Document:

Exhibit 10.9

 

TORNIER N.V.

AMENDED AND RESTATED

STOCK OPTION PLAN

 

(amended and restated effective as of the IPO Date)

 

1.                                       PURPOSE.

 

The purpose of the Plan is to assist the Company in attracting, retaining, motivating and rewarding Eligible Persons, and promoting the creation of long-term value for stockholders of the Company by closely aligning the interests of Participants with those of such stockholders.  The Plan authorizes the award of stock-based incentives to Participants to encourage such persons to expend their maximum efforts in the creation of stockholder value.  The Plan was established effective as of the Effective Date, and was subsequently amended and restated in its entirety effective as of the IPO Date.

 

2.                                       DEFINITIONS.

 

For purposes of the Plan, the following terms shall be defined as set forth below:

 

(a)                                  “Affiliate” means, with respect to any entity, any other entity that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such entity all within the meaning of section 2:24b of the Dutch Civil Code.

 

(b)                                 “Board” means the Management Board of the Company or any successor thereto; provided, that if the Management Board does not exist, “Board” means the Board of Directors of the Company.

 

(c)                                  “Cause” means, in the absence of any employment agreement between a Participant and the Employer otherwise defining Cause, (i) incompetence, incompetence, fraud, personal dishonesty, or acts of gross negligence or willful misconduct on the part of a Participant in the course of his or her employment or services; (ii) a Participant’s engagement in conduct that is, or could reasonably be expected to be, materially injurious to the Company or its Affiliates; (iii) misappropriation by a Participant of the assets or business opportunities of the Company or its Affiliates; (iv) embezzlement or other financial fraud committed by a Participant, at his or her direction, or with his or her personal knowledge; (v) a Participant’s conviction by a court of competent jurisdiction of, or pleading “guilty” or “no contest” to, (x) a felony, or (y) any other criminal charge (other than minor traffic violations) which could reasonably be expected to have a material adverse impact on the Company’s or an Affiliate’s reputation or business; or (vi) failure by a Participant to follow the lawful directions of a superior officer or the Board.  In the event there is an employment agreement between a Participant and the Employer defining Cause, “Cause” shall have the meaning provided in such agreement.

 

(d)                                 “Change in Control” means (i) the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any person or group, other than the Institutional Investors; (ii) any person or group, other than the Institutional Investors, is or becomes the “beneficial owner,” directly or indirectly, of more than 50% of the total voting power of the voting stock of the Company, including by way of merger, 

 

 

consolidation or otherwise (other than an offering of Ordinary Shares to the general public through a registration statement filed with the Securities and Exchange Commission); or (iii) the sale or disposition, in one or a series of related transactions, of the voting stock of the Company, as a result of which the Institutional Investors (either directly or indirectly) are no longer the single largest holder of voting stock of the Company.

 

(e)                                  “Committee” means the Board or such other committee appointed in writing by the Board consisting of two or more individuals, which may include all or part of the Management Board.

 

(f)                                    “Company” means Tornier N.V., a public limited liability company (naamloze vennootschap) organized under the laws of The Netherlands or any successor thereto (formerly Tornier B.V. (formerly “TMG B.V.”), a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) organized under the laws of the Netherlands).

 

(g)                                 “Company Securities” means equity securities of the Company acquired by the Institutional Investors from time to time (determined on an as-converted basis).

 

(h)                                 “Competitive Activity” means, with respect to any Participant, any activity reasonably determined by the Committee to be competitive with the business of the Employer of the Participant.  If a Participant is a party to an employment or other agreement with the Employer that contains restrictive covenants, “Competitive Activity” with respect to such Participant shall be limited to the material breach of such restrictive covenants by such Participant.

 

(i)                                     “Corporate Event” means (i) a merger or consolidation involving the Company in which the Company is not the surviving corporation; (ii) a merger or consolidation involving the Company in which the Company is the surviving corporation but the holders of shares of Stock receive securities of another corporation and/or other property, including cash; (iii) a Change in Control; or (iv) the reorganization or liquidation of the Company.

 

(j)                                     “Depositary Receipts” means depositary receipts (‘certificaten van aandelen’) of shares in the capital of the Company, par value €0.03 per Depositary Receipt, issued without cooperation of the company as referred to in article 2:227 paragraph 2 of the Dutch Civil Code, which shares in the capital of the Company, par value €0.03 per share are held by the Dutch Foundation Stichting Administratiekantoor Tornier.

 

(k)                                  “Disability” means, in the absence of any employment agreement between a Participant and the Employer otherwise defining Disability, the permanent and total disability of a person as determined in good faith by the Committee. In the event there is an employment agreement between a Participant and the Employer defining Disability, “Disability” shall have the meaning provided in such agreement.

 

(l)                                     “Effective Date” means July 18, 2006.

 

(m)                               “Eligible Person” means (i) each employee of the Company or of any of its Affiliates, including each such person who may also be a director of the Company and/or its 

 

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Affiliates; (ii) each non-employee director of the Company and/or its Affiliates; (iii) each other person who provides substantial services to the Company and/or its Affiliates and who is designated as eligible by the Committee; and (iv) any person who has been offered employment by the Company or its Affiliates; provided that such prospective employee may not receive any payment or exercise any right relating to an Option until such person has commenced employment with the Company or its Affiliates.  An employee on an approved leave of absence may be considered as still in the employ of the Company or its Affiliates for purposes of eligibility for participation in the Plan.

 

(n)                                 “Employer” means either the Company or an Affiliate of the Company that the Participant (determined without regard to any transfer of an Option) is principally employed by or provides services to, as applicable.

 

(o)                                 “Expiration Date” means the date upon which the term of an Option expires, as determined under Section 5(b) hereof.

 

(p)                                 “Fair Market Value” means (i) prior to an IPO, the fair market value per share of Stock, as determined by the Board in good faith, (ii) at the time of an IPO, the per share price offered to the public in such IPO, and (iii) after an IPO, on any date (A) if the Stock is listed on a national or international securities exchange, the mean between the highest and lowest sale prices reported as having occurred on the primary exchange with which the Stock is listed and traded on the date prior to such date, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported, or (B) if the Stock is not listed on any national securities exchange but is listed on a nationally or internationally recognized automated quotation system, the average between the high bid price and low ask price reported on the date prior to such date, or, if there is no such sale on that date then on the last preceding date on which such a sale was reported.  If, after an IPO, the Stock is not listed on a national or international securities exchange or on a nationally or internationally recognized automated quotation system, the Fair Market Value shall mean the amount determined by the Board in good faith to be the fair market value per share of Stock, on a fully diluted basis.

 

(q)                                 “Institutional Investors” means the “Institutional Investors” listed on Schedule I to the Securityholders’ Agreement as of the Effective Date, together with their respective Affiliates.

 

(r)                                    “IPO” means an initial public offering of the Ordinary Shares registered pursuant to an effective registration statement.

 

(s)                                  “IPO Date” means the effective date of the registration statement for the IPO.

 

(t)                                    “Lock-Up Period” shall have the meaning set forth in Section 6(a) below.

 

(u)                                 “Majority Institutional Investors” shall have the meaning set forth in the Securityholders’ Agreement.

 

(v)                                 “Management Board” shall mean the Management Board of the Company.

 

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(w)                               “Option” means a conditional right, granted to a Participant under Section 5 hereof, to purchase shares of Stock at a specified price during specified time periods.

 

(x)                                   “Option Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of an individual Option grant.

 

(y)                                 “Ordinary Shares” means the Company’s ordinary shares, par value €0.03 per share, and such other securities as may be substituted for such shares pursuant to 10 hereof.

 

(z)                                   “Participant” means an Eligible Person who has been granted an Option under the Plan, or if applicable, such other person or entity who holds an Option.

 

(aa)                            “Permitted Transfer” shall mean any transfer by a Participant of all or any portion of his or her Stock (i) to or for the benefit of any spouse, child or grandchild of the Participant, or (ii) to a trust or partnership for the benefit of any of the foregoing, including transfers by will or the laws of descent and distribution.

 

(bb)                          “Plan” means this Tornier N.V. Amended and Restated Stock Option Plan (formerly Tornier B.V. Stock Option Plan).

 

(cc)                            “Prime Rate” shall mean the rate from time to time published in the “Money Rates” section of The Wall Street Journal as being the “Prime Rate” (or, if more than one rate is published as the Prime Rate, then the highest of such rates).

 

(dd)                          “Stock” means the Ordinary Shares and Depositary Receipts.

 

(ee)                            “Securityholders’ Agreement” means that certain Securityholders’ Agreement by and among the Company and certain stockholders of the Company dated even with the Effective Date.

 

(ff)                                “Time Vested Option” means an Option subject to the vesting schedule provided in Section 5(e)(ii) below.

 

(gg)                          “Trust Conditions” (‘administratie voorwaarden’) means the agreement entered into by operation of law between Stichting Administratiekantoor Tornier and the Participants upon receiving Depositary Receipts.

 

(hh)                          “Vesting Commencement Date” means a date designated in the Option Agreement that vesting of the Time Vested Options is based upon.

 

3.                                       ADMINISTRATION.

 

(a)                                  Authority of the Committee. Except as otherwise provided below, the Plan shall be administered by the Committee.  The Committee shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to (i) select Eligible Persons to become Participants; (ii) grant Options; (iii) determine the type, number, and other terms and conditions of, and all other matters relating to, Options; (iv) prescribe Option Agreements (which need not be identical for each Participant) and rules and regulations for the 

 

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administration of the Plan; (v) construe and interpret the Plan and Option agreements and correct defects, supply omissions, or reconcile inconsistencies therein; and (vi) make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan. The foregoing notwithstanding, the Board shall perform the functions of the Committee for purposes of granting Options under the Plan to non-employee directors.  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.  Any action of the Committee shall be final, conclusive and binding on all persons, including, without limitation, the Company, its Affiliates, Eligible Persons, Participants and beneficiaries of Participants.

 

(b)                                 Delegation.  The Committee may delegate to officers or employees of the Company or any of its Affiliates, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions, including but not limited to administrative functions, as the Committee may determine appropriate.  The Committee may appoint agents to assist it in administering the Plan.  Notwithstanding the foregoing or any other provision of the Plan to the contrary, any Option granted under the Plan to any person or entity who is not an employee of the Company or any of its Affiliates shall be expressly approved by the Committee.

 

4.                                       SHARES AVAILABLE UNDER THE PLAN.

 

(a)                                  Number of Shares Available for Delivery. Subject to adjustment as provided in 10 hereof, the total number of Ordinary Shares reserved and available for delivery in connection with Options under the Plan shall be 5,000,000.  Ordinary Shares described in this Section 4(a) shall be reserved to the extent that the Company deems appropriate from authorized but unissued Ordinary Shares and from Ordinary Shares which have been reacquired by the Company.

 

(b)                                 Share Counting Rules.  The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Option.  To the extent that an Option expires or is canceled, forfeited, settled in cash or otherwise terminated or concluded without a delivery to the Participant of the full number of shares of Stock of which the Option related, the undelivered shares of Stock will again be available for Options. Shares of Stock withheld in payment of the exercise price or taxes relating to an Option and shares equal to the number surrendered in payment of any exercise price or taxes relating to an Option shall be deemed to constitute shares of Stock not delivered to the Participant and shall be deemed to again be available for Options under the Plan; provided, however, that, where shares of Stock are withheld or surrendered more than ten years after the date of the most recent stockholder approval of the Plan or any other transaction occurs that would result in shares of Stock becoming available under this Section 4(b), such shares of Stock shall not become available if and to the extent that it would constitute a material revision of the Plan subject to stockholder approval under then applicable rules of the national or international securities exchange on which the Stock is listed.

 

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5.                                       OPTIONS.

 

(a)                                  General.  Options may be granted to Eligible Persons in such form and having such terms and conditions as the Committee shall deem appropriate.  The provisions of separate Options shall be set forth in an Option Agreement, which agreements need not be identical.  The Option Agreement shall designate whether an Option is a Time Vested Option or is subject to other applicable vesting conditions.  All Options exercised prior to the IPO Date shall be exercisable for Depositary Receipts.  All Options exercised on or following the IPO Date shall be exercisable for Ordinary Shares.

 

(b)                                 Term.  The term of each Option shall be set by the Committee at the time of grant; provided, however, that no Option granted hereunder shall be exercisable after the expiration of ten (10) years from the date it was granted.

 

(c)                                  Exercise Price.  The exercise price per share of Stock for each Option shall be set by the Committee at the time of grant but shall not be less than the Fair Market Value of a share of Stock on the date of grant.  The exercise price may be designated in Euros or United States Dollars.

 

(d)                                 Payment for Stock. Payment for shares of Stock acquired pursuant to Options granted hereunder shall be made in full, upon exercise of the Options: (i) in immediately available funds in Euros or United States dollars, as applicable, or by certified or bank cashier’s check; (ii) by delivery of a notice of “net exercise” to the Company, pursuant to which the Participant shall receive the number of shares of Stock underlying the Options so exercised reduced by the number of shares of Stock equal to the aggregate exercise price of the Options divided by the Fair Market Value on the date of exercise; or (iii) by any other means approved by the Committee.

 

(e)                                  Vesting.

 

(i)                                     General.  Options shall vest and become exercisable in such manner, on such date or dates, or upon the achievement of performance or other conditions, in each case, as set forth in subsection (ii), or as may otherwise be determined by the Committee and set forth in the Option Agreement; provided, however, that notwithstanding any such vesting dates, the Committee may in its sole discretion accelerate the vesting of any Option, which acceleration shall not affect the terms and conditions of any such Option other than with respect to vesting.  Unless otherwise specifically determined by the Committee, the vesting of an Option shall occur only while the Participant is employed or rendering services to the Employer, and all vesting shall cease upon a Participant’s termination of employment or services with the Employer for any reason.

 

(ii)                                  Time Vested Options.  Subject to a Participant’s continued employment or service, as applicable, with the Employer, a Participant’s Time Vested Options shall vest as to 25% of the shares of Stock underlying such Time Vested Options on the one (1) year anniversary of the Vesting Commencement Date, and the remaining 75% of the shares of Stock underlying such Time Vested Options shall vest pro rata on 

 

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each quarterly anniversary of the Vesting Commencement Date over the subsequent three (3) year period following such one (1) year anniversary of the Vesting Commencement Date.

 

(f)                                    Transferability of Options.  An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant.  Notwithstanding the foregoing, Options shall be transferable to the extent provided in the Option Agreement or otherwise determined by the Committee.

 

(g)                                 Termination of Employment or Service. Except as may otherwise be provided by the Committee in the Option Agreement:

 

(i)                                     If prior to the Expiration Date, a Participant’s employment or service, as applicable, with the Employer terminates for any reason other than (A) by the Employer for Cause, or (B) by reason of the Participant’s death or Disability, (1) all vesting with respect to the Options shall cease, (2) any unvested Options shall expire as of the date of such termination, and (3) any vested Options shall remain exercisable until the earlier of the Expiration Date or the date that is ninety (90) days after the date of such termination.

 

(ii)                                  If prior to the Expiration Date, a Participant’s employment or service, as applicable, with the Employer terminates by reason of such Participant’s death or Disability, (A) all vesting with respect to the Options shall cease, (B) any unvested Options shall expire as of the date of such termination, and (C) any vested Options shall expire on the earlier of the Expiration Date or the date that is twelve (12) months after the date of such termination due to death or Disability of the Participant.  In the event of a Participant’s death, the Options shall remain exercisable by the person or persons to whom a Participant’s rights under the Options pass by will or the applicable laws of descent and distribution until its expiration, but only to the extent the Options were vested by such Participant at the time of such termination due to death.

 

(iii)                               If prior to the Expiration Date, a Participant’s employment or service, as applicable, with the Employer is terminated by the Employer for Cause, all Options (whether or not vested) shall immediately expire as of the date of such termination.

 

6.                                       RESTRICTIONS ON STOCK.

 

(a)                                  Prohibition on Transfers. Except as otherwise approved by the Committee, pursuant to Section 7 below, pursuant to subsections (b) or (c) below or in the event of a transfer of undertaking pursuant to section 7:663 et seq.  Dutch Civil Code, shares of Stock acquired by a Participant pursuant to exercise of any Option granted hereunder may not be sold, transferred or otherwise disposed of prior to the one hundred eightieth (180th) day following the IPO Date (the “Lock-Up Period”).  If requested by the underwriters managing any IPO, each Participant shall execute a separate agreement to the foregoing effect.  The Company may impose stop-transfer instructions with respect to the Stock (or securities) subject to the foregoing restriction until the end of such period.  In the event of a transfer of undertaking as mentioned in 

 

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section 7:663 et seq. Dutch Civil Code, the rights to shares of Stock and/or Options as granted to Participants under the Plan shall not be transferred to the acquiror.

 

(b)                                 [Intentionally Omitted]

 

(c)                                  Permitted Transfers. Shares of Stock acquired upon exercise of an Option may be transferred in connection with a Permitted Transfer; provided, however, that it shall be a condition of each such Permitted Transfer, that (x) the transferee agrees to be bound by the terms of the Plan and the applicable Option Agreement as though no such transfer had taken place, and that (y) the Participant has complied with all applicable law in connection with such transfer.

 

(d)                                 Securityholders’ Agreement.  In the event that a Participant is a party to the Securityholders’ Agreement, the provisions of this Sections 6 shall not apply, and any restrictions on Stock acquired upon the exercise of Options shall be governed by the Securityholders’ Agreement.

 

7.                                       [INTENTIONALLY OMITTED]

 

8.                                       COMPETITIVE ACTIVITIES

 

Notwithstanding anything contained in the Plan to the contrary, in the event that a Participant engages in any Competitive Activity during the term of such Participant’s employment or service with the Employer or during the six (6) month period following such Participant’s termination of employment or service with the Employer for any reason, the Committee may determine, in its sole discretion, to (a) require all Options held by such Participant to be immediately forfeited and returned to the Company without additional consideration, (b) require all shares of Stock acquired upon the exercise or vesting of Options within the twelve (12) month period prior to the date of such Competitive Activity to be immediately forfeited and returned to the Company without additional consideration, and (c) to the extent that such Participant received any profit from the sale of an Option or the shares of Stock underlying an Option within the twelve (12) month period prior to the date of such Competitive Activity, require that such Participant promptly repay to the Company any profit received pursuant to such sale.

 

9.                                       CHANGE IN CONTROL.

 

(a)                                  Acceleration of Vesting. Without limiting the authority of the Committee under Sections 3 and 10 of this Plan, if a Change in Control of the Company occurs, then, unless otherwise provided by the Committee in its sole discretion at any time after the grant of an Option, all outstanding Options shall become immediately exercisable in full and shall remain exercisable for the remainder of their terms, regardless of whether the Participant to whom such Options have been granted remains in employment or service with the Company or any Affiliate; provided, however, that no Options that provide for a deferral of compensation within the meaning of Section 409A of the Code shall be accelerated upon the occurrence of a Change in Control unless the event or circumstances constituting the Change in Control also constitute a “change in the ownership” of the Company, a “change in the effective control” of the Company or a “change in the ownership of a substantial portion of the assets” of the Company, in each case as determined under Section 409A of the Code.

 

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(b)                                 Limitation on Change in Control Payments. Notwithstanding anything in Section 9(a) to the contrary, if, with respect to a Participant, the acceleration of the vesting of an Option as provided in Section 9(a) (which acceleration or payment could be deemed a “payment” within the meaning of Section 280G(b)(2) of the Code), together with any other “payments” that such Participant has the right to receive from the Company or any corporation that is a member of an “affiliated group” (as defined in Section 1504(a) of the Code without regard to Section 1504(b) of the Code) of which the Company is a member, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), then the “payments” to such Participant pursuant to Section 9(a) shall (unless otherwise mutually agreed by the Participant and the Committee) be reduced (or acceleration of vesting eliminated) to the largest amount as shall result in no portion of such “payments” being subject to the excise tax imposed by Section 4999 of the Code; provided, however, that such reduction shall be made only if the aggregate amount of the payments after such reduction exceeds the difference between (i) the amount of such payments absent such reduction, minus (ii) the aggregate amount of the excise tax imposed under Section 4999 of the Code attributable to any such excess parachute payments.  Furthermore, if a Participant is subject to a separate agreement with the Company or an Affiliate that expressly addresses the potential application of Section 280G or 4999 of the Code, then this Section 9(b) shall not apply and any “payments” to a Participant pursuant to Section 9(a) shall be treated as “payments” arising under such separate agreement.

 

10.                                 ADJUSTMENT FOR RECAPITALIZATION, MERGER, ETC.

 

(a)                                  Capitalization Adjustments.  The aggregate number of shares of Stock which may be granted or purchased pursuant to Options granted hereunder, the number of shares of Stock covered by each outstanding Option, and the price per share of Stock thereof in each such Option shall be equitably and proportionally adjusted or substituted, as determined by the Committee, as to the number, price or kind of Stock or other consideration subject to such Options (i) in the event of changes in the outstanding Stock or in the capital structure of the Company by reason of stock dividends, stock splits, reverse stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges, or other relevant changes in capitalization occurring after the date of grant of any such Option (including any Corporate Event (as defined below)); or (ii) in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights granted to, or available for, Participants in the Plan.

 

(b)                                 Corporate Events. Notwithstanding the foregoing, except as may otherwise be provided in an Option agreement, in the event of a Corporate Event, in lieu of providing the adjustment set forth in subsection (a) above, the Committee may, in its discretion, cancel any or all vested and/or unvested Options as of the consummation of such Corporate Event, and provide that holders of Options so cancelled will receive a payment in respect of cancellation of their Options based on the amount of the per share consideration being paid for the Stock in connection with such Corporate Event, less the applicable exercise price; provided, however, that holders of (1) Options shall only be entitled to consideration in respect of cancellation of an Option if the per share consideration less the applicable exercise price is greater than zero, and (2) “performance vested” Options shall only be entitled to consideration in respect of cancellation of such Options to the extent that the applicable performance criteria is achieved prior to or as a result of such Corporate Event, and shall not otherwise be entitled to 

 

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payment in consideration of cancelled unvested Options.  Payments to holders pursuant to the preceding sentence shall be made in cash, or, in the sole discretion of the Committee, in such other consideration necessary for a holder of an Option to receive property, cash or securities as such holder would have been entitled to receive upon the occurrence of the transaction if the holder had been, immediately prior to such transaction, the holder of the number of shares of Stock covered by the Option at such time.

 

(c)                                  Fractional Shares.  Any such adjustment may provide for the elimination of any fractional share which might otherwise become subject to an Option.

 

11.                                 USE OF PROCEEDS.

 

The proceeds received from the sale of Stock pursuant to the Plan shall be used for general corporate purposes.

 

12.                                 RIGHTS AND PRIVILEGES AS A HOLDER OF DEPOSITARY RECEIPTS.

 

Except as otherwise specifically provided in the Plan, Stichting Administratiekantoor Tornier shall be entitled to the rights and privileges of stock ownership in respect of shares of Stock underlying the Depositary Receipts which are subject to Options hereunder.  Pursuant to the Trust Conditions, the holders of Depositary Receipts shall not have these rights and privileges.

 

Except as other specified provided in the Plan, no person shall be entitled to the rights and privileges of Depositary Receipt ownership in respect of Depositary receipts which are subject to Options hereunder until such Depositary Receipts have been issued to that person.

 

13.                                 EMPLOYMENT OR SERVICE RIGHTS.

 

No individual shall have any claim or right to be granted an Option under the Plan or, having been selected for the grant of an Option, to be selected for a grant of any other Option in the future.  The decision to offer the Plan in any given year, the terms on which the Plan may be offered and the countries in which the Plan may be offered, is made in the sole discretion of the Board.  The benefits obtained under the Plan are not contractual benefits and do not form part of the employment contract or the employment conditions of a Participant. Neither the Plan nor any action taken hereunder shall be construed as giving any individual any right to be retained in the employ or service of the Company or an Affiliate of the Company.

 

14.                                 COMPLIANCE WITH LAWS.

 

The obligation of the Company to make payment of Options in shares of Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Option to the contrary, the Company shall be under no obligation to offer to sell or to sell and shall be prohibited from offering to sell or selling any shares of Stock pursuant to an Option unless such shares have been properly registered for sale under applicable laws or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption and the terms and 

 

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conditions of such exemption have been fully complied with.  The Company shall be under no obligation to register for sale or resale under applicable law any of the shares of Stock to be offered or sold under the Plan or any shares of Stock issued upon exercise of Options.  If the shares of Stock offered for sale or sold under the Plan are offered or sold pursuant to an exemption from registration, the Company may restrict the transfer of such shares of Stock as it deems advisable to ensure the availability of any such exemption.

 

15.                                 WITHHOLDING OBLIGATIONS.

 

As a condition to the exercise of any Option, the Committee may require that a Participant satisfy, through a cash payment by the Participant, or, in the discretion of the Committee, through deduction or withholding from any payment of any kind otherwise due to the Participant, or through such other arrangements as are satisfactory to the Committee, the minimum amount of all income, social insurance and other taxes of any kind required or permitted under applicable law to be withheld in connection with such exercise.  The Committee, in its discretion, may permit shares of Stock to be used to satisfy tax withholding requirements and such shares of Stock shall be valued at their Fair Market Value as of the exercise date of the Option; provided, however, that the aggregate Fair Market Value of the number of shares of Stock that may be used to satisfy tax withholding requirements may not exceed the minimum statutory required withholding amount with respect to such Option.

 

16.                                 AMENDMENT OF THE PLAN OR OPTIONS.

 

(a)                                  Amendment of Plan.  The Board at any time, and from time to time, may amend the Plan; provided, however, that, following the IPO Date, without stockholder approval, the Board shall not make any amendment to the Plan which would violate the stockholder approval requirements of the national or international securities exchange on which the Stock is listed.

 

(b)                                 No Impairment of Rights. Rights under any Option granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless the Board has consulted the Participant prior to such amendment.

 

(c)                                  Amendment of Options.  The Committee, at any time, and from time to time, may amend the terms of any one or more Options; provided, however, that the rights under any Option shall not be impaired by any such amendment unless the Board has consulted Participant prior to such amendment.

 

17.                                 TERMINATION OR SUSPENSION OF THE PLAN.

 

The Board may suspend or terminate the Plan at any time.  Unless sooner terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the date the Plan is adopted by the Board.  No Options may be granted under the Plan while the Plan is suspended or after it is terminated.

 

18.                                 EFFECTIVE DATE OF THE PLAN.

 

The Plan is effective as of the Effective Date.

 

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19.                                 MISCELLANEOUS.

 

(a)                                  Options to Participants Outside of the Netherlands.  The Committee may modify the terms of any Option under the Plan made to or held by a Participant who is then a resident or primarily employed outside of the Netherlands in any manner deemed by the Committee to be necessary or appropriate in order that such Option shall conform to laws, regulations and customs of the country in which the Participant is then a resident or primarily employed, or so that the value and other benefits of the Option to the Participant, as affected by applicable tax laws and other restrictions applicable as a result of the Participant’s residence or employment abroad, shall be comparable to the value of such Option to a Participant who is a resident or primarily employed in the Netherlands.  An Option may be modified under this 19(a) in a manner that is inconsistent with the express terms of the Plan, so long as such modifications will not contravene any applicable law or regulation.

 

(b)                                 No Liability of Committee Members.  No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his or her behalf in his or her capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own fraud or willful bad faith; provided, however, that approval of the Board shall be required for the payment of any amount in settlement of a claim against any such person. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s certificate or articles of incorporation or by-laws, each as may be amended from time to time, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

 

(c)                                  Payments Following Accidents or Illness.  If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his or her affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his or her estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his or her spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment.  Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

 

(d)                                 Governing Law.  This Agreement and the rights and obligations of the Parties hereunder and the Persons subject hereto shall be governed by, and construed and interpreted in accordance with, the laws of the Netherlands, without giving effect to the choice of law principles thereof.

 

(e)                                  Funding.  No provision of the Plan shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a 

 

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trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes.  Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law.

 

(f)                                    Reliance on Reports.  Each member of the Committee and each member of the Board shall be fully justified in relying, acting or failing to act, and shall not be liable for having so relied, acted or failed to act in good faith, upon any report made by the independent public accountant of the Company and its Affiliates and upon any other information furnished in connection with the Plan by any person or persons other than such member.

 

(g)                                 Titles and Headings.  The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

 

13Exhibit 10.42

 

TORNIER N.V.
 2010 EMPLOYEE STOCK PURCHASE PLAN

 

1.                                       Purpose.  This Tornier N.V. 2010 Employee Stock Purchase Plan (the “Plan”) is intended to advance the interests of Tornier N.V., a public limited liability company (naamloze vennootschap) organized under the laws of The Netherlands, or any successor thereto (the “Company”) and its stockholders by providing Eligible Employees of the Company and each Designated Subsidiary with opportunities to acquire shares of Stock on favorable terms through payroll deductions.  The Plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”), and will be construed so as to extend and limit participation in a manner consistent with the requirements of Section 423 of the Code.

 

2.                                       Definitions.  For purposes of the Plan, the following terms shall be defined as set forth below:

 

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

 

(b)                                 “Committee” shall mean the Compensation Committee of the Board or a subcommittee thereof consisting solely of not less than two members of the Board who are “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act.

 

(c)                                  “Company Group” shall mean the Company, together with each Designated Subsidiary.

 

(d)                                 “Compensation” shall mean regular straight-time earnings and commissions that are included in regular compensation, including amounts that would have constituted compensation but for a Participant’s election to defer or reduce compensation pursuant to any deferred compensation, cafeteria, capital accumulation or any other similar plan of the Company and excluding all other amounts such as amounts attributable to overtime, shift premium, incentive compensation and bonuses (except to the extent that the inclusion of any such item is specifically directed by the Committee), determined in a manner consistent with the requirements of Section 423 of the Code.

 

(e)                                  “Designated Subsidiary” shall mean a Subsidiary that has been designated by the Board from time to time, in its sole discretion, as eligible to participate in the Plan.

 

(f)                                    “Eligible Employee” shall mean an Employee of the Company or a Designated Subsidiary (i) who would not, immediately after an option is granted to him hereunder, own shares possessing five percent (5%) or more of the total combined voting power or value of all classes of shares of the Company or any Subsidiary (as determined under Section 423(b)(3) of the Code); (ii) whose customary employment is for more than twenty (20) hours per week; and (iii) whose customary employment is for more than five (5) months in any calendar year.  For purposes of clause (i) of this subsection (f), the rules of Section 424(d) of the Code with regard to the attribution of share ownership shall apply in determining the share ownership of an individual, and shares which an Employee may purchase under outstanding options shall be treated as shares owned by the Employee.  Notwithstanding anything herein to the contrary, Employees who are citizens or residents of a foreign jurisdiction (without regard to 

 

 

whether they are citizens of the United States or resident aliens (within the meaning of Section 7701(b)(1)(A) of the Code)) shall not be considered Eligible Employees for purposes of the Plan if (x) the grant of an option hereunder or any Offering to a citizen or foreign resident of such foreign jurisdiction is prohibited by the laws of such jurisdiction, or (y) compliance with the laws of such foreign jurisdiction would cause the Plan or any Offering to violate the requirements of Section 423 of the Code.

 

(g)                                 “Employee” shall mean any person, including an officer, who renders services to the Company or a Designated Subsidiary in the status of an employee within the meaning of Section 3401(c) of the Code.  “Employee” shall not include any director of the Company or a Designated Subsidiary who does not render services to the Company or a Designated Subsidiary in the status of an employee within the meaning of Section 3401(c) of the Code.  For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company or Designated Subsidiary and meeting the requirements of Treasury Regulation Section 1.421-7(h)(2).  Where the period of leave exceeds ninety (90) days and the individual’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the ninety first (91st) day of such leave.

 

(h)                                 “Employer” shall mean, with respect to a Participant, the member of the Company Group by which the Participant is principally employed.

 

(i)                                     “Enrollment Date” shall mean the first Trading Day of each Offering Period.

 

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

 

(k)                                  “Exercise Date” shall mean the last Trading Day of each Offering Period.

 

(l)                                     “Fair Market Value” shall mean, with respect to the Stock, as of any date: (i) the closing sale price of the Stock as of such date at the end of the regular trading session, as reported by the Nasdaq Stock Market, the New York Stock Exchange, the American Stock Exchange or any national securities exchange on which the Stock is then listed or quoted (or, if no shares were traded on such date, as of the next preceding date on which there was such a trade); (ii) if the Stock is not so listed, admitted to unlisted trading privileges, or reported on any national securities exchange, the closing sale price as of such date at the end of the regular trading session, as reported by the OTC Bulletin Board or the Pink Sheets, LLC, or other comparable service (or, if no shares were traded or quoted on such date, as of the next preceding date on which there was such a trade or quote); or (iii) if the Stock is not so listed or reported, such price as the Committee determines in its sole discretion in a manner acceptable under Section 423 of the Code.

 

(m)                               “Offering” means any of the offerings to Participants of options to purchase Stock under the Plan, as described in Section 4 below.

 

(n)                                 “Participant” shall mean an Eligible Employee who participates in the Plan pursuant to Section 5 hereof.

 

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(o)                                 “Purchase Price” shall mean eighty five percent (85%) of the Fair Market Value of one share of Stock on the Exercise Date; provided, however, that the Purchase Price may be adjusted by the Committee pursuant to Section 19 hereof; provided, further, that the Purchase Price shall not be less than the par value of one share of Stock.

 

(p)                                 “Securities Act” shall mean the Securities Act of 1933, as amended.

 

(q)                                 “Stock” shall mean the ordinary shares, par value €0.03 per share, of the Company, or the number and kind of shares of stock or other securities into which such ordinary shares may be changed in accordance with Section 13 of the Plan.

 

(r)                                    “Subsidiary” shall mean any subsidiary corporation of the Company within the meaning of Section 424(f) of the Code.

 

(s)                                  “Trading Day” shall mean a day on which the principal exchange on which the Stock is traded is open for trading.

 

3.                                       Eligibility.

 

(a)                                  Any Employee who is an Eligible Employee on the Enrollment Date for an Offering Period (as defined in Section 4 below) shall be eligible to participate in the Plan during such Offering Period, subject to the requirements of Section 3(b) hereof and the limitations imposed by Section 423(b) of the Code.

 

(b)                                 No Eligible Employee shall be granted an option under the Plan if the amount of payroll deductions that the Eligible Employee has elected to have withheld under such option (pursuant to Section 5 below) would permit the Eligible Employee to purchase shares of Stock under all “employee stock purchase plans” (within the meaning of Section 423 of the Code) of the Company or any Subsidiary to accrue (i.e., become exercisable) at a rate that exceeds twenty five thousand dollars ($25,000) of the Fair Market Value of such shares of Stock (determined as of the Enrollment Date) for each calendar year in which such option is outstanding at any time.

 

4.                                       Offering Periods.  Options to purchase shares of Stock shall be offered to Participants under the Plan through a continuous series of Offerings, each continuing for six months and each of which shall commence on January 1 and July 1 of each year, as the case may be, and shall terminate on June 30 and December 31 of such year, as the case may be (each such period being, an “Offering Period”); provided, however, that the first Offering Period under the Plan and any subsequent Offering Period commenced immediately after a suspension of the Plan shall have an Enrollment Date and Exercise Date as determined by the Committee in its sole discretion. Offerings under the Plan shall continue until either (a) the Committee decides, in its sole discretion, that no further Offerings shall be made because the Stock remaining available under the Plan is insufficient to make an Offering to all Eligible Employees, or (b) the Plan is terminated under Section 20 below. Notwithstanding the foregoing, and without limiting the authority of the Committee under Section 14, 19 and 20 of the Plan, the Committee, in its sole discretion, may (a) accelerate the Exercise Date of the then current Offering Period and provide for the exercise of options thereunder by Participants in accordance with Section 8 of the Plan, or (b) accelerate the Exercise Date of the then current Offering Period and provide that all payroll 

 

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deductions credited to the accounts of Participants will be paid to Participants as soon as practicable after such Exercise Date and that all options for such Offering Period will automatically be canceled and will no longer be exercisable, if such change is announced at least five (5) days prior to the newly scheduled Exercise Date.

 

5.                                       Participation.

 

(a)                                  Each Eligible Employee may become a Participant with respect to any Offering Period by completing a subscription agreement authorizing payroll deductions in a form acceptable to the Committee and filing it with the Company (or its designated third-party stock plan administrator) fifteen (15) business days (or a different number of days as may be determined by the Committee, in its sole discretion) prior to the first day of such Offering Period.  A Participant’s completion of a subscription agreement with respect to any Offering Period will enroll such Participant in the Plan for each subsequent Offering Period on the terms contained therein until the Participant either submits a new subscription agreement, withdraws from participation under the Plan as provided in Section 10 hereof, or otherwise becomes ineligible to participate in the Plan.

 

(b)                                 Payroll deductions for a Participant shall commence on the first payday following the Enrollment Date and shall end on the last payday in the Offering Period with respect to which such authorization is applicable, unless sooner terminated by the Participant as provided in Section 10 hereof.

 

(c)                                  During a Participant’s leave of absence approved by his Employer and meeting the requirements of Treasury Regulation Section 1.421-7(h)(2), such Participant may continue to participate in the Plan by making cash payments to the Company on each payday equal to the amount of the Participant’s payroll deductions under the Plan for the payday immediately preceding the first day of such Participant’s leave of absence.  If a leave of absence is unapproved or fails to meet the requirements of Treasury Regulation Section 1.421-7(h)(2), the Participant will automatically cease to participate in the Plan and may not make any further contributions to the Plan hereunder.  In such event, the Company will automatically cease to deduct the Participant’s payroll under the Plan.  The Company will pay to the Participant his total payroll deductions for the Offering Period, in cash in one lump sum (without interest), as soon as practicable after the Participant ceases to participate in the Plan.

 

(d)                                 The subscription agreement(s) used in connection with the Plan shall be in a form prescribed by the Committee, and the Committee may, in its sole discretion, determine whether such agreement shall be submitted in written or electronic form.

 

6.                                       Payroll Deductions.

 

(a)                                  At the time a Participant files his subscription agreement, such Participant shall elect to have payroll deductions made on each payday (such amount to be deducted after any applicable deduction for tax and other withholding) during the Offering Period in an amount from one percent (1%) to ten percent (10%) of the Compensation which he receives on each pay day during the Offering Period.

 

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(b)                                 All payroll deductions made for a Participant shall be credited to his account under the Plan and shall be withheld in whole percentages only.  Except as described in Section 5(c) hereof, a Participant may not make any additional payments into such account.

 

(c)                                  A Participant may discontinue his participation in the Plan as provided in Section 10 hereof, or may increase or decrease the rate of his payroll deductions during the Offering Period by completing or filing with the Company (or its designated third-party stock plan administrator) a new subscription agreement authorizing a change in payroll deduction rate.  The Committee may, in its discretion, limit the number of participation rate changes per Participant during any Offering Period. The change in rate shall be effective with the first full payroll period following five business (5) days (or a different number of days as may be determined by the Committee, in its sole discretion) after the Company’s (or its designated third-party stock plan administrator’s) receipt of the new subscription agreement.

 

(d)                                 Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a Participant’s payroll deductions may be decreased to zero percent (0%) at any time during an Offering Period.

 

(e)                                  At the time an option is exercised, in whole or in part, or at the time some or all of the shares of Stock issued under the Plan are disposed of, the Participant must make adequate provision for any federal, state, or other tax obligations, if any, which arise upon the exercise of the option or the disposition of the shares of Stock.  At any time, the Company may, but shall not be obligated to, withhold from all of the Participant’s compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to the sale or early disposition of shares of Stock by the Participant.

 

7.                                       Grant of Option.  On the Enrollment Date of each Offering Period, each Participant in such Offering Period shall be granted an option to purchase on the Exercise Date with respect to such Offering Period (at the applicable Purchase Price) up to a number of the shares of Stock determined by dividing such Participant’s payroll deductions accumulated prior to such Exercise Date and retained in the Participant’s account as of the Exercise Date by the applicable Purchase Price; provided, however, that (i) such purchase shall be subject to the limitations set forth in Sections 3 and 13 hereof, and (ii) in no event may more than eight hundred thirty-three (833) shares of Stock be purchased by any Participant during any Offering Period.  Exercise of the option shall occur as provided in Section 8 hereof, unless the Participant has withdrawn from participation pursuant to Section 10 hereof or otherwise becomes ineligible to participate in the Plan. The option shall expire on the last day of the Offering Period.

 

8.                                       Exercise of Option.

 

(a)                                  Unless a Participant withdraws from the Plan as provided in Section 10 hereof or otherwise becomes ineligible to participate in the Plan, such Participant’s option for the purchase of Stock shall be exercised automatically on the Exercise Date, and the maximum number of full shares of Stock subject to the option shall be purchased for such Participant at the applicable Purchase Price with the accumulated payroll deductions in his account.  No fractional shares of Stock shall be purchased, and any payroll deductions accumulated in a Participant’s 

 

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account which are not sufficient to purchase a full share of Stock shall be retained in such Participant’s account for the subsequent Offering Period.  During a Participant’s lifetime, a Participant’s option to purchase Stock hereunder is exercisable only by him.

 

(b)                                 If the Committee determines that, on a given Exercise Date, the number of shares of Stock with respect to which options are to be exercised may exceed either (i) the number of shares of Stock that were available for sale under the Plan on the Enrollment Date of the applicable Offering Period (notwithstanding any authorization of additional shares of Stock for issuance under the Plan by the Company’s shareholders subsequent to such Enrollment Date); or (ii) the number of shares of Stock available for sale under the Plan on such Exercise Date, the Committee shall provide that the Company (or its designated third-party stock plan administrator) shall make a pro rata allocation of the Stock available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all Participants exercising options to purchase Stock on such Exercise Date, and shall decide, in its sole discretion, to either (x) continue all Offering Periods then in effect or (y) terminate any or all Offering Periods then in effect pursuant to Section 20 hereof. In the event of such a pro rata allocation of Stock pursuant to this Section 8(b), the balance of the amount credited to the account of each Participant that has not been applied to the purchase of Stock shall be paid to each such Participant in one lump sum in cash as soon as reasonably practicable after the Exercise Date, without any interest thereon.

 

9.                                       Deposit of Stock.  As promptly as practicable after each Exercise Date on which a purchase of Stock occurs, the Company may arrange for the deposit, into each Participant’s account with any broker designated by the Company to administer this Plan, of the number of shares of Stock purchased upon exercise of each such Participant’s option.

 

10.                                 Withdrawal.

 

(a)                                  At any time prior to the Exercise Date, a Participant, by giving written notice to the Company (or its designated third-party stock plan administrator) in a form acceptable to the Committee, may withdraw all but not less than all of the payroll deductions credited to his account and not yet used to exercise an option under the Plan.  All of the Participant’s payroll deductions credited to his account during the Offering Period, plus any balance retained in his account from a prior Offering Period, if any, shall be paid to such Participant as soon as reasonably practicable after receipt of notice of withdrawal, and such Participant’s option for the Offering Period shall be automatically terminated, and no further payroll deductions for the purchase of Stock shall be made for such Offering Period. If a Participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of any subsequent Offering Period unless the Participant delivers to the Company (or its designated third-party stock plan administrator) a new subscription agreement in accordance with the terms of Section 5(a) hereof.

 

(b)                                 A Participant’s withdrawal from an Offering Period shall not have any effect upon his eligibility to participate in any similar plan which may hereafter be adopted by the Company or in Offering Periods which commence after the termination of the Offering Period from which the Participant withdraws.

 

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11.                                 Termination of Employment.  Upon a Participant’s ceasing to be an Eligible Employee, for any reason, such Participant shall be deemed to have elected to withdraw from the Plan, and the payroll deductions credited to such Participant’s account during the Offering Period, plus any balance retained in his account from a prior Offering Period, if any, shall be paid to him, or in the case of his death, to the person or persons entitled thereto under Section 15 hereof, as soon as reasonably practicable, and such Participant’s option for the Offering Period shall be automatically terminated.

 

12.                                 Interest.  No interest shall accrue on the payroll deductions or lump sum contributions of a Participant in the Plan.

 

13.                                 Stock Subject to Plan.

 

(a)                                  Subject to adjustment upon changes in capitalization of the Company as provided in Section 19 hereof, a maximum of three hundred thirty-three thousand, three hundred thirty-three (333,333) shares of Stock shall be made available for sale under the Plan.  If any option granted under the Plan shall for any reason terminate without having been exercised, the shares of Stock not purchased under such option shall again become available for issuance under the Plan.  The shares of Stock subject to the Plan may be unissued shares or reacquired shares bought on the market or otherwise.

 

(b)                                 Except as otherwise provided herein, with respect to Stock subject to an option granted under the Plan, a Participant shall not be deemed to be a shareholder of the Company, and the Participant shall not have any of the rights or privileges of a shareholder, until such Stock has been issued to the Participant or his nominee following exercise of the Participant’s option.  No adjustments shall be made for dividends (ordinary or extraordinary, whether in cash securities, or other property) or distributions or other rights for which the record date occurs prior to the date of such issuance, except as otherwise expressly provided herein.

 

14.                                 Administration.  The Plan will be administered by the Committee.  To the extent consistent with corporate law, the Committee may delegate to any officers of the Company the duties, power and authority of the Committee under the Plan pursuant to such conditions or limitations as the Committee may establish; provided, however, that only the Committee may exercise such duties, power and authority with respect to Participants who are subject to Section 16 of the Exchange Act. The Committee may exercise its duties, power and authority under the Plan in its sole discretion without the consent of any Participant or other party, unless the Plan specifically provides otherwise.  Each determination, interpretation or other action made or taken by the Committee pursuant to the provisions of the Plan will be final, conclusive and binding for all purposes and on all persons, including, without limitation, the Company, the stockholders of the Company, the Participants and their respective successors-in-interest.  No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under the Plan.

 

15.                                 Designation of Beneficiary.

 

(a)                                  A Participant may file a written designation of a beneficiary who is to receive any Stock and cash, if any, from such Participant’s account under the Plan in the event of such Participant’s death subsequent to an Exercise Date on which the option is exercised but 

 

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prior to delivery to such Participant of such Stock and cash.  In addition, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participant’s account under the Plan in the event of such Participant’s death prior to exercise of the option.  To the extent required under applicable law, spousal consent shall be required for such designation to be effective if the Participant is married and the designated beneficiary is not the Participant’s spouse.

 

(b)                                 Such beneficiary designation may be changed by the Participant at any time by written notice to the Company.  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 Participant’s death, the Company shall deliver such Stock and/or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company may, in its discretion, deliver such Stock and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent, or relative is known to the Company, then to such other person as the Company may designate.

 

16.                                 Transferability.  Neither payroll deductions credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive Stock under the Plan may be assigned, transferred, pledged, or otherwise disposed of in any way by the Participant (other than by will, the laws of descent and distribution, or as provided in Section 15 hereof).  Any such attempt at assignment, transfer, pledge, or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10 hereof.

 

17.                                 Use of Funds.  All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.

 

18.                                 Reports.  Individual accounts shall be maintained for each Participant in the Plan.  Statements of account shall be given to Participants following each Offering Period, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares of Stock purchased, and the remaining cash balance, if any.

 

19.                                 Adjustments Upon Changes in Capitalization, Merger, Amalgamation, Asset Sale, Dissolution or Liquidation.

 

(a)                                  Changes in Capitalization.  The number of shares of Stock which have been authorized for issuance under the Plan but not yet placed under option, the maximum number of shares of Stock each Participant may purchase in each Offering Period (pursuant to Section 7 hereof), as well as the price per share of Stock and the number of shares of Stock covered by each option under the Plan which has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a stock split, reverse stock split, stock dividend, combination, or reclassification of the Stock, or any other increase or decrease in the number of shares of Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.”  Such 

 

8

 

adjustment shall be made by the Committee, whose determination in that respect shall be final, binding, and conclusive on all Participants and the Company.  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 of Stock subject to an option.

 

(b)                                 Merger, Amalgamation, Asset Sale, Dissolution or Liquidation.  In the event of a proposed merger or amalgamation of the Company with or into another corporation or a proposed sale of all or substantially all of the assets of the Company, each outstanding option shall be assumed or an equivalent option substituted by the successor corporation or a parent or subsidiary of the successor corporation.  In the event that the successor corporation or a parent or subsidiary of the successor corporation refuses to assume or substitute for the option, or in the event of the proposed dissolution, or liquidation of the Company, the Offering Period then in progress shall be shortened by the Committee by setting a new Exercise Date (the “New Exercise Date”), which shall occur no later than immediately prior to the effective date of such proposed merger, amalgamation, sale, dissolution or liquidation, as applicable.  The Company shall notify each Participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the Participant’s option has been changed to the New Exercise Date and that the Participant’s option shall be exercised automatically on the New Exercise Date, unless prior to such New Exercise Date the Participant has withdrawn from the Offering Period as provided in Section 10 hereof.

 

20.                                 Amendment or Termination.

 

(a)                                  The Board may at any time and for any reason terminate or amend the Plan.  Except as provided in Section 19 hereof, no such termination shall affect options previously granted, provided that an Offering Period may be terminated by the Board if the Board determines that the termination of the Offering Period or the Plan is in the best interests of the Company and its shareholders.  Except as provided in Section 19 hereof and this Section 20, no amendment may make any change in any option theretofore granted which adversely affects the rights of any Participant without the consent of such Participant.  To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation, or stock exchange rule), the Company shall obtain shareholder approval of any amendment in such a manner and to such a degree as required.

 

(b)                                 Without shareholder consent and without regard to whether any Participant’s rights may be considered to have been “adversely affected,” the Committee shall be entitled to change the Offering Periods (but in no event may an Offering Period have a duration in excess of twenty seven (27) months), limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Stock for each Participant properly correspond with amounts withheld from the Participant’s Compensation, and establish such other limitations or procedures as the Committee determines in its sole discretion advisable which are consistent with the Plan.

 

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(c)                                  In the event the Board determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board may, in its discretion and, to the extent necessary or desirable, modify, or amend the Plan to reduce or eliminate such financial accounting consequences, including, but not limited to:

 

(i)                                     altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price;

 

(ii)                                  shortening any Offering Period so that the Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Committee action; and

 

(iii)                               allocating shares.

 

Such modifications or amendments shall not require shareholder approval or the consent of any Participants.

 

21.                                 Notices.  All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

 

22.                                 Conditions to Issuance of Stock.

 

(a)                                  The Company shall not be required to issue or deliver to a Participant any certificate or certificates for shares of Stock purchased upon the exercise of options prior to fulfillment of all the following conditions:

 

(i)                                     The admission of such shares of Stock to listing on all stock exchanges, if any, on which the Stock is then listed;

 

(ii)                                  The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable;

 

(iii)                               Such Participant’s payment to the Company of all amounts which it is required to withhold under federal, state or local law upon exercise of the option; and

 

(iv)                              The lapse of such reasonable period of time following the exercise of the option as the Committee may from time to time establish for reasons of administrative convenience.

 

(b)                                 The obligation of the Company to make a payment of Stock or otherwise shall be subject to all applicable laws, rules and regulations, and to such approvals by governmental agencies as may be required.  Notwithstanding any terms or conditions of any option to the contrary, the Company shall be under no obligation to offer to sell or to sell and shall be prohibited from offering to sell or selling any Stock pursuant to an option unless such Stock has been properly registered for sale with the Securities and Exchange Commission 

 

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pursuant to the Securities Act or unless the Company has received an opinion of counsel, satisfactory to the Company, that such Stock may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale or resale under the Securities Act any of the Stock to be offered or sold under the Plan or any Stock issued upon exercise or settlement of options.  If the Stock offered for sale or sold under the Plan is offered or sold pursuant to an exemption from registration under the Securities Act, the Company may restrict the transfer of such Stock and may legend the share certificates representing such Stock in such manner as it deems advisable to ensure the availability of any such exemption.

 

23.                                 Term of Plan.  The Plan shall become effective as of the Effective Date.  The Plan shall be deemed to be approved by the Company’s shareholders if it receives the affirmative vote of the Company’s shareholders in accordance with the by-laws of the Company.  Subject to approval by the shareholders of the Company in accordance with this Section 23, the Plan shall be in effect until the tenth (10th) anniversary of the date of the initial adoption of the Plan by the Board, unless sooner terminated under Section 20 hereof.  In the event the Company’s shareholders do not approve this Plan pursuant to this Section 23, neither this Plan nor any elections made hereunder shall be of any force or effect, any outstanding option shall be cancelled for no consideration, and all amounts deducted from each Participant’s paycheck shall be repaid to such Participant as soon as practicable without interest.

 

24.                                 Equal Rights and Privileges.  All Eligible Employees will have equal rights and privileges under this Plan so that this Plan qualifies as an “employee stock purchase plan” within the meaning of Section 423 of the Code.  Any provision of this Plan that is inconsistent with this requirement to provide equal rights and privileges will, without further act or amendment by the Company, the Board or the Committee, be reformed to comply with the equal rights and privileges requirement of Section 423 of the Code.

 

25.                                 Section 409A.  The options to purchase Stock under the Plan are not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code. However, if at any time the Committee determines that the options may be subject to Section 409A of the Code, the Committee shall have the right, in its sole discretion, to amend the Plan and any outstanding options as it may determine is necessary or desirable either to exempt the options from the application of Section 409A of the Code or to cause the options to comply with the requirements of Section 409A of the Code.

 

26.                                 No Employment Rights.  Nothing in the Plan shall be construed to give any person (including any Eligible Employee or Participant) the right to remain in the employ of the Company or a Subsidiary, or to affect the right of the Company or any Subsidiary to terminate the employment of any person (including any Eligible Employee or Participant) at any time, with or without cause.

 

27.                                 Notice of Disposition of Stock; Transfer Restrictions.  If required by the Company, each Participant shall give prompt notice to the Company (at its local Human Resources office), or cause a designated third-party stock administrator to give prompt notice to the Company, of any disposition or other transfer of any Stock purchased upon exercise of an 

 

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option hereunder if such disposition or transfer is made either (a) within two (2) years from the Enrollment Date of the Offering Period in which the Stock was purchased or (b) within one (1) year after the Exercise Date on which such Stock was purchased.  Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness, or other consideration, by the Participant in such disposition or other transfer. Notwithstanding anything herein to the contrary, no Participant shall be permitted to dispose of or transfer any Stock purchased pursuant to an option hereunder prior to the date that is twelve (12) months following the date upon which such Stock was so purchased.  The Committee may provide, in its sole discretion, that the Stock purchased pursuant to an option hereunder shall be held in book entry form, rather than delivered to the Participant, through the expiration of such twelve (12) month period.  If certificates representing the shares of Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Stock and that the Company retain physical possession of the certificates.

 

28.                                 Governing Law.  Subject to any applicable provisions of United States federal law (including, without limitation, Section 423(b) of the Code), the validity and enforceability of this Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to otherwise governing principles of conflicts of law.

 

*                                         *                                         *

 

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