Document:

EX-10.1

 

Exhibit 10.1

Amended

August 30, 2007

Hartville Group, Inc.

2006 Stock Option Plan

(as adopted on February 10, 2006 and amended August 30, 2007)

     1. PURPOSE AND DEFINITIONS. The purpose of this Plan is to provide incentives to
attract retain and motivate eligible persons whose present and potential contributions are
important to the success of the Company, its Parent and Subsidiaries, by offering them an
opportunity to participate in the Company’s future performance through awards of Options.
Capitalized terms not defined in the text are defined in Section 22 hereof.

     2. SHARES SUBJECT TO THE PLAN. Subject to Section 16 hereof, the total number of
Shares reserved and available for grant and issuance pursuant to this Plan will be 50,000,000
Shares. All such shares are eligible to be issued as Options, as determined by the Committee or
the Board. Subject to Section 16 hereof, Shares that are subject to issuance upon exercise of an
Option but cease to be subject to such Option for any reason other than exercise of such Option
will be available for grant and issuance in connection with future Options under this Plan. At all
times the Company will reserve and keep available a sufficient number of Shares as will be required
to satisfy the requirements of all outstanding Options granted under this Plan. The Shares that
may be issued under the Plan may be authorized but unissued Shares or issued Shares reacquired by
the Company, including without limitation Shares purchased on the open market, and held as treasury
shares.

     3. ELIGIBILITY. Options may be granted to employees, officers, directors or
consultants (provided such consultants render bona fide services). A person may be granted more
than one Option under this Plan.

     4. ADMINISTRATION.

          4.1 Committee Authority. This Plan will be administered by the Committee. Subject
to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the
Committee has full power to implement and carry out this Plan. Without limitation, the Committee
has the authority to:

          (a) construe and interpret this Plan, any Stock Option Agreement or Exercise Agreement (each
as defined in Section 5 hereof) and any other agreement or document executed pursuant to this Plan;

          (b) prescribe, amend and rescind rules and regulations relating to this Plan;

          (c) select persons to receive Options;

          (d) determine the form and terms of Options;

          (e) determine the number of Shares or other consideration subject to Options;

          (f) determine whether Options will be granted singly, in combination with, in tandem with, in
replacement of, or as alternatives to, any Options granted under this Plan or any awards under any
other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company;

          (g) grant waivers of Plan or Option conditions;

          (h) determine the vesting and exercisability of Options;

          (i) correct any defect, supply any omission, or reconcile any inconsistency in this Plan, any
Option or any Stock Option Agreement or Exercise Agreement (each as defined in Section 5 hereof);

          (j) extend the period in which a Participant may exercise a vested Option following a
Termination;

 

 

          (k) determine whether an Option has been earned; and

          (l) make all other determinations necessary or advisable for the administration of this
Plan.

          Other provisions of the Plan notwithstanding, the Board shall perform the functions of the
Committee for purposes of granting awards to directors who serve on the Committee, and the Board
may perform any function of the Committee under the Plan for any other purpose, including without
limitation for the purpose of ensuring that transactions under the Plan by Participants who are
then subject to Section 16 of the Exchange Act, as amended, in respect of the Company are exempt
under Rule 16b-3. In any case in which the Board is performing a function of the Committee under
the Plan, each reference to the Committee herein shall be deemed to refer to the Board, except
where the context otherwise requires.

          4.2 Committee Discretion. Any determination made by the Committee with respect to
any Option will be made in its sole discretion at the time of grant of the Option or, unless in
contravention of any express term of this Plan or Option, and subject to Section 5.8 hereof, at any
later time, and such determination will be final and binding on the Company and on all persons
having an interest in any Option under this Plan. The Committee may delegate to one or more
officers of the Company the authority to grant Options under this Plan; provided that such officer
cannot grant options to himself or herself, can only grant options to subordinate employees and
provided, further, that such delegation is limited to a specific number of shares to be granted at
a specified option price and subject to a vesting schedule approved by the Committee.

     5. OPTIONS. The Committee may grant Options to eligible persons as set forth in
Section 3 and will determine the number of Shares subject to the Option, the Exercise Price of the
Option, the period during which the Option may be exercised, and all other terms and conditions
of the Option, subject to the following:

          5.1 Form of Option Grant. Each Option granted under this Plan will be evidenced by
an Agreement (“STOCK OPTION AGREEMENT”) which will be in such form and contain such provisions
(which need not be the same for each Participant) as the Committee may from time to time approve,
and which will comply with and be subject to the terms and conditions of this Plan.

          5.2 Date of Grant. The date of grant of an Option will be the date on which the
Committee makes the determination to grant such Option (or the date that an officer with delegated
authority makes the determination to grant such Option), unless otherwise specified by the
Committee. The Stock Option Agreement and a copy of this Plan will be delivered to the Participant
within a reasonable time after the granting of the Option.

          5.3 Exercise Period. Options may be exercisable on such vesting or other schedule
within the times or upon the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option will be exercisable after the
expiration of ten (10) years from the date the Option is granted. The Committee may provide for
Options to become exercisable at one time or from time to time, periodically or otherwise, in such
number of Shares or percentage of Shares and based on such criteria as the Committee determines.

          5.4 Exercise Price. The Exercise Price of an Option will be determined by the
Committee when the Option is granted and may not be less than the Fair Market Value on the date
of grant. Payment for the Shares purchased must be made in accordance with Section 6 hereof.

          5.5 Method of Exercise. Options may be exercised only by delivery to the Company of
a written stock option exercise agreement (the “EXERCISE AGREEMENT”) in a form approved by the
Committee (which need not be the same for each Participant), stating the number of Shares being
purchased, the restrictions imposed on the Shares purchased under such Exercise Agreement, if any,
and such representations and agreements regarding Participant’s investment intent and access to
information and other matters, if any, as may be required or desirable by the Company to comply
with applicable securities laws, together with payment in full of the Exercise Price, and any
applicable taxes, for the number of Shares being purchased.

          5.6 Termination. Subject to earlier termination pursuant to Section 16 hereof and
subject to the terms set forth in any Stock Option Agreement approved by the Committee, exercise of
an Option will always be subject to the following:

(a) If a Participant who is an employee, officer, director or consultant to the Company or a
Parent or Subsidiary of the Company is Terminated for any reason other than death, Disability
or Cause, then the Participant may exercise such Participant’s Options, only to the extent
that such Options are vested and exercisable on the Termination Date and such Options must be
exercised by the Participant, if at all, within three (3) months after the Termination Date,
but in any event, no later than the expiration date of the Options.

(b) If a Participant who is an employee, officer, director or consultant to the Company or a
Parent or Subsidiary of the Company is Terminated because of the Participant’s death or
Disability (or the Participant dies within three (3) months after Participant’s Termination
other than for Cause), then the Participant may exercise such Participant’s Options, only to
the

 

 

extent that such Options are vested and exercisable on the Termination Date and such
Options must be exercised by
Participant (or Participant’s legal representative or authorized assignee), if at all, within
twelve (12) months after the Termination Date, but in any event no later than the
expiration date of the Options.

(c) If a Participant who is an employee, officer, director or consultant to the Company or a
Parent or Subsidiary of the Company is Terminated for Cause, as determined by the Committee
in its sole discretion, then the Participant’s Options shall expire on such Participant’s
Termination Date, or at such later time and on such conditions as are determined by the
Committee.

          5.7 Limitations on Exercise. The Committee may specify a reasonable minimum number
of Shares that may be purchased on exercise of an Option, provided that such minimum number will
not prevent Participant from exercising the Option for the full number of Shares for which it is
then exercisable.

          5.8 Modification, Extension or Renewal. The Committee may modify,  extend or renew
outstanding Options and authorize the grant of new Options in substitution therefor, provided that
any such action may not, without the written consent of a Participant, impair any of such
Participant’s rights under any Option previously granted. The Committee may reduce the Exercise
Price of outstanding Options without the consent of Participants affected by a written notice to
them; provided, however, that the Exercise Price may not be reduced below the minimum Exercise
Price that would be permitted under Section 5.4 hereof for Options granted on the date the action
is taken to reduce the Exercise Price.

     6. PAYMENT FOR SHARE PURCHASES.

          6.1 Payment. Payment for Shares purchased pursuant to this Plan may be made in cash
(by check) or, where expressly approved for the Participant by the Committee and where permitted by
law:

(a) by cancellation of indebtedness of the Company to the                     Participant;

(b) by surrender of unrestricted shares that have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which such Option will be
exercised and are clear of all liens, claims, encumbrances or security interests;

(c) by waiver of compensation due or accrued to the Participant for                       services
rendered;

(d) through a cashless exercise program implemented by the Company and approved by the
Committee in connection with this Plan; or

(f) by any combination of the foregoing.

     7. WITHHOLDING TAXES. 

          7.1 Withholding Generally. Whenever Shares are to be issued in satisfaction of
Options granted under this Plan, the Company may require the Participant to remit to the Company an
amount sufficient to satisfy federal, state and local withholding tax requirements prior to the
delivery of any certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Options are to be made in cash, such payment will be net of an amount sufficient
to satisfy federal, state, and local withholding tax requirements.

          7.2 Stock Withholding. When, under applicable tax laws, the  Participant incurs tax
liability in connection with the exercise or vesting of any Option that is subject to tax
withholding and the Participant is obligated to pay the Company the amount required to be withheld,
the Committee may in its sole discretion allow the Participant to satisfy the minimum withholding
tax obligation by electing to have the Company withhold from the Shares to be issued that number of
Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined
on the date that the amount of tax to be withheld is to be determined. All elections by a
Participant to have Shares withheld for this purpose will be made in accordance with the
requirements established by the Committee and be in writing in a form acceptable to the Committee.

     8. PRIVILEGES OF STOCK OWNERSHIP. No Participant will have any of the rights of a
stockholder with respect to any Shares until the Shares are issued to the Participant. After
Shares are issued to the Participant, the Participant will be a stockholder and have all the rights
of a stockholder with respect to such Shares, including the right to vote and receive all dividends
or other distributions made or paid with respect to such Shares.

     9. TRANSFERABILITY. Options granted under this Plan, and any interest therein, will
not be transferable or assignable by Participant, and may not be made subject to execution,
attachment or similar process, otherwise than by will or by the laws of descent

 

 

and distribution.
During the lifetime of the Participant an Option will be exercisable only by the Participant
or Participant’s legal
representative and any elections with respect to an Option may be made only by the Participant or
Participant’s legal representative. Notwithstanding the foregoing to the contrary, the Committee
may, in its sole discretion and in the manner established by the Committee, provide for the
irrevocable transfer, without payment of consideration, of any Option by a Participant to such
Participant’s spouse, children, grandchildren, nieces, or nephews, to the trustee of any trust for
the principal benefit of one or more such persons, or to a partnership whose only partners are one
or more such persons. In the case of such a permitted transfer, the Option shall be exercisable
only by the transferee or such transferee’s legal representative.

     10.  DESIGNATION OF A BENEFICIARY. A Participant may file a written designation of a
beneficiary who is to receive the Participant’s rights pursuant to a grant of Options upon the
death of the Participant. The Participant may include his or her grant of Options in an omnibus
beneficiary designation for all benefits under the Plan. To the extent that a Participant has
completed a designation of beneficiary while employed with the Company, or serving on its Board or
as a consultant, such beneficiary shall remain in effect, to the extent enforceable under
applicable law, with respect to any grant of Options thereunder.

          Such designation of beneficiary may be changed by the Participant at any time by written
notice. In the event of the death of a Participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such death, the Company shall allow the
legal representative of the Participant’s estate to exercise the grant of Options.

     11. CERTIFICATES. All certificates for Shares or other securities delivered under
this Plan will be subject to such stock transfer orders, legends and other restrictions as the
Committee may deem necessary or advisable, including restrictions under any applicable federal,
state or foreign securities law, or any rules, regulations and other requirements of the SEC or any
stock exchange or automated quotation system upon which the Shares may be listed or quoted.

     12. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares,
the Committee may require the Participant to deposit all certificates representing Shares, together
with stock powers or other instruments of transfer approved by the Committee, appropriately
endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until
such restrictions have lapsed or terminated, and the Committee may cause a legend or legends
referencing such restrictions to be placed on the certificates.

     13. EXCHANGE AND BUYOUT OF OPTIONS. The Committee may, at any time or from time to
time, authorize the Company, with the consent of the respective Participants, to issue new Options
in exchange for the surrender and cancellation of any or all outstanding Options. The Committee
may at any time buy from a Participant an Option previously granted with payment in cash, Common
Stock of the Company (including restricted stock) or other consideration, based on such terms and
conditions as the Committee and the Participant may agree.

     14. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Option will not be effective
unless such Option is in compliance with all applicable federal and state securities laws, rules
and regulations of any governmental body, and the requirements of any stock exchange or automated
quotation system upon which the Shares may then be listed or quoted, as they are in effect on the
date of grant of the Option and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue or deliver
certificates for Shares under this Plan prior to (a) obtaining any approvals from governmental
agencies that the Company determines are necessary or advisable, and/or (b) compliance with any
exemption, completion of any registration or other qualification of such Shares under any state or
federal law or ruling of any governmental body that the Company determines to be necessary or
advisable. The Company will be under no obligation to register the Shares with the SEC or to
effect compliance with the exemption, registration, qualification or listing requirements of any
state securities laws, stock exchange or automated quotation system, and the Company will have no
liability for any inability or failure to do so.

     15. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted under this
Plan will confer or be deemed to confer on any Participant any right to continue in the employ of,
or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company
or limit in any way the right of the Company or any Parent or Subsidiary of the Company to
terminate Participant’s employment or other relationship at any time, with or without cause.

     16. CORPORATE TRANSACTIONS.

          16.1 Assumption or Replacement of Options by Successor or Acquiring Company. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger, acquisition consolidation,
reorganization or other transaction or series of related transactions in which the Company is not
the surviving corporation (other than a merger or consolidation with a wholly owned subsidiary,
a reincorporation of the Company in a different jurisdiction, or a merger, acquisition
consolidation, reorganization
or other transaction or series of related transactions in which the
shares of capital stock of the Company outstanding immediately prior to such merger, acquisition
consolidation, reorganization or other transaction or series of related transactions continue to
represent, or are converted or exchanged for shares of capital stock which represent, immediately
following such merger, acquisition consolidation, reorganization

 

 

or other transaction or series of
related transactions at least a majority, by voting power, of the capital stock of the surviving or
resulting corporation), (c) a merger, acquisition consolidation, reorganization or other
transaction or series of related transactions in which the Company is the surviving corporation but
after which the shares of capital stock of the Company outstanding immediately prior to such
merger, acquisition consolidation, reorganization or other transaction or series of related
transactions no longer represent, or are converted or exchanged for shares of capital stock which
no longer represent, at least a majority, by voting power, of the capital stock of the Company or
(d) the sale of all or substantially all of the assets of the Company, any or all outstanding
Options may be assumed, converted or replaced by the successor or acquiring corporation (if any),
which assumption, conversion or replacement will be binding on all Participants. In the
alternative, the successor or acquiring corporation may substitute equivalent Options or provide
substantially similar consideration to Participants as was provided to stockholders (after taking
into account the existing provisions of the Options). In the event such successor or acquiring
corporation (if any) does not assume or substitute Options, as provided above, pursuant to a
transaction described in this Section 16.1, then notwithstanding any other provision in this Plan
to the contrary, the vesting of such Options will accelerate and the Options will become
exercisable in full prior to the consummation of such event at such times and on such conditions as
the Committee determines, and if such Options are not exercised prior to the consummation of the
corporate transaction, they shall terminate in accordance with the provisions of this Plan.

          16.2 Other Treatment of Options. Subject to any greater rights granted to
Participants under the foregoing provisions of this Section 16, in the event of the occurrence of
any transaction described in Section 16.1 hereof, any outstanding Options will be treated as
provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation or
sale of assets.

          16.3 Assumption of Options by the Company. The Company, from time to time, also may
substitute or assume outstanding options granted by another company, whether in connection with an
acquisition of such other company or otherwise, by either (a) granting an Option under this Plan in
substitution of such other company’s option, or (b) assuming such option as if it had been granted
under this Plan if the terms of such assumed option could be applied to an Option granted under
this Plan. Such substitution or assumption will be permissible if the holder of the substituted or
assumed option would have been eligible to be granted an Option under this Plan if the other
company had applied the rules of this Plan to such grant. In the event the Company assumes an
option granted by another company, the terms and conditions of such option will remain unchanged
(except that the exercise price and the number and nature of shares issuable upon exercise of any
such option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event
the Company elects to grant a new Option rather than assuming an existing option, such new Option
may be granted with a similarly adjusted Exercise Price.

          16.4 Adjustment of Shares. In the event that the number of the Company’s outstanding
shares of Common Stock is changed by a stock dividend, recapitalization, stock split, reverse stock
split, subdivision, combination, reclassification or other similar change in the capital structure
of the Company without consideration, then (a) the number of Shares reserved for issuance
under this Plan and (b) the Exercise Prices of and number of Shares subject to outstanding Options,
will be proportionately adjusted by the Committee, subject to any required action by the Board or
the stockholders of the Company and compliance with applicable securities laws; provided, however,
that fractions of a Share will not be issued but will either be paid in cash at the Fair Market
Value of such fraction of a Share or will be rounded down to the nearest whole Share, as determined
by the Committee in its discretion. The Board or the Committee shall give notice of any adjustments
to each Participant granted an Option under this Plan, and such adjustments shall be effective and
binding on all Participants. If because of one or more recapitalizations, reorganizations or other
corporate events, the holders of outstanding Shares receive something other than Shares, then upon
exercise of an Option, the Participant will receive what the holder would have owned if the holder
had exercised the Option immediately before the first such corporate event and not disposed of
anything the holder received as a result of the corporate event.

     17. ADOPTION AND APPROVAL. This Plan will become effective on the date that it is
adopted by the Board (the “EFFECTIVE DATE”). Upon the Effective Date, the Board may grant Options
pursuant to this Plan.

     18. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this
Plan will terminate ten (10) years from the Effective Date. This Plan and all agreements hereunder
shall be governed by and construed in accordance with the laws of the State of Nevada.

     19. AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.8 hereof, the Board may
at any time terminate or amend this Plan in any respect, including without limitation amendment of
any form of Stock Option Agreement or instrument to be executed pursuant to this Plan. However, no
such action may prejudice the rights of any Participant who has prior thereto been granted Options
under this Plan.

     20. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the
submission of this Plan to the stockholders of the Company for approval, nor any provision of this
Plan will be construed as creating any limitations on the power of the Board to adopt such
additional compensation arrangements as it may deem desirable, including, without limitation,
the granting of stock options or any other equity awards outside of this Plan, and such
arrangements may be either generally applicable or applicable only in specific cases.

 

 

     21. COMPLIANCE WITH RULE 16B-3. This Plan is intended to comply in all respects with
Rule 16b-3 with respect to Participants who are subject to Section 16 of the Exchange Act, and at
any time that the Company is a reporting company pursuant to Section 13 or 15(d) of the Exchange
Act, any provision(s) herein that is/are contrary to Rule 16b-3 shall be deemed null and void to
the extent appropriate by either the Committee or the Board. If, with respect to Participants who
are subject to Section 16 of the Exchange Act, an exemption from Section 16(b) of the Exchange Act
is not otherwise available under Exchange Act Rule 16b-3(d)(1) or (2), then Shares purchased upon
exercise of an Option granted to such Participant may not be sold before at least six months have
elapsed from the date the Option was granted.

     22. DEFINITIONS. As used in this Plan, the following terms will have the following
meanings:

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

“CAUSE” means Termination because of (i) any willful material violation by the Participant of
any law or regulation applicable to the business of the Company or a Parent or Subsidiary of
the Company, (ii) the Participant’s conviction for or guilty plea to, a felony or a crime
involving moral turpitude or any willful perpetration by the Participant of a common
law fraud, (iii) the Participant’s commission of an act of personal dishonesty which involves
a personal profit in connection with the Company or any other entity having a business
relationship with the Company, (iv) any material breach by the Participant of any material
provision of any agreement or understanding between the Company or a Parent or Subsidiary of
the Company and the Participant regarding the terms of the Participant’s service as an
employee, director or consultant to the Company or a Parent or Subsidiary of the Company,
including without limitation, the willful and continued failure or refusal of the Participant
to perform the material duties required of such Participant as an employee, director or
consultant of the Company or a Parent or Subsidiary of the Company, other than as a result of
having a Disability, or a breach of any applicable invention assignment and confidentiality
agreement, non-competition agreement or similar agreement between the Company or a Parent or
Subsidiary of the Company and the Participant, (v) Participant’s intentional disregard of the
policies of the Company or a Parent or Subsidiary of the Company so as to cause loss, damage
or injury to the property, reputation or employees of the Company or a Parent or Subsidiary
of the Company, or (vi) any other misconduct by the Participant which is materially injurious
to the financial condition or business reputation of, or is otherwise materially injurious
to, the Company or a Parent or Subsidiary of the Company.

“CODE” means the Internal Revenue Code of 1986, as amended, or any successor thereto,
together with rules, regulations and interpretations promulgated thereunder.

“COMMITTEE” means the Compensation Committee of the Board or another committee of the Board
specifically appointed by the Board to administer this Plan. Any such Committee appointed by
the Board specifically to administer this Plan shall consist of not less than two members and
shall consist solely of non-employee directors. If neither the Compensation Committee nor a
separate Plan committee is appointed, the Board shall act as the Committee.

“COMPANY” means Hartville Group, Inc., a Nevada corporation.

“DISABILITY” means a total and permanent disability as defined in Section 22(e)(3) of the
Code.

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

“EXERCISE PRICE” means the price at which a holder of an Option may purchase the Shares
issuable upon exercise of the Option.

“FAIR MARKET VALUE” means, as of any date, the value of a share of the Company’s Common Stock
determined as follows:

(a) if such shares of Common Stock are then quoted on the NASDAQ National Market, its
closing price on the NASDAQ National Market on the business day immediately preceding
the date of determination;

(b) if such shares of Common Stock are publicly traded and are then listed on
a national securities exchange, its closing price on the business day immediately
preceding the date of determination on the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading;

(c) if such shares of Common Stock are publicly traded but are not quoted on
the NASDAQ National Market nor listed or admitted to trading on a national securities
exchange, the average of the closing bid and ask prices on the business day
immediately preceding the date of determination as reported by National Association of
Securities

 

 

Dealers, Inc. (or, if not so reported, as otherwise reported by any newspaper or other
source as the Board may determine); or

(d) if none of the foregoing is applicable, by the Committee in good faith after
reasonable investigation.

“OPTION” means an award of an option to purchase Shares, which is not intended to qualify as
an incentive stock option under Section 422 of the Code, pursuant to Section 5 hereof.

“PARENT” means a “parent corporation,” whether now or hereafter existing, as defined in
Section 424(e) of the Code.

“PARTICIPANT” means a person who receives an Option under this Plan.

“PLAN” means this 2006 Stock Option Plan, as amended from time to time.

“RULE 16B-3” means Rule 16b-3 promulgated by the SEC under the Exchange Act.

“SEC” means the Securities and Exchange Commission.

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

“SHARES” means the shares of Common Stock of the Company, $0.001 par value per share,
reserved for issuance under this Plan, as adjusted pursuant to Sections 2 and 16 hereof,
and any successor security.

“SUBSIDIARY” means a “subsidiary corporation,” whether now or hereafter existing, as defined
in Section 424(f) of the Code.

“TERMINATION” or “TERMINATED” means, for purposes of this Plan with respect to a Participant,
that the Participant has for any reason ceased to provide services as an employee, officer,
director or consultant to the Company or a Parent or Subsidiary of the Company. A
Participant will not be deemed to have ceased to provide services in the case of (i) sick
leave, (ii) military leave, or (iii) any other leave of absence approved by the Committee,
provided that such leave is for a period of not more than ninety (90) days,
unless reinstatement upon the expiration of such leave is guaranteed by contract or statute
or unless provided otherwise pursuant to formal policy adopted from time to time by the
Company and issued and promulgated in writing. In the case of any Participant on (i) sick
leave, (ii) military leave or (iii) an approved leave of absence, the Committee may make such
provisions respecting suspension of vesting of the Option while the Participant is on leave
from the Company or a Parent or Subsidiary of the Company as the Committee may deem
appropriate, except that in no event may an Option be exercised after the expiration of the
term set forth in the Stock Option Agreement. The Committee will have sole discretion
to determine whether a Participant has ceased to provide services and the effective date on
which the Participant ceased to provide services (the “TERMINATION DATE”).

     23. PLAN IS UNFUNDED. Insofar as it provides for the grant of Options, the Plan
shall be unfunded. Any liability of the Company to any Participant with respect to a grant of
Options shall be based solely upon any contractual obligations which may be created by the Plan; no
such obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on
any property of the Company. Neither the Company nor the Board shall be required to give any
security or bond for the performance of any obligation which may be created by this Plan.

     24. APPROVALS. This Plan was adopted by the Board on February 10, 2006.

 

 

SIGNATURE

          In accordance with the requirements of the Exchange Act of 1934, the Registrant has caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	 	 	 	 	 
	 	 	 
	November 14, 2007 	/s/ Dennis Rushovich
 	 
	 	Dennis Rushovich 	 
	 	Chief Executive Officer

(PRINCIPAL EXECUTIVE OFFICER) 	 
	 
	 	 	 
	November 14, 2007 	/s/ Christopher R. Sachs
 	 
	 	Christopher R. Sachs 	 
	 	Chief Financial Officer

(PRINCIPAL ACCOUNTING OFFICER)exv4w3

 

EXHIBIT
4.3

ATHERSYS, INC.

EQUITY INCENTIVE COMPENSATION PLAN

     1. Purpose. The purpose of this Equity Incentive Compensation Plan is to attract and retain
officers, other employees, Directors, consultants and other
independent contractors of Athersys,
Inc., a Delaware corporation (the “Company”), and its Subsidiaries and to provide to such persons
incentives and rewards for performance.

     2. Definitions. As used in this Plan,

          (a) “Appreciation Right” means a right granted pursuant to Section 5 of this Plan, and will
include both Free-Standing Appreciation Rights and Tandem Appreciation Rights.

          (b) “Base Price” means the price to be used as the basis for determining the Spread upon the
exercise of a Free-Standing Appreciation Right or a Tandem Appreciation Right.

          (c) “Board” means the Board of Directors of the Company and, to the extent of any delegation
by the Board to a committee (or subcommittee thereof) pursuant to Section 10 of this Plan, such
committee (or subcommittee).

          (d) “Change in Control” has the meaning set forth in Section 12 of this Plan.

          (e) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

          (f) “Common Shares” means the shares of common stock, par value $0.001 per share, of the
Company or any security into which such Common Shares may be changed by reason of any transaction
or event of the type referred to in Section 11 of this Plan.

          (g)
“Company” means Athersys, Inc., a Delaware corporation and its successors.

          (h) “Date of Grant” means the date specified by the Board on which a grant of Option Rights,
Appreciation Rights, Performance Shares, Performance Units or other awards contemplated by Section
9 of this Plan, or a grant or sale of Restricted Stock, Restricted Stock Units, or other awards
contemplated by Section 9 of this Plan will become effective (which date will not be earlier than
the date on which the Board takes action with respect thereto).

          (i) “Director” means a member of the Board of Directors of the Company.

          (j) “Effective Date” means the date of approval of the Plan by the Company’s Board of
Directors.

          (k) “Evidence of Award” means an agreement, certificate, resolution or other type or form of
writing or other evidence approved by the Board that sets forth the terms and

 

 

conditions of the awards granted. An Evidence of Award may be in an electronic medium, may be
limited to notation on the books and records of the Company and, with the approval of the Board,
need not be signed by a representative of the Company or a Participant.

          (l) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, as such law, rules and regulations may be amended from time to time.

          (m) “Free-Standing Appreciation Right” means an Appreciation Right granted pursuant to Section
5 of this Plan that is not granted in tandem with an Option Right.

          (n) “Incumbent Directors” means the individuals who, as of the Effective Date, are Directors
of the Company and any individual becoming a Director subsequent to the Effective Date whose
election, nomination for election by the Company’s stockholders, or appointment was approved by a
vote of at least two-thirds of the then Incumbent Directors (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named as a nominee for
director, without objection to such nomination), including, without limitation, after consummation
of the proposed transaction (the “Transaction”) contemplated by that certain non-binding letter of
intent, dated as of April 18, 2007, to which the Company is a party; provided,
however, that an individual shall not be an Incumbent Director if such individual’s
election or appointment to the Board occurs as a result of an actual or threatened election contest
(as described in Rule 14a-12(c) of the Exchange Act) with respect to the election or removal of
Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board.

          (o) “Management Objectives” means the measurable performance objective or objectives
established pursuant to this Plan for Participants who have received grants of Performance Shares
or Performance Units or, when so determined by the Board, Option Rights, Appreciation Rights,
Restricted Stock, Restricted Stock Units, dividend credits and other awards pursuant to this Plan.
Management Objectives may be described in terms of Company-wide objectives or objectives that are
related to the performance of the individual Participant or of a Subsidiary, division, department
or function within the Company or a Subsidiary. The Board may provide, in connection with the
setting of the Management Objectives, that any evaluation of performance may include or exclude
certain items that may occur during any fiscal year, including, but not limited to the following:
(i) asset write downs; (ii) litigation or claim judgments or settlements; (iii) the effect of
changes in tax laws, accounting principles, or other laws or provisions affecting reported results;
(iv) any reorganization and restructuring programs; (v) extraordinary nonrecurring items as
described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and
analysis of financial condition and results of operations appearing in the Company’s annual report
to stockholders for the applicable year; (vi) acquisitions or divestitures; and (vii) foreign
exchange gains and losses. It is intended generally that the Management Objectives applicable to
any award will be based on specified levels of, or relative peer company performance in any one or
more of the following objectives, or any combination thereof, as determined by the Board in its
sole discretion:

	 	(i)	 	Adjusted net earnings
	 
	 	(ii)	 	Cash flow (including free cash flow)

2

 

	 	(iii)	 	Cost of capital
	 
	 	(iv)	 	Cost reduction
	 
	 	(v)	 	Customer service
	 
	 	(vi)	 	Debt reduction
	 
	 	(vii)	 	Development milestone achievement
	 
	 	(viii)	 	Earnings and earnings growth (including earnings per share and earnings
before taxes and earnings before interest and taxes)
	 
	 	(ix)	 	Economic value added
	 
	 	(x)	 	Establishment of partnerships and collaborations
	 
	 	(xi)	 	Financing proceeds
	 
	 	(xii)	 	Gross profit
	 
	 	(xiii)	 	Inventory management
	 
	 	(xiv)	 	Market share
	 
	 	(xv)	 	Market value added
	 
	 	(xvi)	 	Net income
	 
	 	(xvii)	 	Operating profit and operating income
	 
	 	(xviii)	 	Partnership milestone achievement
	 
	 	(xix)	 	Productivity improvement
	 
	 	(xx)	 	Profit after taxes
	 
	 	(xxi)	 	Project execution
	 
	 	(xxii)	 	Quality
	 
	 	(xxiii)	 	Recruitment and development of associates
	 
	 	(xxiv)	 	Reduction of fixed costs
	 
	 	(xxv)	 	Return on assets and return on net assets
	 
	 	(xxvi)	 	Return on equity
	 
	 	(xxvii)	 	Return on invested capital
	 
	 	(xxviii)	 	Sales and sales growth
	 
	 	(xxix)	 	Successful start-up of new facility
	 
	 	(xxx)	 	Successful acquisition/divestiture
	 
	 	(xxxi)	 	Total stockholder return and improvement of stockholder return
	 
	 	(xxxii)	 	Unit volume
	 
	 	(xxxiii)	 	Unit cost
	 
	 	(xxxiv)	 	Pricing
	 
	 	(xxxv)	 	Working capital

     If the Board determines that a change in the business, operations, corporate structure or
capital structure of the Company, or the manner in which it conducts its business, or other events
or circumstances render the Management Objectives unsuitable, the Board may in its discretion
modify such Management Objectives or the related levels of achievement, in whole or in part, as the
Board deems appropriate and equitable.

          (p) “Market Value per Share” means, as of any particular date, the closing sales price of the
Common Shares or, as determined by the Board, the average closing sales price of the Common Shares
over a period of time, either before or after any particular date, of one to ten days, as reported
on the Nasdaq Stock Market (including, without limitation, the Nasdaq Global Select Market, the
Nasdaq Global Market or the Nasdaq Capital Market, as

3

 

applicable) or, if not listed on such exchange, on any other national securities exchange on
which the Common Shares are listed or, if not listed on any such other national securities
exchange, the NASD OTC Bulletin Board or any other quotation facility on which the Common Shares
are quoted. If there is no regular trading market for such Common Shares, the Market Value per
Share shall be determined by the Board.

          (q) “Non-Employee Director” means a Director who is not an employee of the Company or any
Subsidiary.

          (r) “Optionee” means the optionee named in an Evidence of Award evidencing an outstanding
Option Right.

          (s) “Option Price” means the purchase price payable on exercise of an Option Right.

          (t) “Option Right” means the right to purchase Common Shares upon exercise of an option
granted pursuant to Section 4 of this Plan.

          (u) “Participant” means a person who is selected by the Board to receive benefits under this
Plan and who is at the time an officer or other employee of the Company or any one or more of its
Subsidiaries, or who has agreed to commence serving in such capacities within 90 days of the Date
of Grant, or who is a consultant or other independent contractor, or a Non-Employee Director of the
Company or a Subsidiary.

          (v) “Performance Period” means, in respect of a Performance Share or Performance Unit, a
period of time established pursuant to Section 8 of this Plan within which the Management
Objectives relating to such Performance Share or Performance Unit are to be achieved.

          (w) “Performance Share” means a bookkeeping entry that records the equivalent of one Common
Share awarded pursuant to Section 8 of this Plan.

          (x) “Performance Unit” means a bookkeeping entry awarded pursuant to Section 8 of this Plan
that records a unit equivalent to $1.00 or such other value as is determined by the Board.

          (y)
“Plan” means this Athersys, Inc. Equity Incentive Compensation Plan, as may be amended from
time to time.

          (z) “Restricted Stock” means Common Shares granted or sold pursuant to Section 6 of this Plan
as to which neither the substantial risk of forfeiture nor the prohibition on transfers has
expired.

          (aa) “Restriction Period” means the period of time during which Restricted Stock Units are
subject to restrictions, as provided in Section 7 of this Plan.

          (bb) “Restricted Stock Unit” means an award made pursuant to Section 7 of this Plan of the
right to receive Common Shares or cash at the end of a specified period.

4

 

          (cc) “Spread” means the excess of the Market Value per Share on the date when an Appreciation
Right is exercised, or on the date when Option Rights are surrendered in payment of the Option
Price of other Option Rights, over the Option Price or Base Price provided for in the related
Option Right or Free-Standing Appreciation Right, respectively.

          (dd) “Subsidiary” means a corporation, company or other entity (i) at least 50 percent of
whose outstanding shares or securities (representing the right to vote for the election of
directors or other managing authority) are, or (ii) which does not have outstanding shares or
securities (as may be the case in a partnership, joint venture or unincorporated association), but
at least 50 percent of whose ownership interest representing the right generally to make decisions
for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the
Company.

          (ee) “Tandem Appreciation Right” means an Appreciation Right granted pursuant to Section 5 of
this Plan that is granted in tandem with an Option Right.

          (ff) “Voting Stock” means securities entitled to vote generally in the election of directors.

     3. Shares Available Under the Plan.

          (a) Maximum Shares Available Under Plan. Subject to adjustment as provided in Section
11 of this Plan, the number of Common Shares that may be issued or transferred (i) upon the
exercise of Option Rights or Appreciation Rights, (ii) in payment of Restricted Stock and released
from substantial risks of forfeiture thereof, (iii) as Restricted Stock Units, (iv) in payment of
Performance Shares or Performance Units that have been earned, (v) as awards contemplated by
Section 9 of this Plan, or (vi) in payment of dividend equivalents paid with respect to awards made
under the Plan will not exceed in the aggregate 1,465,000 Common Shares. Common Shares covered by
an award granted under the Plan shall not be counted as used unless and until they are actually
issued and delivered to a Participant. Without limiting the generality of the foregoing, the
number of Common Shares available under this Plan will be adjusted to account for shares relating
to awards that expire, are forfeited, terminated or cancelled without the issuance of Common Shares
and to awards settled in cash in lieu of Common Shares. Shares issued under the Plan may be shares
of original issuance or treasury shares or a combination of the foregoing.

          (b) Life of Plan Limits. Awards will not be granted under Section 9 of the Plan to
the extent they would involve the issuance of more than 1,465,000 shares in the aggregate.

          (c) Individual Participant Limits. Notwithstanding anything in this Section 3, or
elsewhere in this Plan to the contrary, and subject to adjustment as provided in Section 11 of this
Plan:

	 	(i)	 	No Participant will be granted Option Rights or Appreciation
Rights, in the aggregate, for more than 750,000 Common Shares during any
calendar year.

5

 

	 	(ii)	 	No Participant will be granted Restricted Stock or Restricted
Stock Units that specify Management Objectives, Performance Shares or other
awards under Section 9 of this Plan, in the aggregate, for more than 750,000
Common Shares during any calendar year.
	 
	 	(iii)	 	Notwithstanding any other provision of this Plan to the
contrary, in no event will any Participant in any calendar year receive an
award of Performance Units having an aggregate maximum value as of their
respective Dates of Grant in excess of $3,000,000.

          (d) Impact of Election on the Limit. If, under this Plan, a Participant has elected
to give up the right to receive compensation in exchange for Common Shares based on fair market
value, such Common Shares will be counted against the number of shares available in Section 3(a)
above.

     4. Option Rights. The Board may, from time to time and upon such terms and conditions as it
may determine, authorize the granting to Participants of options to purchase Common Shares. Each
such grant will be subject to all of the requirements contained in the following provisions:

          (a) Each grant will specify the number of Common Shares to which it pertains subject to the
limitations set forth in Section 3 of this Plan.

          (b) Each grant will specify an Option Price per share, which may not be less than the Market
Value per Share on the Date of Grant.

          (c) Each grant will specify whether the Option Price will be payable (i) in cash or by check
acceptable to the Company or by wire transfer of immediately available funds, (ii) by the actual or
constructive transfer to the Company of Common Shares owned by the Optionee having a value at the
time of exercise equal to the total Option Price (or other consideration authorized pursuant to
Section 4(d)), (iii) by a combination of such methods of payment, or (iv) by such other methods as
may be approved by the Board.

          (d) The Board may determine, at the Date of Grant, that payment of the Option Price of any
Option Right may also be made in whole or in part in the form of Restricted Shares or other Common
Shares that are forfeitable or subject to restrictions on transfer. Unless otherwise determined by
the Board at the Date of Grant, whenever any Option Price is paid in whole or in part by means of
any of the forms of consideration specified in this Section 4(d), the Common Shares received upon
the exercise of the Option Rights shall be subject to the same risks of forfeiture or restrictions
on transfer as may correspond to any that apply to the consideration surrendered; provided,
however, that such risks of forfeiture or restrictions on transfer shall apply only to the
same number of Common Shares received by the Optionee as applied to the forfeitable or restricted
Common Shares surrendered by the Optionee.

          (e) To the extent permitted by law, any grant may provide for deferred payment of the Option
Price from the proceeds of sale through a bank or broker on a date satisfactory to the Company of
some or all of the shares to which such exercise relates.

6

 

          (f) To the extent permitted by law, any grant may provide for payment of the Option Price, at
the election of the Optionee, in installments, with or without interest, upon terms determined by
the Board.

          (g) Successive grants may be made to the same Participant whether or not any Option Rights
previously granted to such Participant remain unexercised.

          (h) Each grant will specify the period or periods of continuous service by the Optionee with
the Company or any Subsidiary that is necessary before the Option Rights or installments thereof
will become exercisable. A grant of Option Rights may provide for the earlier exercise of such
Option Rights in the event of the retirement, death or disability of a Participant or a Change in
Control.

          (i) Any grant of Option Rights may specify Management Objectives that must be achieved as a
condition to the exercise of such rights.

          (j) Option Rights granted under this Plan will be nonqualified options under the Code.

          (k) The exercise of an Option Right will result in the cancellation on a share- for-share
basis of any Tandem Appreciation Right authorized under Section 5 of this Plan.

          (l) No Option Right will be exercisable more than 10 years from the Date of Grant.

          (m) The Board may, at the Date of Grant of any Option Rights, provide for the payment of
dividend equivalents to the Optionee on either a current or deferred or contingent basis or may
provide that such equivalents shall be credited against the Option Price.

          (n) Each grant of Option Rights will be evidenced by an Evidence of Award. Each Evidence of
Award shall be subject to this Plan and shall contain such terms and provisions, consistent with
this Plan, as the Board may approve.

     5. Appreciation Rights.

          (a) The Board may also authorize the granting (i) to any Optionee, of Tandem Appreciation
Rights in respect of Option Rights granted hereunder, and (ii) to any Participant, of Free-Standing
Appreciation Rights. A Tandem Appreciation Right will be a right of the Optionee, exercisable by
surrender of the related Option Right, to receive from the Company an amount determined by the
Board, which will be expressed as a percentage of the Spread (not exceeding 100 percent) at the
time of exercise. Tandem Appreciation Rights may be granted at any time prior to the exercise or
termination of the related Option Rights. A Free-Standing Appreciation Right will be a right of
the Participant to receive from the Company an amount determined by the Board, which will be
expressed as a percentage of the Spread (not exceeding 100 percent) at the time of exercise.

          (b) Each grant of Appreciation Rights will be subject to all of the requirements contained in
the following provisions:

7

 

	 	(i)	 	Any grant may specify that the amount payable on exercise of an
Appreciation Right may be paid by the Company in cash, in Common Shares or in
any combination thereof and may either grant to the Participant or retain in
the Board the right to elect among those alternatives.
	 
	 	(ii)	 	Any grant may specify that the amount payable on exercise of an
Appreciation Right may not exceed a maximum specified by the Board at the Date
of Grant.
	 
	 	(iii)	 	Any grant may specify waiting periods before exercise and
permissible exercise dates or periods.
	 
	 	(iv)	 	Any grant may specify that such Appreciation Right may be
exercised only in the event of, or earlier in the event of, the retirement,
death or disability of a Participant or a Change in Control.
	 
	 	(v)	 	Any grant of Appreciation Rights may specify Management
Objectives that must be achieved as a condition of the exercise of such
Appreciation Rights.
	 
	 	(vi)	 	To the extent permitted by law, any grant may provide for the
payment to the Participant of dividend equivalents thereon in cash or Common
Shares on a current, deferred or contingent basis.
	 
	 	(vii)	 	Each grant of Appreciation Rights will be evidenced by an
Evidence of Award, which Evidence of Award will describe such Appreciation
Rights, identify the related Option Rights (if applicable), and contain such
other terms and provisions, consistent with this Plan, as the Board may
approve.

          (c) Any grant of Tandem Appreciation Rights will provide that such Tandem Appreciation Rights
may be exercised only at a time when the related Option Right is also exercisable and at a time
when the Spread is positive, and by surrender of the related Option Right for cancellation.
Successive grants of Tandem Appreciation Rights may be made to the same Participant regardless of
whether any Tandem Appreciation Rights previously granted to the Participant remain unexercised.

          (d) Regarding Free-Standing Appreciation Rights only:

	 	(i)	 	Each grant will specify in respect of each Free-Standing
Appreciation Right a Base Price, which may not be less than the Market Value
per Share on the Date of Grant;
	 
	 	(ii)	 	Successive grants may be made to the same Participant
regardless of whether any Free-Standing Appreciation Rights previously
granted to the Participant remain unexercised; and

8

 

	 	(iii)	 	No Free-Standing Appreciation Right granted under this
Plan may be exercised more than 10 years from the Date of Grant.

     6. Restricted Stock. The Board may also authorize the grant or sale of Restricted Stock to
Participants. Each such grant or sale will be subject to all of the requirements contained in the
following provisions:

          (a) Each such grant or sale will constitute an immediate transfer of the ownership of Common
Shares to the Participant in consideration of the performance of services, entitling such
Participant to voting, dividend and other ownership rights, but subject to the substantial risk of
forfeiture and restrictions on transfer hereinafter referred to.

          (b) Each such grant or sale may be made without additional consideration or in consideration
of a payment by such Participant that is less than the Market Value per Share at the Date of Grant.

          (c) Each such grant or sale will provide that the Restricted Stock covered by such grant or
sale that vests upon the passage of time will be subject to a “substantial risk of forfeiture”
within the meaning of Section 83 of the Code for a period to be determined by the Board at the Date
of Grant, or may provide that the Restricted Stock will vest upon the achievement of Management
Objectives (as provided in Section 6(e) below); provided, however, that if
Restricted Stock vests based on the passage of time rather than the achievement of Management
Objectives, the period of time will be no shorter than three years, except that the restrictions
may be removed on an annual, ratable basis during the three year period.

          (d) Each such grant or sale will provide that during the period for which such substantial
risk of forfeiture is to continue, the transferability of the Restricted Stock will be prohibited
or restricted in the manner and to the extent prescribed by the Board at the Date of Grant (which
restrictions may include, without limitation, rights of repurchase or first refusal in the Company
or provisions subjecting the Restricted Stock to a continuing substantial risk of forfeiture in the
hands of any transferee).

          (e) Any grant of Restricted Stock may specify Management Objectives that, if achieved, will
result in termination or early termination of the restrictions applicable to such Restricted Stock;
provided, however, that notwithstanding subparagraph (c) above, restrictions
relating to Restricted Stock that vests upon the achievement of Management Objectives may not
terminate sooner than one year from the Date of Grant. Each grant may specify in respect of such
Management Objectives a minimum acceptable level of achievement and may set forth a formula for
determining the number of shares of Restricted Stock on which restrictions will terminate if
performance is at or above the minimum level, but falls short of maximum achievement of the
specified Management Objectives. The grant of Restricted Stock will specify that, before the
termination or early termination of restrictions applicable to such Restricted Stock, the Board
must determine that the Management Objectives have been satisfied; provided,
however, that notwithstanding Section 6(c) above, the substantial risk of forfeiture
relating to Restricted Stock that vests upon the achievement of Management Objections may not
terminate sooner than one year from the Date of Grant.

9

 

          (f) Notwithstanding anything to the contrary contained in this Plan, any grant or sale of
Restricted Stock may provide for the earlier lapse of the substantial risk of forfeiture in the
event of the retirement, death or disability of a Participant or a Change in Control.

          (g) Any such grant or sale of Restricted Stock may require that any or all dividends or other
distributions paid thereon during the period of such restrictions be automatically deferred and
reinvested in additional shares of Restricted Stock, which may be subject to the same restrictions
as the underlying award.

          (h) Each grant or sale of Restricted Stock will be evidenced by an Evidence of Award and will
contain such terms and provisions, consistent with this Plan, as the Board may approve. Unless
otherwise directed by the Board, all certificates representing shares of Restricted Stock will be
held in custody by the Company until all restrictions thereon will have lapsed, together with a
stock power or powers executed by the Participant in whose name such certificates are registered,
endorsed in blank and covering such Shares.

     7. Restricted Stock Units. The Board may also authorize the granting or sale of Restricted
Stock Units to Participants. Each such grant or sale will be subject to all of the requirements
contained in the following provisions:

          (a) Each such grant or sale will constitute the agreement by the Company to deliver Common
Shares or cash to the Participant in the future in consideration of the performance of services,
but subject to the fulfillment of such conditions (which may include the achievement of Management
Objectives) during the Restriction Period as the Board may specify. If a grant of Restricted Stock
Units specifies that the Restriction Period will terminate upon the achievement of Management
Objectives, then, notwithstanding anything to the contrary contained in subparagraph (c) below,
such Restriction Period may not terminate sooner than one year from the Date of Grant. Each grant
may specify in respect of such Management Objectives a minimum acceptable level of achievement and
may set forth a formula for determining the number of shares of Restricted Stock Units on which
restrictions will terminate if performance is at or above the minimum level, but falls short of
maximum achievement of the specified Management Objectives. The grant of such Restricted Stock
Units will specify that, before the termination or early termination of restrictions applicable to
such Restricted Stock Units, the Board must determine that the Management Objectives have been
satisfied.

          (b) Each such grant or sale may be made without additional consideration or in consideration
of a payment by such Participant that is less than the Market Value per Share at the Date of Grant.

          (c) If the Restriction Period lapses only by the passage of time rather than the achievement
of Management Objectives as provided in subparagraph (a) above. Each such grant or sale will be
subject to a Restriction Period of not less than one year.

          (d) Notwithstanding anything to the contrary contained in this Plan, any grant or sale of
Restricted Stock Units may provide for the earlier lapse or other modification of

10

 

the Restriction Period in the event of the retirement, death or disability of a Participant or
a Change in Control.

          (e) During the Restriction Period, the Participant will have no right to transfer any rights
under his or her award and will have no rights of ownership in the Restricted Stock Units and will
have no right to vote them, but the Board may at the Date of Grant, authorize the payment of
dividend equivalents on such Restricted Stock Units on either a current or deferred or contingent
basis, either in cash or in additional Common Shares.

          (f) Each grant or sale will specify the time and manner of payment of the Restricted Stock
Units that have been earned. Any grant or sale may specify that the amount payable with respect
thereto may be paid by the Company in cash, in Common Shares or in any combination thereof and may
either grant to the Participant or retain in the Board the right to elect among those alternatives.

          (g) Each grant or sale of Restricted Stock Units will be evidenced by an Evidence of Award and
will contain such terms and provisions, consistent with this Plan, as the Board may approve.

     8. Performance Shares and Performance Units. The Board may also authorize the granting of
Performance Shares and Performance Units that will become payable to a Participant upon achievement
of specified Management Objectives during the Performance Period. Each such grant will be subject
to all of the requirements contained in the following provisions:

          (a) Each grant will specify the number of Performance Shares or Performance Units to which it
pertains, which number may be subject to adjustment to reflect changes in compensation or other
factors.

          (b) The Performance Period with respect to each Performance Share or Performance Unit will be
such period of time (not less than three years) as will be determined by the Board at the time of
grant, which may be subject to earlier lapse or other modification in the event of the retirement,
death or disability of a Participant or a Change in Control.

          (c) Any grant of Performance Shares or Performance Units will specify Management Objectives
which, if achieved, will result in payment or early payment of the award, and each grant may
specify in respect of such specified Management Objectives a level or levels of achievement and
will set forth a formula for determining the number of Performance Shares or Performance Units that
will be earned if performance is at or above the minimum level or levels, but falls short of
maximum achievement of the specified Management Objectives. The grant of Performance Shares or
Performance Units will specify that, before the Performance Shares or Performance Units will be
earned and paid, the Board must determine that the Management Objectives have been satisfied.

          (d) Each grant will specify the time and manner of payment of Performance Shares or
Performance Units that have been earned. Any grant may specify that the amount payable with
respect thereto may be paid by the Company in cash, in Common Shares or in any

11

 

combination thereof and may either grant to the Participant or retain in the Board the right
to elect among those alternatives.

          (e) Any grant of Performance Shares may specify that the amount payable with respect thereto
may not exceed a maximum specified by the Board at the Date of Grant. Any grant of Performance
Units may specify that the amount payable or the number of Common Shares issued with respect
thereto may not exceed maximums specified by the Board at the Date of Grant.

          (f) The Board may at the Date of Grant of Performance Shares, provide for the payment of
dividend equivalents to the holder thereof on either a current or deferred or contingent basis,
either in cash or in additional Common Shares.

          (g) Each grant of Performance Shares or Performance Units will be evidenced by an Evidence of
Award and will contain such other terms and provisions, consistent with this Plan, as the Board may
approve.

     9. Other Awards.

          (a) The Board may, subject to limitations under applicable law, grant to any Participant such
other awards that may be denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Common Shares or factors that may influence the value of such
shares, including, without limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Common Shares, purchase rights for Common Shares, awards with
value and payment contingent upon performance of the Company or specified Subsidiaries, affiliates
or other business units thereof or any other factors designated by the Board, and awards valued by
reference to the book value of Common Shares or the value of securities of, or the performance of
specified Subsidiaries or affiliates or other business units of the Company. The Board shall
determine the terms and conditions of such awards. Common Shares delivered pursuant to an award in
the nature of a purchase right granted under this Section 9 shall be purchased for such
consideration, paid for at such time, by such methods, and in such forms, including, without
limitation, cash, Common Shares, other awards, notes or other property, as the Board shall
determine.

          (b) Cash awards, as an element of or supplement to any other award granted under this Plan,
may also be granted pursuant to this Section 9 of this Plan.

          (c) The Board may grant Common Shares as a bonus, or may grant other awards in lieu of
obligations of the Company or a Subsidiary to pay cash or deliver other property under this Plan or
under other plans or compensatory arrangements, subject to such terms as shall be determined by the
Board.

     10. Administration of the Plan.

          (a) This Plan will be administered by the Board, which may from time to time delegate all or
any part of its authority under this Plan to a committee of the Board (or a subcommittee thereof)
consisting of non-employee Directors, as constituted from time to time.

12

 

To the extent of any such delegation, references in this Plan to the Board will be deemed to
be references to such committee or subcommittee.

          (b) The interpretation and construction by the Board of any provision of this Plan or of any
agreement, notification or document evidencing the grant of Option Rights, Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units or other awards
pursuant to Section 9 of this Plan and any determination by the Board pursuant to any provision of
this Plan or of any such agreement, notification or document will be final and conclusive.

          (c) The Board or, to the extent of any delegation as provided in Section 10(a), the committee,
may delegate to one or more of its members or to one or more officers of the Company, or to one or
more agents or advisors, such administrative duties or powers as it may deem advisable, and the
Board, the committee, or any person to whom duties or powers have been delegated as aforesaid, may
employ one or more persons to render advice with respect to any responsibility the Board, the
committee or such person may have under the Plan. The Board or the committee may, by resolution,
authorize one or more officers of the Company to do one or both of the following on the same basis
as the Board or the committee: (i) designate employees to be recipients of awards under this Plan;
(ii) determine the size of any such awards; (B) the resolution providing for such authorization
sets forth the total number of Common Shares such officer(s) may grant; and (iii) the officer(s)
shall report periodically to the Board or the committee, as the case may be, regarding the nature
and scope of the awards granted pursuant to the authority delegated.

     11. Adjustments. The Board shall make or provide for such adjustments in the numbers of
Common Shares authorized under the Plan, subject to limits contained in Section 3 of the Plan, and
covered by outstanding Option Rights, Appreciation Rights, Restricted Stock Units, Performance
Shares and Performance Units granted hereunder and, if applicable, in the number of Common Shares
covered by other awards granted pursuant to Section 9 hereof, in the Option Price and Base Price,
and in the kind of shares covered thereby, as the Board, in its sole discretion may determine is
equitably required to prevent dilution or enlargement of the rights of Participants or Optionees
that otherwise would result from (a) any stock dividend, extraordinary dividend, stock split,
combination of shares, recapitalization or other change in the capital structure of the Company, or
(b) any Change in Control, merger, consolidation, spin-off, split- off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets, issuance of rights
or warrants to purchase securities, or (c) any other corporate transaction or event having an
effect similar to any of the foregoing. Moreover, in the event of any such transaction or event,
the Board, in its discretion, may provide in substitution for any or all outstanding awards under
this Plan such alternative consideration (including cash), if any, as it may determine to be
equitable in the circumstances and may require in connection therewith the surrender of all awards
so replaced. The Board shall also make or provide for such adjustments in the numbers of shares
specified in Section 3 of this Plan as the Board in its sole discretion, exercised in good faith,
may determine is appropriate to reflect any transaction or event described in this Section 11;
provided, however, that any such adjustment to the number specified in Section 3(b)
will be made only if and to the extent that such adjustment would not result in negative tax
consequences under Section 409A of the Code. Without limiting the generality of the foregoing, in
the event that the Company issues warrants or other rights to

13

 

acquire Common Shares on a pro rata basis to all stockholders, the Board shall make such
adjustments in the number of Common Shares authorized under the Plan and in the limits contained
herein as it may deem to be equitable, including, without limitation, proportionately increasing
the number of authorized Common Shares or any such limit.

     12. Change in Control. For purposes of this Plan, except as may be otherwise prescribed by
the Board in an Evidence of Award made under this Plan, a “Change in Control” shall be deemed to
have occurred upon the occurrence of any of the following events:

          (a) any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a “Person”) is or becomes the beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more of the combined voting power of the
then-outstanding Voting Stock of the Company; provided, however, that:

	 	(i)	 	for purposes of this Section 12(a), the following acquisitions
shall not constitute a Change in Control: (A) any acquisition of Voting Stock
of the Company directly from the Company that is approved by a majority of the
Incumbent Directors, (B) any acquisition of Voting Stock of the Company by the
Company or any Subsidiary, (C) any acquisition of Voting Stock of the Company
by the trustee or other fiduciary holding securities under any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
Subsidiary, and (D) any acquisition of Voting Stock of the Company by any
Person pursuant to a Business Transaction that complies with clauses (i), (ii)
and (iii) of Section 12(c) below;
	 
	 	(ii)	 	a Change in Control will not be deemed to have occurred if a
Person is or becomes the beneficial owner of 50% or more of the Voting Stock of
the Company as a result of a reduction in the number of shares of Voting Stock
of the Company outstanding pursuant to a transaction or series of transactions
that is approved by a majority of the Incumbent Directors unless and until such
Person thereafter becomes the beneficial owner of any additional shares of
Voting Stock of the Company representing 1% or more of the then-outstanding
Voting Stock of the Company, other than as a result of a stock dividend, stock
split or similar transaction effected by the Company in which all holders of
Voting Stock are treated equally;
	 
	 	(iii)	 	if at least a majority of the Incumbent Directors determine in
good faith that a Person has acquired beneficial ownership of 50% or more of
the Voting Stock of the Company inadvertently, and such Person divests as
promptly as practicable but no later than the date, if any, set by the
Incumbent Board a sufficient number of shares so that such Person beneficially
owns less than 50% of the Voting Stock of the Company, then no Change in
Control shall have occurred as a result of such Person’s acquisition;
	 
	 	(iv)	 	the consummation of the Transaction shall not constitute a
Change in Control; or

14

 

          (b) a majority of the Board ceases to be comprised of Incumbent Directors; or

          (c) the consummation of a reorganization, merger or consolidation, or sale or other
disposition of all or substantially all of the assets of the Company or the acquisition of the
stock or assets of another corporation, or other transaction (each, a “Business Transaction”),
unless, in each case, immediately following such Business Transaction (i) the Voting Stock of the
Company outstanding immediately prior to such Business Transaction continues to represent (either
by remaining outstanding or by being converted into Voting Stock of the surviving entity or any
parent thereof), more than 60% of the combined voting power of the then outstanding shares of
Voting Stock of the entity resulting from such Business Transaction (including, without limitation,
an entity which as a result of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries), (ii) no Person (other than
the Company, such entity resulting from such Business Transaction, or any employee benefit plan (or
related trust) sponsored or maintained by the Company, any Subsidiary or such entity resulting from
such Business Transaction) beneficially owns, directly or indirectly, 50% or more of the combined
voting power of the then outstanding shares of Voting Stock of the entity resulting from such
Business Transaction, and (iii) at least a majority of the members of the Board of Directors of the
entity resulting from such Business Transaction were Incumbent Directors at the time of the
execution of the initial agreement or of the action of the Board providing for such Business
Transaction; or

          (d) approval by the stockholders of the Company of a complete liquidation or dissolution of
the Company, except pursuant to a Business Transaction that complies with clauses (i), (ii) and
(iii) of Section 12(c).

     13. Non U.S. Participants. In order to facilitate the making of any grant or combination of
grants under this Plan, the Board may provide for such special terms for awards to Participants who
are foreign nationals or who are employed by the Company or any Subsidiary outside of the United
States of America or who provide services to the Company under an agreement with a foreign nation
or agency, as the Board may consider necessary or appropriate to accommodate differences in local
law, tax policy or custom. Moreover, the Board may approve such supplements to or amendments,
restatements or alternative versions of this Plan (including, without limitation, sub-plans) as it
may consider necessary or appropriate for such purposes, without thereby affecting the terms of
this Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the
Company may certify any such document as having been approved and adopted in the same manner as
this Plan. No such special terms, supplements, amendments or restatements, however, will include
any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan
could have been amended to eliminate such inconsistency without further approval by the
stockholders of the Company.

     14. Transferability.

          (a) Except as otherwise determined by the Board, no Option Right, Appreciation Right or other
derivative security granted under the Plan shall be transferable by the Participant except by will
or the laws of descent and distribution. Except as otherwise

15

 

determined by the Board, Option Rights and Appreciation Rights will be exercisable during the
Participant’s lifetime only by him or her or, in the event of the Participant’s legal incapacity to
do so, by his or her guardian or legal representative acting on behalf of the Participant in a
fiduciary capacity under state law and/or court supervision.

          (b) The Board may specify at the Date of Grant that part or all of the Common Shares that are
(i) to be issued or transferred by the Company upon the exercise of Option Rights or Appreciation
Rights, upon the termination of the Restriction Period applicable to Restricted Stock Units or upon
payment under any grant of Performance Shares or Performance Units or (ii) no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in Section 6 of this Plan,
will be subject to further restrictions on transfer.

     15. Withholding Taxes. To the extent that the Company is required to withhold federal, state,
local or foreign taxes in connection with any payment made or benefit realized by a Participant or
other person under this Plan, and the amounts available to the Company for such withholding are
insufficient, it will be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory to the Company for
payment of the balance of such taxes required to be withheld, which arrangements (in the discretion
of the Board) may include relinquishment of a portion of such benefit. If a Participant’s benefit
is to be received in the form of Common Shares, and such Participant fails to make arrangements for
the payment of tax, the Company shall withhold such Common Shares having a value equal to the
amount required to be withheld. Notwithstanding the foregoing, when a Participant is required to
pay the Company an amount required to be withheld under applicable income and employment tax laws,
the Participant may elect to satisfy the obligation, in whole or in part, by electing to have
withheld, from the shares required to be delivered to the Participant, Common Shares having a value
equal to the amount required to be withheld (except in the case of Restricted Stock where an
election under Section 83(b) of the Code has been made), or by delivering to the Company other
Common Shares held by such Participant. The shares used for tax withholding will be valued at an
amount equal to the Market Value per Share of such Common Shares on the date the benefit is to be
included in Participant’s income. In no event shall the Market Value per Share of the Common
Shares to be withheld and/or delivered pursuant to this Section to satisfy applicable withholding
taxes in connection with the benefit exceed the minimum amount of taxes required to be withheld.
Participants shall also make such arrangements as the Company may require for the payment of any
withholding tax obligation that may arise in connection with the disposition of Common Shares
acquired upon the exercise of Option Rights.

     16. Compliance with Section 409A of the Code.

          (a) To the extent applicable, it is intended that this Plan and any grants made hereunder
comply with the provisions of Section 409A of the Code. This Plan and any grants made hereunder
shall be administrated in a manner consistent with this intent, and any provision that would cause
this Plan or any grant made hereunder to fail to satisfy Section 409A of the Code shall have no
force and effect until amended to comply with Section 409A of the Code (which amendment may be
retroactive to the extent permitted by Section 409A of the Code and may be made by the Company
without the consent of Participants). Any reference in this Plan to Section 409A of the Code will
also include any proposed, temporary or final regulations, or

16

 

any other guidance, promulgated with respect to such Section by the U.S. Department of the
Treasury or the Internal Revenue Service.

          (b) In order to determine for purposes of Section 409A of the Code whether a Participant is
employed by a member of the Company’s controlled group of corporations under Section 414(b) of the
Code (or by a member of a group of trades or businesses under common control with the Company under
Section 414(c) of the Code) and, therefore, whether the Common Shares that are or have been
purchased by or awarded under this Plan to the Participant are shares of “service recipient” stock
within the meaning of Section 409A of the Code:

	 	(i)	 	In applying Code Section 1563(a)(1), (2) and (3) for purposes
of determining the Company’s controlled group under Section 414(b) of the Code,
the language “at least 50 percent” is to be used instead of “at least 80
percent” each place it appears in Code Section 1563(a)(1), (2) and (3), and
	 
	 	(ii)	 	In applying Treasury Regulation Section 1.414(c)-2 for purposes
of determining trades or businesses under common control with the Company for
purposes of Section 414(c) of the Code, the language “at least 50 percent” is
to be used instead of “at least 80 percent” each place it appears in Treasury
Regulation Section 1.414(c)-2.

     17. Amendments.

          (a) The Board may at any time and from time to time amend this Plan in whole or in part;
provided, however, that if an amendment to this Plan (i) would materially increase
the benefits accruing to participants under this Plan, (ii) would materially increase the number of
securities which may be issued under this Plan, (iii) would materially modify the requirements for
participation in this Plan or (iv) must otherwise be approved by the stockholders of the Company in
order to comply with applicable legal requirements or the requirements of the principal national
securities exchange upon which the Common Shares are traded or quoted, then, such amendment will be
subject to stockholder approval and will not be effective unless and until such approval has been
obtained.

          (b) The Board will not, without the further approval of the stockholders of the Company,
authorize the amendment of any outstanding Option Right to reduce the Option Price. Furthermore,
no Option Right will be cancelled and replaced with awards having a lower Option Price without
further approval of the stockholders of the Company. This Section 17(b) is intended to prohibit
the repricing of “underwater” Option Rights and will not be construed to prohibit the adjustments
provided for in Section 11 of this Plan.

          (c) If permitted by Section 409A of the Code, in case of termination of employment by reason
of death, disability or normal or early retirement, or in the case of unforeseeable emergency or
other special circumstances, of a Participant who holds an Option Right or Appreciation Right not
immediately exercisable in full, or any shares of Restricted Stock as to which the substantial risk
of forfeiture or the prohibition or restriction on transfer

17

 

has not lapsed, or any Restricted Stock Units as to which the Restriction Period has not been
completed, or any Performance Shares or Performance Units which have not been fully earned, or any
other awards made pursuant to Section 9 subject to any vesting schedule or transfer restriction, or
who holds Common Shares subject to any transfer restriction imposed pursuant to Section 14(b) of
this Plan, the Board may, in its sole discretion, accelerate the time at which such Option Right,
Appreciation Right or other award may be exercised or the time at which such substantial risk of
forfeiture or prohibition or restriction on transfer will lapse or the time when such Restriction
Period will end or the time at which such Performance Shares or Performance Units will be deemed to
have been fully earned or the time when such transfer restriction will terminate or may waive any
other limitation or requirement under any such award.

          (d) Subject to Section 17(b) hereof, the Board may amend the terms of any award theretofore
granted under this Plan prospectively or retroactively. Subject to Section 11 above, no such
amendment shall impair the rights of any Participant without his or her consent. The Board may, in
its discretion, terminate this Plan at any time. Termination of this Plan will not affect the
rights of Participants or their successors under any awards outstanding hereunder and not exercised
in full on the date of termination.

     18. Governing Law. The Plan and all grants and awards and actions taken thereunder shall be
governed by and construed in accordance with the internal substantive laws of the State of
Delaware.

     19. Effective Date/Termination. This Plan will be effective as of the Effective Date. No
grant will be made under this Plan more than 10 years after the Effective Date, but all grants made
on or prior to such date will continue in effect thereafter subject to the terms thereof and of
this Plan.

     20. Miscellaneous Provisions.

          (a) The Company will not be required to issue any fractional Common Shares pursuant to this
Plan. The Board may provide for the elimination of fractions or for the settlement of fractions in
cash.

          (b) This Plan will not confer upon any Participant any right with respect to continuance of
employment or other service with the Company or any Subsidiary, nor will it interfere in any way
with any right the Company or any Subsidiary would otherwise have to terminate such Participant’s
employment or other service at any time.

          (c) Any Evidence of Award may provide, in the event that the Participant engages in any
activity that is detrimental to the Company (as such activity may be defined in any Evidence of
Award): (i) for the forfeiture of any award granted under the Plan, (ii) that the Participant
return to the Company any Common Shares that the Participant has not disposed of that were offered
pursuant to the Plan, and/or (iii) that the Participant pay to the Company in cash the difference
between any amount actually paid by a Participant for any Common Shares received under the Plan
that the Participant has disposed of and the Market Value per Share of the Common Shares on the
date the Participant acquired the Common Shares under the Plan.

18

 

          (d) No award under this Plan may be exercised by the holder thereof if such exercise, and the
receipt of cash or stock thereunder, would be, in the opinion of counsel selected by the Board,
contrary to law or the regulations of any duly constituted authority having jurisdiction over this
Plan.

          (e) Absence on leave approved by a duly constituted officer of the Company or any of its
Subsidiaries shall not be considered interruption or termination of service of any employee for any
purposes of this Plan or awards granted hereunder, except that no awards may be granted to an
employee while he or she is absent on leave.

          (f) No Participant shall have any rights as a stockholder with respect to any shares subject
to awards granted to him or her under this Plan prior to the date as of which he or she is actually
recorded as the holder of such shares upon the stock records of the Company.

          (g) The Board may condition the grant of any award or combination of awards authorized under
this Plan on the surrender or deferral by the Participant of his or her right to receive a cash
bonus or other compensation otherwise payable by the Company or a Subsidiary to the Participant.

          (h) Participants shall provide the Company with a written election form setting forth the name
and contact information of the person who will have beneficial ownership rights upon the death of
the Participant.

          (i) If any provision of this Plan is or becomes invalid, illegal or unenforceable in any
jurisdiction, or would disqualify this Plan or any award under any law deemed applicable by the
Board, such provision shall be construed or deemed amended or limited in scope to conform to
applicable laws or, in the discretion of the Board, it shall be stricken and the remainder of this
Plan shall remain in full force and effect.

Amended
by the Board —November 12, 2007

Adopted
by the Board —June 8, 2007

19

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