Exhibit
10.9
Effective
as of September 17,
2007
NILE
THERAPEUTICS, INC.
Amended
and Restated 2005 Stock Option Plan
1. Purpose.
The
purpose of the Amended and Restated 2005 Stock Option Plan (the “Plan”)
of
Nile Therapeutics, Inc. (the “Company”)
is to
increase shareholder value and to advance the interests of the Company by
furnishing a variety of economic incentives (“Incentives”)
designed to attract, retain and motivate employees, directors and consultants.
Incentives may consist of opportunities to purchase or receive shares of Common
Stock, $0.001 par value, of the Company (“Common
Stock”),
monetary payments or both on terms determined under this Plan.
2. Certain
Transactions.
Pursuant to a merger agreement dated August 15, 2007 (the “Merger
Agreement”),
between SMI Products, Inc. (“SMI”),
Nile
Merger Sub., Inc., a Delaware corporation and wholly-owned subsidiary of SMI
(“Nile
Merger Sub”),
and
Nile Therapeutics, Inc. (“Old
Nile”),
on
September 17, 2007, Nile Merger Sub merged with and into Old Nile, with Old
Nile
remaining as the surviving entity and a wholly-owned operating subsidiary of
SMI. On September 17, 2007, Old Nile merged with and into SMI with SMI remaining
as the surviving corporation to that merger (both mergers, together, the
“Mergers”).
Pursuant to the Mergers, and in accordance with Sections 13.6 of this Plan,
each
share of the common stock then subject to the Plan was substituted with 2.71
shares of common stock of SMI, par value $0.001 per share (the “SMI
Common Stock”).
In
connection with the Mergers, SMI changed its corporate name to “Nile
Therapeutics, Inc.”, and this plan was assumed by the Company.
3. Administration.
3.1 The
Plan
shall be administered by a committee of the Board of Directors of the Company
(the “Committee”).
The
Committee shall consist of not less than two directors of the Company who shall
be appointed from time to time by the board of directors of the Company. Each
member of the Committee shall be a “non-employee director” within the meaning of
Rule 16b-3 of the Exchange Act of 1934, as amended (together with the rules
and
regulations promulgated thereunder, the “Exchange
Act”),
and
an “outside director” as defined in Section 162(m) of the Internal Revenue Code
of 1986, as amended (the “Code”).
The
Committee shall have complete authority to determine all provisions of all
Incentives awarded under the Plan (as consistent with the terms of the Plan),
to
interpret the Plan, and to make any other determination which it believes
necessary and advisable for the proper administration of the Plan. The
Committee’s decisions and matters relating to the Plan shall be final and
conclusive on the Company and its participants. No member of the Committee
will
be liable for any action or determination made in good faith with respect to
the
Plan or any Incentives granted under the Plan. The Committee will also have
the
authority under the Plan to amend or modify the terms of any outstanding
Incentives in any manner; provided, however, that the amended or modified terms
are permitted by the Plan as then in effect and that any recipient on an
Incentive adversely affected by such amended or modified terms has consented
to
such amendment or modification. No amendment or modification to an Incentive,
however, whether pursuant to this Section 3 or any other provisions of the
Plan,
will be deemed to be a re-grant of such Incentive for purposes of this Plan.
If
at any time there is no Committee, then for purposes of the Plan the term
“Committee” shall mean the Company’s Board of Directors.
Effective
as of September 17,
2007
3.2 In
the
event of (i) any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of
shares, rights offering, extraordinary dividend or divestiture (including a
spin-off) or any other similar change in corporate structure or shares,
(ii) any purchase, acquisition, sale or disposition of a significant amount
of assets or a significant business, (iii) any change in accounting
principles or practices, or (iv) any other similar change, in each case
with respect to the Company or any other entity whose performance is relevant
to
the grant or vesting of an Incentive, the Committee (or, if the Company is
not
the surviving corporation in any such transaction, the board of directors of
the
surviving corporation) may, without the consent of any affected participant,
amend or modify the vesting criteria of any outstanding Incentive that is based
in whole or in part on the financial performance of the Company (or any
subsidiary or division thereof) or such other entity so as equitably to reflect
such event, with the desired result that the criteria for evaluating such
financial performance of the Company or such other entity will be substantially
the same (in the sole discretion of the Committee or the board of directors
of
the surviving corporation) following such event as prior to such event;
provided, however, that the amended or modified terms are permitted by the
Plan
as then in effect.
4. Eligible
Participants.
Employees of the Company or its subsidiaries (including officers and employees
of the Company or its subsidiaries), directors and consultants, advisors or
other independent contractors who provide services to the Company or its
subsidiaries (including members of the Company’s scientific advisory board)
shall become eligible to receive Incentives under the Plan when designated
by
the Committee. Participants may be designated individually or by groups or
categories (for example, by pay grade) as the Committee deems appropriate.
Participation by officers of the Company or its subsidiaries and any performance
objectives relating to such officers must be approved by the Committee.
Participation by others and any performance objectives relating to others may
be
approved by groups or categories (for example, by pay grade) and authority
to
designate participants who are not officers and to set or modify such targets
may be delegated.
5. Types
of Incentives.
Incentives under the Plan may be granted in any one or a combination of the
following forms: (a) incentive stock options and non-statutory stock options
(Section 7); (b) stock appreciation rights (“SARs”)
(Section 8); (c) stock awards (Section 9); (d) restricted stock (Section 9);
and
(e) performance shares (Section 10).
6. Shares
Subject to the Plan.
6.1. Number
of Shares.
Subject
to adjustment as provided in Section 13.6, the number of shares of Common Stock
which may be issued under the Plan shall not exceed 2,000,000 shares of Common
Stock. Shares of Common Stock that are issued under the Plan or that are subject
to outstanding Incentives will be applied to reduce the maximum number of shares
of Common Stock remaining available for issuance under the Plan.
Effective
as of September 17,
2007
6.2. Cancellation.
To the
extent that cash in lieu of shares of Common Stock is delivered upon the
exercise of an SAR pursuant to Section 8.4, the Company shall be deemed, for
purposes of applying the limitation on the number of shares, to have issued
the
greater of the number of shares of Common Stock which it was entitled to issue
upon such exercise or on the exercise of any related option. In the event that
a
stock option or SAR granted hereunder expires or is terminated or canceled
unexercised or unvested as to any shares of Common Stock, such shares may again
be issued under the Plan either pursuant to stock options, SARs or otherwise.
In
the event that shares of Common Stock are issued as restricted stock or pursuant
to a stock award and thereafter are forfeited or reacquired by the Company
pursuant to rights reserved upon issuance thereof, such forfeited and reacquired
shares may again be issued under the Plan, either as restricted stock, pursuant
to stock awards or otherwise. The Committee may also determine to cancel, and
agree to the cancellation of, stock options in order to make a participant
eligible for the grant of a stock option at a lower price than the option to
be
canceled.
7. Stock
Options.
A stock
option is a right to purchase shares of Common Stock from the Company. The
Committee may designate whether an option is to be considered an incentive
stock
option or a non-statutory stock option. To the extent that any incentive stock
option granted under the Plan ceases for any reason to qualify as an “incentive
stock option” for purposes of Section 422 of the Code, such incentive stock
option will continue to be outstanding for purposes of the Plan but will
thereafter be deemed to be a non-statutory stock option. Each stock option
granted by the Committee under this Plan shall be subject to the following
terms
and conditions:
7.1. Price.
The
option price per share shall be determined by the Committee, subject to
adjustment under Section 13.6.
7.2. Number.
The
number of shares of Common Stock subject to the option shall be determined
by
the Committee, subject to adjustment as provided in Section 13.6. The number
of
shares of Common Stock subject to a stock option shall be reduced in the same
proportion that the holder thereof exercises a SAR if any SAR is granted in
conjunction with or related to the stock option. No individual may receive
options to purchase more than 1,000,000 shares in any year.
7.3. Duration
and Time for Exercise.
Subject
to earlier termination as provided in Section 13.4, the term of each stock
option shall be determined by the Committee but shall not exceed ten years
and
one day from the date of grant. Each stock option shall become exercisable
at
such time or times during its term as shall be determined by the Committee
at
the time of grant. The Committee may accelerate the exercisability of any stock
option. Subject to the foregoing and with the approval of the Committee, all
or
any part of the shares of Common Stock with respect to which the right to
purchase has accrued may be purchased by the Company at the time of such accrual
or at any time or times thereafter during the term of the option.
Effective
as of September 17,
2007
7.4. Manner
of Exercise.
Subject
to the conditions contained in this Plan and in the agreement with the recipient
evidencing such option, a stock option may be exercised, in whole or in part,
by
giving written notice to the Company, specifying the number of shares of Common
Stock to be purchased and accompanied by the full purchase price for such
shares. The exercise price shall be payable (a) in United States dollars upon
exercise of the option and may be paid by cash; uncertified or certified check;
bank draft; (b) at the discretion of the Committee, by delivery of shares of
Common Stock that are already owned by the participant in payment of all or
any
part of the exercise price, which shares shall be valued for this purpose at
the
Fair Market Value on the date such option is exercised; or (c) at the discretion
of the Committee, by instructing the Company to withhold from the shares of
Common Stock issuable upon exercise of the stock option shares of Common Stock
in payment of all or any part of the exercise price and/or any related
withholding tax obligations, which shares shall be valued for this purpose
at
the Fair Market Value or in such other manner as may be authorized from time
to
time by the Committee. The shares of Common Stock delivered by the participant
pursuant to Section 7.4(b) must have been held by the participant for a period
of not less than six months prior to the exercise of the option, unless
otherwise determined by the Committee. Prior to the issuance of shares of Common
Stock upon the exercise of a stock option, a participant shall have no rights
as
a shareholder. Except as otherwise provided in the Plan, no adjustment will
be
made for dividends or distributions with respect to such stock options as to
which there is a record date preceding the date the participant becomes the
holder of record of such shares, except as the Committee may determine in its
discretion.
7.5. Incentive
Stock Options.
Notwithstanding anything in the Plan to the contrary, the following additional
provisions shall apply to the grant of stock options which are intended to
qualify as Incentive Stock Options (as such term is defined in Section 422
of
the Code):
(a) The
aggregate Fair Market Value (determined as of the time the option is granted)
of
the shares of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by any participant during any calendar year
(under the Plan and any other incentive stock option plans of the Company or
any
subsidiary or parent corporation of the Company) shall not exceed $100,000.
The
determination will be made by taking incentive stock options into account in
the
order in which they were granted.
(b) Any
Incentive Stock Option certificate authorized under the Plan shall contain
such
other provisions as the Committee shall deem advisable, but shall in all events
be consistent with and contain all provisions required in order to qualify
the
options as Incentive Stock Options.
(c) All
Incentive Stock Options must be granted within ten years from the earlier of
the
date on which this Plan was adopted by board of directors or the date this
Plan
was approved by the Company’s shareholders.
Effective
as of September 17,
2007
(d) Unless
sooner exercised, all Incentive Stock Options shall expire no later than 10
years after the date of grant. No Incentive Stock Option may be exercisable
after ten (10) years from its date of grant (five (5) years from its date of
grant if, at the time the Incentive Stock Option is granted, the Participant
owns, directly or indirectly, more than 10% of the total combined voting power
of all classes of stock of the Company or any parent or subsidiary corporation
of the Company).
(e) The
exercise price for Incentive Stock Options shall be not less than 100% of the
Fair Market Value of one share of Common Stock on the date of grant with respect
to an Incentive Stock Option; provided that the exercise price shall be 110%
of
the Fair Market Value if, at the time the Incentive Stock Option is granted,
the
participant owns, directly or indirectly, more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company.
8. Stock
Appreciation Rights.
An SAR
is a right to receive, without payment to the Company, a number of shares of
Common Stock, cash or any combination thereof, the amount of which is determined
pursuant to the formula set forth in Section 8.4. An SAR may be granted (a)
with
respect to any stock option granted under this Plan, either concurrently with
the grant of such stock option or at such later time as determined by the
Committee (as to all or any portion of the shares of Common Stock subject to
the
stock option), or (b) alone, without reference to any related stock option.
Each
SAR granted by the Committee under this Plan shall be subject to the following
terms and conditions:
8.1. Number;
Exercise Price.
Each
SAR granted to any participant shall relate to such number of shares of Common
Stock as shall be determined by the Committee, subject to adjustment as provided
in Section 13.6. In the case of an SAR granted with respect to a stock option,
the number of shares of Common Stock to which the SAR pertains shall be reduced
in the same proportion that the holder of the option exercises the related
stock
option. The exercise price of an SAR will be determined by the Committee, in
its
discretion, at the date of grant but may not be less than 100% of the Fair
Market Value of one share of Common Stock on the date of grant.
8.2. Duration.
Subject
to earlier termination as provided in Section 13.4, the term of each SAR shall
be determined by the Committee but shall not exceed ten years and one day from
the date of grant. Unless otherwise provided by the Committee, each SAR shall
become exercisable at such time or times, to such extent and upon such
conditions as the stock option, if any, to which it relates is exercisable.
The
Committee may in its discretion accelerate the exercisability of any
SAR.
8.3. Exercise.
An SAR
may be exercised, in whole or in part, by giving written notice to the Company,
specifying the number of SARs which the holder wishes to exercise. Upon receipt
of such written notice, the Company shall, within 90 days thereafter, deliver
to
the exercising holder certificates for the shares of Common Stock or cash or
both, as determined by the Committee, to which the holder is entitled pursuant
to Section 8.4.
Effective
as of September 17,
2007
8.4. Payment.
Subject
to the right of the Committee to deliver cash in lieu of shares of Common Stock
(which, as it pertains to officers and directors of the Company, shall comply
with all requirements of the Exchange Act), the number of shares of Common
Stock
which shall be issuable upon the exercise of an SAR shall be determined by
dividing:
(a) the
number of shares of Common Stock as to which the SAR is exercised multiplied
by
the amount of the appreciation in such shares (for this purpose, the
“appreciation” shall be the amount by which the Fair Market Value of the shares
of Common Stock subject to the SAR on the exercise date exceeds (1) in the
case
of an SAR related to a stock option, the exercise price of the shares of Common
Stock under the stock option or (2) in the case of an SAR granted alone, without
reference to a related stock option, an amount which shall be determined by
the
Committee at the time of grant, subject to adjustment under Section 13.6);
by
(b) the
Fair
Market Value of a share of Common Stock on the exercise date.
In
lieu
of issuing shares of Common Stock upon the exercise of a SAR, the Committee
may
elect to pay the holder of the SAR cash equal to the Fair Market Value on the
exercise date of any or all of the shares which would otherwise be issuable.
No
fractional shares of Common Stock shall be issued upon the exercise of an SAR;
instead, the holder of the SAR shall be entitled to receive a cash adjustment
equal to the same fraction of the Fair Market Value of a share of Common Stock
on the exercise date or to purchase the portion necessary to make a whole share
at its Fair Market Value on the date of exercise.
9. Stock
Awards and Restricted Stock.
A stock
award consists of the transfer by the Company to a participant of shares of
Common Stock, without other payment therefor, as additional compensation for
services to the Company. The participant receiving a stock award will have
all
voting, dividend, liquidation and other rights with respect to the shares of
Common Stock issued to a participant as a stock award under this Section 9
upon
the participant becoming the holder of record of such shares. A share of
restricted stock consists of shares of Common Stock which are sold or
transferred by the Company to a participant at a price determined by the
Committee (which price shall be at least equal to the minimum price required
by
applicable law for the issuance of a share of Common Stock) and subject to
restrictions on their sale or other transfer by the participant, which
restrictions and conditions may be determined by the Committee as long as such
restrictions and conditions are not inconsistent with the terms of the Plan.
The
transfer of Common Stock pursuant to stock awards and the transfer and sale
of
restricted stock shall be subject to the following terms and
conditions:
9.1. Number
of Shares.
The
number of shares to be transferred or sold by the Company to a participant
pursuant to a stock award or as restricted stock shall be determined by the
Committee.
Effective
as of September 17,
2007
9.2. Sale
Price.
The
Committee shall determine the price, if any, at which shares of restricted
stock
shall be sold or granted to a participant, which may vary from time to time
and
among participants and which may be below the Fair Market Value of such shares
of Common Stock at the date of sale.
9.3. Restrictions.
All
shares of restricted stock transferred or sold hereunder shall be subject to
such restrictions as the Committee may determine, including, without limitation
any or all of the following:
(a) a
prohibition against the sale, transfer, pledge or other encumbrance of the
shares of restricted stock, such prohibition to lapse at such time or times
as
the Committee shall determine (whether in annual or more frequent installments,
at the time of the death, disability or retirement of the holder of such shares,
or otherwise);
(b) a
requirement that the holder of shares of restricted stock forfeit, or (in the
case of shares sold to a participant) resell back to the Company at his or
her
cost, all or a part of such shares in the event of termination of his or her
employment or consulting engagement during any period in which such shares
are
subject to restrictions; or
(c) such
other conditions or restrictions as the Committee may deem
advisable.
9.4. Escrow.
In
order to enforce the restrictions imposed by the Committee pursuant to Section
9.3, the participant receiving restricted stock shall enter into an agreement
with the Company setting forth the conditions of the grant. Shares of restricted
stock shall be registered in the name of the participant and deposited, together
with a stock power endorsed in blank, with the Company. Each such certificate
shall bear a legend in substantially the following form:
The
transferability of this certificate and the shares of Common Stock represented
by it are subject to the terms and conditions (including conditions of
forfeiture) contained in the 2005 Stock Option Plan of Nile Therapeutics, Inc.,
(the “Company”), and an agreement entered into between the registered owner and
the Company. A copy of the 2005 Stock Option Plan and the agreement is on file
in the office of the secretary of the Company.
9.5. End
of
Restrictions.
Subject
to Section 13.5, at the end of any time period during which the shares of
restricted stock are subject to forfeiture and restrictions on transfer, such
shares will be delivered free of all restrictions to the participant or to
the
participant’s legal representative, beneficiary or heir.
Effective
as of September 17,
2007
9.6. Shareholder.
Subject
to the terms and conditions of the Plan, each participant receiving restricted
stock shall have all the rights of a shareholder with respect to shares of
stock
during any period in which such shares are subject to forfeiture and
restrictions on transfer, including without limitation, the right to vote such
shares. Dividends paid in cash or property other than Common Stock with respect
to shares of restricted stock shall be paid to the participant currently. Unless
the Committee determines otherwise in its sole discretion, any dividends or
distributions (including regular quarterly cash dividends) paid with respect
to
shares of Common Stock subject to the restrictions set forth above will be
subject to the same restrictions as the shares to which such dividends or
distributions relate. In the event the Committee determines not to pay dividends
or distributions currently, the Committee will determine in its sole discretion
whether any interest will be paid on such dividends or distributions. In
addition, the Committee in its sole discretion may require such dividends and
distributions to be reinvested (and in such case the participant consents to
such reinvestment) in shares of Common Stock that will be subject to the same
restrictions as the shares to which such dividends or distributions
relate.
10. Performance
Shares.
A
performance share consists of an award which shall be paid in shares of Common
Stock, as described below. The grant of a performance share shall be subject
to
such terms and conditions as the Committee deems appropriate, including the
following:
10.1. Performance
Objectives.
Each
performance share will be subject to performance objectives for the Company
or
one of its operating units to be achieved by the participant before the end
of a
specified period. The number of performance shares granted shall be determined
by the Committee and may be subject to such terms and conditions, as the
Committee shall determine. If the performance objectives are achieved, each
participant will be paid in shares of Common Stock or cash as determined by
the
Committee. If such objectives are not met, each grant of performance shares
may
provide for lesser payments in accordance with formulas established in the
award.
10.2. Not
Shareholder.
The
grant of performance shares to a participant shall not create any rights in
such
participant as a shareholder of the Company, until the payment of shares of
Common Stock with respect to an award.
10.3. No
Adjustments.
No
adjustment shall be made in performance shares granted on account of cash
dividends which may be paid or other rights which may be issued to the holders
of Common Stock prior to the end of any period for which performance objectives
were established.
10.4. Expiration
of Performance Share.
If any
participant’s employment or consulting engagement with the Company is terminated
for any reason other than normal retirement, death or disability prior to the
achievement of the participant’s stated performance objectives, all the
participant’s rights on the performance shares shall expire and terminate unless
otherwise determined by the Committee. In the event of termination of employment
or consulting by reason of death, disability, or normal retirement, the
Committee, in its own discretion may determine what portions, if any, of the
performance shares should be paid to the participant.
Effective
as of September 17,
2007
11. Change
of Control.
11.1 Change
in Control.
For
purposes of this Section 11, a “Change
in Control”
of
the
Company will mean the following:
(a) the
sale,
lease, exchange or other transfer, directly or indirectly, of substantially
all
of the assets of the Company (in one transaction or in a series of related
transactions) to a person or entity that is not controlled by the Company;
(b) the
approval by the shareholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company;
(c) any
person becomes after the effective date of the Plan the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (i)
20% or more, but not 50% or more, of the combined voting power of the Company’s
outstanding securities ordinarily having the right to vote at elections of
directors, unless the transaction resulting in such ownership has been approved
in advance by the Continuing Directors (as defined below), or (ii) 50% or more
of the combined voting power of the Company’s outstanding securities ordinarily
having the right to vote at elections of directors (regardless of any approval
by the Continuing Directors); provided that a traditional institution or venture
capital financing transaction shall be excluded from this
definition;
(d) a
merger
or consolidation to which the Company is a party if the shareholders of the
Company immediately prior to effective date of such merger or consolidation
have
“beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act),
immediately following the effective date of such merger or consolidation, of
securities of the surviving corporation representing (i) 50% or more, but less
than 80%, of the combined voting power of the surviving corporation’s then
outstanding securities ordinarily having the right to vote at elections of
directors, unless such merger or consolidation has been approved in advance
by
the Continuing Directors, or (ii) less than 50% of the combined voting
power of the surviving corporation’s then outstanding securities ordinarily
having the right to vote at elections of directors (regardless of any approval
by the Continuing Directors); or
(e) after
the
date the Company’s securities are first sold in a registered public offering,
the Continuing Directors cease for any reason to constitute at least a majority
of the Board.
11.2 Continuing
Directors.
For
purposes of this Section 11, “Continuing
Directors”
of
the
Company will mean any individuals who are members of the Board on the effective
date of the Plan and any individual who subsequently becomes a member of the
Board whose election, or nomination for election by the Company’s shareholders,
was approved by a vote of at least a majority of the Continuing Directors
(either by specific vote or by approval of the Company’s proxy statement in
which such individual is named as a nominee for director without objection
to
such nomination).
Effective
as of September 17,
2007
11.3 Acceleration
of Incentives.
Without
limiting the authority of the Committee under the Plan, if a Change in Control
of the Company occurs whereby the acquiring entity or successor to the Company
does not assume the Incentives or replace them with substantially equivalent
incentive awards, then, unless otherwise provided by the Committee in its sole
discretion in the agreement evidencing an Incentive at the time of grant, then
as of the date of the Change of Control (a) all outstanding options and SARs
will vest and will become immediately exercisable in full and will remain
exercisable for the remainder of their terms, regardless of whether the
participant to whom such options or SARs have been granted remains in the employ
or service of the Company or any subsidiary of the Company or any acquiring
entity or successor to the Company; (b) the restrictions on all shares of
restricted stock awards shall lapse immediately; and (c) all performance shares
shall be deemed to be met and payment made immediately.
11.4 Cash
Payment for Options.
If a
Change in Control of the Company occurs, then the Committee, if approved by
the
Committee in its sole discretion either in an agreement evidencing an option
at
the time of grant or at any time after the grant of an option, and without
the
consent of any participant affected thereby, may determine that:
(a) some
or
all participants holding outstanding options will receive, with respect to
some
or all of the shares of Common Stock subject to such options, as of the
effective date of any such Change in Control of the Company, cash in an amount
equal to the excess of the Fair Market Value of such shares immediately prior
to
the effective date of such Change in Control of the Company over the exercise
price per share of such options; and
(b) any
options as to which, as of the effective date of any such Change in Control,
the
Fair Market Value of the shares of Common Stock subject to such options is
less
than or equal to the exercise price per share of such options, shall terminate
as of the effective date of any such Change in Control.
If
the
Committee makes a determination as set forth in subparagraph (a) of this
Section
11.4, then as of the effective date of any such Change in Control of the
Company
such options will terminate as to such shares and the participants formerly
holding such options will only have the right to receive such cash payment(s).
If the Committee makes a determination as set forth in subparagraph (b)
of this
Section 11.4, then as of the effective date of any such Change in Control
of the
Company such options will terminate, become void and expire as to all
unexercised shares of Common Stock subject to such options on such date,
and the
participants formerly holding such options will have no further rights
with
respect to such options.
12. Per-Person
Limitation on Options, SARs and Performance Shares.
The
number of shares of Common Stock with respect to which Options, SARs and
performance shares may be granted under the Plan during any year to an
individual participant shall not exceed 1,000,000 Shares, subject to adjustment
as provided in Section 13.6.
Effective
as of September 17,
2007
13. General.
13.1. Effective
Date.
The
Plan became effective upon approval by the Company’s board of directors on
August 10, 2005, and was amended and restated on September 17, 2007.
13.2. Duration.
The
Plan shall remain in effect until all Incentives granted under the Plan have
either been satisfied by the issuance of shares of Common Stock or the payment
of cash or been terminated under the terms of the Plan and all restrictions
imposed on shares of Common Stock in connection with their issuance under the
Plan have lapsed. No Incentives may be granted under the Plan after the tenth
anniversary of the date the Plan is approved by the shareholders of the
Company.
13.3. Non-transferability
of Incentives.
Except,
in the event of the holder’s death, by will or the laws of descent and
distribution to the limited extent provided in the Plan or the Incentive, unless
approved by the Committee, no stock option, SAR, restricted stock or performance
award may be transferred, pledged or assigned by the holder thereof, either
voluntarily or involuntarily, directly or indirectly, by operation of law or
otherwise, and the Company shall not be required to recognize any attempted
assignment of such rights by any participant. During a participant’s lifetime,
an Incentive may be exercised only by him or her or by his or her guardian
or
legal representative.
13.4. Effect
of Termination or Death.
In the
event that a participant ceases to be an employee of or consultant to the
Company, or the participants other service with the Company is terminated,
for
any reason, including death, any Incentives may be exercised or shall expire
at
such times as may be determined by the Committee in its sole discretion in
the
agreement evidencing an Incentive. Notwithstanding the other provisions of
this
Section 13.4, upon a participant’s termination of employment or other
service with the Company and all subsidiaries, the Committee may, in its sole
discretion (which may be exercised at any time on or after the date of grant,
including following such termination), cause options and SARs (or any part
thereof) then held by such participant to become or continue to become
exercisable and/or remain exercisable following such termination of employment
or service and Restricted Stock Awards, Performance Shares and Stock Awards
then
held by such participant to vest and/or continue to vest or become free of
transfer restrictions, as the case may be, following such termination of
employment or service, in each case in the manner determined by the Committee;
provided, however, that no Incentive may remain exercisable or continue to
vest
beyond its expiration date. Any Incentive Stock Option that remains unexercised
more than one (1) year following termination of employment by reason of death
or
disability or more than three (3) months following termination for any reason
other than death or disability will thereafter be deemed to be a Non-Statutory
Stock Option.
Effective
as of September 17,
2007
13.5. Additional
Conditions.
Notwithstanding anything in this Plan to the contrary: (a) the Company may,
if
it shall determine it necessary or desirable for any reason, at the time of
award of any Incentive or the issuance of any shares of Common Stock pursuant
to
any Incentive, require the recipient of the Incentive, as a condition to the
receipt thereof or to the receipt of shares of Common Stock issued pursuant
thereto, to deliver to the Company a written representation of present intention
to acquire the Incentive or the shares of Common Stock issued pursuant thereto
for his or her own account for investment and not for distribution; and (b)
if
at any time the Company further determines, in its sole discretion, that the
listing, registration or qualification (or any updating of any such document)
of
any Incentive or the shares of Common Stock issuable pursuant thereto is
necessary on any securities exchange or under any federal or state securities
or
blue sky law, or that the consent or approval of any governmental regulatory
body is necessary or desirable as a condition of, or in connection with the
award of any Incentive, the issuance of shares of Common Stock pursuant thereto,
or the removal of any restrictions imposed on such shares, such Incentive shall
not be awarded or such shares of Common Stock shall not be issued or such
restrictions shall not be removed, as the case may be, in whole or in part,
unless such listing, registration, qualification, consent or approval shall
have
been effected or obtained free of any conditions not acceptable to the Company.
Notwithstanding any other provision of the Plan or any agreements entered into
pursuant to the Plan, the Company will not be required to issue any shares
of
Common Stock under this Plan, and a participant may not sell, assign, transfer
or otherwise dispose of shares of Common Stock issued pursuant to any Incentives
granted under the Plan, unless (a) there is in effect with respect to such
shares a registration statement under the Securities Act of 1933, as amended
(the “Securities
Act”),
and
any applicable state or foreign securities laws or an exemption from such
registration under the Securities Act and applicable state or foreign securities
laws, and (b) there has been obtained any other consent, approval or permit
from any other regulatory body which the Committee, in its sole discretion,
deems necessary or advisable. The Company may condition such issuance, sale
or
transfer upon the receipt of any representations or agreements from the parties
involved, and the placement of any legends on certificates representing shares
of Common Stock, as may be deemed necessary or advisable by the Company in
order
to comply with such securities law or other restrictions.
13.6. Adjustment.
In the
event of any merger, consolidation or reorganization of the Company with any
other corporation or corporations, there shall be substituted for each of the
shares of Common Stock then subject to the Plan, including shares subject to
restrictions, options, or achievement of performance share objectives, the
number and kind of shares of stock or other securities to which the holders
of
the shares of Common Stock will be entitled pursuant to the transaction. In
the
event of any recapitalization, reclassification, stock dividend, stock split,
combination of shares or other similar change in the corporate structure of
the
Company or shares of the Company, the exercise price of an outstanding Incentive
and the number of shares of Common Stock then subject to the Plan, including
shares subject to restrictions, options or achievements of performance shares,
shall be adjusted in proportion to the change in outstanding shares of Common
Stock in order to prevent dilution or enlargement of the rights of the
participants. In the event of any such adjustments, the purchase price of any
option, the performance objectives of any Incentive, and the shares of Common
Stock issuable pursuant to any Incentive shall be adjusted as and to the extent
appropriate, in the discretion of the Committee, to provide participants with
the same relative rights before and after such adjustment.
Effective
as of September 17,
2007
13.7. Incentive
Plans and Agreements.
Except
in the case of stock awards or cash awards, the terms of each Incentive shall
be
stated in a plan or agreement approved by the Committee. The Committee may
also
determine to enter into agreements with holders of options to reclassify or
convert certain outstanding options, within the terms of the Plan, as Incentive
Stock Options or as non-statutory stock options and in order to eliminate SARs
with respect to all or part of such options and any other previously issued
options.
13.8. Withholding.
(a) The
Company shall have the right to (i) withhold and deduct from any payments made
under the Plan or from future wages of the participant (or from other amounts
that may be due and owing to the participant from the Company or a subsidiary
of
the Company), or make other arrangements for the collection of, all legally
required amounts necessary to satisfy any and all foreign, federal, state and
local withholding and employment-related tax requirements attributable to an
Incentive, or (ii) require the participant promptly to remit the amount of
such
withholding to the Company before taking any action, including issuing any
shares of Common Stock, with respect to an Incentive. At any time when a
participant is required to pay to the Company an amount required to be withheld
under applicable income tax laws in connection with a distribution of Common
Stock or upon exercise of an option or SAR, the participant may satisfy this
obligation in whole or in part by electing (the “Election”)
to
have the Company withhold from the distribution shares of Common Stock having
a
value up to the amount required to be withheld. The value of the shares to
be
withheld shall be based on the Fair Market Value of the Common Stock on the
date
that the amount of tax to be withheld shall be determined (“Tax
Date”).
(b) Each
Election must be made prior to the Tax Date. The Committee may disapprove of
any
Election, may suspend or terminate the right to make Elections, or may provide
with respect to any Incentive that the right to make Elections shall not apply
to such Incentive. An Election is irrevocable.
(c) If
a
participant is an officer or director of the Company within the meaning of
Section 16 of the Exchange Act, then an Election is subject to the following
additional restrictions:
(1) No
Election shall be effective for a Tax Date which occurs within six months of
the
grant or exercise of the award, except that this limitation shall not apply
in
the event death or disability of the participant occurs prior to the expiration
of the six-month period.
Effective
as of September 17,
2007
(2) The
Election must be made either six months prior to the Tax Date or must be made
during a period beginning on the third business day following the date of
release for publication of the Company’s quarterly or annual summary statements
of sales and earnings and ending on the twelfth business day following such
date.
13.9. No
Continued Employment, Engagement or Right to Corporate Assets.
No
participant under the Plan shall have any right, because of his or her
participation, to continue in the employ of the Company for any period of time
or to any right to continue his or her present or any other rate of
compensation. Nothing contained in the Plan shall be construed as giving an
employee, a consultant, such persons’ beneficiaries or any other person any
equity or interests of any kind in the assets of the Company or creating a
trust
of any kind or a fiduciary relationship of any kind between the Company and
any
such person.
13.10. Deferral
Permitted.
Payment
of cash or distribution of any shares of Common Stock to which a participant
is
entitled under any Incentive shall be made as provided in the Incentive. Payment
may be deferred at the option of the participant if provided in the
Incentive.
13.11. Amendment
of the Plan.
The
Board may amend, suspend or discontinue the Plan at any time; provided, however,
that no amendments to the Plan will be effective without approval of the
shareholders of the Company if shareholder approval of the amendment is then
required pursuant to Section 422 of the Code or the rules of any stock exchange
or Nasdaq or similar regulatory body. No termination, suspension or amendment
of
the Plan may adversely affect any outstanding Incentive without the consent
of
the affected participant; provided, however, that this sentence will not impair
the right of the Committee to take whatever action it deems appropriate under
Section 13.6 of the Plan.
13.12. Definition
of Fair Market Value. For purposes of this Plan, the “Fair Market Value” of a
share of Common Stock at a specified date shall, unless otherwise expressly
provided in this Plan, be the amount which the Committee or the board of
directors of the Company determines in good faith in the exercise of its
reasonable discretion to be 100% of the fair market value of such a share
as of
the date in question; provided, however, that notwithstanding the foregoing,
if
such shares are listed on a U.S. securities exchange or are quoted on the
Nasdaq
National Market System or Nasdaq SmallCap Stock Market (“Nasdaq”), then Fair
Market Value shall be determined by reference to the last sale price of a
share
of Common Stock on such U.S. securities exchange or Nasdaq on the applicable
date. If such U.S. securities exchange or Nasdaq is closed for trading on
such
date, or if the Common Stock does not trade on such date, then the last sale
price used shall be the one on the date the Common Stock last traded on such
U.S. securities exchange or Nasdaq.
13.13 Breach
of Confidentiality, Assignment of Inventions, or Non-Compete
Agreements.
Notwithstanding anything in the Plan to the contrary, in the event that a
participant materially breaches the terms of any confidentiality, assignment
of
inventions, or non-compete agreement entered into with the Company or any
subsidiary of the Company, whether such breach occurs before or after
termination of such participant’s employment or other service with the Company
or any subsidiary, the Committee in its sole discretion may immediately
terminate all rights of the participant under the Plan and any agreements
evidencing an Incentive then held by the participant without notice of any
kind.
Effective
as of September 17,
2007
13.13 Governing
Law.
The
validity, construction, interpretation, administration and effect of the Plan
and any rules, regulations and actions relating to the Plan will be governed
by
and construed exclusively in accordance with the laws of the State of Minnesota,
notwithstanding the conflicts of laws principles of any
jurisdictions.
13.14 Successors
and Assigns.
The
Plan will be binding upon and inure to the benefit of the successors and
permitted assigns of the Company and the participants in the Plan.