Document:

exv10w2

Exhibit
10.2

AMENDMENT NO 2 TO EMPLOYMENT AGREEMENT

     This Amendment No. 2 (“Amendment”) is made as of September 10, 2009 to the Employment
Agreement (“Agreement”) dated as of the 12th day of December 2007, as amended October 7, 2008,
between Alkermes, Inc., a Pennsylvania corporation (the “Company”), and Richard F. Pops
(“Executive”).

     WHEREAS, the Company and Executive have entered into the Agreement and now wish to amend
certain terms of the Agreement pursuant to this Amendment (capitalized terms used but not defined
herein shall have the meaning set forth in the Agreement);

     NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties agree as follows:

     1. Section 1 of the Agreement shall be deleted in its entirety and replaced with a new Section
1 which shall read as follows: “The term of this Agreement shall extend from December 12, 2007 (the
“Commencement Date”) until this Agreement is earlier terminated by either the Executive or the
Company pursuant to Paragraph 4. The term of this Agreement may be referred to herein as the
“Period of Employment.””

     2. Section 2 of the Agreement shall be deleted in its entirety and replaced with a new Section
2 which shall read as follows: “Commencing September 10, 2009, Executive shall serve as the Chief
Executive Officer, President and Chairman of the Board of Directors of the Company, and shall have
supervision and control over and responsibility for the day-to-day business and affairs of the
Company, be responsible for oversight of strategic issues affecting the Company and maintaining key
relationships in the industry and shall have such other powers and duties as may from time to time
be prescribed by the Board of Directors of the Company (the “Board”), provided that such duties are
consistent with Executive’s position or other positions that he may hold from time to time.”

     3. Section 3(a) of the Agreement shall be deleted in its entirety and replaced with a new
Section 3(a) which shall read as follows: “During the Period of Employment, Executive’s annual base
salary shall be his annual base salary on the Commencement Date. Executive’s base salary shall be
redetermined annually by the Compensation Committee of the Board (the “Compensation Committee”).
The base salary in effect at any given time is referred to herein as “Base Salary.” The Base
Salary shall be payable in substantially equal bi-weekly installments.”

     4. Section 3(b) of the Agreement shall be deleted in its entirety and replaced with a new
Section 3(b) which shall read as follows: “Executive shall be eligible to receive cash incentive
compensation as determined by the Compensation Committee from time to time, and shall also be
eligible, as determined by the Compensation Committee, to participate in such incentive
compensation plans as the Compensation Committee shall establish from time to time.”

 

 

     5. Section 4(b) of the Agreement shall be deleted in its entirety and replaced with a new
Section 4(b) which shall read as follows: “If Executive is prevented from performing his duties
hereunder by reason of any physical or mental incapacity that results in Executive’s satisfaction
of all requirements necessary to receive benefits under the Company’s long-term disability plan due
to a total disability, then, to the extent permitted by law, the Company may remove Executive from
his responsibilities. Nothing in this Subparagraph 4(b) shall be construed to waive Executive’s
rights, if any, under existing law including, without limitation, the Family and Medical Leave Act
of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.”

     6. Section 5(b)(i) of the Agreement shall be deleted in its entirety and replaced with a new
Section 5(b)(i) which shall read as follows: “Company shall pay Executive an amount equal to two
(2) times the sum of (A) the Executive’s Base Salary, plus (B) Executive’s Average Incentive
Compensation (the “Severance Amount”). The Severance Amount shall be paid out in substantially
equal bi-weekly installments over twenty-four (24) months, in arrears beginning on the first
payroll date that occurs after thirty-five (35) days from the Date of Termination. Solely for the
purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), each
bi-weekly payment is considered a separate payment. For purposes of this Agreement, “Average
Incentive Compensation” shall mean the average of the annual cash incentive compensation under
Subparagraph 3(b) received by Executive for the two (2) immediately preceding fiscal years. In no
event shall “Average Incentive Compensation” include any sign-on bonus, retention bonus or any
other special bonus. Notwithstanding the foregoing, if Executive breaches any of the provisions
contained in Paragraph 7 of this Agreement, all payments of the Severance Amount shall immediately
cease.”

     7. Except as specifically amended herein, all provisions of the Agreement shall remain in full
force and effect in accordance with their terms.

     IN WITNESS WHEREOF, the parties have executed this Amendment effective on the date and year
first above written.

	 	 	 	 	 	 	 
	 	 	ALKERMES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Kathryn L. Biberstein
 

	 	 
	 

	 	Its:
	 	Senior Vice President
 

	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Richard F. Pops	 	 
	 	 	 	 	 
	 

	 	Richard  F. Pops	 	 

2exv10w1

Exhibit 10.1

FLOW INTERNATIONAL CORPORATION

2005 EQUITY INCENTIVE PLAN

AS AMENDED AND RESTATED—SEPTEMBER 10, 2009

     1. Purposes of the Plan. The purposes of this Plan are to further the growth, development and
financial success of the Company by attracting and retaining the most talented Employees,
Consultants and Directors available, and by aligning the long-term interests of Employees,
Consultants and Directors with those of the shareholders by providing an opportunity to acquire an
ownership interest in the Company and by providing both performance rewards and long term
incentives for future contributions to the success of the Company.

          The Plan permits the grant of Incentive Stock Options, Nonqualified Stock Options, Restricted
Stock, Restricted Stock Units, Stock Appreciation Rights, or cash awards, at the discretion of the
Committee and as reflected in the terms of the Award Agreement. Each Award will be subject to
conditions specified in the Plan, such as continued employment or satisfaction of performance
criteria, as well as any conditions specified in the Award Agreement.

          This Plan will serve as a framework for the Committee to establish sub-plans or procedures
governing the grants to Employees, Directors, Consultants and Employees working for the Company
outside of the United States. The options granted under the Former Plan shall continue to be
administered under the Former Plan until such time as those options are exercised, expire or become
unexercisable for any reason.

     2. Definitions. As used herein, the following definitions shall apply:

          (a) “Award” shall mean any award or benefits granted under the Plan, including Options,
Shares, Restricted Stock, Restricted Stock Units, SARs and cash.

          (b) “Award Agreement” shall mean a written or electronic agreement between the Company
and the Participant setting forth the terms of the Award.

          (c) “Beneficial Ownership” shall have the meaning set forth in Rule 13d-3 promulgated
under the Exchange Act.

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

          (e) “Change in Control” shall mean any of the following: (1) Approval by the holders of
the Company’s Common Stock of any merger or consolidation of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares of common stock
are converted into cash, securities or other property, other than a merger of the Company in
which the holders of the Common Stock immediately prior to the merger have substantially the
same proportionate ownership of common stock of the surviving corporation immediately after
the merger; (2) Approval by the holders of the common stock of any sale, lease, exchange or
other transfer in one transaction or a series of related transactions of all or substantially
all of the Company’s assets other than a transfer of the Company’s assets to a majority-owned
subsidiary of the Company; or (3) Approval by the holders of the Common Stock of any plan or
proposal for the liquidation or dissolution of the Company.

          (f) “Code” shall mean the Internal Revenue Code of 1986, as amended.

          (g) “Committee” shall mean the Compensation and Plan Administrator Committee of the
Board, which at all times shall consist of two (2) or more members of the Board, each of whom
must qualify as an Independent Director.

          (h) “Common Stock” shall mean the common stock of the Company, $0.01 par value per
share.

          (i)“Company” shall mean Flow International Corporation., a Washington corporation and
any successor thereto.

          (j) “Consultant” shall mean any person, except an Employee, engaged by the Company or
any Subsidiary of the Company, to render personal services to such entity,

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including as an advisor, pursuant to the terms of a written agreement.

          (k) “Continuous Status as a Participant” shall mean (i) for Employees, the absence of
any interruption or termination of service as an Employee, (ii) for Directors, the absence of
any interruption or termination of service as a Director, and (iii) for Consultants, the
absence of any interruption, expiration, or termination of such person’s consulting or
advisory relationship with the Company or the occurrence of any termination event as set
forth in such person’s Award Agreement. Continuous Status as a Participant shall not be
considered interrupted (A) for an Employee on leave under any recognized form of leave under
policies of the Company or any applicable Subsidiary as may be in effect from time to time,
and (B) for a Consultant, in the case of any temporary interruption in such person’s
availability to provide services to the Company which has been authorized in writing by a
vice president of the Company prior to its commencement.

          (l) “Director” shall mean a member of the Board.

          (m) “Disability” shall mean (i) in the case of a Participant whose employment with the
Company or a Subsidiary is subject to the terms of an employment or consulting agreement that
includes a definition of “Disability” as used in this Plan shall have the meaning set forth
in such employment or consulting agreement during the period that such employment or
consulting agreement remains in effect; and (ii) in all other cases, the term “Disability” as
used in this Plan shall mean a “permanent and total disability” as the term is defined for
purposes of Section 22(e)(3) of the Code.

          (n) “Effective Date” shall mean the date on which the Company’s shareholders have
approved this Plan in accordance with applicable NASDAQ rules.

          (o) “Employee” shall mean any person, including an officer, who is a common law employee
of, receives remuneration for personal services to, is reflected on the official human
resources database as an employee of, and is on the payroll of the Company or any Subsidiary
of the Company. A person is on the payroll if he or she is paid from or at the direction of
the payroll department of the Company, or any Subsidiary of the Company. Persons providing
services to the Company, or to any Subsidiary of the Company, pursuant to an agreement with a
staff leasing organization, temporary workers engaged through or employed by temporary or
leasing agencies, and workers who hold themselves out to the Company, or a Subsidiary to
which they are providing services as being independent contractors, or as being employed by
or engaged through another company while providing the services, and persons covered by a
collective bargaining agreement (unless the collective bargaining agreement applicable to the
person specifically provides for participation in this Plan) are not Employees for purposes
of this Plan and do not and cannot participate in this Plan, whether or not such persons are,
or may be reclassified by the courts, the Internal Revenue Service, the U. S. Department of
Labor, or other person or entity, as common law employees of the Company, or any Subsidiary,
either solely or jointly with another person or entity.

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

          (q) “Executive Officers” shall mean the officers of the Company as such term is defined
in Rule 16a-1 under the Exchange Act.

          (r) “Fair Market Value” shall mean the closing price per share of the Common Stock on
the Nasdaq National Market or the Nasdaq SmallCap Market as to the date specified (or the
previous trading day if the date specified is a day on which no trading occurred), or if the
Nasdaq National Market or the Nasdaq SmallCap Market shall cease to be the principal exchange
or quotation system upon which the shares of Common Stock are listed or quoted, then such
exchange or quotation system as the

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Company elects to list or quote its shares of
Common Stock and that the Committee designates as the Company’s principal exchange or
quotation system.

          (s) “Former Plan” shall mean the 1995 Long-Term Incentive Compensation Plan.

          (t) “Incentive Stock Option” shall mean any Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code.

          (u) “Independent Director” shall mean a Director who: (1) meets the independence
requirements set forth in NASD Rule 4200(a)(15), or any successor rule, as in effect from
time to time; (2) qualifies as an “outside director” under Section 162(m) of the Code and the
Treasury Regulations promulgated thereunder; (3) qualifies as a “non-employee director” under
Rule 16b-3 promulgated under the Exchange Act; and (4) satisfies independence criteria under
any other applicable laws or regulations relating to the issuance of Shares to Employees.

          (v) “Maximum Annual Cash Award” shall have the meaning set forth in Section 10.

          (w) “Maximum Annual Participant Stock Award” shall have the meaning set forth in Section
6(b).

          (x) “Non-Employee Director” shall mean a Director who is not an Employee.

          (y) “Nonqualified Stock Option” shall mean an Option that is not an Incentive Stock
Option.

          (z) “Option” shall mean a stock option granted pursuant to Section 7 of the Plan.

          (aa) “Option Price” shall mean the per share purchase price of a Share purchased
pursuant to an Option.

          (bb) “Parent” shall mean a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.

          (cc) “Participant” shall mean an Employee, Director or Consultant.

          
(dd) “Performance Criteria” shall have the meaning set forth in Section 8(c).

          (ee) “Plan” shall mean this Flow International Corporation 2005 Equity Incentive Plan,
including any amendments thereto.

          (ff) “Reprice” shall mean the adjustment or amendment of the exercise price of Options
or SARs previously awarded whether through amendment, cancellation, replacement of grants or
any other means.

          (gg) “Restricted Stock” shall mean a grant of Shares pursuant to Section 8 of the Plan.

          (hh) “Restricted Stock Units” shall mean a grant of the right to receive Shares in the
future or their cash equivalent (or both) pursuant to Section 8 of the Plan.

          (ii) “SAR” shall mean a stock appreciation right awarded pursuant to Section 9 of the
Plan.

          (jj) “SEC” shall mean the Securities and Exchange Commission.

          (kk) “Share” shall mean one share of Common Stock, as adjusted in accordance with
Section 4 of the Plan.

          (ll) “Stand-Alone SARs” shall have the meaning set forth in Section 9(c) of the Plan.

         
(mm) “Subcommittee” shall have the meaning set forth in Section 5(d).

          (nn) “Subsidiary” shall mean (1) in the case of an Incentive Stock Option a “subsidiary
corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code,
and (2) in the case of a Nonqualified Stock Option, Restricted Stock, a Restricted Stock Unit
or a SAR, in addition to a subsidiary corporation as defined in (1), (A) a limited liability
company, partnership or other entity in which the Company controls fifty percent (50%) or
more of the voting power or equity interests, or (B) an entity with respect to which the
Company possesses the power, directly or indirectly, to direct or cause the direction of the
management and policies of that entity, whether through the Company’s ownership of voting
securities, by contract or otherwise.

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          (oo) “Tandem SARs” shall have the meaning set forth in Section 9(a) of the Plan.

          (pp) “Ten Percent Shareholder” shall mean a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock comprising more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any Parent or
Subsidiary.

3. Shares Subject to the Plan.

          (a) Reservation of Shares. The shares of Common Stock reserved under this Plan will
include reserved shares of Common Stock that are not subject to a grant or as to which the
option award granted has been forfeited under the Former Plan, and an additional Four Million
Two Hundred Thousand (4,200,000) Shares of Common Stock. Subject to the provisions of Section
4, the maximum aggregate number of Shares which may be awarded and delivered under the Plan
shall not exceed Five Million (5,000,000) Shares (adjusted, proportionately, in the event of
any stock split or stock dividend with respect to the Shares), and the maximum number which
may be granted as Incentive Stock Options under the Plan shall not exceed One Million
(1,000,000) Shares. The Company, during the term of this Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the requirements of
the Plan. Shares available for issuance under the Plan shall be increased by any shares of
Common Stock subject to outstanding awards under the Former Plan on the date of shareholder
approval of the Plan that later cease to be subject to such awards for any reason other than
such awards having been exercised, subject to adjustment from time to time as provided in
Section 5, which shares of Common Stock shall, as of the date such shares cease to be subject
to such awards, cease to be available for grant and issuance under the Former Plan, but shall
be available for issuance under the Plan. The number of shares of Common Stock underlying an
Award not issued as a result of any of the following actions shall again be available for
issuance under the Plan: (i) a payout of a Stand-Alone SAR, or a performance-based award of
Restricted Stock or Restricted Stock Units in the form of cash; (ii) a cancellation,
termination, expiration, forfeiture, or lapse for any reason (with the exception of the
termination of a Tandem SAR upon exercise of the related Options, or the termination of a
related Option upon exercise of the corresponding Tandem SAR) of any Stock Award; or (iii)
payment of the Option exercise price and/or payment of any taxes arising upon exercise of the
Option by withholding shares of Common Stock which otherwise would be acquired on exercise or
issued upon such payout. The Shares may be authorized but unissued, or reacquired shares of
Common Stock.

          (b) Substitutions and Assumptions. The Board or the Committee shall have the right to
substitute or assume Awards in connection with mergers, reorganizations, separations, or
other transactions to which Section 424(a) of the Code applies, provided such substitutions
and assumptions are permitted by Section 424 of the Code and the regulations promulgated
thereunder. The number of Shares reserved pursuant to Section 3(a) (but not the maximum
number of Shares which may be granted as Incentive Stock Options under the Plan) may be
increased by a corresponding number of Awards assumed and, in the case of substitution, by
the net increase in the number of Shares subject to Awards before and after the substitution.

          (c) Securities Law Compliance. Shares shall not be issued pursuant to the exercise of an
Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated
under either such Act, and the requirements of any stock exchange or quotation system upon
which the Shares may then be listed or quoted, and shall be further subject to the approval
of counsel

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for the Company with respect to such compliance.

          4. Adjustments to Shares Subject to the Plan.

          (a) Capitalization Adjustments. If any change is made to the Shares by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Shares as a class without the Company’s receipt of
consideration, appropriate adjustments shall be made to (i) the maximum number and/or class
of securities issuable under the Plan, (ii) the number and/or class of securities and/or the
price per Share covered by outstanding Awards under the Plan, (iii) the Maximum Annual
Participant Stock Award and (iv) the maximum number of Shares which may be granted as
Incentive Stock Options under the Plan. The Committee may also make adjustments described in
(i)-(iv) of the previous sentence in the event of any distribution of assets to shareholders
other than a normal cash dividend. In determining adjustments to be made under this Section
4, the Committee may take into account such factors as it deems appropriate, including the
restrictions of applicable law and the potential tax consequences of an adjustment, and in
light of such factors may make adjustments that are not uniform or proportionate among
outstanding Awards. Adjustments, if any, and any determinations or interpretations, including
any determination of whether a distribution is other than a normal cash dividend, made by the
Committee shall be final, binding and conclusive. The Committee in its discretion may provide
holders of Restricted Stock or Restricted Stock Units a dividend equivalent right with
respect to the Shares the Participant shall be entitled to receive or purchase. For purposes
of this Section 4, conversion of any convertible securities of the Company shall not be
deemed to have been “effected without receipt of consideration.”

          (b) Change in Control. In the event of Change in Control, then, to the extent permitted
by applicable law: (1) any surviving corporation may assume any Awards outstanding under the
Plan or may substitute similar stock awards (including an award to acquire the same
consideration paid to the shareholders in the transaction described in this Section 4(b)) for
those outstanding under the Plan, or (2) in the event any surviving corporation does not
agree to assume or continue such Awards, or to substitute similar stock awards for those
outstanding under the Plan in accordance with the preceding clause, then the time during
which such Awards may be exercised automatically will be accelerated and become fully vested
and exercisable immediately prior to the consummation of such transaction, and the Awards
shall automatically terminate upon consummation of such transaction if not exercised prior to
such event.

          (c) No Limitations. Except as expressly provided herein, no issuance by the Company of
shares of any class, or securities convertible into shares of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price of Shares
subject to an Award.

5. Plan Administration.

          (a) Authority. The Plan shall be administered by the Committee. The Committee shall have
full and exclusive power to administer the Plan on behalf of the Board, subject to such terms
and conditions as the Committee may prescribe. Notwithstanding anything herein to the
contrary, the Committee’s power to administer the Plan, and actions the Committee takes under
the Plan, shall be consistent with the provisions set forth in the Committee’s charter, as
such charter may be amended from time to time.

          (b) Powers of the Committee. Subject to the other provisions of this Plan, the Committee
shall have the authority, in its discretion:

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          (i) to grant Incentive Stock Options, Nonqualified Stock Options, Shares, Restricted
Stock, Restricted Stock Units, cash awards and SARs to Participants and to determine the
terms and conditions of such Awards, including the determination of the Fair Market Value of
the Shares and the exercise price (subject to Section 7(b)), and to modify or amend each
Award, with the consent of the Participant when required;

          (ii) to determine the Participants to whom Awards, if any, will be granted hereunder,
additional eligibility requirements for such awards, the timing of such Awards, and the
number of Shares (if any) to be represented by each Award;

          (iii) to construe and interpret the Plan, the Awards granted hereunder, and any Award
Agreement;

          (iv) to prescribe, amend, and rescind rules and regulations relating to the Plan,
including the form of Award Agreement, and manner of acceptance of an Award, such as
correcting a defect or supplying any omission, or reconciling any inconsistency so that the
Plan or any Award Agreement complies with applicable law, regulations and listing
requirements and to avoid unanticipated consequences deemed by the Committee to be
inconsistent with the purposes of the Plan or any Award Agreement;

          (v) to establish performance, conduct and other criteria for Awards made pursuant to the
Plan in accordance with a methodology established by the Committee, and to determine whether
performance, conduct and other goals have been attained;

          (vi) to accelerate or defer (with the consent of the Participant) the exercise or vested
date of any Award;

          (vii) to authorize any person to execute on behalf of the Company any instrument
required to effectuate the grant of an Award previously granted by the Committee;

          (viii) to establish subplans, procedures or guidelines for the grant of Awards to
Employees, Directors and Consultants;

          (ix) to determine eligibility for an Award and to authorize the cancellation, forfeiture
or suspension of an Award; and

          (x) to make all other determinations deemed necessary or advisable for the
administration of the Plan;

          Provided that, no consent of a Participant is necessary under clauses (i) or (vi) if a
modification, amendment, acceleration, or deferral, in the reasonable judgment of the
Committee confers a benefit on the Participant or is made pursuant to an adjustment in
accordance with Section 4. Furthermore, with respect to outstanding Awards granted to a
Participant who violates any legal obligation owed to the Company, including contractual
obligations, or who otherwise acts in a manner detrimental to the Company’s interests, the
Committee has the authority to cancel any such outstanding Awards as of the date such
violation is discovered and to have the Participant return any gains realized with respect to
such Awards in the twelve months prior to the violation.

          (c) Effect of Committee’s Decision.

All decisions, determinations, and interpretations of the Committee shall be final,
conclusive and binding on all Participants, the Company, any shareholder and all other
persons.

          (d) Delegation and Administration. Consistent with the Committee’s charter, as such
charter may be amended from time to time, the Committee may delegate to one or more
subcommittees consisting of members of the Committee or other Directors who are Independent
Directors (any such committee a “Subcommittee”) the administration of the Plan, and such
administrator(s) may have the authority to directly, or under their supervision, execute and
distribute agreements or other documents evidencing or relating to Awards granted by the
Committee under this Plan, to maintain records relating to the grant, vesting, exercise,
forfeiture or
expiration of Awards, to process or oversee the issuance of Shares upon the exercise,

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vesting and/or settlement of an Award, to interpret the terms of Awards and to take such
other actions as the Committee may specify. Any action by any such Subcommittee within the
scope of such delegation shall be deemed for all purposes to have been taken by the
Committee.

6. General Eligibility.

          (a) Awards. Awards may be granted to Participants, provided that additional eligibility
requirements may be set forth in specific arrangements that limit or narrow the category of
Participants, and further provided that Incentive Stock Options may only granted to
Employees. A Consultant shall not be eligible for the grant of an Award (other than a cash
award) if, at the time of grant, a Form S-8 Registration Statement under the Securities Act
(“Form S-8”) is not available to register either the offer or the sale of the Company’s
securities to such Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or as otherwise
provided by the rules governing the use of Form S-8, unless the Company determines both (i)
that such grant (1) shall be registered in another manner under the Securities Act (e.g., on
a Form S-3 Registration Statement) or (2) does not require registration under the Securities
Act in order to comply with the requirements of the Securities Act, if applicable, and (ii)
that such grant complies with the securities laws of all other relevant jurisdictions. Form
S-8 generally is available to consultants and advisors only if (I) they are natural persons,
(II) they provide bona fide services to the issuer, its parents, its majority-owned
subsidiaries or majority-owned subsidiaries of the issuer’s parent, and (III) the services
are not in connection with the offer or sale of securities in a capital-raising transaction,
and do not directly or indirectly promote or maintain a market for the issuer’s securities.

          (b) Maximum Annual Participant Stock Award. The aggregate number of Shares with respect
to which an Award or Awards may be granted to any one Participant in any one fiscal year of
the Company (the “Maximum Annual Participant Stock Award”) shall not exceed one million
(1,000,000) shares of Common Stock (adjusted, proportionately, in the event of any stock
split or stock dividend with respect to the Shares). If an Option is in tandem with a SAR,
such that the exercise of the Option or SAR with respect to a Share cancels the tandem SAR or
Option right, respectively, with respect to each Share, the tandem Option and SAR rights with
respect to each Share shall be counted as covering but one Share for purposes of the Maximum
Annual Participant Stock Award. If the number of Shares that will be issued under an Award
depends upon the performance of the Company or the individual receiving the Award, then for
purposes of applying the Maximum Annual Participant Stock Award, the number of Shares
considered granted under the Award shall be the maximum number of shares that the individual
could receive under the Award, and those Shares shall be considered granted at the beginning
of the performance period over which the Award is earned, not during or after the end of the
performance period when the amount of Shares actually earned by the Participant is determined
and Shares are issued to the Participant. However, for purposes of Section 3, only the number
of Shares actually issued to the Participant, and not the maximum potential number of Shares
that could have been earned by and issued to the Participant under the Award, will count
against the reserve amount. This one million (1,000,000) Share maximum per Company fiscal
year is in addition to (and not reduced by) cash incentives awarded pursuant to Section 10 or
Shares granted in satisfaction of such cash Awards. The Maximum Annual Participant Stock
Award limit shall only apply to awards made after April 30, 2005.

          (c) No Employment/Service Rights. Nothing in the Plan shall confer upon any Participant
the right to an Award or to continue in service as an Employee or
Consultant for any period of specific duration, or interfere with or otherwise

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restrict
in any way the rights of the Company (or any Subsidiary employing or retaining such person),
or of any Participant, which rights are hereby expressly reserved by each, to terminate such
person’s services at any time for any reason, with or without cause (as such term is defined
in a Company subplan or an Award Agreement, as applicable).

7. Grant, Terms and Conditions of Options.

          (a) Designation. Each Option shall be designated in an Award Agreement as either an
Incentive Stock Option or a Nonqualified Stock Option. However, notwithstanding the
foregoing, if an Option is not designated as an Incentive Stock Option, such Option will be
deemed to be a Nonqualified Stock Option. To the extent that the aggregate Fair Market Value
(determined at the time of grant) of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Employee during any
calendar year exceeds $100,000, such excess Options shall be treated as Nonqualified Stock
Options. For this purpose, Options shall be taken into account in the order in which they
were granted.

          (b) Option Price. The per Share exercise price under an Incentive Stock Option (i)
granted to a Ten Percent Shareholder, shall be no less than 110% of the Fair Market Value per
Share on the date of grant, or (ii) granted to any other Participant, shall be no less than
100% of the Fair Market Value per Share on the date of grant. The per Share exercise price
under a Nonqualified Stock Option or SAR shall be no less than one hundred percent (100%) of
the Fair Market Value per Share on the date of grant. In no event shall the Board or the
Committee be permitted to Reprice an Option after the date of grant.

          (c) Term of Options. The term of each Incentive Stock Option shall be no more than ten
(10) years from the date of grant. However, in the case of an Incentive Stock Option granted
to a Ten Percent Shareholder, the term of the Option shall be no more than five (5) years
from the date of grant. The term of all Nonqualified Options shall be seven (7) years unless
otherwise provided by the Committee in its discretion.

          (d) Vesting. To the extent Options vest and become exercisable in increments, unless
otherwise provided in the applicable Award Agreement or any severance agreement (i) such
Options shall cease to vest upon a Participant’s Disability or termination of such
Participant’s Continuous Status as a Participant (other than upon a Participant’s death), and
(ii) such Options shall immediately vest in full upon a Participant’s death.

          (e) Substitution of SARs for Options. The Committee may provide in the Award Agreement
evidencing the grant of an Option that the Committee shall have the sole discretion to
substitute without receiving Participants’ permission, SARs paid only in stock for
outstanding Options; provided, the terms of the substituted stock SARs are the same as the
terms of the Options, the number of shares underlying the number of stock SARs equals the
number of shares underlying the Options and the difference between the Fair Market Value of
the underlying Shares and the grant price of the SARs is equivalent to the difference between
the Fair Market Value of the underlying Shares and the exercise price of the Options.

          (f) Exercise. Any Option granted hereunder shall be exercisable at such times and under
such conditions as determined by the Committee at the time of grant, and as shall be
permissible under the terms of the Plan. No fractional Shares may be issued or delivered
pursuant to the Plan or any Award.

8. Grant, Terms and Conditions of Stock Awards.

          (a) Designation. Restricted Stock or Restricted Stock Units may be granted under the
Plan. Restricted Stock or Restricted Stock Units may include a dividend equivalent right, as
permitted by Section 4. After the
Committee determines that it will offer Restricted Stock or Restricted Stock Units, it

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will advise the Participant in writing or electronically, by means of an Award Agreement, of
the terms, conditions and restrictions, including vesting, if any, related to the offer,
including the number of Shares that the Participant shall be entitled to receive or purchase,
the price to be paid, if any, and, if applicable, the time within which the Participant must
accept the offer. The offer shall be accepted by execution of an Award Agreement or as
otherwise directed by the Committee. Restricted Stock Units may be paid as permitted by
Section 11(b). The term of each award of Restricted Stock or Restricted Stock Units shall be
at the discretion of the Committee.

          (b) Restrictions. Subject to Section 8(c), the Committee may impose such conditions or
restrictions on the Restricted Stock or Restricted Stock Units granted pursuant to the Plan
as it may determine advisable, including the achievement of specific performance goals, time
based restrictions on vesting, conduct criteria or others. If the Committee established
performance or other goals, the Committee shall determine whether a Participant has satisfied
the performance of such goals.

          (c) Performance Criteria. Restricted Stock, Restricted Stock Units and cash awards
granted pursuant to the Plan that are intended to qualify as “performance based compensation”
under Section 162(m) of the Code shall be subject to the attainment of performance goals
relating to the Performance Criteria selected by the Committee and specified at the time such
Restricted Stock, Restricted Stock Units and cash awards are granted. For purposes of this
Plan, “Performance Criteria” means one or more of the following (as selected by the
Committee): (i) cash flow; (ii) earnings per share; (iii) earnings per share growth; (iv)
earnings before interest, taxes, and amortization; (v) return on equity; (vi) market share;
(vii) total shareholder return; (viii) share price performance; (ix) return on capital; (x)
return on assets, net assets or invested assets; (xi) revenue; (xii) revenue growth; (xiii)
earnings growth; (xiv) operating income; (xvi) operating profit; (xvii) growth in operating
income or profit; (xviii) profit margin; (xix) return on operating revenue; (xx) return on
invested capital; (xxi) market price of Shares; (xxii) brand recognition; (xxiii) customer
satisfaction; (xxiv) operating efficiency; (xxv) productivity; or (xxvi) reduction in costs.
Any of these Performance Criteria may be used to measure the performance of the Company as a
whole or any business unit or division of the Company.

          (d) Vesting. Unless the Committee determines otherwise, the Award Agreement shall
provide for the forfeiture of the non-vested Shares underlying Restricted Stock or the
termination of Restricted Stock Units upon cessation of a Participant’s Continuous Status as
a Participant. Unless the Committee determines otherwise, non-vested Shares underlying
Restricted Stock and Restricted Stock Units shall vest in full immediately upon death. To the
extent that the Participant purchased the Shares granted under any such Restricted Stock
award and any such Shares remain non-vested at the time of cessation of a Participant’s
Continuous Status as a Participant, the cessation of Participant’s Continuous Status as a
Participant shall cause an immediate sale of such non-vested Shares to the Company at the
original price per Share paid by the Participant.

9. Grant, Terms and Conditions of SARs.

          (a) Grants. The Committee shall have the full power and authority, exercisable in its
sole discretion, to grant SARs to selected Participants. The Committee is authorized to grant
both tandem stock appreciation rights consisting of SARs with underlying Options (“Tandem
SARs”) and stand-alone stock appreciation rights consisting of SARs not tied to underlying
Options (“Stand-Alone SARs”). The term of a SAR shall be at the discretion of the Committee.
In no event shall the Board or the Committee be permitted to
Reprice a SAR after the date of grant without shareholder approval.

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          (b) Tandem SARs.

          (i) Participants may be granted a Tandem SAR, exercisable upon such terms and conditions
as the Committee shall establish, to elect between the exercise of the underlying Option for
Shares or the surrender of the Option in exchange for a distribution from the Company in an
amount equal to the excess of (A) the Fair Market Value (on the Option surrender date) of the
number of Shares in which the Participant is at the time vested under the surrendered Option
(or surrendered portion thereof) over (B) the aggregate exercise price payable for such
vested Shares.

          (ii) No such Option surrender shall be effective unless it is approved by the Committee,
either at the time of the actual Option surrender or at any earlier time. If the surrender is
so approved, then the distributions to which the Participant shall become entitled under this
Section 9(b) may be made in Shares valued at Fair Market Value (on the Option surrender
date), in cash, or partly in Shares and partly in cash, as the Committee shall deem
appropriate.

          (iii) If the surrender of an Option is not approved by the Committee, then the
Participant shall retain whatever rights he or she had under the surrendered Option (or
surrendered portion thereof) on the Option surrender date and may exercise such rights at any
time prior to the later of (A) five (5) business days after the receipt of the rejection
notice or (B) the last day on which the Option is otherwise exercisable in accordance with
the terms of the instrument evidencing such Option, but in no event may such rights be
exercised more than ten (10) years after the date of the Option grant.

(c) Stand-Alone SARs.

          (i) A Participant may be granted a Stand-Alone SAR not tied to any underlying Option
under Section 7 of the Plan. The Stand-Alone SAR shall cover a specified number of Shares and
shall be exercisable upon such terms and conditions as the Committee shall establish. Upon
exercise of the Stand-Alone SAR, the holder shall be entitled to receive a distribution from
the Company in an amount equal to the excess of (A) the aggregate Fair Market Value (on the
exercise date) of the Shares underlying the exercised right over (B) the aggregate base price
in effect for those Shares.

          (ii) The number of Shares underlying each Stand-Alone SAR and the base price in effect
for those Shares shall be determined by the Committee at the time the Stand-Alone SAR is
granted. In no event, however, may the base price per Share be less than the Fair Market
Value per underlying Share on the grant date.

          (iii) The distribution with respect to an exercised Stand-Alone SAR may be made in
Shares valued at Fair Market Value on the exercise date, in cash, or partly in Shares and
partly in cash, as the Committee shall deem appropriate.

          10. Cash Awards. Cash awards that are intended to qualify as “performance based
compensation” under Section 162(m) of the Code may be made under the Plan and will be paid in
cash upon the achievement, in whole or part, of performance goals relating to one or more of
the Performance Criteria selected by the Committee and specified at the time such cash awards
are granted. These criteria shall be selected and calculated under a methodology established
in writing by the Committee prior to the issuance of a cash Award. Such writing may be a plan
or other arrangement established by the Committee hereunder, which shall set forth the terms
and conditions of the performance-based cash Awards, and may combine cash Awards with other
forms of grants described in this Plan. Such plan or arrangement shall not expand the class
of individuals entitled to participate under the Plan, add to any of the Performance
Criteria, or increase the maximum amount payable to any single Participant with respect to
any fiscal year of the Company, as set forth below. The maximum amount of total payments of
cash (or Shares in lieu of cash)
that can be awarded under plans or arrangements established by the Committee pursuant to
this Section 10 to any single Participant in any fiscal year of the Company

Page 10 of 13

 

will not exceed a
value of two million dollars ($2,000,000) (the “Maximum Annual Cash Award”). For purposes of
applying the Maximum Annual Cash Award, cash Awards shall be considered awarded at the
beginning of the performance period over which the Award is earned, not during or after the
end of the performance period when the amount of cash actually earned by the Participant is
determined and cash is paid (or Shares are issued) to the Participant. For incentive programs
(other than SARs) where the final amount of the Award is first calculated in cash and then
paid in whole or in part in Shares, the entire amount of the Award shall be treated as a cash
incentive award that is subject to the Maximum Annual Cash Award limitation in this Section
10, not the Maximum Annual Participant Stock Award limitation in Section 6(b).

11. Procedure for Exercise; Rights as a Shareholder.

          (a) Procedure. An Award shall be exercised when written, electronic or verbal notice of
exercise has been given to the Company, or the brokerage firm or firms approved by the
Company to facilitate exercises and sales under this Plan, in accordance with the terms of
the Award by the person entitled to exercise the Award and full payment for the Shares with
respect to which the Award is exercised has been received by the Company or the brokerage
firm or firms, as applicable. The notification to the brokerage firm shall be made in
accordance with procedures of such brokerage firm approved by the Company. Full payment may,
as authorized by the Committee, consist of any consideration and method of payment allowable
under the terms of this Plan. The Company shall issue (or cause to be issued) such share
certificate promptly upon exercise of the Award. In the event that the exercise of an Award
is treated in part as the exercise of an Incentive Stock Option and in part as the exercise
of a Nonqualified Stock Option pursuant to Section 7(a), the Company shall issue a share
certificate evidencing the Shares treated as acquired upon the exercise of an Incentive Stock
Option and a separate share certificate evidencing the Shares treated as acquired upon the
exercise of a Nonqualified Stock Option, and shall identify each such certificate accordingly
in its share transfer records. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the share certificate is issued, except as
provided in Section 4 of the Plan.

          (b) Method of Payment. The consideration to be paid for any Shares to be issued upon
exercise or other required settlement of an Award, including a method of payment, shall be
determined by the Committee at the time of settlement, and which forms may include: (i)
check; (ii) wire transfer; (iii) tender of shares of Common Stock owned by the Participant in
accordance with rules established by the Committee from time to time; and (iv) a request that
the Company or a designated brokerage firm conduct a cashless exercise of the Option. Shares
used to pay the Option Price shall be valued at their Fair Market Value on the exercise date.
Payment of the aggregate Option Price by means of tendering previously-owned shares of Common
Stock shall not be permitted when the same may, in the reasonable opinion of the Company,
cause the Company to record a loss or expense as a result thereof.

          (c) Withholding Obligations. To the extent required by applicable federal, state, local
or foreign law, the Committee may and/or a Participant shall make arrangements satisfactory
to the Company for the satisfaction of any withholding tax obligations that arise with
respect to any Incentive Stock Option, Nonqualified Stock Option, SAR, Restricted Stock or
Restricted Stock Units, cash awards or any sale of Shares. The Company shall not be required
to issue Shares or to recognize the disposition of
such Shares until such obligations are satisfied. These obligations may be satisfied by
having the Company withhold a portion of the Shares that otherwise would be issued to a
Participant under such Award (provided,

Page 11 of 13

 

however, that no Shares are withheld with a value
exceeding the minimum amount of tax required to be withheld by law) or by tendering Shares
previously acquired by the Participant in accordance with rules established by the Committee
from time to time.

          (d) Shareholder Rights. Except as otherwise provided in this Plan, until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the share certificate evidencing such Shares, no right to
vote or receive dividends or any other rights as a shareholder shall exist with respect to
the Shares subject to the Award, notwithstanding the exercise of the Award.

          (e) Non-Transferability of Awards. An Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in exchange for consideration, and may not be
transferred other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Participant, only by the Participant; unless the
Committee permits further transferability, on a general or specific basis, in which case the
Committee may impose conditions and limitations on any permitted transferability.

12. Expiration of Awards.

          (a) Expiration, Termination or Forfeiture of Awards. Unless otherwise provided in the
applicable Award Agreement or any severance agreement, vested Awards granted under this Plan
shall expire, terminate, or otherwise be forfeited as follows:

          (i) ninety (90) days after the date of termination of a Participant’s Continuous Status
as a Participant other than in circumstances covered by (ii), (iii), (iv) or (v) below;

          (ii) immediately upon termination of a Participant’s Continuous Status as a Participant
for cause (as defined in a Company subplan or Award Agreement, as applicable);

          (iii) twelve (12) months after the date on which a Participant ceased performing
services as a result of his or her Disability; and

          (iv) twelve (12) months after the date of the death of a Participant who was a
Participant whose Continuous Status as a Participant terminated as a result of his or her
death.

          (b) Extension of Term. Notwithstanding subsection (a) above, the Committee shall have
the authority to extend the expiration date of any outstanding Options or SARs other than an
Incentive Stock Option in circumstances in which it deems such action to be appropriate
(provided that no such extension shall extend the term of an Option or SAR beyond the date on
which the Award would have expired or been forfeited if there had been no termination of the
Employee’s Continuous Status as a Participant).

13. Term, Amendment and Termination of the Plan.

          (a) Term of Plan. The Plan shall become effective as of the Effective Date. It shall
continue in effect until the tenth anniversary of the Effective Date or until terminated
under this Section 13 of the Plan or extended by an amendment approved by the shareholders of
the Company pursuant to Section 13(a).

          (b) Amendment and Termination. The Board or the Committee may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable (including, but not
limited to amendments which the Board deems appropriate to enhance the Company’s ability to
claim deductions related to stock option exercises); provided that to the extent required by
the Code or any Nasdaq or SEC requirements,
shareholder approval shall be required for any amendment of the Plan. Subject to the
foregoing, it is specifically intended that the Board or Committee may amend the Plan without
shareholder approval to comply with legal, regulatory and listing requirements and to avoid
unanticipated

Page 12 of 13

 

consequences deemed by the Committee to be inconsistent with the purpose of the
Plan or any Award Agreement.

          (c) Participants in Foreign Countries. The Committee shall have the authority to adopt
such modifications, procedures, and subplans as may be necessary or desirable to comply with
provisions of the laws of foreign countries in which the Company or its Subsidiaries may
operate to assure the viability of the benefits from Awards granted to Participants
performing services in such countries and to meet the objectives of the Plan.

          (d) Effect of Amendment or Termination. Any such amendment or termination of the Plan
shall not affect Awards already granted and such Awards shall remain in full force and effect
as if this Plan had not been amended or terminated, unless mutually agreed otherwise between
the Participant and the Committee, which agreement must be in writing and signed by the
Participant and the Company.

          (e) Code Section 409A. Notwithstanding anything to the contrary in this Section 13, the
Committee may amend the Plan and the Award Agreements without any additional consideration to
affected Participants to the extent necessary to avoid penalties arising under Code Section
409A, even if those amendments reduce, restrict or eliminate rights granted under the Plan or
Award Agreement (or both) before those amendments.

14. Shareholder Approval. The Plan is subject to approval by the shareholders of the Company
in accordance with applicable Nasdaq rules.

Page 13 of 13

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