company a
sufficient amount of the proceeds from the sale of Shares to be acquired
pursuant to such exercise and instructing the broker or selling agent to pay
that amount to the Company, which amount shall be paid in cash to the Company
on the date such Shares are issued to the Optionee; or or

 

(v)           by a
combination of such methods of payment or any other method acceptable to the
Administrator in its discretion.

 

(b)           Except in
the case of Options exercised by certified or bank cashier’s check, the
Administrator may impose limitations and prohibitions on the exercise of
Options as it deems appropriate, including, without limitation, any limitation
or prohibition designed to avoid accounting consequences which may result from
the use of Common Stock as payment upon exercise of an Option.  Any fractional Shares resulting from an
Optionee’s election that is accepted by the Company shall be paid in cash.

 

11.           EXERCISE BY
SUCCESSORS.

 

An
Option may be exercised, and payment in full of the aggregate Exercise Price
made, by the Successors of the Optionee only by written notice (in the form
prescribed by the Administrator) to the Company specifying the number of Shares
to be purchased.  Such notice shall state
that the aggregate Option Price will be paid in full, or that the Option will
be exercised as otherwise provided hereunder, in the discretion of the Company
or the Administrator, if and as applicable.

 

12.           NONTRANSFERABILITY
OF OPTION.

 

Each
Option granted under the Plan shall by its terms be nontransferable by the
Optionee except by will or the laws of descent and distribution of the state
wherein the Optionee is domiciled at the time of his death; provided, however,
that the Administrator may (but need not) permit other transfers of
Non-Qualified Options where the Administrator concludes that such
transferability does not result in accelerated U.S. federal income taxation and
is otherwise appropriate and desirable.

 

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13.           TAX WITHHOLDING.

 

13.1.        In General.

 

The
Company shall be entitled to withhold from any payments or deemed payments any
amount of tax withholding determined by the Administrator to be required by
law.  Without limiting the generality of
the foregoing, the Administrator may, in its discretion, require an Optionee to
pay to the Company at such time as the Administrator determines the amount that
the Administrator deems necessary to satisfy the Company’s obligation to
withhold federal, state or local income or other taxes incurred by reason of
the exercise of any Option.

 

13.2.        Share Withholding.

 

Upon
the exercise of an Option, the Optionee may, if approved by the Administrator
in its discretion, make a written election to have Shares then issued withheld
by the Company from the Shares otherwise to be received, or to deliver previously
owned Shares, in order to satisfy the liability for such withholding
taxes.  In the event that the Optionee
makes, and the Administrator permits, such an election, the number of Shares so
withheld or delivered shall have an aggregate Fair Market Value on the date of
exercise sufficient to satisfy the applicable withholding taxes.

 

13.3.        Withholding Required.

 

Notwithstanding
anything contained in the Plan to the contrary, the Optionee’s satisfaction of
any tax-withholding requirements imposed by the Administrator shall be a
condition precedent to the Company’s obligation as may otherwise be provided
hereunder to provide Shares to the Optionee and to the release of any
restrictions as may otherwise be provided hereunder, as applicable; and the
applicable Option shall be forfeited upon the failure of the Optionee to
satisfy such requirements with respect to the exercise of the Option.

 

14.           REGULATIONS AND
APPROVALS

 

(a)           The
obligation of the Company to sell Shares with respect to an Option granted
under the Plan shall be subject to all applicable laws, rules and
regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Administrator.

 

(b)           The
Administrator may make such changes to the Plan as may be necessary or
appropriate to comply with the rules and regulations of any government
authority or to obtain tax benefits applicable to an Option.

 

(c)           Each
grant of Options is subject to the requirement that, if at any time the
Administrator determines, in its discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the issuance of Options no payment shall
be made in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions in a
manner acceptable to the Administrator.

 

(d)           In the
event that the disposition of stock acquired pursuant to the Plan is not
covered by a then current registration statement under the Securities Act, and
is not otherwise exempt from such registration, such Shares shall be restricted
against transfer to the extent

 

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required under the
Securities Act, and the Administrator may require any individual receiving
Shares pursuant to the Plan, as a condition precedent to receipt of such
Shares, to represent to the Company in writing that such Shares will be
disposed of only if registered for sale under the Securities Act or if there is
an available exemption for such disposition.

 

15.           INTERPRETATION AND
AMENDMENTS, OTHER RULES.

 

15.1.        The Administrator may make
such rules and regulations and establish such procedures for the
administration of the Plan as it deems appropriate.  Without limiting the generality of the
foregoing, the Administrator may (i) determine the extent, if any, to
which Options shall be forfeited (whether or not such forfeiture is expressly
contemplated hereunder); (ii) interpret the Plan and the Grant Letters
hereunder, with such interpretations to be conclusive and binding on all
persons and otherwise accorded the maximum deference permitted by law, provided
that the Administrator’s interpretation shall not be entitled to deference on
and after a Change of Control except to the extent that such interpretations
are made exclusively by members of the Administrator who are individuals who
served as Administrator members before the Change of Control; and (iii) take
any other actions and make any other determinations or decisions that it deems necessary
or appropriate in connection with the Plan or the administration or
interpretation thereof.  Unless otherwise
expressly provided hereunder, the Administrator, with respect to any grant, may
exercise its discretion hereunder at the time of the grant or thereafter.  In the event of any dispute or disagreement
as to the interpretation of the Plan or of any rule, regulation or procedure,
or as to any question, right or obligation arising from or related to the Plan,
the decision of the Administrator, except as provided in clause (ii) of
the foregoing sentence, shall be final and binding upon all persons.  The Board may amend the Plan as it shall deem
advisable, except that no amendment may adversely affect an Optionee with
respect to an Option previously granted unless such amendments are required in
order to comply with applicable laws; provided that the Board may not make any
amendment in the Plan that would, if such amendment were not approved by the
holders of the Common Stock, cause the Plan to fail to comply with any
requirement of applicable law or regulation, unless and until the approval of
the holders of such Common Stock is obtained. In addition, except pursuant to Section 16
below, no amendment shall be effective without the approval of the holders of
the Common Stock that results in (1) any material increase in the number
of shares to be issued under the Plan (other than as permitted by Section 16);
(2) any material increase in benefits to Optionees, including any material
change to: (i) permit a repricing (or decrease in exercise price) of
outstanding Options, (ii) reduce the price at which Shares or Options to
purchase Shares may be offered, or (iii) extend the duration of the Plan; (3) any
material expansion of the class of persons eligible to receive Options; or (4) the
grant of any awards other than Options under the Plan.

 

15.2         Notwithstanding any other
provision of the Plan to the contrary, upon approval of the Company’s
stockholders, the Administrator may provide for, and the Company may implement,
a one-time-only option exchange offer, pursuant to which certain outstanding
Options could, at the election of the person holding such Option, be tendered
to the Company for cancellation in exchange for the issuance of a lesser amount
of Options with a lower exercise price, provided that such one-time-only option
exchange offer is commenced within six months of the date of such stockholder
approval.

 

11

 

16.           CHANGES IN CAPITAL
STRUCTURE; CHANGE OF CONTROL.

 

16.1.        Changes in Capital Structure.

 

(a)           If (i) the
Company shall at any time be involved in a merger, consolidation, dissolution,
liquidation, reorganization, exchange of shares, sale of all or substantially
all of the assets or stock of the Company or a transaction similar thereto, (ii) any
stock dividend, stock split, reverse stock split, stock combination,
reclassification, recapitalization or other similar change in the capital
structure of the Company or any distribution to holders of Common Stock other
than cash dividends, shall occur or (iii) any other event shall occur
which in the judgment of the Administrator necessitates action by way of
adjusting the terms of the outstanding Options, then (x) the maximum
aggregate number of Shares which may be made subject to Options under the Plan
shall be appropriately adjusted by the Administrator; and (y) the
Administrator shall take any such action as in its judgment shall be necessary
to preserve the Optionees’ rights in their respective Options substantially
proportionate to the rights existing in such Options prior to such event,
including, without limitation, adjustments in (A) the number of Options
granted, (B) the number and kind of shares or other property to be
distributed in respect of Options, and (C) the Exercise Price.

 

16.2.        Change of Control or
Approved Sale.

 

(a)           Upon a
Change of Control or an Approved Sale unless otherwise provided in an Optionee’s
Grant Letter, the vesting and exercisability of all Options that are
outstanding and unexercised as of such Change of Control, to the extent
unvested, and any unvested shares held by the Optionee shall be accelerated
such that all outstanding Options are fully vested and exercisable and all
Shares held by the Optionee are fully vested, and, if the Company does not
survive such Change of Control or an Approved Sale, the Company shall, if the
Company does not cash-out all outstanding options, require the successor
corporation to the Company to assume all outstanding Options and to substitute
such Options with awards involving the common stock of such successor
corporation on terms and conditions necessary to preserve the rights of
Optionees with respect to such Options. 
Upon a Change of Control or an Approved Sale, the Administrator, in its
sole discretion, may require the Company to cancel all outstanding vested
Options (including those Options vested upon a Change of Control or an Approved
Sale) in exchange for a cash payment in an amount equal to the excess, if any,
of the Fair Market Value of the Common Stock underlying the unexercised portion
of the Option as of the date of the Change of Control or Approved Sale over the
Option Price of such portion. 
Notwithstanding anything in the Plan to the contrary, in the event of an
Approved Sale or a Change of Control, the Administrator shall not have the
right to take any actions described in the Plan (including without limitation
actions described in this Section 16.2) that would make the Approved Sale
or Change of Control ineligible for pooling of interests accounting treatment
or that would make the Approved Sale or Change of Control ineligible for
desired tax treatment if, in the absence of such right, the transaction would
qualify for such treatment and the Company intends to use such treatment with
respect to the transaction, in which case the Administrator and the Company
shall be required to take the action described in the first sentence of this Section 16.2.

 

12

 

16.3.        Administrator Authority.
 The judgment of the Administrator with
respect to any matter referred to in this Section 16 shall be conclusive
and binding upon each Optionee without the need for any amendment to the Plan.

 

17.           MISCELLANEOUS.

 

17.1.        No Rights to Employment or Other Service.

 

Nothing
in the Plan or in any grant made pursuant to the Plan shall confer on any
individual any right to        continue
in the employ or other service of the Company or its Subsidiaries or interfere
in any way with the right of the Company or its Subsidiaries and its
stockholders to terminate the individual’s employment or other service at any
time.

 

17.2.        No Fiduciary
Relationship.

 

Nothing
contained in the Plan, and no action taken pursuant to the provisions of the
Plan, shall create or shall be construed to create a trust of any kind, or a
fiduciary relationship between the Company or its Subsidiaries, or their
officers or the Administrator, on the one hand, and the Optionee, the Company,
its Subsidiaries or any other person or entity, on the other.

 

17.3.        Notices.

 

All
notices under the Plan shall be in writing, and if to the Company, shall be
delivered to the Board or mailed to its principal office, addressed to the
attention of the Board; and if to the Optionee, shall be delivered personally,
sent by facsimile transmission or mailed to the Optionee at the address
appearing in the records of the Company. 
Such addresses may be changed at any time by written notice to the other
party given in accordance with this Section 17.3.

 

17.4.        Exculpation and Indemnification.

 

The
Company shall indemnify and hold harmless the members of the Board and the
members of the Administrator, from and against any and all liabilities, costs
and expenses incurred by such persons as a result of any act or omission to act
in connection with the performance of such person’s duties, responsibilities
and obligations under the Plan, to the maximum extent permitted by law, other
than such liabilities, costs and expenses as may result from the gross
negligence, bad faith, willful misconduct or criminal acts of such persons.

 

17.5.        Captions.

 

The
use of captions in this Plan is for convenience.  The captions are not intended to provide
substantive rights.

 

17.6.        Governing Law.

 

THE
PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE
TO PRINCIPLES OF CONFLICTS OF LAWS.

 

13

 

IN
WITNESS WHEREOF, on behalf of Adolor Corporation and pursuant to the direction
of the Board, the undersigned hereby adopts the Plan as set forth herein.

 

	
   

  	
  Adolor Corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

759776.4.01

AS AMENDED DECEMBER 31, 2002

AS AMENDED MAY 13, 2003

AS AMENDED DECEMBER 13, 2006
EFFECTIVE JANUARY 1, 2007

AS AMENDED FEBRUARY 21, 2008

AS AMENDED EFFECTIVE AS OF MAY 12,
2009

 

14Exhibit
10.3

 

ADOLOR CORPORATION

 

AMENDED AND RESTATED 2003 STOCK-BASED

INCENTIVE COMPENSATION PLAN

 

Adopted February 27, 2003

Amended January 6, 2004

Amended May 18, 2006

Amended December 13, 2006 Effective January 1, 2007

Amended April 12, 2007

Amended February 21, 2008

Amended May 22, 2008

Amended May 12, 2009

 

1

 

ADOLOR CORPORATION

 

2003 STOCK-BASED INCENTIVE COMPENSATION PLAN

 

1.             Purpose of the Plan

 

The
purpose of the Plan is to assist the Company, its Subsidiaries and Affiliates
in attracting and retaining valued Employees, Consultants and Directors by
offering them a greater stake in the Company’s success and a closer
identification with it, and to encourage ownership of the Company’s stock by
such Employees, Consultants and Directors.

 

2.             Definitions

 

2.1.          “Affiliate” means
any entity other than the Subsidiaries in which the Company has a substantial
direct or indirect equity interest, as determined by the Board.

 

2.2.          “Award” means an
award of Deferred Stock, Restricted Stock or Options under the Plan.

 

2.3.          “Board” means the
Board of Directors of the Company.

 

2.4.          “Cause” means the
Participant’s (i) conviction for committing a felony under federal law or
of the state in which such action occurred, (ii) dishonesty in the course
of fulfilling his or her employment or consulting duties or (iii) willful
and deliberate failure to perform his or her employment or consulting duties in
any material respect, or such other similar events as shall be determined by
the Committee.  The Committee shall have
the sole discretion to determine whether “Cause” as set forth in (i), (ii) or
(iii) above exists, and its determination shall be final.

 

2.5.          “Change of Control”
means the happening of any of the following:

 

(i)            any Person, other
than (a) the Company or any of its Subsidiaries, (b) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company or any of its Subsidiaries, (c) an underwriter temporarily holding
securities pursuant to an offering of such securities, (d) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportion as their ownership of stock of the Company,
or (e) a Holder or any “group” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) which includes such Holder, becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its Subsidiaries) representing more than 20% of either the then
outstanding shares of Stock of the Company or the combined voting power of the
Company’s then outstanding securities;

 

(ii)           the individuals who
serve on the Board as of the effective date hereof (the “Incumbent Directors”)
cease for any reason to constitute at least a majority of the Board; provided,
however, any Person who becomes a director subsequent to the effective
date hereof, whose election or nomination for election was approved by a vote
of at least a majority of the directors then constituting the Incumbent Board,
shall for purposes of this clause (ii) be considered an Incumbent
Director;

 

(iii)          the consummation of
a merger or consolidation of the Company in which the stockholders of the
Company immediately prior to such merger or consolidation, would not,
immediately

 

2

 

after the merger
or consolidation, beneficially own (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, shares representing in the
aggregate 50% or more of the combined voting power of the securities of the
corporation issuing cash or securities in the merger or consolidation (or of
its ultimate parent corporation, if any); or

 

(iv)          the stockholders of
the Company approve a plan of complete liquidation or dissolution of the
Company, or there is consummated an agreement for the sale or disposition by
the Company of all or substantially all of the Company’s assets, other than a
sale or disposition by the Company of all or substantially all of the Company’s
assets to an entity, at least 50% of the combined voting power of the voting
securities of which are owned by Persons in substantially the same proportion
as their ownership of the Company immediately prior to such sale.

 

If an event set forth in clause (i)(e) of the definition of “Change
of Control” occurs, a Change of Control shall be deemed to have occurred for
each Holder other than any Holder who alone or as part of any “group” (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act),
becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its Subsidiaries) representing more than
20% of either the then outstanding shares of Stock of the Company or the
combined voting power of the Company’s then outstanding securities.

 

2.6.          “Code” means the
Internal Revenue Code of 1986, as amended.

 

2.7.          “Common Stock” means
the common stock of the Company, par value $.0001 per share, or such other
class or kind of shares or other securities resulting from the application of Section 9.

 

2.8.          “Company” means
Adolor Corporation, a Delaware corporation, or any successor corporation.

 

2.9.          “Committee” means
the committee designated by the Board to administer the Plan under Section 4.  The Committee shall have at least two
members, each of whom shall be a member of the Board, a Non-Employee Director
and an Outside Director.

 

2.10.        “Consultant” means a
key consultant or advisor to the Company, its Subsidiaries or Affiliates who is
not an Employee.

 

2.11.        “Deferred Stock”
means an Award made under Section 6 of the Plan to receive Common Stock at
the end of a specified Deferral Period.

 

2.12.        “Deferral Period”
means the period during which the receipt of a Deferred Stock Award under Section 6
of the Plan will be deferred.

 

2.13.        “Director” means a
member of the Board.

 

2.14.        “Disability” means
disabled within the meaning of section 22(e)(3) of the Code.

 

2.15.        “Employee” means an
officer or other employee of the Company, a Subsidiary or an Affiliate
including a director who is such an employee.

 

2.16.        “Fair Market Value”
means, on any given date (i) if shares of Common Stock are then listed on
a national stock exchange, the closing sales price per share of Common Stock on
the exchange for the last preceding date on which there was a sale of shares of
Common Stock on such exchange, as determined by the Committee, (ii) if
shares of Common Stock are then listed on the Nasdaq National Market or the
Nasdaq

 

3

 

SmallCap Market,
the closing sales price (or the closing bid price if no sales were reported)
per share of Common Stock on the Nasdaq National Market or the Nasdaq SmallCap
Market, as applicable, for the last preceding date on which there was a sale of
shares of Common Stock on the Nasdaq National Market or the Nasdaq SmallCap
Market, as applicable, as determined by the Committee, (iii) if shares of
Common Stock are not then listed on a national stock exchange, the Nasdaq
National Market or the Nasdaq Small Cap Market but are then traded on an
over-the-counter market, the average of the closing bid and asked prices for
the shares of Common Stock in such over-the-counter market for the last
preceding date on which there was a sale of such shares of Common Stock in such
market, as determined by the Committee, or (iv) if shares of Common Stock
are not then listed on a national stock exchange or traded on an
over-the-counter market, or if the Committee determines that the value as
determined pursuant to Section (i), (ii) or (iii) above does not
reflect fair market value, the Committee shall determine fair market value
after taking into account such factors that it deems appropriate.
Notwithstanding the foregoing, if Shares are listed on a national stock
exchange or traded on an over-the-counter market, solely for purposes of
determining the Exercise Price of any Option granted hereunder, the Fair Market
Value per Share shall be the closing sales price on the applicable exchange or
market on the date such Option is granted.

 

2.17.        “Holder” means a
Participant to whom an Award is made.

 

2.18.        “Incentive Stock
Option” means an Option intended to meet the requirements of an incentive stock
option as defined in section 422 of the Code and designated as an Incentive
Stock Option.

 

2.19.        “1934 Act” means the
Securities Exchange Act of 1934, as amended.

 

2.20.        “Non-Employee
Director” means a member of the Board who meets the definition of a “non-employee
director” under Rule 16b-3(b)(3) promulgated by the Securities and
Exchange Commission under the 1934 Act.

 

2.21.        “Non-Qualified Option”
means an Option not intended to be an Incentive Stock Option, and designated as
a Non-Qualified Option.

 

2.22.        “Option” means any
stock option granted from time to time under Section 8 of the Plan.

 

2.23.        “Outside Director”
means a member of the Board who meets the definition of an “outside director”
under Treasury Regulation § 1.162-27(e)(3)(i).

 

2.24.        “Participant” means a
Consultant, Director or Employee.

 

2.25.        “Performance Goal”
means a goal that must be met by the end of a period specified by the Committee
(but that is substantially uncertain to be met before the grant of an Award)
based upon: (i) the price of Common Stock, (ii) the market share of
the Company, its Subsidiaries or Affiliates (or any business unit thereof), (iii) sales
by the Company, its Subsidiaries or Affiliates (or any business unit thereof), (iv) earnings
per share of Common Stock, (v) return on shareholder equity of the
Company, (vi) costs of the Company, its Subsidiaries or Affiliates (or any
business unit thereof), (vii) cash flow of the Company, its Subsidiaries
or Affiliates (or any business unit thereof), (viii) return on total
assets of the Company, its Subsidiaries or Affiliates (or any business unit
thereof), (ix) return on invested capital of the Company, its Subsidiaries
or Affiliates (or any business unit thereof), (x) return on net assets of
the Company, its Subsidiaries or Affiliates (or any business unit thereof),
(xi) operating income of the Company, its Subsidiaries or Affiliates (or any
business unit thereof), (xii) net income of the Company, its Subsidiaries or
Affiliates (or any business unit thereof), or (xiii) any other goal the
Committee deems appropriate.

 

4

 

2.26.        “Person” means any
individual, partnership, corporation, company, limited liability company,
association, trust, joint venture, unincorporated organization, entity or
division, or any government, governmental department or agency or political
subdivision thereof.

 

2.27.        “Plan” means the
Adolor Corporation 2003 Stock-Based Incentive Compensation Plan herein set
forth, as amended from time to time.

 

2.28.        “Restricted Stock”
means Common Stock awarded by the Committee under Section 7 of the Plan.

 

2.29.        “Restriction Period”
means the period during which Restricted Stock awarded under Section 7 of
the Plan is subject to forfeiture.

 

2.30.        “Retirement” means
retirement from the active employment of the Company, a Subsidiary or an Affiliate
pursuant to the relevant provisions of the applicable pension plan of such
entity or as otherwise determined by the Board.

 

2.31.        “Subsidiary” means
any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company (or any subsequent parent of the Company) if each of
the corporations other than the last corporation in the unbroken chain owns
stock possession 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.

 

2.32.        “Ten Percent
Shareholder” means a Person who on any given date owns, either directly or
indirectly (taking into account the attribution rules contained in section
424(d) of the Code), stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or a Subsidiary.

 

3.             Eligibility

 

Any Participant is eligible to receive an Award.

 

4.             Administration and
Implementation of Plan

 

4.1.          The Plan shall be
administered by the Committee, which shall have full power to interpret and
administer the Plan and full authority to act in selecting the Participants to
whom Awards will be granted, in determining the type and amount of Awards to be
granted to each such Participant, the terms and conditions of Awards granted
under the Plan and the terms of agreements which will be entered into with
Holders.  Notwithstanding the foregoing,
the Board may designate one or more of its members or officers of the Company
to serve as a secondary committee and delegate to the secondary committee
authority to grant Awards to eligible individuals who are not subject to the
requirements of Rule 16b-3 under the 1934 Act or section 162(m) of
the Code.  The secondary committee shall
have the same authority with respect to selecting the individuals to whom such
Awards are granted and establishing the terms and conditions of such Awards as
the Committee has under the terms of the Plan.

 

4.2.          The Committee’s
powers shall include, but not be limited to, the power to determine whether, to
what extent and under what circumstances an Option may be exchanged for cash,
Restricted Stock, Deferred Stock or some combination thereof; to determine
whether, to what extent and under what circumstances an Award is made and
operates on a tandem basis with other Awards made hereunder; to determine
whether, to what extent and under what circumstances Common Stock or cash
payable with respect to an Award shall be deferred, either automatically or at
the election of the Holder (including the power to add deemed earnings to any
such deferral); to grant Awards (other than Incentive Stock Options) that are
transferable by the Holder; and to determine the effect, if any, of a change in
control of the Company upon outstanding Awards.

 

5

 

4.3.          The Committee shall
have the power to adopt regulations for carrying out the Plan and to make
changes in such regulations as it shall, from time to time, deem
advisable.  The Committee shall have the
power unilaterally and without approval of a Holder to amend an existing Award
in order to carry out the purposes of the Plan so long as such an amendment
does not take away any benefit granted to a Holder by the Award and as long as
the amended Award comports with the terms of the Plan.  Any interpretation by the Committee of the
terms and provisions of the Plan and the administration thereof, and all action
taken by the Committee, shall be final and binding on Holders.

 

4.4.          The Committee may
condition the grant of any Award or the lapse of any Deferral or Restriction
Period (or any combination thereof) upon the Holder’s achievement of a
Performance Goal that is established by the Committee before the grant of the
Award.  The Committee shall have
discretion to determine the specific targets with respect to each Performance
Goal.  Before granting an Award or
permitting the lapse of any Deferral or Restriction Period subject to this
Section, the Committee shall certify that an individual has satisfied the
applicable Performance Goal.

 

5.             Shares of Stock Subject to
the Plan

 

5.1.          Subject to
adjustment as provided in Section 9, the total number of shares of Common
Stock available for Awards under the Plan shall be 7,600,000 shares, all of
which may be granted as Incentive Stock Options.

 

5.2.          The maximum number
of shares of Common Stock subject to Awards that may be granted to any
Participant shall not exceed 750,000 during any calendar year (the “Individual
Limit”).  Subject to Section 5.3, Section 9
and Section 12.7, any Award that is canceled or repriced by the Committee
shall count against the Individual Limit. 
Notwithstanding the foregoing, the Individual Limit may be adjusted to
reflect the effect on Awards of any transaction or event described in Section 9.

 

5.3.          Any shares issued by
the Company through the assumption or substitution of outstanding grants from
an acquired company shall not (i) reduce the shares available for Awards
under the Plan, or (ii) be counted against the Individual Limit.  Any shares issued hereunder may consist, in
whole or in part, of authorized and unissued shares or treasury shares.  If any shares subject to any Award granted
hereunder are forfeited or such Award otherwise terminates without the issuance
of such shares or the payment of other consideration in lieu of such shares,
the shares subject to such Award, to the extent of any such forfeiture or
termination, shall again be available for Awards under the Plan.  Notwithstanding the foregoing sentence, any
shares subject to any Option granted hereunder that are tendered for exchange
by the person holding such Option in connection with the one-time-only option
exchange offer described in Section 12.7 herein shall again be available
for Awards under the Plan.

 

6.             Deferred Stock

 

An
Award of Deferred Stock is an agreement by the Company to deliver to the
recipient a specified number of shares of Common Stock at the end of a
specified deferral period or periods. 
Such an Award shall be subject to the following terms and conditions:

 

6.1.          Deferred Stock
Awards shall be evidenced by Deferred Stock agreements.  Such agreements shall conform to the
requirements of the Plan and may contain such other provisions as the Committee
shall deem advisable.

 

6.2.          Upon determination
of the number of shares of Deferred Stock to be awarded to a Holder, the
Committee shall direct that the same be credited to the Holder’s account on the
books of the Company but that issuance and delivery of the same shall be
deferred until the date or dates provided in Section 6.5 hereof.

 

6

 

Prior to issuance
and delivery hereunder the Holder shall have no rights as a stockholder with
respect to any shares of Deferred Stock credited to the Holder’s account.

 

6.3.          Subject to the
provisions of Section 6.4 concerning Deferred Stock Awards that are
subject to the achievement of Performance Goals, amounts equal to any dividends
declared during the Deferral Period with respect to the number of shares
covered by a Deferred Stock Award will be paid to the Holder currently, or
deferred and deemed to be reinvested in additional Deferred Stock, or otherwise
reinvested on such terms as are determined at the time of the Award by the
Committee, in its sole discretion, and specified in the Deferred Stock
agreement.

 

6.4.          The Committee may
condition the grant of an Award of Deferred Stock or the expiration of the
Deferral Period upon the Holder’s achievement of one or more Performance Goal(s) specified
in the Deferred Stock agreement.  Unless
otherwise specified in a Deferred Stock agreement, if the Holder fails to
achieve the specified Performance Goal(s), the Committee shall not grant the
Deferred Stock Award to the Holder, or the Holder shall forfeit the Award and
no Common Stock shall be transferred to him pursuant to the Deferred Stock
Award.  Dividends paid during the
Deferral Period on Deferred Stock subject to a Performance Goal shall be
reinvested in additional Deferred Stock and the expiration of the Deferral
Period for such Deferred Stock shall be subject to the Performance Goal(s) previously
established by the Committee.

 

6.5.          The Deferred Stock
agreement shall specify the duration of the Deferral Period, taking into
account termination of employment or service on account of death, Disability,
Retirement or other cause.  The Deferral
Period may consist of one or more installments. 
At the end of the Deferral Period or any installment thereof the shares
of Deferred Stock applicable to such installment credited to the account of a
Holder shall be issued and delivered to the Holder (or, where appropriate, the
Holder’s legal representative) in accordance with the terms of the Deferred
Stock agreement.  The Committee may, in
its sole discretion, accelerate the delivery of all or any part of a Deferred
Stock Award or waive the deferral limitations for all or any part of a Deferred
Stock Award.

 

7.             Restricted Stock

 

An
Award of Restricted Stock is a grant by the Company of a specified number of
shares of Common Stock to the Participant, which shares are subject to
forfeiture upon the happening of specified events.  Such an Award shall be subject to the
following terms and conditions:

 

7.1.          Restricted Stock
shall be evidenced by Restricted Stock agreements.  Such agreements shall conform to the
requirements of the Plan and may contain such other provisions as the Committee
shall deem advisable.

 

7.2.          Upon determination
of the number of shares of Restricted Stock to be granted to the Holder, the
Committee shall direct that a certificate or certificates representing the
number of shares of Common Stock be issued to the Holder with the Holder
designated as the registered owner.  The
certificate(s) representing such shares shall be legended as to sale,
transfer, assignment, pledge or other encumbrances during the Restriction
Period and deposited by the Holder, together with a stock power endorsed in
blank, with the Company, to be held in escrow during the Restriction Period.

 

7.3.          During the
Restriction Period the Holder shall have the right to vote the shares of
Restricted Stock.  Subject to the
provisions of Section 7.4 concerning Restricted Stock Awards that are
subject to the achievement of Performance Goals, amounts equal to any dividends
declared during the Restriction Period with respect to the number of shares
covered by a Restricted Stock Award will be paid to the Holder currently, or
deferred and deemed to be reinvested in additional Restricted Stock, or
otherwise reinvested on such terms as are determined at the time of the Award
by the Committee, in its sole discretion, and specified in the Restricted Stock
agreement.

 

7

 

7.4.          The Committee may
condition the grant of an Award of Restricted Stock or the expiration of the
Restriction Period upon the Holder’s achievement of one or more Performance
Goal(s) specified in the Restricted Stock Agreement.  Unless otherwise specified in a Restricted
Stock Agreement, if the Holder fails to achieve the specified Performance
Goal(s), the Committee shall not grant the Restricted Stock to the Holder, or
the Holder shall forfeit the Award of Restricted Stock and the Common Stock
shall be forfeited to the Company. 
Dividends paid during the Restriction Period on Restricted Stock subject
to a Performance Goal shall be reinvested in additional Restricted Stock and
the expiration of the Restriction Period for such Restricted Stock shall be
subject to the Performance Goal(s) previously established by the
Committee.

 

7.5.          The Restricted Stock
agreement shall specify the duration of the Restriction Period and the
performance, employment or other conditions (including termination of
employment or service on account of death, Disability, Retirement or other
cause) under which the Restricted Stock may be forfeited to the Company.  At the end of the Restriction Period the
restrictions imposed hereunder shall lapse with respect to the number of shares
of Restricted Stock as determined by the Committee, and the legend shall be
removed and such number of shares delivered to the Holder (or, where
appropriate, the Holder’s legal representative).  The Committee may, in its sole discretion,
modify or accelerate the vesting and delivery of shares of Restricted Stock.

 

8.             Options

 

Options give a Participant the right to purchase a
specified number of shares of Common Stock from the Company for a specified
time period at a fixed price.  Options
may be either Incentive Stock Options or Non-Qualified Stock Options.  The grant of Options shall be subject to the
following terms and conditions:

 

8.1.          Option Grants:  Options shall be evidenced by Option
agreements.  Such agreements shall
conform to the requirements of the Plan, and may contain such other provisions
as the Committee shall deem advisable.

 

8.2.          Specific Option
Grants to Directors:  Each Director who
is not an employee of the Company shall receive an Option to purchase 25,000
shares of Common Stock upon his or her initial election to the Board, and the
shares of Common Stock underlying such Options shall vest one-third (1/3) per
year that such Director remains a Director for three years beginning on the
first anniversary of the grant. 
Beginning at the 2003 annual meeting of the stockholders of the Company
and at each annual meeting of the stockholders of the Company held thereafter
while the Plan is in effect, each Director continuing as such after such
meeting who is not an employee of the Company shall receive an Option to
purchase 20,000 shares of Common Stock, and the shares of Common Stock
underlying such Options shall vest in full on the first anniversary of the
grant; provided, however, that in the event a Director resigns
from the Board other than for Cause prior to such one-year anniversary, the
vesting of such Option shall accelerate so that such Option becomes immediately
exercisable with respect to one-twelfth (1/12) of the shares of Common Stock
underlying such Option for each full month that has elapsed between the date of
the grant of such Option and the date of such resignation.  Notwithstanding anything to the contrary in
the Plan, the price per share at which Common Stock may be purchased upon the
exercise of an Option granted pursuant to this Section 8.2 shall be not
less than the Fair Market Value of a share of Common Stock on the date of
grant.

 

8.3.          Option
Price: The price per share at which Common Stock may be purchased upon exercise
of an Option shall be not less than the Fair Market Value of a share of Common
Stock on the date of grant.  In the case
of any Incentive Stock Option granted to a Ten Percent Shareholder, the option
price per share shall not be less than 110% of the Fair Market Value of a share
of Common Stock on the date of grant.

 

8.4           Term of
Options:  The Option agreements shall
specify when an Option may be exercisable and the terms and conditions
applicable thereto.  The term of an
Option shall in no event be greater than ten years (five years in the case of
an Incentive Stock Option granted to a Ten Percent Shareholder and ten years in
the case of all other Incentive Stock Options). 
The Committee may, in its sole discretion, accelerate the time at

 

8

 

which an Option
vests.  The Committee may, in its sole
discretion, extend the period of exercise for Options that have vested.

 

8.5           Incentive Stock
Options:  Each provision of the Plan and
each Option agreement relating to an Incentive Stock Option shall be construed
so that each Incentive Stock Option shall be an incentive stock option as
defined in section 422 of the Code, and any provisions of the Option agreement
thereof that cannot be so construed shall be disregarded.  In no event may a Holder be granted an
Incentive Stock Option which does not comply with such grant and vesting
limitations as may be prescribed by section 422(b) of the Code.  Incentive Stock Options may only be granted
to Employees; provided, however, that they may not be granted to
employees of Affiliates.  Without
limiting the foregoing, the aggregate Fair Market Value (determined as of the
time the Option is granted) of the Common Stock with respect to which an Incentive
Stock Option may first become exercisable by a Participant in any one calendar
year under the Plan shall not exceed $100,000.

 

8.6           Restrictions on
Transferability of Incentive Stock Options: 
No Incentive Stock Option shall be transferable otherwise than by will
or the laws of descent and distribution and, during the lifetime of the Holder,
shall be exercisable only by the Holder. 
Upon the death of a Holder, the Person to whom the rights have passed by
will or by the laws of descent and distribution may exercise an Incentive Stock
Option only in accordance with this Section 8.

 

8.7           Payment of Option
Price:  The option price of the shares of
Common Stock upon the exercise of an Option shall be paid: (i) in full in
cash at the time of the exercise, (ii) with the consent of the Committee,
in whole or in part in Common Stock held by the Holder for at least six months
valued at Fair Market Value on the date of exercise, or (iii) if approved
by the Committee in its discretion, by assigning to the Company a sufficient
amount of the proceeds from the sale of shares of Common Stock to be acquired
pursuant to such exercise and instructing the broker or selling agent to pay
that amount to the Company, which amount shall be paid in cash to the Company
on the date such shares of Common Stock are issued to the Participant.  With the consent of the Committee, payment
upon the exercise of a Non-Qualified Option may be made in whole or in part by
Restricted Stock which has been held by the Holder for at least six months
(based on the fair market value of the Restricted Stock on the date the Option
is exercised, as determined by the Committee). 
In such case the Common Stock to which the Option relates shall be
subject to the same forfeiture restrictions originally imposed on the
Restricted Stock exchanged therefor.

 

8.8           Termination by
Death:  Unless otherwise provided in an
Option agreement, if a Holder’s employment or service by the Company, a
Subsidiary or Affiliate terminates by reason of death, any Option granted to such
Holder may thereafter be exercised (to the extent such Option was exercisable
at the time of death) by, where appropriate, the Holder’s transferee or by the
Holder’s legal representative, for a period of 12 months from the date of death
or until the expiration of the stated term of the Option, whichever period is
shorter.

 

8.9           Termination by
Reason of Disability:  Unless otherwise
provided in an Option agreement, if a Holder’s employment or service by the
Company, a Subsidiary or Affiliate terminates by reason of Disability, any
unexercised Option granted to the Holder may thereafter be exercised by the
Holder (or, where appropriate, the Holder’s transferee or legal
representative), to the extent it was exercisable at the time of termination,
for a period of 12 months from the date of such termination of employment or
service or until the expiration of the stated term of the Option, whichever
period is shorter.

 

8.10         Termination by Reason
of  Retirement:  If a Holder’s employment by or service with
the Company, a Subsidiary or Affiliate terminates by reason of Retirement, any
unexercised Option granted to the Holder may thereafter be exercised by the
Holder (or, where appropriate, the Holder’s transferee or legal
representative), to the extent it was exercisable at the time of termination,
for a period of 90 days from the date of such termination of employment or
service or until the expiration of the stated term of the Option, whichever
period is shorter.

 

9

 

8.11         Termination Not for
Cause:  If a Holder’s employment by or
service with the Company, a Subsidiary or Affiliate is terminated by the
Company, the Subsidiary or Affiliate not for Cause, any unexercised Option
granted to the Holder may thereafter be exercised by the Holder (or, where
appropriate, the Holder’s transferee or legal representative), to the extent it
was exercisable at the time of termination, for a period of 90 days from the
date of such termination of employment or service or until the expiration of
the stated term of the Option, whichever period is shorter.

 

8.12         Termination for
Cause:  If a Holder’s employment or
service with the Company, a Subsidiary or Affiliate is terminated by the
Company, the Subsidiary or Affiliate for Cause, all unexercised Options awarded
to the Holder shall terminate on the date of such termination.

 

8.13         Termination for Other
Reason:  If a Holder’s employment or
service with the Company, a Subsidiary or Affiliate terminates for any reason
not specified in this Section 8 (including voluntary termination), any
unexercised Option granted to the Holder may thereafter be exercised by the
Holder (or, where appropriate, the Holder’s transferee or legal
representative), to the extent it was exercisable at the time of termination,
for a period of 90 days from the date of such termination of employment or
service or until the expiration of the stated term of the Option, whichever
period is shorter.

 

8.14         Continuation of
Service: Notwithstanding anything to the contrary in this Section 8, a
Holder’s cessation of service as an Employee, Director or Consultant other than
for Cause shall not be treated as a termination under this Section 8 if
the Holder continues without interruption to serve thereafter in a material
manner in one (or more) of such other capacities, as determined by the
Committee in its sole discretion.

 

9.             Changes in Capitalization;
Change of Control

 

9.1.          In the event of a
reorganization, recapitalization, stock split, spin-off, split-off, split-up,
stock dividend, issuance of stock rights, combination of shares, merger,
consolidation or any other change in the corporate structure of the Company
affecting Common Stock, or any distribution to stockholders of the Company
other than a cash dividend, the Board shall make appropriate adjustment in the
number and kind of shares authorized by the Plan and any other adjustments to
outstanding Awards as it determines appropriate.  No fractional shares of Common Stock shall be
issued pursuant to such an adjustment. 
The Fair Market Value of any fractional shares resulting from
adjustments pursuant to this Section shall, where appropriate, be paid in
cash to the Holder.

 

9.2.          Upon a Change of
Control, the Committee shall fully vest all Awards made under the Plan.  In addition, upon a Change of Control, the
Committee may, at its discretion (i) cancel any outstanding Awards in
exchange for a cash payment of an amount equal to the difference between the
then Fair Market Value of the Award less the option or base price of the Award,
(ii) after having given the Award Holder a chance to exercise any
outstanding Options, terminate any or all of the Award Holder’s unexercised
Options, or (iii) where the Company is not the surviving corporation,
cause the surviving corporation to assume or replace all outstanding Awards
with comparable awards.

 

9.3.          The judgment of the
Committee with respect to any matter referred to in this Section 9 shall
be conclusive and binding upon each Holder without the need for any amendment
to the Plan.

 

10.          Effective Date,
Termination and Amendment

 

The Plan shall become effective on February 27,
2003, subject to shareholder approval. 
Options granted under the Plan prior to such shareholder approval shall
expressly not be exercisable prior to such approval.  The Plan shall remain in full force and
effect until the earlier of ten years from the date of its adoption by the
Board, or the date it is terminated by the Board.  The Board shall have the power to amend,
suspend or terminate the Plan at any time, provided that no such amendment
shall be made without shareholder approval (except as provided in Section 9)
which shall (i) increase  the total
number of shares available for issuance pursuant to the Plan; (ii) materially

 

10

 

increase the benefits to Participants, including any material change
to: (a) permit a repricing (or decrease in exercise price) of outstanding
Options, (b) reduce the price at which shares or Options to purchase
shares may be offered, or (c) extend the duration of the Plan; (iii) change
the class of Participants eligible to be Holders; (iv) modify the
Individual Limit (except as provided Section 9) or the categories of
Performance Goals set forth in Section 4.4; (v) expand the types of
Awards provided under the Plan; or (vi) change the provisions of this Section 10.  Termination of the Plan pursuant to this Section 10
shall not affect Awards outstanding under the Plan at the time of termination.

 

11.          Transferability

 

Except as provided in Section 8.6 and this Section 11,
Awards may not be pledged, assigned or transferred for any reason during the
Holder’s lifetime, and any attempt to do so shall be void and the relevant
Award shall be forfeited.  The Committee
may grant Awards (except Incentive Stock Options) that are transferable by the
Holder during his lifetime, but such Awards shall be transferable only to the
extent specifically provided in the agreement entered into with the
Holder.  The transferee of the Holder
shall, in all cases, be subject to the provisions of the agreement between the
Company and the Holder.

 

12.          General Provisions

 

12.1.        Nothing contained in
the Plan, or any Award granted pursuant to the Plan, shall confer upon any
Employee or Consultant any right with respect to continuance of employment or
service by the Company, a Subsidiary or Affiliate, nor interfere in any way
with the right of the Company, a Subsidiary or Affiliate to terminate the
employment or service of any Employee or Consultant at any time.

 

12.2.        Nothing contained in
the Plan, and no action taken pursuant to the provisions of the Plan, shall
create or shall be construed to create a trust of any kind, or a fiduciary
relationship between the Company or its Subsidiaries, or their officers or the
Committee, on the one hand, and any Participant, the Company, its Subsidiaries
or any other Person or entity, on the other.

 

12.3.        For purposes of this
Plan, neither (i) transfer of employment between the Company and its
Subsidiaries and Affiliates nor (ii) transfer of status from Employee to
Consultant shall be deemed termination of employment.

 

12.4.        Holders shall be
responsible to make appropriate provision for all taxes required to be withheld
in connection with any Award, the exercise thereof and the transfer of shares
of Common Stock pursuant to this Plan. 
Such responsibility shall extend to all applicable Federal, state, local
or foreign withholding taxes.  In the
case of the payment of Awards in the form of Common Stock, or the exercise of
Options, the Company shall have the right to retain the number of shares of
Common Stock whose Fair Market Value equals the amount to be withheld in
satisfaction of the applicable withholding taxes.  Agreements evidencing such Awards shall contain
appropriate provisions to effect withholding in this manner.

 

12.5.        Without amending the
Plan, Awards may be granted to Participants who are foreign nationals or
employed outside the United States or both, on such terms and conditions
different from those specified in the Plan as may, in the judgment of the
Committee, be necessary or desirable to further the purpose of the Plan.

 

12.6.        To the extent that
Federal laws (such as the 1934 Act, the Code or the Employee Retirement Income
Security Act of 1974) do not otherwise control, the Plan and all determinations
made and actions taken pursuant hereto shall be governed by the law of the
State of Delaware and construed accordingly.

 

12.7.        The Committee may
amend any outstanding Awards to the extent it deems appropriate; provided,
however, except as provided in Section 9, no Award may be repriced, replaced, regranted through cancellation, or
modified without shareholder approval if the effect would be to reduce the
exercise price for

 

11

 

the shares underlying the Award.  The Committee may amend Awards without the
consent of the Holder, except in the case of amendments adverse to the Holder,
in which case the Holder’s consent is required to any such amendment.

 

Notwithstanding any other
provision of the Plan to the contrary, upon approval of the Company’s
stockholders, the Committee may provide for, and the Company may implement, a
one-time-only option exchange offer, pursuant to which certain outstanding
Options could, at the election of the person holding such Option, be tendered
to the Company for cancellation in exchange for the issuance of a lesser amount
of Options with a lower exercise price, provided that such one-time-only option
exchange offer is commenced within six months of the date of such stockholder
approval.

 

12.8.        All shares of Common
Stock purchased upon the exercise of an Option or issued pursuant to an Award
of Deferred Stock or Restricted Stock shall be subject to restrictions on
transfer pursuant to applicable securities laws and such other agreements as
the Committee shall deem appropriate and shall bear a legend subjecting such
shares to those restrictions on transfer in accordance with the applicable
Award.  The certificates shall also bear
a legend referring to any restrictions on transfer arising hereunder or under
any other applicable law, regulation, rule or agreement.

 

12.9.        The Plan and each
Award under the Plan shall be subject to the requirement that if at any time
the Committee shall determine that (i) the listing, registration or
qualification of the shares of Common Stock purchased upon the exercise of an
Option or issued pursuant to an Award of Deferred Stock or Restricted Stock
upon any securities exchange or under any state or federal law, (ii) the
consent or approval of any government regulatory body or (iii) an
agreement by the recipient of an Award with respect to the disposition of such
shares is necessary or desirable as a condition of, or in connection with, the
Plan or the granting of such Award or the issue or purchase of such shares
thereunder, the Award may not be consummated in whole or in part until such
listing, registration, qualification, consent, approval or agreement shall have
been effected or obtained free of any conditions not acceptable to the Committee.

 

12

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