THE LANGER BIOMECHANICS GROUP, INC.
2001 STOCK INCENTIVE PLAN
1. PURPOSE. The purpose of The Langer Biomechanics Group, Inc., 2001
Stock Incentive Plan (the "Plan") is to provide a means through which the
Company and its Subsidiaries and Affiliates may attract able persons to enter
and remain in the employ of the Company and its Subsidiaries and Affiliates and
to provide a means whereby eligible persons can acquire and maintain Common
Stock ownership, or be paid incentive compensation measured by reference to the
value of Common Stock, thereby strengthening their commitment to the welfare of
the Company and its Subsidiaries and Affiliates and promoting an identity of
interest between stockholders and these eligible persons.
So that the appropriate incentive can be provided, the Plan provides
for granting Incentive Stock Options, Nonqualified Stock Options, Restricted
Stock Awards and Stock Bonuses, or any combination of the foregoing. Capitalized
terms not defined in the text are defined in Section 24.
2. SHARES SUBJECT TO THE PLAN. Subject to Section 18, the total number
of Shares reserved and available for grant and issuance pursuant to this Plan
will be 1,500,000 Shares, provided that the Committee may not grant Awards to
the extent and at a time that the total number of outstanding Options or other
Awards granted under the Plan, aggregated with the total number of outstanding
options granted pursuant to the Company's 1992 Stock Option Plan, exceed 15% of
the total number of Shares outstanding of the Company; provided, however, a
reduction in the number of Shares outstanding shall not cause a reduction in the
number of Awards previously granted. Shares that have been (a) reserved for
issuance under Options which have expired or otherwise terminated without
issuance of the underlying Shares, (b) reserved for issuance or issued under an
Award granted hereunder but are forfeited or are repurchased by the Company at
the original issue price, or (c) reserved for issuance or issued under an Award
that otherwise terminates without Shares being issued, shall be available for
issuance. At all times the Company shall reserve and keep available a sufficient
number of Shares as shall be required to satisfy the requirements of all
outstanding Options granted under this Plan and all other outstanding but
unvested Awards granted under this Plan.
3. ELIGIBILITY. ISO's (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of the Company or any Parent, Affiliate or Subsidiary of the
Company; provided such consultants, contractors and advisors render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction.
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board. Any power, authority or discretion granted to the
Committee may also be taken by the Board. Subject to the general purposes, terms
and conditions of this Plan, and to the direction of the Board, the Committee
will have full power to implement and carry out this Plan. Without limitation,
the Committee will have the authority to:
a. select persons to receive Awards;
b. determine the nature, extent, form and terms of Awards and the
number of Shares or other consideration subject to Awards;
c. determine the vesting, exerciseability and payment of Awards;
d. correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
e. determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or as
alternatives to, other Awards under this Plan or any other
incentive or compensation plan of the Company or any Parent or
Subsidiary of the Company;
f. prescribe, amend and rescind rules and regulations relating to
this Plan or any Award;
g. construe and interpret this Plan, any Award Agreement and any
other agreement or document executed pursuant to this Plan;
h. grant waivers of Plan or Award conditions;
i. determine whether an Award has been earned;
j. accelerate the vesting of any Award; and
k. make all other determinations necessary or advisable for the
administration of this Plan.
The Committee shall have the authority, subject to the provisions of
the Plan, to establish, adopt, or revise such rules and regulations and to make
all such determinations relating to the Plan as it may deem necessary or
advisable for the administration of the Plan. The Committee's interpretation of
the Plan or any documents evidencing Awards granted pursuant thereto and all
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decisions and determinations by the Committee with respect to the Plan shall be
final, binding, and conclusive on all parties unless otherwise determined by the
Board.
4.2 Committee Discretion. Any determination made by the
Committee with respect to any Award will be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
this Plan or Award, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Award under
this Plan.
5. OPTIONS. The Committee may grant Options to eligible persons and
will determine whether such Options will be intended to be "Incentive Stock
Options" within the meaning of Section 422 of the Code or any successor section
thereof ("ISO's") or Nonqualified Stock Options ("NQSO's"), the number of Shares
subject to the Option, the Exercise Price of the Option, the period during which
the Option may be exercised, and all other terms and conditions of the Option,
subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Award Agreement ("Stock Option Agreement"), which will
expressly identify the Option as an ISO or NQSO, and will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Exercise Period. Options may be exercisable to the extent
vested within the times or upon the events determined by the Committee as set
forth in the Stock Option Agreement governing such Option; provided, however,
that no Option will be exercisable after the expiration of ten (10) years from
the date the Option is granted; and provided further that no ISO granted to a
person who directly or by attribution owns more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any
Parent or Subsidiary of the Company ("Ten Percent Stockholder") will be
exercisable after the expiration of five (5) years from the date the ISO is
granted. The Committee also may provide for Options to become exercisable at one
time or from time to time, periodically or otherwise, in such number of Shares
or percentage of Shares as the Committee determines.
5.3 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may be greater, less
than, or equal to the Fair Market Value of the Shares on the date of grant;
provided that: (i) the Exercise Price of an ISO will be not less than 100% of
the Fair Market Value of the Shares on the date of grant; and (ii) the Exercise
Price of any ISO granted to a Ten Percent Stockholder will not be less than 110%
of the Fair Market Value of the Shares on the date of grant. Payment for the
Shares purchased may be made in accordance with Section 8 of this Plan.
5.4 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by
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the Committee. The Stock Option Agreement and a copy of this Plan will be
delivered to the Participant within a reasonable time after the granting of the
Option.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"Exercise Agreement") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 Termination. Unless otherwise expressly provided in an
Award Agreement, exercise of an Option will always be subject to the following:
a. If the Participant is Terminated for any
reason (including voluntary Termination)
other than death or Disability, then the
Participant may exercise such Participant's
Options only to the extent that such Options
would have been exercisable upon the
Termination Date no later than three (3)
months after the Termination Date (or such
shorter or longer time period not exceeding
five (5) years as may be determined by the
Committee, with any exercise beyond three
(3) months after the Termination Date deemed
to be a NQSO), but in any event, no later
than the expiration date of the Options.
b. If the Participant is Terminated because of
Participant's death or Disability (or the
Participant dies within three (3) months
after a Termination other than for Cause or
because of Participant's Disability), then
Participant's Options may be exercised only
to the extent that such Options would have
been exercisable by Participant on the
Termination Date and must be exercised by
Participant (or Participant's legal
representative or authorized assignee) no
later than twelve (12) months after the
Termination Date (or such shorter or longer
time period not exceeding five (5) years as
may be determined by the Committee, with any
such exercise beyond twelve (12) months
after the Termination Date when the
Termination is for Participant's death or
Disability, deemed to be a NQSO), but in any
event no later than the expiration date of
the Options.
c. Notwithstanding the provisions in paragraph
5.6(a) above, if a Parti cipant is
terminated for Cause, neither the
Participant, the Participant's estate nor
such other person who may then hold the
Option shall be entitled to exercise any
Option with respect to any
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Shares whatsoever, after termination of
service, whether or not after termination of
service the Participant may receive payment
from the Company or Subsidiary for vacation
pay, for services rendered prior to
termination, for services rendered for the
day on which termination occurs, for salary
in lieu of notice, or for any other
benefits. In making such determination, the
Board shall give the Participant an
opportunity to present to the Board evidence
on his behalf. For the purpose of this
paragraph, termination of service shall be
deemed to occur on the date when the Company
dispatches notice or advice to the
Participant that his service is terminated.
d. If the Participant is not an employee or a
director, the Award Agree ment shall specify
treatment of the Award upon Termination.
5.7 Limitations on ISO. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISO's are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company, Parent
or Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value
of Shares on the date of grant with respect to which ISO's are exercisable for
the first time by a Participant during any calendar year exceeds $100,000, then
the Options for the first $100,000 worth of Shares to become exercisable in such
calendar year will be ISO's and the Options for the amount in excess of $100,000
that become exercisable in that calendar year will be NQSO's. In the event that
the Code or the regulations promulgated thereunder are amended after the
Effective Date of this Plan to provide for a different limit on the Fair Market
Value of Shares permitted to be subject to ISO's, such different limit will be
automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.
5.8 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that, except as expressly provided
for in the Plan or an Award Agreement, any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or other wise altered will be treated in accordance with Section 424(h)
of the Code. The Committee may, by a written notice to the affected
Participants, reduce the Exercise Price of outstanding Options without the
consent of such Participants; provided, however, that the Exercise Price may not
be reduced below the minimum Exercise Price that would be permitted under
Section 5.3 of this Plan for Options granted on the date the action is taken to
reduce the Exercise Price.
5.9 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
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5.10 No Disqualification. Notwithstanding any other provision
in this Plan, no term of this Plan relating to ISO's will be interpreted,
amended or altered, nor will any discretion or authority granted under this Plan
be exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that will be in such form
(which need not be the same for each Par ticipant) as the Committee will from
time to time approve, and shall comply with and be subject to the terms and
conditions of this Plan. The offer of Restricted Stock shall will be accepted by
the Par ticipant's execution and delivery of the Restricted Stock Purchase
Agreement and full payment for the Shares to the Company not later than thirty
(30) days after the date the Restricted Stock Purchase Agreement is delivered to
the person. If such person does not execute and deliver the Restricted Stock
Purchase Agreement along with full payment for the Shares to the Company within
thirty (30) days, then the offer shall terminate, unless otherwise determined by
the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant
to a Re stricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted. Payment of the Purchase Price shall be made
in accordance with Section 8 of this Plan.
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards
shall be subject to such restrictions as the Committee may impose. These
restrictions may be based upon completion of a specified number of years of
service with the Company or upon completion of the performance goals as set out
in advance in the Participant's individual Restricted Stock Purchase Agreement.
Restricted Stock Awards may vary from Participant to Participant and between
groups of Participants. Prior to the grant of a Restricted Stock Award, the
Committee shall: (a) determine the nature, length and starting date of any
Performance Period for the Restricted Stock Award; (b) select from among the
Performance Factors to be used to measure performance goals, if any; and (c)
determine the number of Shares that may be awarded to the Participant. Prior to
the payment of any Restricted Stock Award, the Committee shall determine the
extent to which such Restricted Stock Award has been earned. Performance Periods
may overlap and Participants may participate simul taneously with respect to
Restricted Stock Awards that are subject to different Performance Periods and
having different performance goals and other criteria.
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6.4 Stock Restrictions. Each certificate representing
Restricted Stock awarded under the Plan shall bear the following legend until
the lapse of all restrictions with respect to such Stock:
"TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS
RESTRICTED PURSUANT TO THE TERMS OF A RESTRICTED STOCK AGREEMENT, DATED
AS OF _______, BETWEEN THE LANGER BIOMECHANICS GROUP, INC., AND
____________. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE LANGER BIOMECHANICS GROUP, INC."
Stop transfer orders shall be entered with the Company's
transfer agent and registrar against the transfer of legended securities.
6.5 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement, unless
the Committee will determine otherwise.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of
Shares (which may consist of Restricted Stock) for services rendered to the
Company or any Parent or Subsidiary of the Company. A Stock Bonus may be awarded
for past services already rendered to the Company, or any Parent or Subsidiary
of the Company pursuant to an Award Agreement (the "Stock Bonus Agreement") that
will be in such form (which need not be the same for each Participant) as the
Committee will from time to time approve, and will comply with and be subject to
the terms and conditions of this Plan. A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in the
Participant's individual Award Agreement (the "Performance Stock Bonus
Agreement") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual Performance Factors or upon such other criteria as the Committee may
determine.
7.2 Terms of Stock Bonuses. The Committee will determine the
number of Shares to be awarded to the Participant. If the Stock Bonus is being
earned upon the satisfaction of performance goals pursuant to a Performance
Stock Bonus Agreement, then the Committee will: (a) determine the nature, length
and starting date of any Performance Period for each Stock Bonus; (b) select
from among the Performance Factors to be used to measure the performance, if
any; and (c) determine the number of Shares that may be awarded to the
Participant. Prior to the payment of any Stock Bonus, the Committee shall
determine the extent to which such Stock Bonuses have been
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earned. Performance Periods may overlap and Participants may participate
simultaneously with respect to Stock Bonuses that are subject to different
Performance Periods and different performance goals and other criteria. The
number of Shares may be fixed or may vary in accordance with such performance
goals and criteria as may be determined by the Committee. The Committee may
adjust the performance goals applicable to the Stock Bonuses to take into
account changes in law and accounting or tax rules and to make such adjustments
as the Committee deems necessary or appropriate to reflect the impact of
extraordinary or unusual items, events or circumstances to avoid windfalls or
hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may
be paid currently or on a deferred basis with such interest or dividend
equivalent, if any, as the Committee may determine. Payment may be made in the
form of cash or whole Shares or a combination thereof, either in a lump sum
payment or in installments, all as the Committee will determine.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to this
Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee or where expressly indicated in the Participants
Award Agreement and where permitted by law:
a. by cancellation of indebtedness of the Company to the
Participant;
b. by surrender of shares that either: (1) have been
owned by Participant for more than six (6) months and
have been paid for within the meaning of SEC Rule 144
(and, if such shares were purchased from the Company
by use of a promissory note, such note has been fully
paid with respect to such shares); or (2) were
obtained by Participant in the public market;
c. by tender of a promissory note having such terms as
may be approved by the Committee and bearing interest
at a rate sufficient to avoid imputation of income
under Sections 483 and 1274 of the Code;
d. by waiver of compensation due or accrued to the
Participant for services rendered;
e. with respect only to purchases upon exercise of an
Option, and provided that a public market for the
Company's stock exists:
(1) through a "same day sale" commitment from
the Participant and a broker-dealer that is
a member of the National Association of
Securities Dealers (an "NASD Dealer")
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whereby the Participant irrevocably elects
to exercise the Option and to sell a portion
of the Shares so purchased to pay for the
Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such
Shares to forward the Exercise Price
directly to the Company; or
(2) through a "margin" commitment from the
Participant and a NASD Dealer whereby the
Participant irrevocably elects to exercise
the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin
account as security for a loan from the NASD
Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to
forward the Exercise Price directly to the
Company; or
f. by any combination of the foregoing or other method
expressly approved by the Committee.
8.2 Loan Guarantees. The Committee may help the Participant
pay for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee.
10. PRIVILEGES OF STOCK OWNERSHIP. No Participant will have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After
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Shares are issued to the Participant, the Participant will be a stockholder and
have all the rights of a stockholder with respect to such Shares, including the
right to vote and receive all dividends or other distributions made or paid with
respect to such Shares; provided, that if such Shares are Restricted Stock, then
any new, additional or different securities the Participant may become entitled
to receive with respect to such Shares by virtue of a stock dividend, stock
split or any other change in the corporate or capital structure of the Company
will be subject to the same restrictions as the Restricted Stock; provided,
further, that the Participant will have no right to retain such stock dividends
or stock distributions with respect to Shares that are repurchased at the
Participant's Purchase Price or Exercise Price pursuant to Section 12.
11. TRANSFERABILITY. Awards granted under this Plan, and any interest
therein, shall not be transferable or assignable by a Participant, and may not
be made subject to execution, attachment or similar process, otherwise than by
will or by the laws of descent and distribution, except as determined by the
Committee. During the lifetime of the Participant an Award will be exercisable
only by the Participant (or by a duly appointed conservator, committee, or
similar fiduciary acting for a disabled Participant), and any elections with
respect to an Award may be made only by the Participant unless otherwise
determined by the Committee and set forth in the Award Agreement with respect to
Awards that are not ISO's.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within three (3) months
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price or Purchase Price, as the case
may be.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions, consistent with the terms of the Awards, as the
Committee may deem necessary or advisable, including restrictions under any
applicable federal, state or foreign securities law, or any rules, regulations
and other requirements of the SEC or any stock exchange or automated quotation
system upon which the Shares may be listed or quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional
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forms of collateral to secure the payment of such obligation and, in any event,
the Company will have full recourse against the Participant under the promissory
note notwithstanding any pledge of the Participant's Shares or other collateral.
In connection with any pledge of the Shares, Participant will be required to
execute and deliver a written pledge agreement in such form as the Committee
will from time to time approve. In the discretion of the Committee, the pledge
agreement may provide that the Shares purchased with the promissory note may be
released from the pledge on a pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. However, in the
event that an Award is not effective as discussed in the preceding sentence, the
Company will use reasonable efforts to modify, revise or renew such Award in a
manner so as to make the Award effective. Notwithstanding any other provision in
this Plan, the Company will have no obligation to issue or deliver certificates
for Shares under this Plan prior to: (a) obtaining any approvals from
governmental agencies that the Company determines are necessary or advisable;
and/or (b) completion of any registration or other qualification of such Shares
under any state or federal law or ruling of any governmental body that the
Company determines to be necessary or advisable. The Company will be under no
obligation to register the Shares with the SEC or to effect compliance with the
registration, qualification or listing requirements of any state securities
laws, stock exchange or automated quotation system, and the Company will have no
liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
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18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. If a
Change-of-Control Event occurs:
(i) the successor company in any Change-of-Control Event
may, if approved in writing by the Committee prior to
any Change- of-Control Event:
(1) substitute equivalent Options or Awards or
provide substantially similar consideration
to Participants as was provided to
stockholders (after taking into account the
existing provisions of the Awards), or
(2) issue, in place of outstanding Shares of the
Company held by the Participant,
substantially similar shares or
substantially similar other securities or
substantially similar other property subject
to repurchase restrictions no less favorable
to the Participant.
(ii) Notwithstanding anything in this Plan to the
contrary, the Committee may, in its sole discretion,
provide that the vesting of any or all Options and
Awards granted pursuant to this Plan will accelerate
immediately prior to the consummation of a Change-of-
Control Event. If the Committee exercises such
discretion with respect to Options, such Options will
become exercisable in full prior to the consummation
of such event at such time and on such conditions as
the Committee determines, and if such Options are not
exercised prior to the consummation of such event,
they shall terminate at such time as determined by
the Committee.
18.2 Other Treatment of Awards. Subject to any rights and
limitations set forth in Section 18.1, if a Change-of-Control Event occurs or
has occurred, any outstanding Awards will be treated as provided in the
applicable agreement or plan of merger, consolidation, dissolution, liquidation,
or sale of assets constituting the Change-of-Control Event.
18.3 Assumption of Awards by the Company. The Company, from
time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either (a) granting an Award under this Plan in substitution of
such other company's award, or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the sub stituted or assumed award would have been eligible to be
granted an Award under this Plan if the
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other company had applied the rules of this Plan to such grant. If the Company
assumes an award granted by another company, the terms and conditions of such
award will remain unchanged (except that the exercise price and the number and
nature of Shares issuable upon exercise of any such option will be adjusted
appropriately pursuant to Section 424(a) of the Code). If the Company elects to
grant a new Option rather than assuming an existing option, such new Option may
be granted with a similarly adjusted Exercise Price.
18.4 Adjustment of Shares. In the event that the number of
outstanding shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however, that
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective
on the date that this Plan is approved by the stockholders of the Company,
consistent with applicable laws (the "Effective Date").
20. TERM OF PLAN. Unless earlier terminated as provided herein, this
Plan will terminate ten (10) years from the date this Plan is adopted by the
Board or, if earlier, the date of stockholder approval.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval.
22. EFFECT OF SECTION 162(M) OF THE CODE. The Plan, and all Awards
issued thereunder, are intended to be exempt from the application of Section
162(m) of the Code, which restricts under certain circumstances the Federal
income tax deduction for compensation paid by a public company to named
executives in excess of $1 million per year. The exemption is based on Treasury
Regulation Section 1.162-27(f) as in effect on the effective date of the Plan,
with the understanding that such regulation generally exempts from the
application of Section 162(m) of the Code compensation paid pursuant to a plan
that existed before a company becomes publicly held. The Committee may, without
stockholder approval (unless otherwise required to comply with Rule 16b-3 under
the Exchange Act), amend the Plan retroactively and/or prospectively to the
extent it determines necessary in order to comply with any subsequent
clarification of Section 162(m) of the
13
Code required to preserve the Company's Federal income tax deduction for
compensation paid pursuant to the Plan. To the extent that the Committee
determines as of the Date of Grant of an Award that (i) the Award is intended to
comply with Section 162(m) of the Code and (ii) the exemption described above is
no longer available with respect to such Award, such Award shall not be
effective until any stockholder approval required under Section 162(m) of the
Code has been obtained.
23. GENERAL.
23.1 Additional Provisions of an Award. Awards under the Plan
also may be subject to such other provisions (whether or not applicable to the
benefit awarded to any other Participant) as the Committee determines
appropriate including, without limitation, provisions to assist the Participant
in financing the purchase of Stock upon the exercise of Options, provisions for
the forfeiture of or restrictions on resale or other disposition of shares of
Stock acquired under any Award, provisions giving the Company the right to
repurchase shares of Stock acquired under any Award in the event the Participant
elects to dispose of such shares, provisions which restrict a Participant's
ability to sell Shares for a period of time under certain circumstances, and
provisions to comply with Federal and state securities laws and Federal and
state tax withholding requirements. Any such provisions shall be reflected in
the applicable Award Agreement.
23.2. Claim to Awards and Employment Rights. Unless otherwise
expressly agreed in writing by the Company, no employee or other person shall
have any claim or right to be granted an Award under the Plan or, having been
selected for the grant of an Award, to be selected for a grant of any other
Award. Neither the Plan nor any action taken hereunder shall be construed as
giving any Participant any right to be retained in the employ or service of the
Company, a Subsidiary or an Affiliate.
23.3. Designation and Change of Beneficiary. Each Participant
shall file with the Committee a written designation of one or more persons as
the beneficiary who shall be entitled to receive the amounts payable with
respect to an Award of Restricted Stock, if any, due under the Plan upon his
death. A Participant may, from time to time, revoke or change his beneficiary
designation without the consent of any prior beneficiary by filing a new
designation with the Committee. The last such designation received by the
Committee shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received by the
Committee prior to the Participant's death, and in no event shall it be
effective as of a date prior to such receipt. If no beneficiary designation is
filed by the Participant, the beneficiary shall be deemed to be his or her
spouse or, if the Participant is unmarried at the time of death, his or her
estate.
23.4. Payments to Persons Other Than Participants. 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 is otherwise legally incompetent or incapacitated or has died,
then any payment due to such person or such person's estate (unless a prior
14
claim therefor has been made by a duly appointed legal representative) may, if
the Committee so directs the Company, be paid to such person's spouse, child,
relative, an institution maintaining or having custody of such person, or any
other person deemed by the Committee, in its absolute discretion, 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.
23.5. 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 Committee 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 Articles of Incorporation
or By-Laws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
23.6. Governing law. The Plan and all agreements hereunder
shall be governed by and construed in accordance with the internal laws of the
State of New York without regard to the principles of conflicts of law thereof.
23.7. 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 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 general
unsecured 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.
23.8. Reliance on Reports. Each member of the Committee and
each member of the Board shall be fully justified in relying, acting or failing
or refusing to act, and shall not be liable for having so relied, acted or
failed or refused to act in good faith, upon any report made by the independent
public accountant of the Company and its Subsidiaries and Affiliates and upon
any other information furnished in connection with the Plan by any person or
persons other than himself.
23.9. Relationship to Other Benefits. No payment under the
Plan shall be taken into account in determining any benefits under any pension,
retirement, profit sharing, group
15
insurance or other benefit plan of the Company or any Subsidiary except as
otherwise specifically provided in such other plan.
23.10. Expenses. The expenses of administering the Plan shall
be borne by the Company and its Subsidiaries and Affiliates.
23.11. Pronouns. Masculine pronouns and other words of
masculine gender shall refer to both men and women.
23.12. 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.
23.13. Termination of Employment. For all purposes herein, a
person who transfers from employment or service with the Company to employment
or service with a Subsidiary or Affiliate or vice versa shall not be deemed to
have terminated employment or service with the Company, a Subsidiary or
Affiliate.
23.14 Nonexclusivity of The Plan. Neither the adoption of this
Plan by the Board, the submission of this Plan to the stockholders of the
Company for approval, nor any provision of this Plan will be construed as
creating any limitations on the power of the Board to adopt such incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
24. DEFINITIONS. As used in this Plan, the following terms will have
the following meanings:
"Affiliate" means any affiliate of the Company within the meaning of 17
CFR ss.230.405.
"Award" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Cause" means the Company, a Subsidiary or Affiliate having cause to
terminate a Participant's employment or service under any existing
employment, consulting or any other agreement between the Participant
and the Company or a Subsidiary or
16
Affiliate or, in the absence of such an employment, consulting or other
agreement, upon (i) the determination by the Committee that the
Participant has ceased to perform his duties to the Company, a
Subsidiary or Affiliate (other than as a result of his incapacity due
to physical or mental illness or injury), which failure amounts to an
intentional and extended neglect of his duties to such party, (ii) the
Committee's determination that the Participant has engaged or is about
to engage in conduct materially injurious to the Company, a Subsidiary
or Affiliate or (iii) the Participant having been convicted of a felony
or a misdemeanor carrying a jail sentence of six months or more.
"Change-of-Control Event" means any one or more of the following:
(i) a dissolution or liquidation of the Company,
(ii) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation
with a wholly-owned subsidiary, a reincorporation of the
Company in a different jurisdiction, or other transaction in
which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the Awards
granted under this Plan are assumed, converted or replaced by
the successor corporation, which assumption will be binding on
all Participants),
(iii) a merger in which the Company is the surviving corporation but
after which the stockholders of the Company immediately prior
to such merger (other than any stockholder that merges, or
which owns or controls another corporation that merges, with
the Company in such merger) cease to own their Shares or other
equity interest in the Company,
(iv) the sale of substantially all of the assets of the Company, or
(v) the acquisition, sale, or transfer of more than 50% of the
outstanding capital stock of the Company by tender offer or
similar transaction.
"Code" means the Internal Revenue Code of 1986, as amended. Reference
in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations
under such section.
"Common Stock" means the outstanding common stock, par value $0.02 per
share, of the Company, or any other class of securities into which
substantially all the Common Stock is converted or for which
substantially all the Common Stock is exchanged.
17
"Committee" means the Compensation Committee, the Stock Option
Committee or such other committee appointed by the Board consisting
solely of two or more Outside Directors or the Board.
"Company" means The Langer Biomechanics Group, Inc., a New York
corporation, or any successor corporation.
"Disability" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:
a. if such Common Stock is then quoted on the NASDAQ
National Market, its closing price on the NASDAQ
National Market on the date of determination as
reported in The Wall Street Journal;
b. if such Common Stock is publicly traded and is then
listed on a national securities exchange, its closing
price on the date of determination on the principal
national securities exchange on which the Common
Stock is listed or admitted to trading as reported in
The Wall Street Journal;
c. if such Common Stock is publicly traded but is not
quoted on the NASDAQ National Market nor listed or
admitted to trading on a national securities
exchange, the average of the closing bid and asked
prices on the date of determination as reported in
The Wall Street Journal or, if not reported in The
Wall Street Journal, as reported by any reputable
publisher or quotation service, as determined by the
Committee in good faith;
d. if none of the foregoing is applicable, by the
Committee in good faith based upon factors available
at the time of the determination, including, but not
limited to, capital raising activities of the
Company.
18
"Insider" means an officer or director of the Company or any other
person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.
"NASD Dealer" has the meaning set forth in Section 8(e).
"NQSO's" has the meaning set forth in Section 5.
"Option" means an award of an option to purchase Shares pursuant to
Section 5.
"Outside Director" means a person who is (i) a "nonemployee director"
within the meaning of Rule 16b-3 under the Exchange Act, or any
successor rule or regulation and (ii) an "outside director" within the
meaning of Section 162(m) of the Code.
"Parent" means any corporation or other legal entity (other than the
Company) in an unbroken chain of corporations and/or other legal
entities ending with the Company if each of such corporations and other
legal entities other than the Company owns stock, other equity
securities or other equity interests possessing 50% or more of the
total combined voting power of all classes of stock, equity securities
or other equity interests in one of the other corporations or other
entities in such chain.
"Participant" means a person who receives an Award under this Plan.
"Performance Factors" means the factors selected by the Committee from
time to time, including, but not limited to, the following measures to
determine whether the performance goals established by the Committee
and applicable to Awards have been satisfied:
a. Net revenue and/or net revenue growth;
b. Earnings before income taxes and amortization and/or
earnings before income taxes and amortization growth;
c. Operating income and/or operating income growth;
d. Net income and/or net income growth;
e. Earnings per share and/or earnings per share growth;
f. Total stockholder return and/or total stockholder
return growth;
g. Return on equity;
19
h. Operating cash flow;
i. Adjusted operating cash flow return on income;
j. Economic value added;
k. Successful capital raises;
l. Individual confidential business objectives
m. Other factors deemed reasonable and appropriate by
the Committee.
"Performance Period" means the period of service determined by the
Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock
Bonuses.
"Plan" means The Langer Biomedical Group, Inc. 2001 Stock Incentive
Plan, as amended from time to time.
"Restricted Stock Award" means an award of Shares pursuant to Section
6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Section 18, and any
successor security.
"Stock Bonus" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.
"Subsidiary" means any corporation or other legal entity (other than
the Company) in an unbroken chain of corporations and/or other legal
entities beginning with the Company if each of the corporations and
entities other than the last corporation or entity in the unbroken
chain owns stock, other equity securities or other equity interests
possessing 50% or more of the total combined voting power of all
classes of stock, other equity securities or other equity interests in
one of the other corporations or entities in such chain.
"Ten Percent Stockholder" has the meaning set forth in Section 5.2.
"Termination" or "Terminated" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason
ceased to provide services as an
20
employee, officer, director, consultant, independent contractor, or
advisor to the Company or a Parent or Subsidiary of the Company. An
employee will not be deemed to have ceased to provide services in the
case of (i) sick leave, (ii) military leave, or (iii) any other leave
of absence approved by the Committee, provided, that such leave is for
a period of not more than 90 days, unless re-employment upon the
expiration of such leave is guaranteed by contract or statute or unless
provided otherwise pursuant to formal policy adopted from time to time
by the Company and issued and promulgated to employees in writing. In
the case of any employee on an approved leave of absence, the Committee
may make such provisions respecting suspension of vesting of the Award
while on leave from the employ of the Company or a Subsidiary as it may
deem appropriate, except that in no event may an Option be exercised
after the expiration of the term set forth in the Option agreement. The
Committee will have sole discretion to determine whether a Participant
has ceased to provide services and the effective date on which the
Participant ceased to provide services (the "Termination Date").
"Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.
"Vested Shares" means "Vested Shares" as defined in the Award
Agreement.
CERTIFICATION
The undersigned, being the Secretary of The Langer Biomechanics
Group, Inc., a New York corporation, hereby certifies that the foregoing is a
true and complete copy of The Langer Biome chanics Group, Inc. 2001 Stock
Incentive Plan, as duly adopted by the Board of Directors of the Company on
February 23, 2001, and duly approved by the stockholders of the Company on
_______, 2001, and that said plan is in full force and effect on the date
hereof, without amendment or modifi cation.
------------------------------------
Secretary
21
(NO. 1) SCHEDULE (INLAND REVENUE APPROVED)
TO
THE LANGER BIOMECHANICS GROUP, INC. 2001 STOCK INCENTIVE PLAN
INLAND REVENUE REFERENCE: [______]
APPROVED BY THE INLAND REVENUE ON [_________]
ALTERATIONS AND AMENDMENTS TO THE PLAN IN RESPECT OF ITS OPERATION
IN RELATION TO UNITED KINGDOM EMPLOYEES
1. In this Schedule, "Plan" refers to THE LANGER BIOMECHANICS GROUP, INC.
2001 Stock Incentive Plan and words and expressions defined therein
shall have the same meaning when used in this Schedule. The provisions
of the Plan relating to Non-Qualified Stock Options shall apply to the
provisions of this Schedule except where expressly varied herein.
References to Sections in this Schedule are to Sections of the Plan.
2. It is intended that Non-Qualified Stock Options ("Options") granted by
the Company pursuant to this Schedule to persons ("UK Participants)
employed by the Company and/or its subsidiary corporations in the UK
who are subject to UK Income Tax in respect of such employment will be
granted pursuant to an approved share option scheme within the
provisions of Section 185 of and Schedule 9 to the United Kingdom
Income and Corporation Taxes Act 1988 ("ICTA 1988").
3. Only Options may be granted pursuant to this Schedule and not any other
form of incentive. An Option granted under this Schedule shall not be
granted to an individual in conjunction with any other form of Award
under the Plan.
4. Section 24 (DEFINITIONS) shall be amended in relation to Options
granted pursuant to this Schedule so that:-
(i) "Share" means "shares of the Company's Common Stock which comply
with the conditions of paragraphs 10-14 Schedule 9 ICTA 1988"; (ii)
"Subsidiary" means "any company of which the Company has control"; and
(iii) "Parent" means "any company which has control of the Company", in
each case control shall have the meaning set out in Section 840 of ICTA
1988.
5. Options may only be granted pursuant to this Schedule to employees of
the Company or Subsidiary of the Company who are not excluded by
paragraph 8 of Schedule 9 ICTA 1988. No employee who is a director
shall be eligible to participate in the Plan pursuant to this Schedule,
unless required in that capacity to work for the Company and/or any
Subsidiary for at least 25 hours per week excluding meal breaks.
22
6. The conditions attaching to an Option granted under this Schedule
(including any shorter or later time for exercising Options following
the termination of a Participant's employment provided that where a
Participant's employment terminates by reason of his death his Options
may be exercised no later than twelve months after the date of his
death) shall be determined at the time of grant and may not be
determined following the grant of an Option. Any performance condition
which is imposed on any Option granted under this Schedule must be
objective in nature. Such a condition may only be varied if events
occur which cause the Committee to reasonably believe that the original
condition is no longer a fair measure of performance. In such
circumstances the Committee may waive the performance condition or may
impose a different objective performance condition which, in the fair
and reasonable opinion of the Committee, is no more difficult to meet
than the original condition was considered to be when it was first set.
7. No Option may be granted pursuant to this Schedule to any UK
Participant which would result in the aggregate Exercise Price of
Shares comprised in outstanding Options granted to him or her under
this Schedule together with the aggregate Exercise Price of shares in
subsisting options granted to him or her under any share option scheme,
(not being a savings-related share option scheme), approved under
Schedule 9 ICTA 1988 and established by the Company or any associated
company (within the meaning of Section 416 ICTA 1988) exceeding 30,000
UK pounds sterling (converting, for this purpose, the Exercise Price
into pounds sterling using the exchange rate applicable on the date of
grant of such options) or such other amount as is from time to time
specified in paragraph 28(1) of Schedule 9 ICTA 1988.
8. The Exercise Price for each Share under Option granted under this
Schedule shall be determined by the Board of Directors or the Committee
and be denominated in dollars, but shall not be less than the greater
of:-
(i) 100% of the Fair Market Value of a Share on the date of grant
as agreed in advance with the Inland Revenue Shares Valuation
Division; and
(ii) the par value of the Share.
9. The price for each Share which may be acquired under an Option granted
pursuant to this Schedule shall be payable in cash (and no other form)
in full on the exercise of the Option and the provisions of Section 8.1
which allow for payment in forms other than cash shall not apply to
this Schedule.
10. Section 5.2 (EXERCISE PERIOD) shall not apply in relation to Options
granted pursuant to this Schedule and the following provisions shall
apply instead:-
"An Option shall be exercisable at such times, in such amounts and
during such periods as the Board of Directors or the Committee, as the
case may be, shall determine at the date of
23
the grant of such Option but shall not be exercisable in any event on
or after the tenth anniversary of the date of grant."
11. No restriction may be imposed pursuant to section 5.5 on the Shares
acquired under an Exercise Agreement other than such restrictions as
may be required by the Company to comply with applicable securities
laws.
12. Section 5.8 (MODIFICATION, EXTENSION OR RENEWAL) shall not apply to
Options granted under this Schedule.
13. No Option granted under this Schedule may be exercised by any UK
Participant at any time when he or she is precluded by paragraph 8 of
Schedule 9 ICTA 1988 from participating in the Plan pursuant to this
Schedule.
14. In Section 11 (TRANSFERABILITY) the words "or as determined by the
Committee and set forth in the Award Agreement with respect to Awards
that are not IS0s" and "unless otherwise determined by the Committee
and set forth is the Award Agreement with respect to Awards that are
not IS0s" will not apply to this Schedule.
15. Section 12 (RESTRICTIONS ON SHARES) will not apply to this Schedule.
16. Section 15 (EXCHANGE AND BUYOUT OF AWARDS) will not apply to this
Schedule.
17. In Section 18.1 (ASSUMPTION OR REPLACEMENT OF AWARDS BY SUCCESSOR) the
words "If a Change-of-Control Event Occurs:" to "__________" will be
replaced in this Schedule by:-
"18.1.1 If any company (hereafter "the Acquiring Company")
(i) obtains control of the Company (as defined in Section 840
of ICTA 1988) as a result of making:-
(a) a general offer to acquire the whole of the
issued ordinary share capital of the Company which is
made on a condition such that if it is satisfied the
Acquiring Company will have control of the Company;
or
(b) a general offer to acquire all the shares of the
same class as the shares over which Options have been
or may be granted; or
(ii) obtains control of the Company in pursuance of a
compromise or arrangement sanctioned by the court under
section 425 of the UK Companies Act 1985 or (where relevant)
legislation that the Inland Revenue agrees is the overseas
equivalent thereof; or
24
(iii) becomes bound or entitled to acquire Shares under
section 428 to 430 of that Act or (where relevant) legislation
that the Inland Revenue agrees is the overseas
equivalent thereof.
the Participant may by agreement with the Acquiring Company
within the periods specified in paragraph 15(2) of Schedule 9
ICTA 1988 release (the "Release") his Options (the "Old
Options") in consideration of the grant to him of equivalent
rights over shares in the Acquiring Company or in another
company within paragraph 10(b) or (c) of Schedule 9 ICTA 1988
("New Options").
18.1.2 The grant of New Options may only take place on the following
conditions:-
(i) the shares over which the New Options are granted (the
"New Scheme Shares") comply with the provisions relating to
scheme shares contained in paragraphs 10 to 14 inclusive of
Schedule 9 ICTA 1988;
(ii) the total market value, immediately before the Release,
of the shares which were subject to the Old Options is equal
to the total market value, immediately after the Release, of
the New Scheme Shares in respect of which the New Options are
granted to the Participant;
(iii) the total amount payable by the Participant for the
acquisition of New Scheme Shares on complete exercise of the
New Options is equal to the total amount that would have been
payable for the acquisition of shares on complete exercise of
the Old Options; and
(iv) the New Options are otherwise identical in terms to the
Old Options.
18.1.3 The New Options shall, for all the other purposes of this
Scheme, be treated as having been acquired at the same time as the Old
Options were or were treated as acquired and "Date of Grant" shall be
construed accordingly.
18.1.4 Where the Participant releases his Options under 18.1.1 above
the New Options granted to him on that Release shall not lapse, nor
shall the Participant be entitled to exercise the New Options early
solely by virtue of the circumstances which entitled the Participant to
effect the Release.
18.1.5 Where any New Options are granted pursuant to 18.1.1 above,
references to the Company shall, where applicable, be construed in
relation to the New Options as references to the Acquiring Company or,
as the case may be, to the other company to whose shares the New
Options relate.
25
18. Section 18.4 (ADJUSTMENT OF SHARES) shall, in the case of any Option
granted pursuant to this Schedule, be amended so that any adjustment
made under that Article may only be made to take account of a variation
in the share capital of which the shares form part and shall be subject
to:
(i) confirmation from the auditors of the Company that such
adjustment is fair and reasonable;
(ii) the prior approval of the Inland Revenue;
(iii) the Shares continuing to satisfy the conditions
specified in paragraphs 10 to 14 inclusive of Schedule 9 ICTA
1988.
19. Section 21 (AMENDMENT OR TERMINATION OF PLAN) shall apply with the
additional requirement that no amendment shall have effect until
approved by the Inland Revenue.
20. Section 23.1 (ADDITIONAL PROVISIONS OF AN AWARD) shall not apply to
this Schedule except to the extent that it allows Award Agreements to
contain provisions to comply with Federal and state securities laws and
Federal and state tax withholding requirements.
26
(NO. 2) SCHEDULE (UNAPPROVED)
TO
THE LANGER BIOMECHANICS GROUP, INC. 2001 STOCK
INCENTIVE PLAN
ALTERATIONS AND AMENDMENTS TO THE PLAN IN RESPECT OF
ITS OPERATION IN RELATION TO UNITED KINGDOM EMPLOYEES
1. In this (No. 2) Schedule, "Plan" refers to THE LANGER BIOMECHANICS
GROUP, INC. 2001 Stock Incentive Plan together with the (No. 1)
Schedule and words and expressions defined therein shall have the same
meaning when used in this (No. 2 ) Schedule. The provisions of the Plan
relating to Options shall apply to the provisions of this (No.2)
Schedule except where expressly varied herein
2. It is intended that this (No. 2) Schedule will not be approved by the
Inland Revenue pursuant to Schedule 9 ICTA 1988.
3. Clause 4(i) of the (No. 1) Schedule will not apply to Options granted
under this (No. 2) Schedule.
4. The words "who are not excluded by paragraph 8 of Schedule 9 ICTA 1988"
in clause 5 and the second sentence of clause 5 to the (No. 1) Schedule
shall not apply to this (No. 2) Schedule.
5. The limit set out in clause 7 of the (No. 1) Schedule shall not apply
to this (No. 2) Schedule.
6. Clause 11 of the (No. 1) Schedule shall not apply to this (No.2)
Schedule.
7. Clause 12 of the (No. 1) Schedule shall not apply to this (No. 2)
Schedule.
8. Clause 13 of the (No. 1) Schedule shall not apply to this (No. 2)
Schedule.
9. Clause 15 of the (No. 1) Schedule shall not apply to this (No. 2)
Schedule.
10. All requirements in the (No. 1) Schedule for the approval, consent or
agreement of the Inland Revenue shall not apply to this (No. 2)
Schedule.
27