Exhibit 10.7

 

VALERITAS HOLDINGS, INC. 2016 INCENTIVE COMPENSATION PLAN    LOGO
[g180550ex108.jpg]

 

ARTICLE ONE: GENERAL PROVISIONS

 

I. PURPOSE OF THE PLAN

This 2016 Incentive Compensation Plan is intended to promote the interests of
Valeritas Holdings, Inc., a Delaware corporation, by providing eligible persons
in the Corporation’s service with the opportunity to participate in one or more
cash or equity incentive compensation programs designed to encourage them to
continue their service relationship with the Corporation.

Capitalized terms shall have the meanings assigned to such terms in the attached
Appendix.

 

II. STRUCTURE OF THE PLAN

 

  A. The Plan shall be divided into three separate equity incentive programs:

 

  •   the Discretionary Grant Program under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
Common Stock or stock appreciation rights tied to the value of such Common
Stock;

 

  •   the Stock Issuance Program under which eligible persons may, at the
discretion of the Plan Administrator, be issued shares of Common Stock pursuant
to restricted stock awards, restricted stock units or other stock-based awards
which vest upon the completion of a designated service period or the attainment
of pre-established performance milestones, or such shares of Common Stock may be
issued through direct purchase or as a bonus for services rendered the
Corporation (or any Parent or Subsidiary); and

 

  •   the Incentive Bonus Program under which eligible persons may, at the
discretion of the Plan Administrator, be provided with incentive bonus
opportunities through performance unit awards and special cash incentive
programs tied to the attainment of pre-established performance milestones.

 

  B. The provisions of Articles One and Five shall apply to all incentive
compensation programs under the Plan and shall govern the interests of all
persons under the Plan.

 

III. ADMINISTRATION OF THE PLAN

 

  A.

The Plan shall be administered and interpreted by a committee consisting of
members of the Board, which shall be appointed by the Board (the “Committee”).
The Committee shall consist of two or more persons who are “outside directors”
as defined under section 162(m) of the Code, and related Treasury regulations,
“non-employee directors” as defined under Rule 16b-3 under the 1934 Act, and
“independent directors” as determined in accordance with the independence
standards established by the Stock Exchange on which the Common Stock is at the
time primarily traded. However, the Board may ratify or approve any Awards as it
deems appropriate, and the Board shall approve and administer all Awards made to

--------------------------------------------------------------------------------

  non-employee directors. The Committee may delegate authority to one or more
subcommittees, as it deems appropriate. To the extent the Board, the Committee
or a subcommittee administers the Plan, references in the Plan to the “Plan
Administrator” shall be deemed to refer to the Board, the Committee or
subcommittee.

 

  B. Members of the Committee shall serve for such period of time as the Board
may determine and may be removed by the Board at any time.

 

  C. The Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Discretionary Grant, Stock Issuance
and Incentive Bonus Programs and to make such determinations under, and issue
such interpretations of, the provisions of those programs and any outstanding
Awards thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Grant, Stock Issuance and Incentive Bonus Programs under its
jurisdiction or any Award thereunder.

 

  D. Service on the Committee shall constitute service as a Board member, and
the members of the Committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service on the
Committee. No member of the Committee shall be liable for any act or omission
made in good faith with respect to the Plan or any Award made thereunder.

 

IV. ELIGIBILITY

 

  A. The persons eligible to participate in the Plan are as follows:

 

  (i) Employees;

 

  (ii) non-employee members of the Board or the non-employee members of the
board of directors of any Parent or Subsidiary; and

 

  (iii) consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary).

 

  B.

The Plan Administrator shall have full authority to determine, (i) with respect
to Awards made under the Discretionary Grant Program, which eligible persons are
to receive such Awards, the time or times when those Awards are to be made, the
number of shares to be covered by each such Award, the time or times when the
Award is to become exercisable, the vesting schedule (if any) applicable to an
Award, the maximum term for which such Award is to remain outstanding and the
status of a granted option as either an Incentive Option or a Non-Statutory
Option, (ii) with respect to Awards made under the Stock Issuance Program, which
eligible persons are to receive such Awards, the time or times when the Awards
are to be made, the number of shares subject to each such Award, the vesting and
issuance schedule (if any) applicable to the shares which are the subject of
such Award and the cash consideration (if any) payable for those shares, and
(iii) with respect to

 

2

--------------------------------------------------------------------------------

  Awards under the Incentive Bonus Program, which eligible persons are to
receive such Awards, the time or times when the Awards are to be made, the
performance objectives for each such Award, the amounts payable at designated
levels of attained performance, any applicable service vesting requirements, the
payout schedule for each such Award and the form (cash or shares of Common
Stock) in which the Award is to be settled.

 

  C. The Plan Administrator shall have the absolute discretion to grant options
or stock appreciation rights in accordance with the Discretionary Grant Program,
to effect stock issuances and other stock-based awards in accordance with the
Stock Issuance Program and to grant incentive bonus awards in accordance with
the Incentive Bonus Program.

 

V. STOCK SUBJECT TO THE PLAN

 

  A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including treasury shares and shares
repurchased by the Corporation on the open market. Subject to adjustment as
provided in Section V.G, the number of shares of Common Stock reserved for
issuance over the term of the Plan shall initially be limited to 3,000,000
shares.

 

  B. Following the Underwriting Date, the number of shares of Common Stock
available for issuance under the Plan shall automatically increase on the first
trading day in January each calendar year during the term of the Plan, beginning
on the first trading day in January of the first calendar year following the
Underwriting Date, by an amount equal to four percent (4%) of the total number
of shares of Common Stock outstanding as measured as of the last trading day in
the immediately preceding calendar year, but in no event shall any such annual
increase exceed 1,500,000 shares.

 

  C. Subject to adjustment as provided in Section V.G, the maximum number of
shares of Common Stock that may be issued pursuant to Incentive Options granted
under Plan shall not exceed 3,000,000 shares. Such share limitation shall
automatically be increased on the first trading day in January each calendar
year, beginning on the first trading day in January of the calendar year
following the Underwriting Date, by the number of shares of Common Stock added
to the share reserve on that day pursuant to the provisions of Section V.B of
this Article One.

 

  D. Each person participating in the Plan shall be subject the following
limitations:

 

  (i) no one person participating in the Plan may receive stock options and
stand-alone stock appreciation rights for more than 1,500,000 shares of Common
Stock in the aggregate per calendar year;

 

  (ii) no one person participating in the Plan may receive direct stock
issuances (whether vested or unvested) or stock-based awards (other than stock
options and stand-alone stock appreciation rights) for more than 1,500,000
shares of Common Stock in the aggregate per calendar year; and

 

3

--------------------------------------------------------------------------------

  (iii) for Awards denominated in terms of cash (whether payable in cash, Common
Stock or a combination of both) and subject to one or more performance-vesting
conditions, the maximum dollar amount for which such Awards may be made to such
person in any calendar year shall not exceed 3,000,000 dollars for each calendar
year within the applicable performance measurement period, with any such
performance period not to exceed five (5) years and with pro-ration based on the
foregoing dollar amount in the event of any fractional calendar year included
within such performance period.

 

  E. Shares of Common Stock subject to outstanding Awards made under the Plan
shall be available for subsequent issuance under the Plan to the extent those
Awards expire, terminate or are forfeited or cancelled for any reason prior to
the issuance of the shares of Common Stock subject to those Awards. Such shares
shall be added back to the number of shares of Common Stock reserved for award
and issuance under the Plan as follows:

 

  (i) for each share of Common Stock subject to such an expired, forfeited,
cancelled or terminated Award made under the Discretionary Grant Program, one
share of Common Stock shall become available for subsequent award and issuance
under the Plan;

 

  (ii) for each share of Common Stock subject to a forfeited or cancelled Full
Value Award made under the Stock Issuance or Incentive Bonus Program, one share
shall become available for subsequent award and issuance; and

 

  (iii) for each unvested share of Common Stock issued under the Discretionary
Grant or Stock Issuance Program for cash consideration not less than the Fair
Market Value per share of Common Stock on the Award date and subsequently
repurchased by the Corporation, at a price per share not greater than the
original issue price paid per share, pursuant to the Corporation’s repurchase
rights under the Plan, one share shall become available for subsequent award and
issuance under the Plan.

 

  F. Should the exercise price of an option under the Plan be paid with shares
of Common Stock subject to such option, then the authorized reserve of Common
Stock under the Plan shall be reduced by the net number of shares issued under
the exercised stock option, and not by the gross number of shares for which that
option is exercised. Upon the exercise of any stock appreciation right under the
Plan, the share reserve shall be reduced by the net number of shares actually
issued by the Corporation upon such exercise, and not the gross number of shares
as to which such right is exercised. If shares of Common Stock otherwise
issuable under the Plan are withheld by the Corporation in satisfaction of the
Withholding Taxes incurred in connection with the issuance, exercise or vesting
of an Award, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the net number of shares issued, exercised or
vesting under such Award, calculated in each instance after any such share
withholding.

 

  G.

Should any change be made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares,
spin-off

 

4

--------------------------------------------------------------------------------

  transaction, merger, reorganization, consolidation, reclassification or change
in par value, or any other unusual or infrequently occurring event affecting the
outstanding Common Stock as a class without the Corporation’s receipt of
consideration, or if the value of outstanding shares of Common Stock is
substantially reduced as a result of a spin-off transaction or the Corporation’s
payment of an extraordinary dividend or distribution, then equitable adjustments
shall be made by the Plan Administrator to (i) the maximum number and/or class
of securities issuable under the Plan, (ii) the maximum number and/or class of
securities by which the share reserve is to increase automatically each calendar
year pursuant to the provisions of Article One, Section V.B, (iii) the maximum
number and/or class of securities that may be issued pursuant to Incentive
Options granted under the Plan, (iv) the maximum number and/or class of
securities for which any one person may receive Common Stock-denominated Awards
under the Plan per calendar year, (v) the maximum number and/or class of
securities for which any one person may receive stock options and stock
appreciation rights under the Plan per calendar year, (vi) the number and/or
class of securities and the exercise or base price per share in effect under
each outstanding Award under the Discretionary Grant Program, (vii) the number
and/or class of securities subject to each outstanding Award under the Stock
Issuance Program and the cash consideration (if any) payable per share, (viii)
the number and/or class of securities subject to each outstanding Award under
the Incentive Bonus Program denominated in shares of Common Stock and (ix) the
number and/or class of securities subject to the Corporation’s outstanding
repurchase rights under the Plan and the repurchase price payable per share. In
the event of a Change in Control, the applicable Change in Control provisions of
the Plan shall apply. The adjustments shall be made by the Plan Administrator in
such manner as the Plan Administrator deems appropriate in order to prevent the
dilution or enlargement of benefits under the Plan and outstanding Awards. The
adjustments shall be final, binding and conclusive.

 

  H. Outstanding Awards under the Plan shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

 

VI. REPRICING PROGRAMS

The Plan Administrator shall have the authority to effect, at any time and from
time to time, with the consent of the affected option holders, the cancellation
of any or all outstanding options under the Plan and to grant in substitution
therefore new options covering the same or different number of Common Shares but
with an exercise price per share based on the Fair Market Value per Common Share
on the new option grant date.

 

ARTICLE TWO: DISCRETIONARY GRANT PROGRAM

 

I. OPTION TERMS

Each option shall be evidenced by one or more documents in the form approved by
the Plan Administrator; provided, however, that each such document shall comply
with the terms specified below. Each option shall be designated in the document
as either an Incentive Option or a Non-Statutory Option. Each document
evidencing an Incentive Option shall, in addition, be subject to the provisions
of the Plan applicable to such options.

 

5

--------------------------------------------------------------------------------

  A. Exercise Price.

 

  (i) The exercise price per share shall be fixed by the Plan Administrator; but
shall not be less than one hundred percent (100%) of the Fair Market Value per
share of Common Stock on the option grant date.

 

  (ii) The exercise price shall become immediately due upon exercise of the
option and shall, subject to the provisions of the documents evidencing the
option, be payable in cash or check made payable to the Corporation. Should the
Common Shares be publicly traded at the time the option is exercised, then the
exercise price may also be paid as follows:

 

  (a) in shares of Common Stock held for the requisite period necessary to avoid
a charge to the Corporation’s earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date;

 

  (b) in shares of Common Stock otherwise issuable under the option but withheld
by the Corporation in satisfaction of the exercise price, with such withheld
shares to be valued at Fair Market Value on the Exercise Date; or

 

  (c) to the extent the option is exercised for vested shares, through a special
sale and remittance procedure pursuant to which the Optionee shall concurrently
provide irrevocable instructions to (A) a brokerage firm (reasonably
satisfactory to the Corporation for purposes of administering such procedure in
compliance with the Corporation’s pre-clearance/pre-notification policies) to
effect the immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares plus all
applicable income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (B) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale.

Except to the extent such sale and remittance procedure is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.

 

  B. Exercise and Term of Options. Each option shall be exercisable at such time
or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.

 

6

--------------------------------------------------------------------------------

  C. Effect of Termination of Service. The following provisions shall govern the
exercise of any options granted pursuant to the Discretionary Grant Program that
are outstanding at the time of the Optionee’s cessation of Service or death:

 

  (i) Any option outstanding at the time of the Optionee’s cessation of Service
for any reason other than death, Retirement, Permanent Disability and Misconduct
shall remain exercisable for such period of time thereafter as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the expiration of the
option term, and provided that if such documents do not include such a period of
time, any such option shall remain so exercisable until the earlier of (i) the
expiration of the three (3)-month period following the date of Optionee’s
cessation of Service, and (ii) the expiration of the option term set forth in
the documents evidencing the option.

 

  (ii) Any option held by the Optionee at the time of the Optionee’s cessation
of Service due to Retirement or Permanent Disability shall remain exercisable
until the earlier of (i) the expiration of the twelve (12)-month period
following the date of Optionee’s cessation of Service and (ii) the expiration of
the option term set forth in the documents evidencing the option.

 

  (iii) Any option held by the Optionee at the time of the Optionee’s death and
exercisable in whole or in part at that time may be subsequently exercised by
the personal representative of the Optionee’s estate or by the person or persons
to whom the option is transferred pursuant to the Optionee’s will or the laws of
inheritance or by the Optionee’s designated beneficiary or beneficiaries of that
option. Any such option shall remain so exercisable until the earlier of (i) the
expiration of the twelve (12)-month period following the date of Optionee’s
death, and (ii) the expiration of the option term set forth in the documents
evidencing the option.

 

  (iv) Should the Optionee’s Service be terminated for Misconduct or should the
Optionee otherwise engage in Misconduct while holding one or more outstanding
options granted under this Article Two, then all of those options shall
terminate immediately and cease to be outstanding.

 

  (v) During the applicable post-Service exercise period, the option may not be
exercised for more than the number of vested shares for which the option is at
the time exercisable. No additional shares shall vest under the option following
the Optionee’s cessation of Service, except to the extent (if any) specifically
authorized by the Plan Administrator in its sole discretion pursuant to an
express written agreement with the Optionee. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding.

The Plan Administrator shall have complete discretion, exercisable either at the
time an option is granted or at any time while the option remains outstanding,
to:

 

  (a)

extend the period of time for which the option is to remain exercisable
following the Optionee’s cessation of Service from the limited exercise

 

7

--------------------------------------------------------------------------------

  period otherwise in effect for that option to such greater period of time as
the Plan Administrator shall deem appropriate, but in no event beyond the
expiration of the option term;

 

  (b) include an automatic extension provision whereby the specified
post-Service exercise period in effect for any option granted under this Article
Two shall automatically be extended by an additional period of time equal in
duration to any interval within the specified post-Service exercise period
during which the exercise of that option or the immediate sale of the shares
acquired under such option could not be effected in compliance with applicable
federal and state securities laws, but in no event shall such an extension
result in the continuation of such option beyond the expiration date of the term
of that option; and/or

 

  (c) permit the option to be exercised, during the applicable post-Service
exercise period, not only with respect to the number of vested shares of Common
Stock for which such option is exercisable at the time of the Optionee’s
cessation of Service but also with respect to one or more additional
installments in which the Optionee would have vested had the Optionee continued
in Service.

 

  D. Stockholder Rights. The holder of an option shall have no stockholder
rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of record
of the purchased shares.

 

  E. Repurchase Rights. The Plan Administrator shall have the discretion to
grant options which are exercisable for unvested shares of Common Stock. Should
the Optionee cease Service while such shares are unvested, the Corporation shall
have the right to repurchase any or all of those unvested shares at a price per
share equal to the lower of (i) the exercise price paid per share or (ii) the
Fair Market Value per share of Common Stock at the time of repurchase. The terms
upon which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right.

 

  F. Transferability of Options. The transferability of options granted under
the Plan shall be governed by the following provisions:

 

  (i) Incentive Options: During the lifetime of the Optionee, Incentive Options
shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or the laws of inheritance following the
Optionee’s death.

 

  (ii)

Non-Statutory Options. Non-Statutory Options shall be subject to the same
limitation on transfer as Incentive Options, except that the Plan Administrator
may structure one or more Non-Statutory Options so that the option may be
assigned in whole or in part during the Optionee’s lifetime to one or more
Family Members of the Optionee or to a trust established

 

8

--------------------------------------------------------------------------------

  exclusively for the Optionee and/or one or more such Family Members, to the
extent such assignment is in connection with the Optionee’s estate plan or
pursuant to a domestic relations order. The assigned portion may only be
exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.

 

  (iii) Beneficiary Designations. Notwithstanding the foregoing, the Optionee
may designate one or more persons as the beneficiary or beneficiaries of his or
her outstanding options under this Article Two (whether Incentive Options or
Non-Statutory Options), and those options shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee’s death while holding those options. Such beneficiary or
beneficiaries shall take the transferred options subject to all the terms and
conditions of the applicable agreement evidencing each such transferred option,
including (without limitation) the limited time period during which the option
may be exercised following the Optionee’s death.

 

  (iv) Hedging. Prior to the date the Corporation first becomes subject to the
reporting requirements of Section 13 or 15(d) of the 1934 Act, outstanding
options under the Plan, together with the shares of Common Stock subject to
those options during the period prior to exercise, shall not be the subject of
any short position, put equivalent position (as such term is defined in Rule
16a-1(h) under the 1934 Act) or call equivalent position (as such term is
defined Rule 16a-1(b) of the 1934 Act).

 

  (v) Pledges, Gifts and other Transfers. Except as otherwise provided in
subparagraph (i), (ii) or (iii) above, until the date the Corporation first
becomes subject to the reporting requirements of Section 13 or 15(d) of the 1934
Act, outstanding options under the Plan, together with the shares of Common
Stock subject to those options during the period prior to exercise, shall not be
the subject of any pledges, gifts, hypothecations or other transfers, other than
pursuant to the Corporation’s repurchase rights or in connection with a Change
in Control in which such options shall terminate and cease to be outstanding.

 

II. INCENTIVE OPTIONS

The terms specified below shall be applicable to all Incentive Options. Except
as modified by the provisions of this Section II, all the provisions of Articles
One, Two and Five shall be applicable to Incentive Options. Options which are
specifically designated as Non-Statutory Options when issued under the Plan
shall not be subject to the terms of this Section II.

 

  A. Eligibility. Incentive Options may only be granted to Employees.

 

  B.

Dollar Limitation. The aggregate Fair Market Value of the shares of Common Stock
(determined as of the respective date or dates of grant) for which one or more
options

 

9

--------------------------------------------------------------------------------

  granted to any Employee under the Plan (or any other option plan of the
Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000).

To the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.

 

  C. 10% Stockholder. If any Employee to whom an Incentive Option is granted is
a 10% Stockholder, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the option grant date, and the option term shall not exceed five (5) years
measured from the option grant date.

 

III. STOCK APPRECIATION RIGHTS

 

  A. Authority. The Plan Administrator shall have full power and authority,
exercisable in its sole discretion, to grant stock appreciation rights in
accordance with this Section III to selected Optionees or other individuals
eligible to receive option grants under the Discretionary Grant Program.

 

  B. Types. Two types of stock appreciation rights shall be authorized for
issuance under this Section III: (i) tandem stock appreciation rights (“Tandem
Rights”) and (ii) stand-alone stock appreciation rights (“Stand-alone Rights”).

 

  C. Tandem Rights. The following terms and conditions shall govern the grant
and exercise of Tandem Rights.

 

  (i) One or more Optionees may be granted a Tandem Right, exercisable upon such
terms and conditions as the Plan Administrator may establish, to elect between
the exercise of the underlying option for shares of Common Stock or the
surrender of that option in exchange for a distribution from the Corporation in
an amount equal to the excess of (i) the Fair Market Value (on the option
surrender date) of the number of shares in which the Optionee is at the time
vested under the surrendered option (or surrendered portion thereof) over
(ii) the aggregate exercise price payable for such vested shares.

 

  (ii) No such option surrender shall be effective unless it is approved by the
Plan Administrator, either at the time of the actual option surrender or at any
earlier time. If the surrender is so approved, then the distribution to which
the Optionee shall accordingly become entitled under this Section III may be
made in shares of Common Stock valued at Fair Market Value on the option
surrender date, in cash or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.

 

  (iii)

If the surrender of an option is not approved by the Plan Administrator, then
the Optionee shall retain whatever rights the Optionee had under the

 

10

--------------------------------------------------------------------------------

  surrendered option (or surrendered portion thereof) on the option surrender
date and may exercise such rights at any time prior to the later of (i) five (5)
business days after the receipt of the rejection notice or (ii) the last day on
which the option is otherwise exercisable in accordance with the terms of the
instrument evidencing such option, but in no event may such rights be exercised
more than ten (10) years after the date of the option grant.

 

  D. Stand-Alone Rights. The following terms and conditions shall govern the
grant and exercise of Stand-alone Rights:

 

  (i) One or more individuals eligible to participate in the Discretionary Grant
Program may be granted a Stand-alone Right not tied to any underlying option
under this Discretionary Grant Program. The Stand-alone Right shall relate to a
specified number of shares of Common Stock and shall be exercisable upon such
terms and conditions as the Plan Administrator may establish. In no event,
however, may the Stand-alone Right have a maximum term in excess of ten (10)
years measured from the grant date. Upon exercise of the Stand-alone Right, the
holder shall be entitled to receive a distribution from the Corporation in an
amount equal to the excess of (i) the aggregate Fair Market Value (on the
exercise date) of the shares of Common Stock underlying the exercised right over
(ii) the aggregate base price in effect for those shares.

 

  (ii) The number of shares of Common Stock underlying each Stand-alone Right
and the base price in effect for those shares shall be determined by the Plan
Administrator in its sole discretion at the time the Stand-alone Right is
granted. In no event, however, may the base price per share be less than the
Fair Market Value per underlying share of Common Stock on the grant date. In the
event outstanding Stand-alone Rights are to be assumed in connection with a
Change in Control transaction or otherwise continued in effect, the shares of
Common Stock underlying each such Stand-alone Right shall be adjusted
immediately after such Change in Control so as to apply to the number and class
of securities into which those shares of Common Stock would have been converted
in consummation of such Change in Control had those shares actually been
outstanding at that time. Appropriate adjustments to reflect such Change in
Control shall also be made to the base price per share in effect under each
outstanding Stand-alone Right, provided the aggregate base price shall remain
the same. To the extent the actual holders of the Corporation’s outstanding
Common Stock receive cash consideration for their Common Stock in consummation
of the Change in Control, the successor corporation may, in connection with the
assumption or continuation of the outstanding Stand-alone Rights under the
Discretionary Grant Program, substitute, for the securities underlying those
assumed rights, one or more shares of its own common stock with a fair market
value equivalent to the cash consideration paid per share of Common Stock in the
Change in Control transaction.

 

  (iii)

Stand-alone Rights shall be subject to the same transferability restrictions
applicable to Non-Statutory Options and may not be transferred during the

 

11

--------------------------------------------------------------------------------

  holder’s lifetime, except if such assignment is in connection with the
holder’s estate plan and is to one or more Family Members of the holder or to a
trust established for the holder and/or one or more such Family Members or
pursuant to a domestic relations order covering the Stand-alone Right as marital
property. In addition, one or more beneficiaries may be designated for an
outstanding Stand-alone Right in accordance with substantially the same terms
and provisions as set forth in Section I.F of this Article Two.

 

  (iv) The distribution with respect to an exercised Stand-alone Right may be
made in shares of Common Stock valued at Fair Market Value on the exercise date,
in cash or partly in shares and partly in cash, as the Plan Administrator shall
in its sole discretion deem appropriate.

 

  (v) The holder of a Stand-alone Right shall have no stockholder rights with
respect to the shares subject to the Stand-alone Right unless and until such
person shall have exercised the Stand-alone Right and become a holder of record
of the shares of Common Stock issued upon the exercise of such Stand-alone
Right.

 

  E. Post-Service Exercise. The provisions governing the exercise of Tandem, and
Stand-alone Stock Appreciation Rights following the cessation of the recipient’s
Service shall be substantially the same as those set forth in Section I.C of
this Article Two for the options granted under the Discretionary Grant Program.

 

  F. Net Counting. Upon the exercise of any Tandem or Stand-alone Right under
this Section III, the share reserve under Section V of Article One shall be
reduced by the net number of shares actually issued by the Corporation upon such
exercise and not by the gross number of shares as to which such right is
exercised.

 

IV. CHANGE IN CONTROL

 

  A. Except as otherwise set forth in the applicable Award agreement, the
following provisions shall be in effect in the event of a Change in Control
transaction:

 

  (i)

In the event of a Change in Control, each option or stock appreciation right
outstanding under the Discretionary Grant Program on the effective date of the
Change in Control may, as determined by the Plan Administrator in its sole
discretion, be (i) assumed by the successor corporation (or parent thereof) or
otherwise continued in full force and effect pursuant to the terms of the Change
in Control transaction, or (ii) replaced with a cash incentive program of the
successor corporation which preserves the spread existing at the time of the
Change in Control on any shares as to which the option or stock appreciation
right is not otherwise at that time exercisable and provides for subsequent
payout of that spread in accordance with the same exercise/vesting schedule
applicable to those shares, but only if such replacement cash program would not
result in the treatment of the option or stock appreciation right as an item of
deferred compensation subject to Code Section 409A. However, to the extent that
the Plan Administrator determines in its sole discretion that any option or
stock appreciation right outstanding

 

12

--------------------------------------------------------------------------------

  under the Discretionary Grant Program on the effective date of such Change in
Control transaction is not to be so assumed, continued or replaced, that option
or stock appreciation right shall automatically accelerate so that each such
option or stock appreciation right shall, immediately prior to the effective
date of that Change in Control, become exercisable as to all the shares of
Common Stock at the time subject to such option or stock appreciation right and
may be exercised as to any or all of those shares as fully vested shares of
Common Stock.

 

  (ii) To the extent the Plan Administrator determines, in its sole discretion,
that any option or stock appreciation right outstanding under the Discretionary
Grant Program on the date of a Change in Control is not to be assumed by the
successor corporation (or parent thereof) or otherwise continued in full force
and effect or replaced with a cash incentive program in accordance with Section
IV.A.1. of this Article Two, the holder of any such option or stock appreciation
right shall be entitled to receive, upon consummation of the Change in Control,
a lump sum cash payment in an amount equal to the spread, if any, existing on
the shares of Common Stock subject to the option or stock appreciation right at
the time of the Change in Control over the aggregate exercise or base price in
effect for such option or stock appreciation right. The Plan Administrator shall
have the authority to determine, in its sole discretion, that any option or
stock appreciation right outstanding under the Discretionary Grant Program on
the date of such Change in Control that is not to be assumed by the successor
corporation (or parent thereof) or otherwise continued in full force and effect
or replaced with a cash incentive program in accordance with Section IV.A.1. of
this Article Two shall be subject to cancellation and termination, without cash
payment or other consideration due the award holder, if the Fair Market Value
per share of Common Stock on the date of such Change in Control is less than the
per share exercise or base price in effect for such option or stock appreciation
right.

 

  (iii) All outstanding repurchase rights under the Discretionary Grant Program
shall automatically terminate, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of a Change in
Control, except to the extent: (i) the Plan Administrator determines in its sole
discretion that those repurchase rights are to be assigned to the successor
corporation (or parent thereof) or are otherwise to continue in full force and
effect pursuant to the terms of the Change in Control transaction or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.

 

  (iv)

Each option or stock appreciation right which is assumed in connection with a
Change in Control or otherwise continued in effect shall be appropriately
adjusted, immediately after such Change in Control, to apply to the number and
class of securities which would have been issuable to the Optionee in
consummation of such Change in Control had those shares actually been

 

13

--------------------------------------------------------------------------------

  outstanding at the time. Appropriate adjustments to reflect such Change in
Control shall also be made to (i) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same, (ii) the maximum number and/or class of
securities available for issuance over the remaining term of the Plan, (iii) the
maximum number and/or class of securities for which any one person may be
granted Awards under the Plan per calendar year, (iv) the maximum number and/or
class of securities for which Incentive Options may be granted under the Plan,
and (v) the number and/or class of securities subject to the Corporation’s
outstanding repurchase rights under the Plan and the repurchase price payable
per share. To the extent the actual holders of the Corporation’s outstanding
Common Stock receive cash consideration for their Common Stock in consummation
of the Change in Control, the Plan Administrator may, in its sole discretion,
provide in the document evidencing the Change in Control transaction that the
successor corporation, in connection with the assumption or continuation of the
outstanding options or stock appreciation rights under the Discretionary Grant
Program, shall substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Change in Control transaction.

 

  B. Immediately following the consummation of the Change in Control, all
outstanding options or stock appreciation rights under the Discretionary Grant
Program shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof) or otherwise continued
in full force and effect pursuant to the terms of the Change in Control
transaction.

 

  C. The Plan Administrator shall have the discretionary authority to structure
one or more outstanding options or stock appreciation rights under the
Discretionary Grant Program so that those options or stock appreciation rights
shall, immediately prior to the effective date of a Change in Control, become
exercisable as to all the shares of Common Stock at the time subject to those
options or stock appreciation rights and may be exercised as to any or all of
those shares as fully vested shares of Common Stock, whether or not those
options or stock appreciation rights are to be assumed in the Change in Control
transaction or otherwise continued in effect. In addition, the Plan
Administrator shall have the discretionary authority to structure one or more of
the Corporation’s repurchase rights under the Discretionary Grant Program so
that those rights shall immediately terminate upon the consummation of the
Change in Control transaction, and the shares subject to those terminated rights
shall thereupon vest in full.

 

  D.

The Plan Administrator shall have full power and authority to structure one or
more outstanding options or stock appreciation rights under the Discretionary
Grant Program so that those options or stock appreciation rights shall become
exercisable as to all the shares of Common Stock at the time subject to those
options or stock appreciation rights in the event the Optionee’s Service is
subsequently terminated by reason of an Involuntary Termination within a
designated period following the effective date of any Change in Control
transaction in which those options or stock

 

14

--------------------------------------------------------------------------------

  appreciation rights do not otherwise fully accelerate. In addition, the Plan
Administrator may structure one or more of the Corporation’s repurchase rights
so that those rights shall immediately terminate with respect to any shares held
by the Optionee at the time of such Involuntary Termination, and the shares
subject to those terminated repurchase rights shall accordingly vest in full at
that time.

 

  E. The portion of any Incentive Option accelerated in connection with a Change
in Control shall remain exercisable as an Incentive Option only to the extent
the applicable One Hundred Thousand Dollar ($100,000) limitation is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under the
Federal tax laws.

 

ARTICLE THREE: STOCK ISSUANCE PROGRAM

 

I. STOCK ISSUANCE TERMS

Shares of Common Stock may be issued under the Stock Issuance Program, either as
vested or unvested shares, through direct and immediate issuances without any
intervening option grants. Each such stock issuance shall be evidenced by a
Stock Issuance Agreement which complies with the terms specified below. Shares
of Common Stock may also be issued under the Stock Issuance Program pursuant to
share right awards, restricted stock units or performance shares which entitle
the recipients to receive the shares underlying those Awards upon the attainment
of designated performance goals or the satisfaction of specified Service
requirements or upon the expiration of a designated time period following the
vesting of those awards or units.

 

  A. Consideration. Shares of Common Stock may be issued under the Stock
Issuance Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:

 

  (i) cash or check made payable to the Corporation,

 

  (ii) past services rendered to the Corporation (or any Parent or Subsidiary);
or

 

  (iii) any other valid consideration under the Delaware General Corporation
Law.

 

  B. Transferability. Awards under the Stock Issuance Program shall be
transferable by will and by the laws of descent and distribution, and during the
lifetime of the recipient, such Awards shall be transferable, by gift or
pursuant to a domestic relations order, to a Family Member to the extent and in
the manner determined by the Plan Administrator and set forth in the applicable
agreement evidencing the Award. Notwithstanding the foregoing, the recipient of
an Award under the Stock Issuance Program may designate a beneficiary of the
recipient’s Award in the event of the recipient’s death on a beneficiary
designation form provided by the Plan Administrator.

 

15

--------------------------------------------------------------------------------

  C. Vesting Provisions.

 

  (i) Shares of Common Stock issued under the Stock Issuance Program may, in the
discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in one or more installments over the Participant’s period
of Service or upon the attainment of specified performance objectives. The
elements of the vesting schedule applicable to any unvested shares of Common
Stock issued under the Stock Issuance Program shall be determined by the Plan
Administrator and incorporated into the Stock Issuance Agreement. Shares of
Common Stock may also be issued under the Stock Issuance Program pursuant to
restricted stock units or performance shares which entitle the recipients to
receive the shares underlying those Awards upon the attainment of designated
performance goals or the satisfaction of specified Service requirements or upon
the expiration of a designated time period following the vesting of those
Awards, including (without limitation) a deferred distribution date following
the termination of the Participant’s Service.

 

  (ii) The Plan Administrator shall also have the discretionary authority,
consistent with Code Section 162(m), to structure one or more Awards under the
Stock Issuance Program so that the shares of Common Stock subject to those
Awards shall vest (or vest and become issuable) upon the achievement of certain
pre-established corporate performance objectives based on one or more
Performance Goals and measured over the performance period (not to exceed five
(5) years) specified by the Plan Administrator at the time of the Award.

 

  (iii) Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant’s
unvested shares of Common Stock by reason of any transaction described in
Section V.G of Article One shall be issued subject to (i) the same vesting
requirements applicable to the Participant’s unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

 

  (iv)

The Participant shall have full stockholder rights with respect to any shares of
Common Stock issued to the Participant under the Stock Issuance Program, whether
or not the Participant’s interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares, subject to any applicable vesting
requirements, including (without limitation) the requirement that any dividends
paid on shares subject to performance-vesting conditions shall be held in escrow
by the Corporation and shall not vest or actually be paid to the Award holder
prior to the time those shares vest. The Participant shall not have any
stockholder rights with respect to the shares of Common Stock subject to a
restricted stock unit or share right award until that award vests and the shares
of Common Stock are actually issued thereunder. However, dividend-equivalent
units may be paid or

 

16

--------------------------------------------------------------------------------

  credited, either in cash or in actual or phantom shares of Common Stock, on
outstanding restricted stock unit or share right awards, subject to such terms
and conditions as the Plan Administrator may deem appropriate; provided,
however, that no such dividend-equivalent units relating to restricted stock
unit or share right awards subject to performance-vesting conditions shall vest
or otherwise become payable prior to the time the underlying award (or portion
thereof to which such dividend-equivalents units relate) vests upon the
attainment of the applicable performance goals and shall accordingly be subject
to cancellation and forfeiture to the same extent as the underlying award.

 

  (v) Should the Participant cease to remain in Service while holding one or
more unvested shares of Common Stock issued under the Stock Issuance Program or
should the performance objectives not be attained with respect to one or more
such unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further stockholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for consideration
paid in cash or cash equivalent, the Corporation shall repay to the Participant
the lower of (i) the cash consideration paid for the surrendered shares or (ii)
the Fair Market Value of those shares at the time of cancellation.

 

  (vi) The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested shares of Common Stock which would
otherwise occur upon the cessation of the Participant’s Service or the
non-attainment of the performance objectives applicable to those shares. Any
such waiver shall result in the immediate vesting of the Participant’s interest
in the shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant’s cessation of
Service or the attainment or non-attainment of the applicable performance
objectives. However, no vesting requirements tied to the attainment of
Performance Goals may be waived with respect to Awards which were intended at
the time of grant to qualify as performance-based compensation under Code
Section 162(m).

 

  (vii) Outstanding Awards of restricted stock units or performance shares under
the Stock Issuance Program shall automatically terminate, and no shares of
Common Stock shall actually be issued in satisfaction of those Awards, if the
performance goals or Service requirements established for such Awards are not
attained or satisfied. The Plan Administrator, however, shall have the
discretionary authority to issue vested shares of Common Stock under one or more
outstanding Awards of restricted stock units or performance shares as to which
the designated performance goals or Service requirements have not been attained
or satisfied. However, no vesting requirements tied to the attainment of
Performance Goals may be waived with respect to Awards which were intended, at
the time those Awards were made, to qualify as performance-based compensation
under Code Section 162(m).

 

17

--------------------------------------------------------------------------------

  (viii) The following additional requirements shall be in effect for any
performance shares awarded under this Article Three:

 

  (a) At the end of the performance period, the Plan Administrator shall
determine the actual level of attainment for each performance objective and the
extent to which the performance shares awarded for that period are to vest and
become payable based on the attained performance levels.

 

  (b) The performance shares which so vest shall be paid as soon as practicable
following the end of the performance period, unless such payment is to be
deferred for the period specified by the Plan Administrator at the time the
performance shares are awarded or the period selected by the Participant in
accordance with the applicable requirements of Code Section 409A.

 

  (c) Performance shares may be paid in (i) cash, (ii) shares of Common Stock or
(iii) any combination of cash and shares of Common Stock, as set forth in the
applicable Award agreement.

 

  (d) Performance shares may also be structured so that the shares are
convertible into shares of Common Stock, but the rate at which each performance
share is to so convert shall be based on the attained level of performance for
each applicable performance objective.

 

II. CHANGE IN CONTROL

 

  A. Except as otherwise set forth in the applicable Award agreement, the
following provisions shall be in effect in the event of a Change in Control
transaction:

 

  (i) Each Award outstanding under the Stock Issuance Program on the effective
date of an actual Change in Control transaction may, as determined by the Plan
Administrator in its sole discretion, be (i) assumed by the successor
corporation (or parent thereof) or otherwise continued in full force and effect
pursuant to the terms of the Change in Control transaction, or (ii) replaced
with a cash incentive program of the successor corporation which preserves the
Fair Market Value of the underlying shares of Common Stock at the time of the
Change in Control and provides for the subsequent vesting and payment of that
value in accordance with the same vesting schedule in effect for those shares at
the time of such Change in Control. However, to the extent that the Plan
Administrator determines in its sole discretion that any Award outstanding under
the Stock Issuance Program on the effective date of such Change in Control
Transaction is not to be so assumed, continued or replaced, that Award shall
vest in full immediately prior to the effective date of the actual Change in
Control transaction and the shares of Common Stock underlying the portion of the
Award that vests on such accelerated basis shall be issued in accordance with
the applicable Award agreement, unless such accelerated vesting is precluded by
other limitations imposed in the Stock Issuance Agreement.

 

18

--------------------------------------------------------------------------------

  (ii) Each outstanding Award under the Stock Issuance Program which is assumed
in connection with a Change in Control or otherwise continued in effect shall be
adjusted immediately after the consummation of that Change in Control so as to
apply to the number and class of securities into which the shares of Common
Stock subject to that Award immediately prior to the Change in Control would
have been converted in consummation of such Change in Control had those shares
actually been outstanding at that time, and appropriate adjustments shall also
be made to the cash consideration (if any) payable per share thereunder,
provided the aggregate amount of such cash consideration shall remain the same.
To the extent the actual holders of the Corporation’s outstanding Common Stock
receive cash consideration for their Common Stock in consummation of the Change
in Control, the Plan Administrator may, in its sole discretion, provide in the
document evidencing the Change in Control transaction that the successor
corporation, in connection with the assumption or continuation of the
outstanding Awards, shall substitute one or more shares of its own common stock
with a fair market value equivalent to the cash consideration paid per share of
Common Stock in such Change in Control transaction.

 

  B. The Plan Administrator shall have the discretionary authority to structure
one or more unvested Awards under the Stock Issuance Program so that the shares
of Common Stock subject to those Awards shall automatically vest (or vest and
become issuable) in whole or in part immediately upon the occurrence of a Change
in Control or upon the subsequent termination of the Participant’s Service by
reason of an Involuntary Termination within a designated period following the
effective date of that Change in Control transaction. The Plan Administrator’s
authority under this Section II.B shall also extend to any Awards under the
Stock Issuance Program which are intended to qualify as performance-based
compensation under Code Section 162(m), even though the actual vesting of those
Awards pursuant to this Section II.B may result in their loss of
performance-based status under Code Section 162(m).

 

III. SHARE ESCROW/LEGENDS

Unvested shares may, in the Plan Administrator’s discretion, be held in escrow
by the Corporation until the Participant’s interest in such shares vests or may
be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.

ARTICLE FOUR: INCENTIVE BONUS PROGRAM

 

I. INCENTIVE BONUS TERMS

 

  A. Incentive Bonus Programs. The Plan Administrator shall have full power and
authority to implement one or more of the following incentive bonus programs
under the Plan:

 

  (i) cash bonus awards (“Cash Awards”),

 

  (ii) performance unit awards (“Performance Unit Awards”), and

 

  (iii) dividend equivalent rights (“DER Awards”)

 

19

--------------------------------------------------------------------------------

  B. Cash Awards. The Plan Administrator shall have the discretionary authority
under the Plan to make Cash Awards which are to vest in one or more installments
over the Participant’s continued Service with the Corporation or upon the
attainment of specified performance objectives. Each such Cash Award shall be
evidenced by one or more documents in the form approved by the Plan
Administrator; provided however, that each such document shall comply with the
terms specified below.

 

  (i) The elements of the vesting schedule applicable to each Cash Award shall
be determined by the Plan Administrator and incorporated into the Incentive
Bonus Award agreement.

 

  (ii) The Plan Administrator shall also have the discretionary authority,
consistent with Code Section 162(m), to structure one or more Cash Awards so
that those Awards shall vest upon the achievement of pre-established corporate
performance objectives based upon one or more Performance Goals measured over
the performance period (not to exceed five (5) years) specified by the Plan
Administrator at the time of the Award.

 

  (iii) Outstanding Cash Awards shall automatically terminate, and no cash
payment or other consideration shall be due the holders of those Awards, if the
performance objectives or Service requirements established for those Awards are
not attained or satisfied. The Plan Administrator may in its discretion waive
the cancellation and termination of one or more unvested Cash Awards which would
otherwise occur upon the cessation of the Participant’s Service or the
non-attainment of the performance objectives applicable to those Awards. Any
such waiver shall result in the immediate vesting of the Participant’s interest
in the Cash Award as to which the waiver applies. Such wavier may be effected at
any time, whether before or after the Participant’s cessation of Service or the
attainment or non-attainment of the applicable performance objectives. However,
no vesting requirements tied to the attainment of Performance Goals may be
waived with respect to Awards which were intended, at the time those Awards were
made, to qualify as performance-based compensation under Code Section 162(m),
except in the event of the Participant’s cessation of Service by reason of death
or Permanent Disability or as otherwise provided in Section II of this Article
Four.

 

  (iv) Cash Awards which become due and payable following the attainment of the
applicable performance objectives or satisfaction of the applicable Service
requirement (or the waiver of such goals or Service requirement) may be paid in
(i) cash, (ii) shares of Common Stock valued at Fair Market Value on the payment
date or (iii) a combination of cash and shares of Common Stock as set forth in
the applicable Award agreement.

 

20

--------------------------------------------------------------------------------

  C. Performance Unit Awards. The Plan Administrator shall have the
discretionary authority to make Performance Unit Awards in accordance with the
terms of this Article Four. Each such Performance Unit Award shall be evidenced
by one or more documents in the form approved by the Plan Administrator;
provided however, that each such document shall comply with the terms specified
below.

 

  (i) A Performance Unit shall represent either (i) a unit with a dollar value
tied to the level at which pre-established corporate performance objectives
based on one or more Performance Goals are attained or (ii) a participating
interest in a special bonus pool tied to the attainment of pre-established
corporate performance objectives based on one or more Performance Goals. The
amount of the bonus pool may vary with the level at which the applicable
performance objectives are attained, and the value of each Performance Unit
which becomes due and payable upon the attained level of performance shall be
determined by dividing the amount of the resulting bonus pool (if any) by the
total number of Performance Units issued and outstanding at the completion of
the applicable performance period.

 

  (ii) Performance Units may also be structured to include a Service requirement
which the Participant must satisfy following the completion of the performance
period in order to vest in the Performance Units awarded with respect to that
performance period.

 

  (iii) Performance Units which become due and payable following the attainment
of the applicable performance objectives and the satisfaction of any applicable
Service requirement may be paid in (i) cash, (ii) shares of Common Stock valued
at Fair Market Value on the payment date or (iii) a combination of cash and
shares of Common Stock, as set forth in the applicable Award agreement.

 

  D. DER Awards. The Plan Administrator shall have the discretionary authority
to make DER Awards in accordance with the terms of this Article Four. Each such
DER Award shall be evidenced by one or more documents in the form approved by
the Plan Administrator; provided however, that each such document shall comply
with the terms specified below.

 

  (i) The DER Awards may be made as stand-alone awards or in tandem with other
Awards made under the Plan. The term of each such DER Award shall be established
by the Plan Administrator at the time of grant, but no DER Award shall have a
term in excess of ten (10) years.

 

  (ii) Each DER shall represent the right to receive the economic equivalent of
each dividend or distribution, whether in cash, securities or other property
(other than shares of Common Stock), which is made per issued and outstanding
share of Common Stock during the term the DER remains outstanding. A special
account on the books of the Corporation shall be maintained for each Participant
to whom a DER Award is made, and that account shall be credited per DER with
each such dividend or distribution made per issued and outstanding share of
Common Stock during the term of that DER remains outstanding.

 

21

--------------------------------------------------------------------------------

  (iii) Payment of the amounts credited to such book account may be made to the
Participant either concurrently with the actual dividend or distribution made
per issued and outstanding share of Common Stock or may be deferred for a period
specified by the Plan Administrator at the time the DER Award is made or
selected by the Participant in accordance with the requirements of Code Section
409A. In no event, however, shall any DER Award made with respect to an Award
subject to performance-vesting conditions under the Stock Issuance or Incentive
Bonus Program vest or become payable prior to the vesting of that Award (or the
portion thereof to which the DER Award relates) upon the attainment of the
applicable performance goals and shall accordingly be subject to cancellation
and forfeiture to the same extent as the underlying Award in the event those
performance conditions are not attained.

 

  (iv) Payment may be paid in (i) cash, (ii) shares of Common Stock or (iii) a
combination of cash and shares of Common Stock, as set forth in the applicable
Award agreement. If payment is to be made in the form of Common Stock, the
number of shares of Common Stock into which the cash dividend or distribution
amounts are to be converted for purposes of the Participant’s book account may
be based on the Fair Market Value per share of Common Stock on the date of
conversion, a prior date or an average of the Fair Market Value per share of
Common Stock over a designated period, as set forth in the applicable Award
agreement.

 

  (v) The Plan Administrator shall also have the discretionary authority,
consistent with Code Section 162(m), to structure one or more DER Awards so that
those Awards shall vest only after the achievement of pre-established corporate
performance objectives based upon one or more Performance Goals measured over
the performance period (not to exceed five (5) years) specified by the Plan
Administrator at the time the Award is made.

 

II. CHANGE IN CONTROL

 

  A. The Plan Administrator shall have the discretionary authority to structure
one or more Awards under the Incentive Bonus Program so that those Awards shall
automatically vest in whole or in part immediately prior to the effective date
of an actual Change in Control transaction or upon the subsequent termination of
the Participant’s Service by reason of an Involuntary Termination within a
designated period following the effective date of such Change in Control. To the
extent any such Award is, at the time of such Change in Control, subject to a
performance-vesting condition tied to the attainment of one or more specified
performance goals, then that performance vesting condition shall automatically
be cancelled on the effective date of such Change in Control, and such Award
shall thereupon be converted into a Service-vesting Award that will vest upon
the completion of a Service period co-terminous with the portion of the
performance period (and any subsequent Service vesting component that was
originally part of that Award) remaining at the time of the Change in Control.

 

  B.

The Plan Administrator’s authority under Section II.A above shall also extend to
any Award under the Incentive Bonus Program intended to qualify as
performance-based

 

22

--------------------------------------------------------------------------------

  compensation under Code Section 162(m), even though the automatic vesting of
that Award may result in the loss of performance-based status under Code Section
162(m).

ARTICLE FIVE: MISCELLANEOUS

 

I. DEFERRED COMPENSATION

 

  A. The Plan Administrator may, in its sole discretion, structure one or more
awards under the Stock Issuance Program so that the Participants may be provided
with an election to defer the compensation associated with those awards for
federal income tax purposes. Any such deferral opportunity shall comply with all
applicable requirements of Code Section 409A.

 

  B. To the extent the Corporation maintains one or more separate non-qualified
deferred compensation arrangements which allow the participants the opportunity
to make notional investments of their deferred account balances in shares of
Common Stock, the Plan Administrator may authorize the share reserve under the
Plan to serve as the source of any shares of Common Stock that become payable
under those deferred compensation arrangements. In such event, the share reserve
under the Plan shall be reduced on a share-for-share basis for each share of
Common Stock issued under the Plan in settlement of the deferred compensation
owed under those separate arrangements.

 

  C. To the extent there is any ambiguity as to whether any provision of any
award made under the Plan that is deemed to constitute a deferred compensation
arrangement under Code Section 409A would otherwise contravene one or more
requirements or limitations of such Code Section 409A and the Treasury
Regulations thereunder, such provision shall be interpreted and applied in a
manner that complies with the applicable requirements of Code Section 409A and
the Treasury Regulations thereunder.

 

II. TAX WITHHOLDING

 

  A. The Corporation’s obligation to deliver shares of Common Stock upon the
issuance, exercise or vesting of an Award under the Plan shall be subject to the
satisfaction of all applicable income and employment tax withholding
requirements.

 

23

--------------------------------------------------------------------------------

  B. The Plan Administrator may, in its discretion, provide any or all holders
of Non-Statutory Options, stock appreciation rights, restricted stock units or
any other share right awards pursuant to which vested shares of Common Stock are
to be issued under the Plan and any or all Participants to whom vested or
unvested shares of Common Stock are issued in a direct issuance under the Stock
Issuance Program with the right to use shares of Common Stock in satisfaction of
all or part of the Withholding Taxes to which such holders may become subject in
connection with the exercise of their options or stock appreciation rights, the
issuance to them of vested shares or the subsequent vesting of unvested shares
issued to them. Such right may be provided to any such holder in either or both
of the following formats:

 

  (i) Stock Withholding: The election to have the Corporation withhold, from the
shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or stock appreciation right or upon the issuance of
fully-vested shares, a portion of those shares with an aggregate Fair Market
Value equal to the percentage of the Withholding Taxes (not to exceed one
hundred percent (100%), provided that such withholding amount may not exceed the
maximum applicable Withholding Tax rate for federal (including FICA), state and
local tax liabilities or such other amount required to avoid adverse accounting
consequences to the Corporation, as determined by the Plan Administrator in its
discretion). The shares of Common Stock so withheld shall reduce the number of
shares of Common Stock authorized for issuance under the Plan.

 

  (ii) Stock Delivery: The election to deliver to the Corporation, at the time
the Non-Statutory Option or stock appreciation right is exercised, the vested
shares are issued or the unvested shares subsequently vest, one or more shares
of Common Stock previously acquired by such holder (other than in connection
with the exercise, share issuance or share vesting triggering the Withholding
Taxes) with an aggregate Fair Market Value equal to the percentage of the
Withholding Taxes (not to exceed one hundred percent (100%)) designated by the
holder. The shares of Common Stock so delivered shall neither reduce the number
of shares of Common Stock authorized for issuance under the Plan nor be added to
the shares of Common Stock authorized for issuance under the Plan

 

III. ASSUMPTION OR SUBSTITUTION OF OPTIONS

 

  A. The shares of Common Stock reserved for issuance under the Plan may, in the
sole discretion of the Plan Administrator, be used to fund one or more shares of
Common Stock issuable upon the exercise of (i) any Code Section 422 incentive
stock option originally granted by a corporation or other entity acquired by the
Corporation (or any Parent or Subsidiary), whether by merger or asset or stock
sale, and assumed by the Corporation in connection with that acquisition or (ii)
any Incentive Option granted under this Plan in substitution for such incentive
stock option of the acquired entity. Any such assumption or substitution of
options shall not be deemed to contravene the option exercise price requirements
of Section I.A of Article Two, even if the exercise price per share of Common
Stock under the assumed or substituted option is less than one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the date such
assumption or substitution is effected, provided all of the following
requirements are satisfied:

 

  (i) The excess of the aggregate Fair Market Value of the shares of Common
Stock subject to the assumed or substituted option immediately after the
assumption or substitution over the aggregate exercise price in effect for those
shares is not greater than the excess of the aggregate fair market value of the
shares of stock subject to the option immediately prior to such assumption or
substitution over the aggregate exercise price payable for those shares.

 

24

--------------------------------------------------------------------------------

  (ii) The ratio of the exercise price to the Fair Market Value per share of
Common Stock subject to the assumed or substituted option immediately after such
assumption or substitution is no more favorable to the Optionee than the ratio
of the exercise price to the fair market value per share immediately prior to
such assumption or substitution.

 

  (iii) The assumed or substituted option does not provide the Optionee with any
additional benefits the Optionee did not otherwise have under the option
immediately prior to the assumption or substitution.

 

  (iv) In the case of a substitution, the option granted by the acquired entity
must be cancelled at the time of such substitution, and the Optionee must have
no further rights under that cancelled option.

 

IV. SHARE ESCROW/LEGENDS

Unvested shares may, in the Plan Administrator’s discretion, be held in escrow
by the Corporation until the Participant’s interest in such shares vests or may
be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.

 

V. EFFECTIVE DATE AND TERM OF THE PLAN

 

  A. The Plan became effective on the Plan Effective Date, and was approved by
the Corporation’s stockholders on May 3, 2016.

 

  B. The Plan shall terminate upon the earliest to occur of (i) May 2, 2026,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as fully vested shares or (iii) the termination of all
outstanding Awards in connection with a Change in Control. Should the Plan
terminate on May 2, 2026, then all Awards outstanding at that time shall
continue to have force and effect in accordance with the provisions of the
documents evidencing those Awards.

 

VI. AMENDMENT OF THE PLAN

 

  A. The Board shall have complete and exclusive power and authority to amend or
modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
Awards at the time outstanding under the Plan unless the Optionee or the
Participant consents to such amendment or modification. In addition, amendments
to the Plan will be subject to stockholder approval to the extent required under
applicable law or regulation or pursuant to the listing standards of the Stock
Exchange on which the Common Stock is at the time primarily traded, and no
amendment that would reduce or limit the scope of the prohibition on repricing
programs set forth in Section VI of Article Two or otherwise eliminated such
prohibition shall be effective unless approved by the stockholders.

 

  B.

The Committee shall have the discretionary authority to adopt and implement from
time to time such addenda or subplans to the Plan as it may deem necessary in
order to bring the Plan into compliance with applicable laws and regulations of
any foreign

 

25

--------------------------------------------------------------------------------

  jurisdictions in which grants or awards are to be made under the Plan and/or
to obtain favorable tax treatment in those foreign jurisdictions for the
individuals to whom the grants or awards are made.

 

  C. Awards may be made under the Plan that involve shares of Common Stock in
excess of the number of shares then available for issuance under the Plan,
provided no shares shall actually be issued pursuant to those Awards until the
number of shares of Common Stock available for issuance under the Plan is
sufficiently increased by stockholder approval of an amendment of the Plan
authorizing such increase. If stockholder approval is required and is not
obtained within twelve (12) months after the date the first excess Award is
made, then all Awards granted on the basis of such excess shares shall terminate
and cease to be outstanding.

 

  D. The provisions of the Plan and the outstanding Awards under the Plan shall,
in the event of any ambiguity, be construed, applied and interpreted in a manner
so as to ensure that all Awards and Award agreements provided to Optionees or
Participants who are subject to U.S. income taxation either qualify for an
exemption from the requirements of Section 409A of the Code or comply with those
requirements; provided, however, that the Corporation shall not make any
representations that any Awards made under the Plan will in fact be exempt from
the requirements of Section 409A of the Code or otherwise comply with those
requirements, and each Optionee and Participant shall accordingly be solely
responsible for any taxes, penalties or other amounts which may become payable
with respect to his or her Awards by reason of Section 409A of the Code.

 

VII. USE OF PROCEEDS

Any cash proceeds received by the Corporation from the sale of shares of Common
Stock under the Plan shall be used for general corporate purposes.

 

VIII. REGULATORY APPROVALS

 

  A. The implementation of the Plan, the grant of any Award and the issuance of
shares of Common Stock in connection with the issuance, exercise or vesting of
any Award made under the Plan shall be subject to the Corporation’s procurement
of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the Awards made under the Plan and the shares of
Common Stock issuable pursuant to those Awards.

 

  B. No shares of Common Stock or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of applicable securities laws.

 

IX. NO EMPLOYMENT/SERVICE RIGHTS

Nothing in the Plan shall confer upon the Optionee or the Participant any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person’s Service at any time for any reason, with or without cause.

 

26

--------------------------------------------------------------------------------

X. RECOUPMENT

Optionees and Participants shall be subject to any clawback, recoupment or other
similar policy adopted by the Board as in effect from time to time, and Awards
and any cash, shares of Common Stock or other property or amounts due, paid or
issued to the holder of an Award shall be subject to the terms of such policy,
as in effect from time to time.

 

27

--------------------------------------------------------------------------------

APPENDIX

The following definitions shall be in effect under the Plan:

 

A. Award shall mean any of the following awards authorized for issuance or grant
under the Plan: stock options, stock appreciation rights, direct stock
issuances, restricted stock or restricted stock unit awards, performance shares,
performance units, dividend-equivalent rights and cash incentive awards.

 

B. Board shall mean the Corporation’s Board of Directors.

 

C. Change in Control shall have the meaning assigned to such term in the Award
agreement for the particular Award or in any other agreement incorporated by
reference into the Award agreement for purposes of defining such term, and in
the absence of such a Change in Control definition shall mean a change in
ownership or control of the Corporation effected through any of the following
transactions:

 

  (i) the closing of a merger, consolidation or other reorganization approved by
the Corporation’s stockholders, unless securities representing more than fifty
percent (50%) of the total combined voting power of the voting securities of the
successor corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Corporation’s outstanding voting securities immediately
prior to such transaction;

 

  (ii) the closing of a stockholder-approved sale, transfer or other disposition
(including in whole or in part through one or more licensing arrangements) of
all or substantially all of the Corporation’s assets; or

 

  (iii) a change in the composition of the Board over a period of thirty-six
(36) consecutive months or less such that a majority of the Board members
ceases, by reason of one or more contested elections for Board membership, to be
comprised of individuals who either (A) have been Board members continuously
since the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of the Board
members described in clause (A) who were still in office at the time the Board
approved such election or nomination.

Unless otherwise determined by the Board, in no event shall (i) any public
offering of the Company’s securities (whether directly or via a reverse merger
with a public shell company) be deemed to constitute a Change in Control, (ii) a
Change in Control be deemed to have occurred for purposes of the Plan as a
result of a majority of the Board being designated by Capital Royalty Partners
II, L.P. and/or its affiliates or Capital Royalty Partners II, L.P. and/or its
affiliates acquiring, directly or indirectly, beneficial ownership of securities
(or interests convertible into or exercisable for securities) of the Corporation
as a result of one or more equity financing transactions, (iii) a change in the
Stock Exchange in which the Common Stock is listed or (iv) the merger of
Valeritas, Inc. with and into a subsidiary of the Corporation, in each case, be
deemed to constitute a Change in Control.

 

D. Code shall mean the Internal Revenue Code of 1986, as amended.

 

E. Common Stock shall mean the Corporation’s common stock.

 

F. Corporation shall mean Valeritas Holdings, Inc., a Delaware corporation, and
any corporate successor to all or substantially all of the assets or voting
stock of Valeritas Holdings, Inc. which has by appropriate action assumed the
Plan.

--------------------------------------------------------------------------------

G. Discretionary Grant Program shall mean the discretionary grant program in
effect under Article Two of the Plan pursuant to which stock options and stock
appreciation rights may be granted to one or more eligible individuals.

 

H. Employee shall mean an individual who is in the employ of the Corporation (or
any Parent or Subsidiary, whether now existing or subsequently established),
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance.

 

I. Exercise Date shall mean the date on which the Corporation shall have
received written notice of the option exercise.

 

J. Fair Market Value per Common Share on any relevant date shall be determined
in accordance with the following provisions:

 

  (i) If the Common Stock is at the time listed on any Stock Exchange, then the
Fair Market Value per share of Common Stock on any relevant date shall be the
closing selling price per share of Common Stock at the close of regular trading
hours (i.e., before after-hours trading begins) on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary market for
the Common Stock, as such price is reported by the National Association of
Securities Dealers (if primarily traded on the Nasdaq Global or Global Select
Market) or as officially quoted in the composite tape of transactions on any
other Stock Exchange on which the Corporation’s common stock is then primarily
traded. If there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.

 

  (ii) If the Common Stock is not at the time listed on any Stock Exchange, then
the Fair Market Value shall be determined by the Plan Administrator through the
reasonable application of a reasonable valuation method that takes into account
the applicable valuation factors set forth in the Treasury Regulations issued
under Section 409A of the Code; provided, however, that with respect to an
Incentive Option, such Fair Market Value shall be determined in accordance with
the standards of Section 422 of the Code and the applicable Treasury Regulations
thereunder.

 

K. Family Member means, with respect to a particular Optionee or Participant,
any child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law.

 

L. Full Value Award means any of the following Awards made under the Stock
Issuance or Incentive Bonus Programs that are settled in shares of Common Stock:
restricted stock awards (unless issued for cash consideration equal to the Fair
Market Value of the shares of Common Stock on the award date), restricted stock
unit awards, performance shares, performance units, cash incentive awards and
any other Awards under the Plan other than (i) stock options and stock
appreciation rights issued under the Discretionary Grant Program and (ii)
dividend equivalent rights under the Incentive Bonus Program.

 

M. Incentive Bonus Program shall mean the incentive bonus program in effect
under Article Four of the Plan.

 

N. Incentive Option shall mean an option which satisfies the requirements of
Code Section 422.

--------------------------------------------------------------------------------

O. Involuntary Termination shall have the meaning assigned to such term in the
Award agreement for the particular Award or in any other agreement incorporated
by reference into the Award agreement for purposes of defining such term. In the
absence of such an Involuntary Termination definition, such term shall mean the
termination of the Service of any individual which occurs by reason of:

 

  (i) such individual’s involuntary dismissal or discharge by the Corporation
(or any Parent or Subsidiary) for reasons other than Misconduct, or

 

  (ii) such individual’s voluntary resignation following (A) a change in his or
her position with the Corporation (or any Parent or Subsidiary) which materially
reduces his or her duties and responsibilities or the level of management to
which he or she reports, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and target bonus under any
corporate-performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of such individual’s place of employment by
more than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation (or any Parent or Subsidiary) without
the individual’s consent.

 

P. Misconduct shall have the meaning assigned to such term in the Award
agreement for the particular Award or in any other agreement incorporated by
reference into the Award agreement for purposes of defining such term, and in
the absence of such, Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not in any way preclude or restrict the right of the Corporation (or any
Parent or Subsidiary) to discharge or dismiss any Optionee, Participant or other
person in the Service of the Corporation (or any Parent or Subsidiary) for any
other acts or omissions, but such other acts or omissions shall not be deemed,
for purposes of the Plan, to constitute grounds for termination for Misconduct.

 

Q. 1933 Act shall mean the Securities Act of 1933, as amended.

 

R. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.

 

S. Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.

 

T. Optionee shall mean any person to whom an option is granted under the
Discretionary Grant Program.

 

U. Parent shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation, provided each corporation in
the unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

V. Participant shall mean any person who is issued (i) shares of Common Stock,
restricted stock units, performance shares, performance units or other
stock-based awards under the Stock Issuance Program or (ii) an incentive bonus
award under the Incentive Bonus Program.

 

W.

Performance Goals shall mean any of the following performance criteria upon
which the vesting of one or more Awards under the Plan may be based: (i)
revenue, organic revenue, net sales, or new-product revenue or net sales, (ii)
achievement of specified milestones in the discovery and development of the
Corporation’s technology or of one or more of the Corporation’s products, (iii)
achievement of specified milestones in the commercialization of one or more of
the Corporation’s products, (iv) achievement of specified milestones in the
manufacturing of one or more of the Corporation’s products, (v) expense targets,
(vi) share price, (vii) total shareholder return, (viii) earnings per share,
(ix) operating margin, (x) gross margin, (xi) return measures (including, but
not limited to, return on assets, capital, equity, or sales), (xii) productivity
ratios, (xiii) operating income, (xiv) net operating profit, (xv) net earnings
or net income (before or after taxes), (xvi) cash flow (including, but not
limited to, operating cash flow,

--------------------------------------------------------------------------------

  free cash flow and cash flow return on capital), (xvii) earnings before or
after interest, taxes, depreciation, amortization and/or stock-based
compensation expense, (xviii) economic value added, (xix) market share, (xx)
working capital targets, (xxi) achievement of specified milestones relating to
corporate partnerships, collaborations, license transactions, distribution
arrangements, mergers, acquisitions, dispositions or similar business
transactions, and (xxii) employee retention and recruiting and human resources
management. In addition, such performance goals may be based upon the attainment
of specified levels of the Corporation’s performance under one or more of the
measures described above relative to the performance of other entities and may
also be based on the performance of any of the Corporation’s business units or
divisions or any Parent or Subsidiary. Performance goals may include a minimum
threshold level of performance below which no award will be earned, levels of
performance at which specified portions of an award will be earned and a maximum
level of performance at which an award will be fully earned. Each applicable
performance goal may be structured at the time of the Award to provide for
appropriate adjustments or exclusions for one or more of the following items:
(A) asset impairments or write-downs; (B) litigation or governmental
investigation expenses and any judgments, verdicts and settlements in connection
therewith; (C) the effect of changes in tax law, accounting principles or other
such laws or provisions affecting reported results; (D) accruals for
reorganization and restructuring programs; (E) any unusual or infrequently
occurring item or event; (F) items of income, gain, loss or expense attributable
to the operations of any business acquired by the Corporation or costs and
expenses incurred in connection with mergers and acquisitions; (G) items of
income, gain, loss or expense attributable to one or more business operations
divested by the Corporation or the gain or loss realized upon the sale of any
such business the assets thereof, (H) accruals for bonus or incentive
compensation costs and expenses associated with cash-based awards made under the
Plan or other bonus or incentive compensation plans of the Corporation, and (I)
the impact of foreign currency fluctuations or changes in exchange rates.

 

X. Permanent Disability or Permanently Disabled have the meaning assigned to
such term in the Award agreement for the particular Award or in any other
agreement incorporated by reference into the Award agreement for purposes of
defining such term, and in the absence of such a definition shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.

 

Y. Plan shall mean the Corporation’s 2016 Incentive Compensation Plan as set
forth in this document and as subsequently amended or restated from time to
time.

 

Z. Plan Administrator shall mean the particular entity, whether the Committee,
the Board or a subcommittee, which is authorized to administer the Discretionary
Grant, Stock Issuance and Incentive Bonus Programs with respect to one or more
classes of eligible persons, to the extent such entity is carrying out its
administrative functions under those programs with respect to the persons under
its jurisdiction.

 

AA. Plan Effective Date shall mean May 3, 2016, the date that the Plan was
adopted by the Board.

 

BB. Retirement shall have the meaning assigned to such term in the Award
agreement for the particular Award or in any other agreement incorporated by
reference into the Award agreement for purposes of defining such term. In the
absence of such a Retirement definition, such term shall mean the Award holder’s
cessation of Service after attaining age sixty (60) with at least five (5)
completed years of Service to the Corporation.

 

CC.

Service shall mean the performance of services for the Corporation (or any
Parent or Subsidiary, whether now existing or subsequently established) by a
person in the capacity of an Employee, a non-employee

--------------------------------------------------------------------------------

  member of the board of directors or a consultant or independent advisor,
except to the extent otherwise specifically provided in the documents evidencing
the option grant or stock issuance. For purposes of the Plan, an Optionee or
Participant shall be deemed to cease Service immediately upon the occurrence of
the either of the following events: (i) the Optionee or Participant no longer
performs services in any of the foregoing capacities for the Corporation or any
Parent or Subsidiary or (ii) the entity for which the Optionee or Participant is
performing such services ceases to remain a Parent or Subsidiary of the
Corporation, even though the Optionee or Participant may subsequently continue
to perform services for that entity. Service shall not be deemed to cease during
a period of military leave, sick leave or other personal leave approved by the
Corporation; provided, however, that should such leave of absence exceed three
(3) months, then for purposes of determining the period within which an
Incentive Option may be exercised as such under the federal tax laws, the
Optionee’s Service shall be deemed to cease on the first day immediately
following the expiration of such three (3)-month period, unless Optionee is
provided with the right to return to Service following such leave either by
statute or by written contract. Except to the extent otherwise required by law
or expressly authorized by the Plan Administrator or by the Corporation’s
written policy on leaves of absence, no Service credit shall be given for
vesting purposes for any period the Optionee or Participant is on a leave of
absence.

 

DD. Stock Exchange shall mean the American Stock Exchange, the Nasdaq Global or
Global Select Market or the New York Stock Exchange.

 

EE. Stock Issuance Agreement shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

 

FF. Stock Issuance Program shall mean the stock issuance program in effect under
Article Three of the Plan.

 

GG. Subsidiary shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

 

HH. 10% Stockholder shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).

 

II. Underwriting Agreement shall mean the agreement between the Corporation and
the underwriter or underwriters managing the initial public offering of the
Common Stock.

 

JJ. Underwriting Date shall mean the date on which the Underwriting Agreement is
executed and priced in connection with the initial public offering of the Common
Stock or, if earlier, the closing of a private placement of securities of the
Corporation of at least $25,000,000.

 

KK. Withholding Taxes shall mean the applicable federal and state income and
employment withholding taxes to which the holder of an Award under the Plan may
become subject in connection with the issuance, exercise, vesting or settlement
of that Award.