Document:

exv10w38

 

Exhibit 10.38

AMENDED EMPLOYMENT AGREEMENT

     THIS AMENDED EMPLOYMENT AGREEMENT (the “Agreement”), dated as of May12, 2007 (the
“Execution Date”), is hereby entered into in the State of Maryland by and between SUCAMPO
PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and Mariam Morris
(“Executive”).

     WHEREAS, Executive has been employed by the Company since February 2, 2004, most recently
pursuant to the terms of an Employment Agreement effective as of June 16, 2006 (the “Effective
Date”) and amended effective January 2, 2007;

     WHEREAS, Executive possesses certain skills, experience or expertise which will be of use to
the Company;

     WHEREAS, the parties acknowledge that Executive’s abilities and services are unique and will
significantly enhance the business prospects of the Company; and

     WHEREAS, in light of the foregoing, the Company desires to continue to employ Executive as its
Chief Accounting Officer and Executive desires to remain in such employment, and the parties
mutually desire to enter into this Agreement to reflect the current terms of their understanding;

     NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements
herein contained, the Company and Executive hereby agree as follows:

 

 

Article 1. Employment Agreement

     1.1 Employment and Duties

          The Company offers and Executive hereby accepts employment with the Company for the Term (as
hereinafter defined) as its Chief Accounting Officer, and in connection therewith, to perform such
duties as Executive shall reasonably be assigned by the Company’s Chief Financial Officer and/or by
the Company’s Board of Directors. Executive hereby warrants and represents that Executive has no
contractual commitments or other obligations to third parties inconsistent with Executive’s
acceptance of this employment and performance of the obligations set forth in this Agreement.
Executive shall perform such duties and carry out Executive’s responsibilities hereunder faithfully
and to the best of Executive’s ability, and shall devote Executive’s full business time and best
efforts to the business and affairs of the Company during normal business hours (exclusive of
periods of vacation, sickness, disability, or other leaves to which Executive is entitled).
Executive will perform all of Executive’s responsibilities in compliance with all applicable laws
and will ensure that the operations that Executive manages are in compliance with all applicable
laws.

Article 2. Employment Term

     2.1 Term

     The term of Executive’s employment hereunder (the “Term”) shall be deemed to commence
on the Effective Date and shall end on the second anniversary of the Effective Date, unless sooner
terminated as hereinafter provided; provided, however, that the Term shall be
automatically renewed and extended for an additional period of one (1) year on each anniversary

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thereafter unless either party gives a Notice of Termination (as defined below) to the other
party at least sixty (60) days prior to such anniversary.

     2.2 Survival on Merger or Acquisition

     In the event the Company is acquired during the Term, or is the non-surviving party in a
merger, or sells all or substantially all of its assets, this Agreement shall not automatically be
terminated, and the Company agrees to use its best efforts to ensure that the transferee or
surviving company shall assume and be bound by the provisions of this Agreement.

Article 3. Compensation and Benefits

     3.1 Compensation

     (a) Base Salary. The Company shall pay Executive a salary at an annual rate
that is not less than $160,000, to be paid in bi-weekly installments, in arrears (the
“Base Salary”). Thereafter, the Base Salary will be reviewed by the Compensation
Committee of the Board of Directors (“Compensation Committee”) at least annually, and the
Committee’s recommendation shall be reviewed and approved by the Board of Directors. The
Base Salary may, in the sole discretion of the Board of Directors, be increased, but not
decreased (unless mutually agreed by Executive and the Company).

     (b) Stock Compensation. At least annually for the Term of this Agreement,
Executive shall be eligible for consideration to receive restricted stock grants, incentive
stock options or other awards in accordance with the 2006 Stock Incentive Plan.
Recommendations concerning the decision to make an award pursuant to that Plan and the
amount of any award are entirely discretionary and shall be made initially by the

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Compensation Committee, subject to review and approval by the Board of Directors. In
the event that, during the Term (i) the Company is acquired or is the non-surviving party in
a merger, or (ii) the Company sells all or substantially all of its assets, or (iii) in the
event of the death of Executive, all unvested restricted stock awards and incentive stock
options having previously been awarded to Executive shall immediately vest and may be
exercised in accordance with the terms of the Plan and the Executive’s grant award.

     (c) Bonuses. Executive shall be eligible to receive an annual bonus award in
recognition of Executive’s contributions to the success of the Company pursuant to the
Company’s management incentive bonus program as it may be amended or modified from time to
time. Recommendations concerning the decision to make an award and the amount of any award
are entirely discretionary and shall be made initially by the Compensation Committee,
subject to review and approval by the Board of Directors.

     (d) Withholding Taxes. All compensation due to Executive shall be paid subject
to withholding by the Company to ensure compliance with all applicable laws and regulations.

     3.2 Participation in Benefit Plans

     Executive shall be entitled to participate in all employee benefit plans or programs of the
Company offered to other employees to the extent that Executive’s position, tenure, salary, and
other qualifications make Executive eligible to participate in accordance with the terms of such
plans. The Company does not guarantee the continuance of any particular employee benefit plan or
program during the Term, and Executive’s participation in any such plan or program shall be subject
to all terms, provisions, rules and regulations applicable thereto. Executive will be

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entitled to fifteen (15) vacation days per year, to be used and administered in accordance
with the Company’s vacation policy as it may change from time to time.

     3.3 Expenses

     The Company will pay or reimburse Executive for all reasonable and necessary out-of-pocket
expenses incurred by Executive in the performance of Executive’s duties under this Agreement.
Executive shall provide to the Company detailed and accurate records of such expenses for which
payment or reimbursement is sought, and Company payments shall be in accordance with the regular
policies and procedures maintained by the Company from time to time.

     3.4 Professional Organizations

     During the Term, Executive shall be reimbursed by the Company for the annual dues payable for
membership in professional societies associated with subject matter related to the Company’s
interests. New memberships for which reimbursement will be sought shall be approved by the Company
in advance.

     3.5 Parking

     During the Term, the Company shall either provide parking for Executive’s automobile at the
Company’s expense or reimburse Executive for such expense.

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Article 4. Termination of Employment

     4.1 Definitions

     As used in Article 4 of this Agreement, the following terms shall have the meaning set forth
for each below:

     (a) “Benefit Period” shall mean: (i) the two (2) month period which coincides
with the two (2) month period for determining the amount of the lump sum severance payment
described in Section 4.4(a)(iii) commencing on the Date of Termination which occurs in
connection with a termination of employment described in the first sentence of Section
4.4(a), or (ii) a period ending when Executive becomes eligible as an employee or spouse of
an employee of another firm for group medical benefits coverage, whichever is shorter.
Executive shall give prompt written notice to the Company when Executive becomes eligible
for group medical benefits coverage as an employee or spouse of an employee of another firm.

     (b) “Cause” shall mean any of the following as determined by the Board of
Directors or a committee of the Board of Directors designated for this purpose:

     (i) the gross neglect or willful failure or refusal of Executive to perform
Executive’s duties hereunder (other than as a result of Executive’s death or
Disability);

     (ii) perpetration of an intentional and knowing fraud against or affecting the
Company or any customer, supplier, client, agent or employee thereof;

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     (iii) any willful or intentional act that could reasonably be expected to
injure the reputation, financial condition, business or business relationships of
the Company or Executive’s reputation or business relationships;

     (iv) conviction (including conviction on a nolo contendere plea) of a felony or
any crime involving fraud, dishonesty or moral turpitude;

     (v) the material breach by Executive of this Agreement (including, without
limitation, the Employment Covenants set forth in Article 5 of this Agreement); or

     (vi) the failure or continued refusal to carry out the directives of the Chief
Executive Officer, the Chief Financial Officer, or the Board of Directors that are
consistent with Executive’s duties and responsibilities under this Agreement which
is not cured within thirty (30) days after receipt of written notice from the
Company specifying the nature of such failure or refusal; provided,
however, that Cause shall not exist if such refusal arises from Executive’s
reasonable, good faith belief that such failure or refusal is required by law
(including rules and regulations promulgated by the SEC, IRS or other applicable
governmental agency).

     (c) “Date of Termination” shall mean the date specified in the Notice of
Termination (as hereinafter defined) (except in the case of Executive’s death, in which case
the Date of Termination shall be the date of death); provided, however, that
if Executive’s employment is terminated by the Company other than for Cause, the date

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specified in the Notice of Termination shall be at least thirty (30) days after the
date the Notice of Termination is given to Executive.

     (d) “Notice of Termination” shall mean a written notice from the Company to
Executive that indicates Section 2 or the specific provision of Section 4 of this Agreement
relied upon as the reason for such termination or nonrenewal, the Date of Termination, and,
in the case of termination or non-renewal by the Company for Cause, in reasonable detail,
the facts and circumstances claimed to provide a basis for termination or nonrenewal.

     (e) “Good Reason” shall mean:

     (i) Company effects a material diminution of Executive’s position, authority or
duties;

     (ii) any requirement that Executive, without his/her consent, move his/her
regular office to a location more than fifty (50) miles from Company’s executive
offices;

     (iii) the material failure by Company, or its successor, if any, to pay
compensation or provide benefits or perquisites to Executive as and when required by
the terms of this Agreement; or

     (iv) any material breach by Company of this Agreement.

     The Executive shall have Good Reason to terminate Executive’s employment if (i) within
twenty-one (21) days following Executive’s actual knowledge of the event

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which Executive determines constitutes Good Reason, Executive notifies the Company in
writing that Executive has determined a Good Reason exists and specifies the event creating
Good Reason, and (ii) following receipt of such notice, the Company fails to remedy such
event within twenty-one (21) days. If either condition is not met, Executive shall not have
a Good Reason to terminate Executive’s employment.

     (f) “Change in Control” shall mean:

     (i) the acquisition by any person of beneficial ownership of fifty percent
(50%) or more of the outstanding shares of the Company’s voting securities; or

     (ii) the Company is the non-surviving party in a merger; or

     (iii) the Company sells all or substantially all of its assets; provided,
however, that no “Change in Control” shall be deemed to have occurred merely as the
result of a refinancing by the Company or as a result of the Company’s insolvency or
the appointment of a conservator; or

     (iv) the Compensation Committee of the Company, in its sole and absolute
discretion determines that there has been a sufficient change in the share ownership
or ownership of the voting power of the Company’s voting securities to constitute a
change of effective ownership or control of the Company.

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     4.2 Termination Upon Death or Disability

     This Agreement, and Executive’s employment hereunder, shall terminate automatically and
without the necessity of any action on the part of the Company upon the death of Executive. In
addition, if at any time during the Term, Executive shall become physically or mentally disabled
(as determined by an independent physician competent to assess the condition at issue), whether
totally or partially, so that Executive is unable substantially to perform Executive’s duties and
services hereunder, with or without reasonable accommodation, for either (i) a period of sixty (60)
consecutive calendar days, or (ii) ninety (90) consecutive or non-consecutive calendar days during
any consecutive five (5) month period (the “Disability Date”), the Company may terminate this
Agreement and Executive’s employment hereunder by written notice to Executive after the Disability
Date (but before Executive has recovered from such disability).

     4.3 Company’s and Executive’s Right to Terminate

     This Agreement and Executive’s employment hereunder may be terminated at any time by the
Company for Cause or, if without Cause, upon thirty (30) days prior written notice to Executive.
In the event the Company should give Executive notice of termination without Cause, the Company
may, at its option, elect to provide Executive with thirty (30) days’ salary in lieu of Executive’s
continued active employment during the notice period. This Agreement and Executive’s employment
hereunder may be terminated by Executive at any time for Good Reason and, if without Good Reason,
upon thirty (30) days prior written notice to the Company.

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     4.4 Compensation Upon Termination

     (a) Severance. In the event the Company terminates (or elects not to renew)
this Agreement without Cause or pursuant to Section 4.2 due to the disability of Executive,
or in the event Executive terminates this Agreement for Good Reason, Executive shall be
entitled to receive: (i) Executive’s Base Salary through the Date of Termination, (ii)
reimbursement of any COBRA continuation premium payments made by Executive for the Benefit
Period, and (iii) a lump sum severance payment equal to two (2) months of Executive’s then
current Base Salary, to be made not later than ten (10) business days following the
expiration of the revocation period in Executive’s Release (as provided in Section 4.4(c)
below) without any revocation having occurred. Notwithstanding the foregoing, the Company
shall, to the extent necessary and only to the extent necessary, modify the timing of
delivery of severance benefits to Executive if the Company reasonably determines that the
timing would subject the severance benefits to any additional tax or interest assessed under
Section 409A of the Internal Revenue Code. In such event, the payments will be made as soon
as practicable without causing the severance benefits to trigger such additional tax or
interest under Section 409A of the Internal Revenue Code. In the event this Agreement is
terminated (or not renewed) for any reason other than by the Company without Cause or
pursuant to Section 4.2 due to the disability of Executive or by Executive for Good Reason,
Executive shall not be entitled to the continuation of any compensation, bonuses or benefits
provided hereunder, or any other payments following the Date of Termination, other than Base
Salary earned through such Date of Termination.

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     (b) Change in Control. In the event that Executive is terminated other than
for “Cause” within eighteen (18) months following the occurrence of a “Change in Control” of
the Company, then Executive shall be entitled to a severance payment in an amount that is
two (2) times the amount specified in Section 4.4(a), clause (iii) above (the “Change in
Control Severance Payment”). In the event that Executive shall become entitled to a Change
in Control Severance Payment as provided herein, the Company shall cause its independent
auditors promptly to review, at the Company’s sole expense, the applicability to those
payments of Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the
“Code”). If the auditors determine that any payment of the Change in Control Severance
Payment would be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties with respect to such excise tax, then such payment owed to Executive
shall be reduced by an amount calculated to provide to Executive the maximum Change in
Control Severance Payment which will not trigger application of Sections 280G and 4999 of
the Code.

     (c) Release. Anything to the contrary contained herein notwithstanding, as a
condition to Executive receiving severance benefits to be paid pursuant to this Section 4.4,
Executive shall execute and deliver to the Company a general release in the form attached
hereto as Exhibit A. The Company shall have no obligation to provide any severance benefits
to Executive until it has received the general release from Executive and any revocation or
rescission period applicable to the Release shall have expired without revocation or
rescission.

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Article 5. Employment Covenants

     5.1 Definitions

     As used in this Article 5 of the Agreement, the following terms shall have the meaning set
forth for each below:

     (a) “Affiliate” shall mean a person or entity that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or under common control
with another person or entity, including current and former directors and officers of such
an entity.

     (b) “Confidential Information” shall mean all confidential and proprietary
information of the Company, its Predecessors and Affiliates, whether in written, oral,
electronic or other form, including but not limited to trade secrets; technical, scientific
or business information; processes; works of authorship; Inventions; discoveries;
developments; systems; chemical compounds; computer programs; code; algorithms; formulae;
methods; ideas; test data; know how; functional and technical specifications; designs;
drawings; passwords; analyses; business plans; information regarding actual or demonstrably
anticipated business, research or development; marketing, sales and pricing strategies; and
information regarding the Company’s current and prospective consultants, customers,
licensors, licensees, investors and personnel, including their names, addresses, duties and
other personal characteristics. Confidential Information does not include information that
(i) is in the public domain, other than as a result of an act of misappropriation or breach
of an obligation of confidentiality by any person; (ii) Executive can verify by written
records kept in the ordinary course of business was in

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Executive’s lawful possession prior to its disclosure to Executive; (iii) is received
by Executive from a third party without a breach of an obligation of confidentiality owed by
the third party to the Company and without the requirement that Executive keep such
information confidential; or (iv) Executive is required to disclose by applicable law,
regulation or order of a governmental agency or a court of competent jurisdiction. If
Executive is required to make disclosure pursuant to clause (iv) of the preceding sentence
as a result of the issuance of a court order or other government process, Executive shall
(a) promptly, but in no event more than 72 hours after learning of such court order or other
government process, notify, pursuant to Section 6.1 below, the Company; (b) at the Company’s
expense, take all reasonable necessary steps requested by the Company to defend against the
enforcement of such court order or other government process, and permit the Company to
intervene and participate with counsel of its choice in any proceeding relating to the
enforcement thereof; and (c) if such compelled disclosure is required, Executive shall
disclose only that portion of the Confidential Information that is necessary to meet the
minimum legal requirement imposed on Executive.

     (c) “Executive Work Product” shall mean all Confidential Information and
Inventions conceived of, created, developed or prepared by Executive (whether individually
or jointly with others) before or during Executive’s employment with the Company, during or
outside of working hours, which relate in any manner to the actual or demonstrably
anticipated business, research or development of the Company, or result from or are
suggested by any task assigned to Executive or any work performed by Executive for or on
behalf of the Company or any of its Affiliates.

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     (d) “Invention” shall mean any apparatus, biological processes, cell line,
chemical compound, creation, data, development, design, discovery, formula, idea,
improvement, innovation, know-how, laboratory notebook, manuscript, process or technique,
whether or not patentable or protectable by copyright, or other intellectual property in any
form.

     (e) “Predecessor” shall mean an entity, the major portion of the business and
assets of which was acquired by another entity in a single transaction or in a series of
related transactions.

     (f) “Trade Secrets,” as used in this Agreement, will be given its broadest
possible interpretation under the law applicable to this Agreement.

     5.2 Nondisclosure and Nonuse 

     Executive acknowledges that prior to and during Executive’s employment with the Company,
Executive had and will have occasion to create, produce, obtain, gain access to or otherwise
acquire, whether individually or jointly with others, Confidential Information. Accordingly,
during the term of Executive’s employment with the Company and at all times thereafter, Executive
shall keep secret and shall not, except for the Company’s benefit, disclose or otherwise make
available to any person or entity or use, reproduce or commercialize, any Confidential Information,
unless specifically authorized in advance by the Company in writing.

     5.3 Other Confidentiality Obligations 

     Executive acknowledges that the Company may, from time to time, have agreements with other
persons or entities or with the U.S. Government or governments of other countries, or agencies
thereof, which impose confidentiality obligations or other restrictions on the Company.

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Executive hereby agrees to be bound by all such obligations and restrictions and shall take
all actions necessary to discharge the obligations of the Company thereunder, including, without
limitation, signing any confidentiality or other agreements required by such third parties.

     5.4 Return of Confidential Information 

     At any time during Executive’s employment with the Company, upon the Company’s request, and in
the event of Executive’s termination of employment with the Company for any reason whatsoever,
Executive shall immediately surrender and deliver to the Company all records, materials, notes,
equipment, drawings, documents and data of any nature or medium, and all copies thereof, relating
to any Confidential Information (collectively the “the Company Materials”) which is in Executive’s
possession or under Executive’s control. Executive shall not remove any of the Company Materials
from the Company’s business premises or deliver any of the Company Materials to any person or
entity outside of the Company, except as required in connection with Executive’s duties of
employment. In the event of the termination of Executive’s employment for any reason whatsoever,
Executive shall promptly sign and deliver to the Company a Termination Certificate in the form of
Exhibit B attached hereto.

     5.5 Confidential Information of Others 

     Executive represents that Executive’s performance of all the terms of this Agreement and
Executive’s employment with the Company do not and will not breach any agreement to keep in
confidence proprietary information, knowledge or data with regard to which Executive has
obligations of confidentiality or nonuse, and Executive shall not disclose to the Company or cause
the Company to use any such confidential proprietary information, knowledge or data belonging to
any previous employer of Executive or other person. Executive represents that

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Executive has not brought and will not bring to the Company or use at the Company any
confidential materials or documents of any former employer or other person that are not generally
available to the public, unless express written authorization for their possession and use has been
obtained from such former employer or other person. Executive agrees not to enter into any
agreement, whether written or oral, that conflicts with these obligations.

     5.6 Other Obligations 

     The terms of this Section 5 are in addition to, and not in lieu of, any statutory or other
contractual or legal obligation to which Executive may be subject relating to the protection of
Confidential Information.

     5.7 Assignment of Confidential Information and Inventions; Works Made for Hire

     Executive hereby assigns to the Company all right, title and interest in all intellectual
property, including any patent applications, trade secrets, know how, copyrights, software, or
trademarks associated with the Executive Work Product and Confidential Information. Executive
hereby acknowledges and agrees that all Executive Work Product subject to copyright protection
constitutes “work made for hire” under United States copyright laws (17 U.S.C. § 101) and is owned
exclusively by the Company. To the extent that title to any Executive Work Product subject to
copyright protection does not constitute a “work for hire,” and to the extent title to any other
Executive Work Product does not, by operation of law or otherwise, vest in the Company, all right,
title, and interest therein, including, without limitation, all copyrights, patents and trade
secrets, and all copyrightable or patentable subject matter, are hereby irrevocably assigned to the
Company. Executive shall promptly disclose to the Company in writing all Executive Work Product.
Executive shall, without any additional compensation,

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execute and deliver all documents or instruments and give the Company all assistance it
requires to transfer all right, title, and interest in any Executive Work Product to the Company;
to vest in the Company good, valid and marketable title to such Executive Work Product; to perfect,
by registration or otherwise, trademark, copyright and patent protection of the Company with
respect to such Executive Work Product; and otherwise to protect the Company’s trade secret and
proprietary interest in such Executive Work Product. Executive hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as Executive’s agents and
attorneys-in-fact to act for and on Executive’s behalf, and to execute and file any documents and
to do all other lawfully permitted acts to further the purposes of this Section 5.7 with the same
legal force and effect as if executed by Executive.

     5.8 Representations 

     Executive represents that, to the best of his or her knowledge, none of the Inventions will
violate or infringe upon any right, patent, copyright, trademark or right of privacy, or constitute
libel or slander against or violate any other rights of any person, firm or corporation, and that
Executive will not knowingly create any Invention which causes any such violation.

     5.9 Inventions, Intellectual Property and Equipment Not Transferred 

     Executive has set forth on Exhibit C attached hereto a complete list and brief description of
all Inventions, intellectual property and equipment located at the Company which is owned directly
or indirectly by Executive and which shall not be transferred to the Company pursuant to this
Agreement. Except as so listed, Executive agrees that he or she will not assert any rights under
any intellectual property as having been made or acquired by Executive prior to being

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employed by the Company. The Company may, at its discretion, require detailed disclosures and
materials demonstrating ownership of the intellectual property so listed.

     5.10 Exclusivity of Employment

     During the Term, and without prior approval of the Board of Directors, Executive shall not
directly or indirectly engage in any activity competitive with or adverse to the Company’s business
or welfare or render a material level of services of a business, professional or commercial nature
to any other person or firm, whether for compensation or otherwise.

     5.11 Covenant Not to Compete

     Executive agrees to be bound and abide by the following covenant not to compete:

     (a) Term and Scope. During Executive’s employment with the Company and for a
period of twelve (12) months after the Term, Executive will not render to any Conflicting
Organization (as hereinafter defined), services, directly or indirectly, anywhere in the
world in connection with any Conflicting Product (as hereunder defined), except that
Executive may accept employment with a Conflicting Organization whose business is
diversified (and which has separate and distinct divisions) if Executive first certifies to
the Company in writing that such prospective employer is a separate and distinct division of
the Conflicting Organization and that Executive will not render services directly or
indirectly in respect of any Conflicting Product. Such twelve (12) month time period shall
be tolled during any period that Executive is engaged in activity in violation of this
covenant.

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     (b) Judicial Construction. Executive and the Company agree that, if the period
of time or the scope of this Covenant Not to Compete shall be adjudged unreasonably
overbroad in any court proceeding, then the period of time and/or scope shall be modified
accordingly, so that this covenant may be enforced with respect to such services or
geographic areas and during such period of time as is judged by the court to be reasonable.

     (c) Definitions. For purposes of this Agreement, the following terms shall
have the following meanings:

     “Conflicting Product” means any product, method or process, system or
service of any person or organization other than the Company that is the same as,
similar to or interchangeable with any product, method or process, system or service
that was provided or under development by the Company or any of its Affiliates at
the time Executive’s employment with the Company terminates, or about which
Executive acquired any Confidential Information or developed any Executive Work
Product.

     “Conflicting Organization” means any person or organization which is
engaged in research on or development, production, marketing, licensing, selling or
servicing of any Conflicting Product.

     5.12 Non-Solicitation

     For a period of twelve (12) months after termination of employment with the Company for any
reason, Executive shall not directly or indirectly solicit or hire, or assist any other person

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in soliciting or hiring, any person employed by the Company (as of the date of Executive’s
termination) or any person who, as of the date of Executive’s termination, was in the process of
being recruited by the Company, or induce any such employee to terminate his or her employment with
the Company.

     5.13 Judicial Enforcement

     In the event of a breach or violation of any provision of this Article 5 by Executive, the
parties agree that, in addition to any other remedies it may have, the Company shall be entitled to
equitable relief for specific performance, and Executive hereby agrees and acknowledges that the
Company has no adequate remedy at law for the breach of the employment covenants contained herein.

Article 6. Miscellaneous

     6.1 Notices

     All notices or other communications which are required or permitted hereunder shall be deemed
to be sufficient if contained in a written instrument given by personal delivery, air courier or
registered or certified mail, postage prepaid, return receipt requested, addressed to such party at
the address set forth below or such other address as may thereafter be designated in a written
notice from such party to the other party:

	 	 	 	 	 
	 

	 	To Company:
	 	Sucampo Pharmaceuticals, Inc.
	 

	 	 	 	4733 Bethesda Avenue, Suite 450
	 

	 	 	 	Bethesda, Maryland 20814
	 

	 	 	 	Attention: Chief Executive Officer

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	 	To Executive:
	 	Mariam Morris
	 

	 	 	 	8742 Delcris Drive
	 

	 	 	 	Montgomery Village, Maryland 20886

All such notices, advances and communications shall be deemed to have been delivered and received
(i) in the case of personal delivery, on the date of such delivery, (ii) in the case of air
courier, on the business day after the date when sent and (iii) in the case of mailing, on the
third business day following such mailing.

     6.2 Headings

     The headings of the articles and sections of this Agreement are inserted for convenience only
and shall not be deemed a part of or affect the construction or interpretation of any provision
hereof.

     6.3 Modifications; Waiver

     No modification of any provision of this Agreement or waiver of any right or remedy herein
provided shall be effective for any purpose unless specifically set forth in a writing signed by
the party to be bound thereby. No waiver of any right or remedy in respect of any occurrence or
event on one occasion shall be deemed a waiver of such right or remedy in respect of such
occurrence or event on any other occasion.

     6.4 Entire Agreement

     This Agreement, together with Executive’s Acknowledgement of Consideration, contains the
entire agreement of the parties with respect to the subject matter hereof and supersedes all other
agreements, oral or written, heretofore made with respect thereto including, without limitation,
that certain agreement between Executive and the Company dated December 6, 2005.

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     6.5 Severability

     Any provision of this Agreement that may be prohibited by, or unlawful or unenforceable under,
any applicable law of any jurisdiction shall, as to such jurisdiction, be ineffective without
affecting any other provision hereof. To the full extent, however, that the provisions of such
applicable law may be waived, they are hereby waived, to the end that this Agreement be deemed to
be a valid and binding agreement enforceable in accordance with its terms.

     6.6 Controlling Law

     This Agreement has been entered into by the parties in the State of Maryland and shall be
continued and enforced in accordance with the laws of Maryland.

     6.7 Arbitration

     Any controversy, claim, or breach arising out of or relating to this Agreement or the breach
thereof shall be settled by arbitration in the State of Maryland in accordance with the rules of
the American Arbitration Association for commercial disputes and the judgment upon the award
rendered shall be entered by consent in any court having jurisdiction thereof; provided,
however, that this provision shall not preclude the Company from seeking injunctive or
similar relief from the courts to enforce its rights under the Employment Covenants set forth in
Article 5 of this Agreement. It is understood and agreed that, in the event the Company gives
notice to Executive of termination for Cause and it should be finally determined in a subsequent
arbitration that Executive’s termination was not for Cause as defined in this Agreement, then the
remedy awarded to Executive shall be limited to such compensation and benefits as Executive

23

 

would have received in the event of Executive’s termination other than for Cause at the same
time as the original termination.

     6.8 Assignments

     Subject to obtaining Executive’s prior approval, which shall not be unreasonably withheld or
delayed, the Company shall have the right to assign this Agreement and to delegate all rights,
duties and obligations hereunder to any entity that controls the Company, that the Company controls
or that may be the result of the merger, consolidation, acquisition or reorganization of the
Company and another entity. Executive agrees that this Agreement is personal to Executive and
Executive’s rights and interest hereunder may not be assigned, nor may Executive’s obligations and
duties hereunder be delegated (except as to delegation in the normal course of operation of the
Company), and any attempted assignment or delegation in violation of this provision shall be void.

     6.9 Read and Understood

     Executive has read this Agreement carefully and understands each of its terms and conditions.
Executive has sought independent legal counsel of Executive’s choice to the extent Executive deemed
such advice necessary in connection with the review and execution of this Agreement.

24

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the Execution Date.

	 	 	 
	 

	 	

25exv4w1

 

Exhibit 4.1

STEELCLOUD, INC.

AMENDED 2002 STOCK OPTION PLAN

As adopted May 13, 2004

 

 

1. PURPOSE OF PLAN; ADMINISTRATION

     1.1 Purpose.

     The SteelCloud, Inc. 2002 Stock Option Plan was established to grant to officers and other
employees of SteelCloud, Inc. (the “Company”) or of its parents or subsidiaries (as defined in
Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended (the
“Code”)), if any (individually and collectively, the Company”), and to disinterested directors,
consultants and advisors and other persons who may perform significant services for or on behalf of
the Company, a favorable opportunity to acquire common stock, $.001 par value (“Common Stock”), of
the Company and, thereby, to create an incentive for such persons to remain in the employ of or
provide services to the Company and to contribute to its success.

     The Company may grant under the 2002 Stock Option Plan both incentive stock options within the
meaning of Section 422 of the Code (“Incentive Stock Options”) and stock options that do not
qualify for treatment as Incentive Stock Options (“Nonstatutory Options”). Unless expressly
provided to the contrary herein, all references herein to “options,” shall include both incentive
Stock Options and Nonstatutory Options.

     On May 13, 2004, the shareholders of the Company approved this Amended 2002 Stock Option Plan
(hereinafter, the “Plan”) to increase the cumulative aggregate number of shares of common stock
subject to issuance thereunder from a maximum of 750,000 shares of Common Stock to 1,500,000 shares
of Common Stock

     1.2 Administration.

     The Plan shall be administered by the Board of Directors of the Company (the “Board”), if each
member is a “disinterested person” within the meaning of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (“Rule 16b-3”), or a committee (the “Committee”) of two or more directors,
each of whom is a disinterested person. Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by delivering written notice
to the Board. Vacancies in the Committee may be filled by the Board. Until such time that the
Committee is properly appointed, the Board shall administer the Plan in accordance with the terms
of this Section 1.2.

     A majority of the members of the Committee shall constitute a quorum for the purposes of the
Plan. Provided a quorum is present, the Committee may take action by affirmative vote or consent
of a majority of its members present at a meeting. Meetings may be held telephonically as long as
all members are able to hear one another, and a member of the Committee shall be deemed to be
present for this purpose if he or she is in simultaneous communication by telephone with the other
members who are able to hear one another. In lieu of action at a meeting, the Committee may act by
written consent of a majority of its members.

     Subject to the express provisions of the Plan, the Committee shall have the authority to
construe and interpret the Plan and all Stock Option Agreements (as defined in Section 3.4) entered
into pursuant hereto and to define the terms used therein, to prescribe, adopt, amend and rescind
rules and regulations relating to the administration of the Plan and to make all other
determinations necessary or advisable for the administration of the Plan; provided, however, that
the Committee may delegate nondiscretionary administrative duties to such employees of the Company
as it deems proper; and, provided, further, in its absolute discretion, the Board may at any time
and from time to time exercise any and all rights and duties of the Committee under the Plan.
Subject to the express limitations of the Plan, the Committee shall designate the individuals from
among the class of persons eligible to participate as provided in Section 1.3 who shall receive
options, whether an optionee will receive Incentive Stock Options or Nonstatutory Options, or both,
and the amount, price, restrictions and all other terms and provisions of such options (which need
not be identical).

1

 

     Members of the Committee shall receive such compensation for their services as members as may
be determined by the Board. All expenses and liabilities which members of the Committee incur in
connection with the administration of this Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers or
other persons. The Committee, the Company and the Company’s officers and directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons. No members of the
Committee or Board shall be personally liable for any action, determination or interpretation made
in good faith with respect to the Plan, and all members of the Committee shall be fully protected
by the Company in respect of any such action, determination or interpretation.

     1.3 Participation.

     Officers and other employees of the Company, disinterested directors, consultants and advisors
and other persons who may perform significant services on behalf of the Company shall be eligible
for selection to participate in the Plan upon approval by the Committee; provided, however, that
only “employees” (within the meaning of Section 3401(c) of the Code) of the Company shall be
eligible for the grant of Incentive Stock Options. An individual who has been granted an option
may, if otherwise eligible, be granted additional options if the Committee shall so determine. No
person is eligible to participate in the Plan by matter of right; only those eligible persons who
are selected by the Committee in its discretion shall participate in the Plan.

     1.4 Stock Subject to the Plan.

     Subject to adjustment as provided in Section 3.5, the stock to be offered under the Plan shall
be shares of authorized but unissued Common Stock, including any shares repurchased under the terms
of the Plan or any Stock Option Agreement entered into pursuant hereto. The cumulative aggregate
number of shares of Common Stock to be issued under the Plan shall not exceed 1,500,000, subject to
adjustment as set forth in Section 3.5.

     If any option granted hereunder shall expire or terminate for any reason without having been
fully exercised, the unpurchased shares subject thereto shall again be available for the purposes
of the Plan. For purposes of this Section 1.4, where the exercise price of options is paid by
means of the grantee’s surrender of previously owned shares of Common Stock, only the net number of
additional shares issued and which remain outstanding in connection with such exercise shall be
deemed “issued” for purposes of the Plan.

2. STOCK OPTIONS

     2.1 Exercise Price; Payment.

     (a) The exercise price of each Incentive Stock Option granted under the Plan shall be
determined by the Committee, but shall not be less than 100% of the “Fair Market Value” (as defined
below) of Common Stock on the date of grant. If an Incentive Stock Option is granted to an
employee who at the time such option is granted owns (within the meaning of section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of capital stock of the
Company, the option exercise price shall be at least 110% of the Fair Market Value of Common Stock
on the date of grant. The exercise price of each Nonstatutory Option also shall be determined by
the Committee, but shall not be less than 85% of the Fair Market Value of Common Stock on the date
of grant. The status of each option granted under the Plan as either an Incentive Stock Option or
a Nonstatutory Option shall be determined by the Committee at the time the Committee acts to grant
the option, and shall be clearly identified as such in the Stock Option Agreement relating thereto.

2

 

     “Fair Market Value” for purposes of the Plan shall mean: (i) the closing price of a share of
Common Stock on the principal exchange on which shares of Common Stock are then trading, if any, on
the day immediately preceding the date of grant, or, if shares were not traded on the day preceding
such date of grant, then on the next preceding trading day during which a sale occurred; or (ii) if
Common Stock is not traded on an exchange but is quoted on Nasdaq or a successor quotation system,
(1) the last sales price (if Common Stock is then listed on the Nasdaq Stock Market) or (2) the
mean between the closing representative bid and asked price (in all other cases) for Common Stock
on the day prior to the date of grant as reported by Nasdaq or such successor quotation system; or
(iii) if there is no listing or trading of Common Stock either on a national exchange or
over-the-counter, that price determined in good faith by the Committee to be the fair value per
share of Common Stock, based upon such evidence as it deems necessary or advisable.

     (b) In the discretion of the Committee at the time the option is exercised, the exercise
price of any option granted under the Plan shall be paid in full in cash, by check or by the
optionee’s interest-bearing promissory note (subject to any limitations of applicable state
corporations law) delivered at the time of exercise; provided, however, that subject to the timing
requirements of Section 2.7, in the discretion of the Committee and upon receipt of all regulatory
approvals, the person exercising the option may deliver as payment in whole or in part of such
exercise price certificates for Common Stock of the Company (duly endorsed or with duly executed
stock powers attached), which shall be valued at its Fair Market Value on the day of exercise of
the option, or other property deemed appropriate by the Committee; and, provided further, that,
subject to Section 422 of the Code, so-called cashless exercises as permitted under applicable
rules and regulations of the Securities and Exchange Commission and the Federal Reserve Board shall
be permitted in the discretion of the Committee. Without limiting the Committee’s discretion in
this regard, consecutive book entry stock-for-stock exercises of options (or “pyramiding”) also are
permitted in the Committee’s discretion.

     Irrespective of the form of payment, the delivery of shares issuable upon the exercise of an
option shall be conditioned upon payment by the optionee to the Company of amounts sufficient to
enable the Company to pay all federal, state, and local withholding taxes resulting, in the
Company’s judgment, from the exercise. In the discretion of the Committee, such payment to the
Company may be effected through (i) the Company’s withholding from the number of shares of Common
Stock that would otherwise be delivered to the optionee by the Company on exercise of the option a
number of shares of Common Stock equal in value (as determined by the Fair Market Value of Common
Stock on the date of exercise) to the aggregate withholding taxes, (ii) payment by the optionee to
the Company of the aggregate withholding taxes in cash, (iii) withholding by the Company from other
amounts contemporaneously owed by the Company to the optionee, or (iv) any combination of these
three methods, as determined by the Committee in its discretion.

     2.2 Option Period.

     (a) The Committee shall provide, in the terms of each Stock Option Agreement, when the option
subject to such agreement expires and becomes unexercisable, but in no event will an Incentive
Stock Option granted under the Plan be exercisable after the expiration of ten years from the date
it is granted. Without limiting the generality of the foregoing, the Committee may provide in the
Stock Option Agreement that the option subject thereto expires 30 days following a Termination of
Employment (as defined in Section 3.2 hereof) for any reason other than death or disability, or six
months following a Termination of Employment for disability or following an optionee’s death.

     (b) Outside Date for Exercise. Notwithstanding any provision of this Section 2.2, in
no event shall any option granted under the Plan be exercised after the expiration date of such
option set forth in the applicable Stock Option Agreement.

3

 

     2.3 Exercise of Options.

     Each option granted under the Plan shall become exercisable and the total number of shares
subject thereto shall be purchasable, in a lump sum or in such installments, which need not be
equal, as the Committee shall determine; provided, however, that each option shall become
exercisable in full no later than ten years after such option is granted, and each option shall
become exercisable as to at least 10% of the shares of Common Stock covered thereby on each
anniversary of the date such option is granted; and provided, further, that if the holder of an
option shall not in any given installment period purchase all of the shares which such holder is
entitled to purchase in such installment period, such holder’s right to purchase any shares not
purchased in such installment period shall continue until the expiration or sooner termination of
such holder’s option. The Committee may, at any time after grant of the option and from time to
time, increase the number of shares purchasable in any installment, subject to the total number of
shares subject to the option and the limitations set forth in Section 2.5. At any time and from
time to time prior to the time when any exercisable option or exercisable portion thereof becomes
unexercisable under the Plan or the applicable Stock Option Agreement, such option or portion
thereof may be exercised in whole or in part; provided, however, that the Committee may, by the
terms of the option, require any partial exercise to be with respect to a specified minimum number
of shares. No option or installment thereof shall be exercisable except with respect to whole
shares. Fractional share interests shall be disregarded, except that they may be accumulated as
provided above and except that if such a fractional share interest constitutes the total shares of
Common Stock remaining available for purchase under an option at the time of exercise, the optionee
shall be entitled to receive on exercise a certified or bank cashier’s check in an amount equal to
the Fair Market Value of such fractional share of stock.

     2.4 Transferability of Options.

     Except as the Committee may determine as aforesaid, an option granted under the Plan shall, by
its terms, be nontransferable by the optionee other than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order (as defined by the Code), and
shall be exercisable during the optionee’s lifetime only by the optionee or by his or her guardian
or legal representative. More particularly, but without limiting the generality of the immediately
preceding sentence, an option may not be assigned, transferred (except as provided in the preceding
sentence), pledged or hypothecated (whether by operation of law or otherwise), and shall not be
subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of any option contrary to the provisions of the Plan and the
applicable Stock Option Agreement, and any levy of any attachment or similar process upon an
option, shall be null and void, and otherwise without effect, and the Committee may, in its sole
discretion, upon the happening of any such event, terminate such option forthwith.

     2.5 Limitation on Exercise of Incentive Stock Options.

     To the extent that the aggregate Fair Market Value (determined on the date of grant as
provided in Section 2.1 above) of the Common Stock with respect to which Incentive Stock Options
granted hereunder (together with all other Incentive Stock Option plans of the Company) are
exercisable for the first time by an optionee in any calendar year under the Plan exceeds $100,000,
such options granted hereunder shall be treated as Nonstatutory Options to the extent required by
Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking
options into account in the order in which they were granted.

     2.6 Disqualifying Dispositions of Incentive Stock Options.

     If Common Stock acquired upon exercise of any Incentive Stock Option is disposed of in a
disposition that, under Section 422 of the Code, disqualifies the option holder from the
application of Section 421(a) of the Code, the holder of the Common Stock immediately before the
disposition shall comply with any requirements imposed by the Company in order to enable the
Company to secure the related income tax deduction to which it is entitled in such event.

4

 

     2.7 Certain Timing Requirements.

     At the discretion of the Committee, shares of Common Stock issuable to the optionee upon
exercise of an option may be used to satisfy the option exercise price or the tax withholding
consequences of such exercise, in the case of persons subject to Section 16 of the Securities
Exchange Act of 1934, as amended, only (i) during the period beginning on the third business day
following the date of release of the quarterly or annual summary statement of sales and earnings of
the Company and ending on the twelfth business day following such date or (ii) pursuant to an
irrevocable written election by the optionee to use shares of Common Stock issuable to the optionee
upon exercise of the option to pay all or part of the option price or the withholding taxes made at
least six months prior to the payment of such option price or withholding taxes.

     2.8 No Effect on Employment.

     Nothing in the Plan or in any Stock Option Agreement hereunder shall confer upon any optionee
any right to continue in the employ of the Company, any Parent Corporation or any Subsidiary or
shall interfere with or restrict in any way the rights of the Company, its Parent Corporation and
its Subsidiaries, which are hereby expressly reserved, to discharge any optionee at any time for
any reason whatsoever, with or without cause.

     For purposes of the Plan, “Parent Corporation” shall mean any corporation in an unbroken chain
of corporations ending with the Company if each of the corporations other than the Company then
owns stock possessing 50% or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain. For purposes of the Plan, “Subsidiary” shall mean any
corporation in an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of the other corporations
in such chain.

3. OTHER PROVISIONS

     3.1 Sick Leave and Leaves of Absence.

     Unless otherwise provided in the Stock Option Agreement, and to the extent permitted by
Section 422 of the Code, an optionee’s employment shall not be deemed to terminate by reason of
sick leave, military leave or other leave of absence approved by the Company if the period of any
such leave does not exceed a period approved by the Company, or, if longer, if the optionee’s right
to reemployment by the Company is guaranteed either contractually or by statute. A Stock Option
Agreement may contain such additional or different provisions with respect to leave of absence as
the Committee may approve, either at the time of grant of an option or at a later time.

5

 

     3.2 Termination of Employment.

     For purposes of the Plan “Termination of Employment,” shall mean the time when the
employee-employer relationship between the optionee and the Company, any Subsidiary or any Parent
Corporation is terminated for any reason, including, but not by way of limitation, a termination by
resignation, discharge, death, disability or retirement; but excluding (i) terminations where there
is a simultaneous reemployment or continuing employment of an optionee by the Company, any
Subsidiary or any Parent Corporation, (ii) at the discretion of the Committee, terminations which
result in a temporary severance of the employee-employer relationship, and (iii) at the discretion
of the Committee, terminations which are followed by the simultaneous establishment of a consulting
relationship by the Company, a Subsidiary or any Parent Corporation with the former employee.
Subject to Section 3.1, the Committee, in its absolute discretion, shall determine the affect of
all matters and questions relating to Termination of Employment; provided, however, that, with
respect to Incentive Stock Options, a leave of absence or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent that such leave of
absence or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and
the then-applicable regulations and revenue rulings under said Section.

     3.3 Issuance of Stock Certificates.

     Upon exercise of an option, the Company shall deliver to the person exercising such option a
stock certificate evidencing the shares of Common Stock acquired upon exercise. Notwithstanding
the foregoing, the Committee in its discretion may require the Company to retain possession of any
certificate evidencing stock acquired upon exercise of an option which remains subject to
repurchase under the provisions of the Stock Option Agreement or any other agreement signed by the
optionee in order to facilitate such repurchase provisions.

     In order to enforce any restrictions imposed upon Common Stock issued upon exercise of any
option granted under the Plan or to which such common stock may be subject, the Committee may cause
a legend or legends to be placed on any share certificates representing such Common Stock.

     3.4 Terms and Conditions of Options.

     Each option granted under the Plan shall be evidenced by a written Stock Option Agreement
(“Stock Option Agreement”) between the option holder and the Company providing that the option is
subject to the terms and conditions of the Plan and to such other terms and conditions not
inconsistent therewith as the Committee may deem appropriate in each case.

     3.5 Adjustments Upon Changes in Capitalization; Merger and Consolidation.

     If the outstanding shares of Common Stock are changed into, or exchanged for cash or a
different number or kind of shares or securities of the Company or of another corporation through
reorganization, merger, recapitalization, reclassification, stock split-up, reverse stock split,
stock dividend, stock consolidation, stock combination, stock reclassification or similar
transaction, an appropriate adjustment shall be made by the Committee in the number and kind of
shares as to which options may be granted. In the event of such a change or exchange, other than
for shares or securities of another corporation or by reason of reorganization, the Committee shall
also make a corresponding adjustment changing the number or kind of shares and the exercise price
per share allocated to unexercised options or portions thereof, which shall have been granted prior
to any such change, shall likewise be made. Any such adjustment, however, shall be made without
change in the total price applicable to the unexercised portion of the option (except for any
change in the aggregate price resulting from rounding-off of share quantities or prices).

6

 

     In the event of a “spin-off” or other substantial distribution of assets of the Company which
has a material diminutive effect upon the Fair Market Value of the Common Stock, the Committee in
its discretion shall make an appropriate and equitable adjustment to the exercise prices of options
then outstanding under the Plan.

     Where an adjustment under this Section 3.5 of the type described above is made to an Incentive
Stock Option, the adjustment will be made in a manner which will not be considered a “modification”
under the provisions of subsection 424(b)(3) of the Code.

     In connection with the dissolution or liquidation of the Company or a partial liquidation
involving 50% or more of the assets of the Company, a reorganization of the Company in which
another entity is the survivor, a merger or reorganization of the Company under which more than 50%
of the Common Stock outstanding prior to the merger or reorganization is converted into cash or
into a security of another entity, a sale of more than 50% of the Company’s assets, or a similar
event that the Committee determines, in its discretion, would materially alter the structure of the
Company or its ownership, the Committee, upon 30 days prior written notice to the option holders,
may, in its discretion, do one or more of the following: (i) shorten the period during which
options are exercisable (provided they remain exercisable for at least 30 days after the date the
notice is given); (ii) accelerate any vesting schedule to which an option is subject; (iii) arrange
to have the surviving or successor entity grant replacement options with appropriate adjustments in
the number and kind of securities and option prices, or (iv) cancel options upon payment to the
option holders in cash, with respect to each option to the extent then exercisable (including any
options as to which the exercise has been accelerated as contemplated in clause (ii) above), of any
amount that is the equivalent of the Fair Market Value of the Common Stock (at the effective time
of the dissolution, liquidation, merger, reorganization, sale or other event) or the fair market
value of the option. In the case of a change in corporate control, the Committee may, in
considering the advisability or the terms and conditions of any acceleration of the exercisability
of any option pursuant to this Section 3.5, take into account the penalties that may result
directly or indirectly from such acceleration to either the Company or the option holder, or both,
under Section 280G of the Code, and may decide to limit such acceleration to the extent necessary
to avoid or mitigate such penalties or their effects.

     No fractional share of Common Stock shall be issued under the Plan on account of any
adjustment under this Section 3.5.

     3.6 Rights of Participants and Beneficiaries.

     The Company shall pay all amounts payable hereunder only to the option holder or beneficiaries
entitled thereto pursuant to the Plan. The Company shall not be liable for the debts, contracts or
engagements of any optionee or his or her beneficiaries, and rights to cash payments under the Plan
may not be taken in execution by attachment or garnishment, or by any other legal or equitable
proceeding while in the hands of the Company.

     3.7 Government Regulations.

     The Plan, and the grant and exercise of options and the issuance and delivery of shares of
Common Stock under options granted hereunder, shall be subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to state and federal
securities law) and federal margin requirements and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable
in connection therewith. Any securities delivered under the Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by the Company, provide
such assurances and representations to the Company as the Company may deem necessary or desirable
to assure compliance with all applicable legal requirements. To the extent permitted by applicable
law, the Plan and options granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.

7

 

     3.8 Amendment and Termination.

     The Board or the Committee may at any time suspend, amend or terminate the Plan and may, with
the consent of the option holder, make such modifications of the terms and conditions of such
option holder’s option as it shall deem advisable, provided, however, that, without approval of the
Company’s stockholders given within twelve months before or after the action by the Board or the
Committee, no action of the Board or the Committee may, (A) materially increase the benefits
accruing to participants under the Plan; (B) materially increase the number of securities which may
be issued under the Plan; or (C) materially modify the requirements as to eligibility for
participation in the Plan. No option may be granted during any suspension of the Plan or after
such termination. The amendment, suspension or termination of the Plan shall not, without the
consent of the option holder affected thereby, alter or impair any rights or obligations under any
option theretofore granted under the Plan. No option way be granted during any period of
suspension nor after termination of the Plan, and in no event may any option be granted under the
Plan after the expiration of ten years from the date the Plan is adopted by the Board.

     3.9 Time of Grant And Exercise of Option.

     An option shall be deemed to be exercised when the Secretary of the Company receives written
notice from an option holder of such exercise, payment of the exercise price determined pursuant to
Section 2.1 of the Plan and set forth in the Stock Option Agreement, and all representations,
indemnifications and documents reasonably requested by the Committee.

     3.10 Privileges of Stock Ownership; Non-Distributive Intent; Reports to Option
Holders.

     A participant in the Plan shall not be entitled to the privilege of stock ownership as to any
shares of Common Stock not actually issued to the optionee. Upon exercise of an option at a time
when there is not in effect under the Securities Act of 1933, as amended, a Registration Statement
relating to the Common Stock issuable upon exercise or payment therefor and available for delivery
a Prospectus meeting the requirements of Section 10(a)(3) of said Act, the optionee shall represent
and warrant in writing to the Company that the shares purchased are being acquired for investment
and not with a view to the distribution thereof.

     The Company shall furnish to each optionee under the Plan the Company’s annual report and such
other periodic reports, if any, as are disseminated by the Company in the ordinary course to its
stockholders.

     3.11 Legending Share Certificates.

     In order to enforce any restrictions imposed upon Common Stock issued upon exercise of an
option granted under the Plan or to which such Common Stock may be subject, the Committee may cause
a legend or legends to be placed on any share certificates representing such Common Stock, which
legend or legends shall make appropriate reference to such restrictions, including, but not limited
to, a restriction against sale of such Common Stock for any period of time as may be required by
applicable laws or regulations. If any restriction with respect to which a legend was placed on
any certificate ceases to apply to Common Stock represented by such certificate, the owner of the
Common Stock represented by such certificate may require the Company to cause the issuance of a new
certificate not bearing the legend.

     Additionally, and not by way of limitation, the Committee may impose such restrictions on any
Common Stock issued pursuant to the Plan as it may deem advisable, including, without limitation,
restrictions under the requirements of any stock exchange upon which Common Stock is then traded.

     3.12 Use of Proceeds.

     Proceeds realized pursuant to the exercise of options under the Plan shall constitute general
funds of the Company.

8

 

     3.13 Changes in Capital Structure; No Impediment to Corporate Transactions.

     The existence of outstanding options under the Plan shall not affect the Company’s right to
effect adjustments, recapitalizations, reorganizations or other changes in its or any other
corporation’s capital structure or business, any merger or consolidation, any issuance of bonds,
debentures, preferred or prior preference stock ahead of or affecting Common Stock, the dissolution
or liquidation of the Company’s or any other corporation’s assets or business, or any other
corporate act, whether similar to the events described above or otherwise.

     3.14 Effective Date of the Plan.

     The Plan shall be effective as of the date of its approval by the stockholders of the Company
within twelve months after the date of the Board’s initial adoption of the Plan. Options may be
granted but not exercised prior to stockholder approval of the Plan. If any options are so granted
and stockholder approval shall not have been obtained within twelve months of the date of adoption
of this Plan by the Board of Directors, such options shall terminate retroactively as of the date
they were granted.

     3.15 Termination.

     The Plan shall terminate automatically as of the close of business on the day preceding the
tenth anniversary date of its adoption by the Board or earlier as provided in Section 3.8. Unless
otherwise provided herein, the termination of the Plan shall not affect the validity of any option
agreement outstanding at the date of such termination.

     3.16 No Effect on Other Plans.

     The adoption of the Plan shall not affect any other compensation or incentive plans in effect
for the Company, any Subsidiary or any Parent Corporation. Nothing in the Plan shall be construed
to limit the right of the Company (i) to establish any other forms of incentives or compensation
for employees of the Company, any Subsidiary or any Parent Corporation or (ii) to grant or assume
options or other rights otherwise than under the Plan in connection with any proper corporate
purpose including but not by way of limitation, the grant or assumption of options in connection
with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock
or assets of any corporation, partnership, firm or association.

9

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}]]