Exhibit 10.1

 

 

PROTAGENIC THERAPEUTICS, INC.

 

2016 EQUITY COMPENSATION PLAN

 

1.           Establishment and Purpose

 

1.1         The purpose of the Protagenic Therapeutics, Inc. 2016 Equity
Compensation Plan (the “Plan”) is to provide a means whereby eligible employees,
officers, non-employee directors and other individual service providers develop
a sense of proprietorship and personal involvement in the development and
financial success of the Company and to encourage them to devote their best
efforts to the business of the Company, thereby advancing the interests of the
Company and its stockholders. The Company, by means of the Plan, seeks to retain
the services of such eligible persons and to provide incentives for such persons
to exert maximum efforts for the success of the Company and its Subsidiaries.

 

1.2         The Plan permits the grant of Nonqualified Stock Options, Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock, Stock Units,
Performance Shares, Performance Units, Incentive Bonus Awards, Other Cash-Based
Awards and Other Stock-Based Awards. This Plan shall become effective upon the
date set forth in Section 18.1 hereof.

 

2.           Definitions

 

Wherever the following capitalized terms are used in the Plan, they shall have
the meanings specified below:

 

2.1          “Affiliate” means, with respect to a Person, a Person that directly
or indirectly Controls, or is Controlled by, or is under common Control with,
such Person.

 

2.2          “Applicable Law” means the requirements relating to the
administration of equity-based awards or equity compensation plans under U.S.
state corporate laws, U.S. federal and state securities laws, the Code, any
stock exchange or quotation system on which the Common Stock is listed or quoted
and the applicable laws of any foreign country or jurisdiction where Awards are,
or will be, granted under the Plan.

 

2.3         “Award” means an award of a Stock Option, Stock Appreciation Right,
Restricted Stock, Stock Unit, Performance Share, Performance Unit, Incentive
Bonus Award, Other Cash-Based Award and/or Other Stock-Based Award granted under
the Plan.

 

 
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2.4         “Award Agreement” means either (i) a written or electronic agreement
entered into between the Company and a Participant setting forth the terms and
conditions of an Award including any amendment or modification thereof, or (ii)
a written or electronic statement issued by the Company to a Participant
describing the terms and provisions of such Award, including any amendment or
modification thereof. The Committee may provide for the use of electronic,
internet or other non-paper Award Agreements, and the use of electronic,
internet or other non-paper means for the acceptance thereof and actions
thereunder by a Participant. Each Award Agreement shall be subject to the terms
and conditions of the Plan and need not be identical.

 

2.5          “Board” means the Board of Directors of the Company.

 

2.6         “Cause” means (i) conviction of, or the entry of a plea of guilty or
no contest to, a felony or any other crime that causes the Company or its
Affiliates public disgrace or disrepute, or materially and adversely affects the
Company’s or its Affiliates’ operations or financial performance or the
relationship the Company has with its customers, (ii) gross negligence or
willful misconduct with respect to the Company or any of its Affiliates,
including, without limitation fraud, embezzlement, theft or proven dishonesty in
the course of his or her employment; (iii) refusal to perform any lawful,
material obligation or fulfill any duty (other than any duty or obligation of
the type described in clause (v) below) to the Company or its Affiliates (other
than due to a Disability), which refusal, if curable, is not cured within 10
days after delivery of written notice thereof; (iv) material breach of any
agreement with or duty owed to the Company or any of its Affiliates, which
breach, if curable, is not cured within 10 days after the delivery of written
notice thereof; or (v) any breach of any obligation or duty to the Company or
any of its Affiliates (whether arising by statute, common law or agreement)
relating to confidentiality, noncompetition, nonsolicitation or proprietary
rights. Notwithstanding the foregoing, if a Participant and the Company (or any
of its Affiliates) have entered into an employment agreement, consulting
agreement or other similar agreement that specifically defines “cause,” then
with respect to such Participant, “Cause” shall have the meaning defined in that
employment agreement, consulting agreement or other agreement.

 

2.7         “Change in Control” means, unless otherwise provided in an Award
Agreement, the occurrence of any one of the following events:

 

(i)          any “person,” including a “group” (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act, but excluding the Company, any
entity controlling, controlled by or under common control with the Company, any
trustee, fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Company or any such entity, and, with
respect to any particular Participant, the Participant and any “group” (as such
term is used in Section 13(d)(3) of the Exchange Act) of which the Participant
is a member), is or becomes the “beneficial owner” (as defined in Rule 13(d)(3)
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of either (A) the combined voting power of the
Company’s then outstanding securities or (B) the then outstanding shares of
Common Stock (in either such case other than as a result of an acquisition of
securities directly from the Company); or

 

 
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(ii)         any consolidation or merger of the Company where the stockholders
of the Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares
representing in the aggregate 50% or more of the combined voting power of the
securities of the corporation issuing cash or securities in the consolidation or
merger (or of its ultimate parent corporation, if any); or

  

(iii)        there shall occur (A) any sale, lease, exchange or other transfer
(in one transaction or a series of transactions contemplated or arranged by any
party as a single plan) of all or substantially all of the assets of the
Company, other than a sale or disposition by the Company of all or substantially
all of the Company’s assets to an entity, at least 50% of the combined voting
power of the voting securities of which are owned by “persons” (as defined
above) in substantially the same proportion as their ownership of the Company
immediately prior to such sale or (B) the approval by stockholders of the
Company of any plan or proposal for the liquidation or dissolution of the
Company; or

 

(iv)        the members of the Board at the beginning of any consecutive
24-calendar-month period (the “Incumbent Directors”) cease for any reason other
than due to death to constitute at least a majority of the members of the Board;
provided that any Director whose election, or nomination for election by the
Company’s stockholders, was approved or ratified by a vote of at least a
majority of the members of the Board then still in office who were members of
the Board at the beginning of such 24-calendar-month period, shall be deemed to
be an Incumbent Director.

 

Notwithstanding the foregoing, no event or condition shall constitute a Change
in Control to the extent that, if it were, a 20% tax would be imposed under
Section 409A of the Code; provided that, in such a case, the event or condition
shall continue to constitute a Change in Control to the maximum extent possible
(e.g., if applicable, in respect of vesting without an acceleration of
distribution) without causing the imposition of such 20% tax.

 

 
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2.8           “Code” means the Internal Revenue Code of 1986, as amended. For
purposes of this Plan, references to sections of the Code shall be deemed to
include references to any applicable regulations thereunder and any successor or
similar provision.

 

2.9           “Committee” means the committee of the Board delegated with the
authority to administer the Plan, or the full Board, as provided in Section 3 of
the Plan. With respect to any decision involving an Award intended to satisfy
the requirements of Section 162(m) of the Code, the Committee shall consist of
two or more directors of the Company who are “outside directors” within the
meaning of Section 162(m) of the Code. With respect to any decision relating to
a Reporting Person, the Committee shall consist solely of two or more directors
who are disinterested within the meaning of Rule 16b-3 promulgated under the
Exchange Act, as amended from time to time, or any successor provision. The fact
that a Committee member shall fail to qualify under any of these requirements
shall not invalidate an Award if the Award is otherwise validly made under the
Plan. The Board may at any time appoint additional members to the Committee,
remove and replace members of the Committee with or without cause, and fill
vacancies on the Committee however caused.

 

2.10          “Common Stock” means the Company’s Common Stock, par value $.0001
per share.

 

2.11          “Company” means Protagenic Therapeutics, Inc., a Delaware
corporation, and any successor thereto as provided in Section 16.8.

 

 

2.12         “Control” means, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, or the power to appoint
directors of the Company, whether through the ownership of voting securities, by
contract or otherwise (the terms “Controlled by” and “under common Control with”
shall have correlative meanings).

 

2.13         “Date of Grant” means the date on which an Award under the Plan is
granted by the Committee, or such later date as the Committee may specify to be
the effective date of an Award.

 

2.14         “Disability” means a Participant being considered “disabled” within
the meaning of Section 409A of the Code and Treasury Regulation 1.409A-3(i)(4),
as well as any successor regulation or interpretation.

 

2.15         “Effective Date” means the date set forth in Section 18.1 hereof.

 

 
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2.16          “Eligible Person” means any person who is an employee, officer,
director, consultant, advisor or other individual service provider of the
Company or any Subsidiary, or any person who is determined by the Committee to
be a prospective employee, officer, director, consultant, advisor or other
individual service provider of the Company or any Subsidiary.

 

2.17         “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

 

2.18         “Fair Market Value” of a share of Common Stock shall be, as applied
to a specific date, (i) the closing price of a share of Common Stock as of such
date on the principal established stock exchange or national market system on
which the Common Stock is then traded (or, if there is no trading in the Common
Stock as of such date, the closing price of a share of Common Stock on the most
recent date preceding such date on which trades of the Common Stock were
recorded), or (ii) if the shares of Common Stock are not then traded on an
established stock exchange or national market system but are then traded in an
over-the-counter market, the average of the closing bid and asked prices for the
shares of Common Stock in such over-the-counter market as of such date (or, if
there are no closing bid and asked prices for the shares of Common Stock as of
such date, the average of the closing bid and the asked prices for the shares of
Common Stock on the most recent date preceding such date on which such closing
bid and asked prices are available on such over-the-counter market), or (iii) if
the shares of Common Stock are not then listed on a national securities exchange
or national market system or traded in an over-the-counter market, the price of
a share of Common Stock as determined by the Committee in its discretion in a
manner consistent with Section 409A of the Code and Treasury Regulation
1.409A-1(b)(5)(iv), as well as any successor regulation or interpretation.

 

2.19         “Fully Diluted” means, as applied to a specific date, the total
number of shares of Common Stock outstanding as of such date, including
preferred stock on an as-converted to common basis, plus the number of shares of
Common Stock issuable upon the exercise of outstanding warrants, stock options
and other awards exercisable for (or convertible into) Common Stock under an
equity compensation plan of the Company.

 

2.20         “Incentive Bonus Award” means an Award granted under Section 12 of
the Plan.

  

2.21        “Incentive Stock Option” means a Stock Option granted under Section
6 hereof that is intended to meet the requirements of Section 422 of the Code
and the regulations promulgated thereunder.

 

 
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2.22          “Nonqualified Stock Option” means a Stock Option granted under
Section 6 hereof that is not an Incentive Stock Option.

 

2.23        “Other Cash-Based Award” means a contractual right granted to an
Eligible Person under Section 13 hereof entitling such Eligible Person to
receive a cash payment at such times, and subject to such conditions, as are set
forth in the Plan and the applicable Award Agreement.

 

2.24         “Other Stock-Based Award” means a contractual right granted to an
Eligible Person under Section 13 representing a notional unit interest equal in
value to a share of Common Stock to be paid and distributed at such times, and
subject to such conditions as are set forth in the Plan and the applicable Award
Agreement.

 

2.25         “Participant” means any Eligible Person who holds an outstanding
Award under the Plan.

 

2.26        “Person” shall mean any individual, partnership, firm, trust,
corporation, limited liability company or other similar entity. When two or more
Persons act as a partnership, limited partnership, syndicate or other group for
the purpose of acquiring, holding or disposing of Common Stock, such
partnership, limited partnership, syndicate or group shall be deemed a “Person”

 

2.27         “Performance Measures” mean the measures of performance of the
Company and its Subsidiaries as more fully described in Section 14 of the Plan
and Exhibit A hereto.

 

2.28        “Performance Shares” means a contractual right granted to an
Eligible Person under Section 10 hereof representing a notional unit interest
equal in value to a share of Common Stock to be paid and distributed at such
times, and subject to such conditions, as are set forth in the Plan and the
applicable Award Agreement.

 

2.29         “Performance Unit” means a contractual right granted to an Eligible
Person under Section 11 hereof representing a notional dollar interest as
determined by the Committee to be paid and distributed at such times, and
subject to such conditions, as are set forth in the Plan and the applicable
Award Agreement.

 

2.30         “Plan” means this Protagenic Therapeutics, Inc. 2016 Equity
Compensation Plan, as it may be amended from time to time.

 

 
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2.31         “Reporting Person” means an officer, director or greater than ten
percent stockholder of the Company within the meaning of Rule 16a-2 under the
Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the
Exchange Act.

 

2.32         “Restricted Stock Award” means a grant of shares of Common Stock to
an Eligible Person under Section 8 hereof that are issued subject to such
vesting and transfer restrictions and such other conditions as are set forth in
the Plan and the applicable Award Agreement.

 

2.33         “Securities Act” means the Securities Act of 1933, as amended.

 

2.34         “Service” means a Participant’s employment or other service
relationship with the Company or any Subsidiary.

 

2.35        “Stock Appreciation Right” means a contractual right granted to an
Eligible Person under Section 7 hereof entitling such Eligible Person to receive
a payment, upon the exercise of such right, in such amount and at such time, and
subject to such conditions, as are set forth in the Plan and the applicable
Award Agreement.

 

2.36         “Stock Option” means a contractual right granted to an Eligible
Person under Section 6 hereof to purchase shares of Common Stock at such time
and price, and subject to such conditions, as are set forth in the Plan and the
applicable Award Agreement.

 

2.37         “Stock Unit Award” means a contractual right granted to an Eligible
Person under Section 9 hereof representing notional unit interests equal in
value to a share of Common Stock to be paid and distributed at such times, and
subject to such conditions, as are set forth in the Plan and the applicable
Award Agreement.

 

2.38         “Subsidiary” means an entity (whether or not a corporation) that is
wholly or majority owned or controlled, directly or indirectly, by the Company;
provided, however, that with respect to Incentive Stock Options, the term
“Subsidiary” shall include only an entity that qualifies under section 424(f) of
the Code as a “subsidiary corporation” with respect to the Company.

 

3.           Administration

 

3.1           Committee Members. The Plan shall be administered by the
Committee; provided that the entire Board may act in lieu of the Committee on
any matter, subject to Code Section 162(m) and 16b-3 Award requirements referred
to in Section 2.9 of the Plan. If and to the extent permitted by Applicable Law,
the Committee may authorize one or more Reporting Persons (or other officers) to
make Awards to Eligible Persons who are not Reporting Persons (or other officers
whom the Committee has specifically authorized to make Awards). Subject to
Applicable Law and the restrictions set forth in the Plan, the Committee may
delegate administrative functions to individuals who are Reporting Persons,
officers, or employees of the Company or its Subsidiaries.

 

 
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3.2           Committee Authority. The Committee shall have such powers and
authority as may be necessary or appropriate for the Committee to carry out its
functions as described in the Plan. Subject to the express limitations of the
Plan, the Committee shall have authority in its discretion to determine the
Eligible Persons to whom, and the time or times at which, Awards may be granted,
the number of shares, units or other rights subject to each Award, the exercise,
base or purchase price of an Award (if any), the time or times at which an Award
will become vested, exercisable or payable, the performance criteria,
performance goals and other conditions of an Award, the duration of the Award,
and all other terms of the Award. Subject to the terms of the Plan, the
Committee shall have the authority to amend the terms of an Award in any manner
that is not inconsistent with the Plan (including to extend the post-termination
exercisability period of Stock Options and Stock Appreciation Rights), provided
that no such action shall adversely affect the rights of a Participant with
respect to an outstanding Award without the Participant’s consent. The Committee
shall also have discretionary authority to interpret the Plan, to make all
factual determinations under the Plan, and to make all other determinations
necessary or advisable for Plan administration, including, without limitation,
to correct any defect, to supply any omission or to reconcile any inconsistency
in the Plan or any Award Agreement hereunder. The Committee may prescribe,
amend, and rescind rules and regulations relating to the Plan. The Committee’s
determinations under the Plan need not be uniform and may be made by the
Committee selectively among Participants and Eligible Persons, whether or not
such persons are similarly situated. The Committee shall, in its discretion,
consider such factors as it deems relevant in making its interpretations,
determinations and actions under the Plan including, without limitation, the
recommendations or advice of any officer or employee of the Company or such
attorneys, consultants, accountants or other advisors as it may select. All
interpretations, determinations, and actions by the Committee shall be final,
conclusive, and binding upon all parties.

 

3.3           No Liability; Indemnification. Neither the Board nor any Committee
member, nor any Person acting at the direction of the Board or the Committee,
shall be liable for any act, omission, interpretation, construction or
determination made in good faith with respect to the Plan, any Award or any
Award Agreement.  The Company and its Subsidiaries shall pay or reimburse any
member of the Committee, as well as any other Person who takes action on behalf
of the Plan, for all reasonable expenses incurred with respect to the Plan, and
to the full extent allowable under Applicable Law shall indemnify each and every
one of them for any claims, liabilities, and costs (including reasonable
attorney’s fees) arising out of their good faith performance of duties on behalf
of the Company with respect to the Plan.  The Company and its Subsidiaries may,
but shall not be required to, obtain liability insurance for this purpose.

 

 
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4.           Shares Subject to the Plans

 

4.1         Share Limitation.

 

(a)          Subject to adjustment pursuant to Section 4.1(b) and 4.2 hereof,
the maximum aggregate number of shares of Common Stock which may be issued under
all Awards granted to Participants under the Plan shall be 3,000,000 shares. All
of the shares available pursuant to this Section 4.1(a) may, but need not, be
issued in respect of Incentive Stock Options; provided, however, that the
maximum aggregate number of shares of Common Stock which may be issued in
respect of Incentive Stock Options (after giving effect to any increases
pursuant to Section 4.1(b)(i) below) shall not exceed 6,000,000 shares, subject
to adjustment pursuant to Section 4.2 hereof.

 

(b)          The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on January 1st of each year for a period
of ten years commencing on January 1, 2017 and ending on (and including) January
1, 2026, in an amount equal to (i) five point five percent (5.5%) of the total
number of shares of Common Stock outstanding on December 31st of the preceding
calendar year, or (ii) with respect to shares of Common Stock which may be
issued under the Plan other than in respect to Incentive Stock Options, the
difference between (x) eighteen percent (18%) of the total number of shares of
Common Stock outstanding on December 31st of the preceding calendar year, and
(y) the total number of shares of Common Stock reserved under the Plan on
December 31st of such preceding calendar year (including shares subject to
outstanding Awards, issued pursuant to Awards or available for future Awards) if
such amount is greater than the amount determined in (i) immediately above.
Notwithstanding the foregoing, the Board may act prior to the first day of any
calendar year, to provide that there shall be no increase in the share reserve
for such calendar year or that the increase in the share reserve for such
calendar year shall be a lesser number of shares of Common Stock than would
otherwise occur pursuant to the preceding sentence.

 

 
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(c)          Shares of Common Stock issued under the Plan may be either
authorized but unissued shares or shares held in the Company’s treasury. Any
shares of Common Stock subject to Awards that are settled in Common Stock shall
be counted against the maximum share limitations of this Section 4.1 as one
share of Common Stock for every share of Common Stock subject thereto,
regardless of the number of shares of Common Stock actually issued to settle the
Stock Option or Stock Appreciation Right upon exercise. To the extent that any
Award under the Plan payable in shares of Common Stock is forfeited, cancelled,
returned to the Company for failure to satisfy vesting requirements or upon the
occurrence of other forfeiture events, or otherwise terminates without payment
being made thereunder, the shares of Common Stock covered thereby will no longer
be counted against the foregoing maximum share limitations and may again be made
subject to Awards under the Plan pursuant to such limitations. Shares of Common
Stock that otherwise would have been issued upon the exercise of a Stock Option
or in payment with respect to any other form of Award, that are surrendered in
payment or partial payment of taxes required to be withheld with respect to the
exercise of such Stock Option or the making of such payment, will no longer be
counted against the foregoing maximum share limitations and may again be made
subject to Awards under the Plan pursuant to such limitations.

  

4.2         Adjustments. If there shall occur any change with respect to the
outstanding shares of Common Stock by reason of any recapitalization,
reclassification, stock dividend, extraordinary dividend, stock split, reverse
stock split, or other distribution with respect to the shares of Common Stock,
or any merger, reorganization, consolidation, combination, spin-off or other
similar corporate change, or any other change affecting the Common Stock, the
Committee shall, in the manner and to the extent that it deems appropriate and
equitable to the Participants and consistent with the terms of the Plan, cause
an adjustment to be made in (i) the maximum numbers and kind of shares provided
in Section 4.1 hereof, (ii) the numbers and kind of shares of Common Stock,
units, or other rights subject to then outstanding Awards, (iii) the price for
each share or unit or other right subject to then outstanding Awards, (iv) the
performance measures or goals relating to the vesting of an Award and (v) any
other terms of an Award that are affected by the event to prevent dilution or
enlargement of a Participant’s rights under an Award. Notwithstanding the
foregoing, in the case of Incentive Stock Options, any such adjustments shall,
to the extent practicable, be made in a manner consistent with the requirements
of Section 424(a) of the Code.

 

5.           Participation and Awards

 

5.1         Designation of Participants. All Eligible Persons are eligible to be
designated by the Committee to receive Awards and become Participants under the
Plan. The Committee has the authority, in its discretion, to determine and
designate from time to time those Eligible Persons who are to be granted Awards,
the types of Awards to be granted and the number of shares of Common Stock or
units subject to Awards granted under the Plan. In selecting Eligible Persons to
be Participants and in determining the type and amount of Awards to be granted
under the Plan, the Committee shall consider any and all factors that it deems
relevant or appropriate.

 

 
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5.2         Determination of Awards. The Committee shall determine the terms and
conditions of all Awards granted to Participants in accordance with its
authority under Section 3.2 hereof. An Award may consist of one type of right or
benefit hereunder or of two or more such rights or benefits granted in tandem or
in the alternative. To the extent deemed appropriate by the Committee, an Award
shall be evidenced by an Award Agreement as described in Section 16.1 hereof.

 

6.           Stock Options

 

6.1         Grant of Stock Option. A Stock Option may be granted to any Eligible
Person selected by the Committee. Subject to the provisions of Section 6.6
hereof and Section 422 of the Code, each Stock Option shall be designated, in
the discretion of the Committee, as an Incentive Stock Option or as a
Nonqualified Stock Option.

 

6.2          Exercise Price. The exercise price per share of a Stock Option
shall not be less than 100% of the Fair Market Value of a share of Common Stock
on the Date of Grant, subject to adjustments as provided for under Section 4.2,
provided that the Committee may in its discretion specify for any Stock Option
an exercise price per share that is higher than the Fair Market Value on the
Date of Grant.

 

6.3         Vesting of Stock Options. The Committee shall in its discretion
prescribe the time or times at which, or the conditions upon which, a Stock
Option or portion thereof shall become vested and/or exercisable. The
requirements for vesting and exercisability of a Stock Option may be based on
the continued Service of the Participant with the Company or a Subsidiary for a
specified time period (or periods) and/or on the attainment of a specified
performance goal (or goals) established by the Committee in its discretion. The
Committee may, in its discretion, accelerate the vesting or exercisability of
any Stock Option at any time. The Committee in its sole discretion may allow a
Participant to exercise unvested Nonqualified Stock Options, in which case the
shares of Common Stock then issued shall be Restricted Stock having analogous
vesting restrictions to the unvested Nonqualified Stock Options.

 

 
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6.4         Term of Stock Options. The Committee shall in its discretion
prescribe in an Award Agreement the period during which a vested Stock Option
may be exercised, provided that the maximum term of a Stock Option shall be ten
(10) years from the Date of Grant. A Stock Option may be earlier terminated as
specified by the Committee and set forth in an Award Agreement upon or following
the termination of a Participant’s Service with the Company or any Subsidiary,
including by reason of voluntary resignation, death, Disability, termination for
Cause or any other reason. Except as otherwise provided in this Section 6 or in
an Award Agreement as such agreement may be amended from time to time upon
authorization of the Committee, no Stock Option may be exercised at any time
during the term thereof unless the Participant is then in the Service of the
Company or one of its Subsidiaries. Notwithstanding the foregoing, unless an
Award Agreement provides otherwise:

 

(a)          If a Participant who holds a Stock Option incurs a termination of
Service with the Company (including, if applicable, any of its Subsidiaries) by
reason of his or her death, such Stock Option may, to the extent then
exercisable, be exercised by such Participant’s estate or any person who
acquires the right to exercise such Stock Option by bequest or inheritance at
any time in accordance with its terms for up to one year after the date of such
Participant’s death (but in no event after the earlier of the expiration of the
term of such Stock Option or such time as the Stock Option is otherwise canceled
or terminated in accordance with its terms). Upon expiration of such one-year
period, no portion of the Stock Option held by such Participant shall be
exercisable and the Stock Option shall be deemed to be canceled, forfeited and
of no further force or effect.

 

(b)          If a Participant who holds a Stock Option incurs a termination of
Service with the Company (including, if applicable, any of its Subsidiaries) by
reason of his or her Disability, such Stock Option may, to the extent then
exercisable, be exercised by the Participant or his or her personal
representative at any time in accordance with its terms for up to one year after
the date of such Participant’s termination of Service (but in no event after the
earlier of the expiration of the term of such Stock Option or such time as the
Stock Option is otherwise canceled or terminated in accordance with its terms).
Upon expiration of such one-year period, no portion of the Stock Option held by
such Participant shall be exercisable and the Stock Option shall be deemed to be
canceled, forfeited and of no further force or effect.

 

(c)          If a Participant who holds a Stock Option incurs a termination of
Service with the Company (including, if applicable, any of its Subsidiaries) for
any reason other than death, Disability or Cause, such Stock Option may, to the
extent then exercisable, be exercised up until ninety (90) days following such
termination of Service (but in no event after the earlier of the expiration of
the term of such Stock Option or such time as the Stock Option is otherwise
canceled or terminated in accordance with its terms). Upon expiration of such
90-day period, no portion of the Stock Option held by such Participant shall be
exercisable and the Stock Option shall be deemed to be canceled, forfeited and
of no further force or effect.

 

 
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6.5         Stock Option Exercise. Subject to such terms and conditions as shall
be specified in an Award Agreement, a Stock Option may be exercised in whole or
in part at any time during the term thereof by notice in the form required by
the Company, and payment of the aggregate exercise price by certified or bank
check, or such other means as the Committee may accept. As set forth in an Award
Agreement or otherwise determined by the Committee, in its sole discretion, at
or after grant, payment in full or in part of the exercise price of an Option
may be made: (i) in the form of shares of Common Stock that have been held by
the Participant for such period as the Committee may deem appropriate for
accounting purposes or otherwise, valued at the Fair Market Value of such shares
on the date of exercise; (ii) by surrendering to the Company shares of Common
Stock otherwise receivable on exercise of the Option; (iii) by a cashless
exercise program implemented by the Committee in connection with the Plan;
and/or (iv) by such other method as may be approved by the Committee and set
forth in an Award Agreement. Subject to any governing rules or regulations, as
soon as practicable after receipt of written notification of exercise and full
payment of the exercise price and satisfaction of any applicable tax withholding
pursuant to Section 17.5, the Company shall deliver to the Participant evidence
of book entry shares of Common Stock, or upon the Participant’s request, Common
Stock certificates in an appropriate amount based upon the number of shares of
Common Stock purchased under the Option. Unless otherwise determined by the
Committee, all payments under all of the methods indicated above shall be paid
in United States dollars or shares of Common Stock, as applicable.

 

6.6         Additional Rules for Incentive Stock Options.

 

(a)          Eligibility.     An Incentive Stock Option may only be granted to
an Eligible Person who is considered an employee under Treasury Regulation
§1.421-7(h) of the Company or any Subsidiary.

 

(b)          Annual Limits.     No Incentive Stock Option shall be granted to an
Eligible Person as a result of which the aggregate Fair Market Value (determined
as of the Date of Grant) of the stock with respect to which Incentive Stock
Options are exercisable for the first time in any calendar year under the Plan
and any other stock option plans of the Company or any Subsidiary would exceed
$100,000, determined in accordance with Section 422(d) of the Code. This
limitation shall be applied by taking Incentive Stock Options into account in
the order in which granted.

 

 
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(c)          Ten Percent Stockholders.     If a Stock Option granted under the
Plan is intended to be an Incentive Stock Option, and if the Participant, at the
time of grant, owns stock possessing ten percent or more of the total combined
voting power of all classes of Common Stock of the Company or any Subsidiary,
then (A) the Stock Option exercise price per share shall in no event be less
than 110% of the Fair Market Value of the Common Stock on the date of such grant
and (B) such Stock Option shall not be exercisable after the expiration of five
(5) years following the date such Stock Option is granted.

  

(d)           Termination of Employment.     An Award of an Incentive Stock
Option shall provide that such Stock Option may be exercised not later than
three (3) months following termination of employment of the Participant with the
Company and all Subsidiaries, or not later than one (1) year following death or
a permanent and total disability within the meaning of Section 22(e)(3) of the
Code, as and to the extent determined by the Committee to be necessary to comply
with the requirements of Section 422 of the Code.

 

(e)          Disqualifying Dispositions.     If shares of Common Stock acquired
by exercise of an Incentive Stock Option are disposed of within two (2) years
following the Date of Grant or one (1) year following the transfer of such
shares to the Participant upon exercise, the Participant shall, promptly
following such disposition, notify the Company in writing of the date and terms
of such disposition and provide such other information regarding the disposition
as the Company may reasonably require.

 

7.           Stock Appreciation Rights

 

7.1          Grant of Stock Appreciation Rights. A Stock Appreciation Right may
be granted to any Eligible Person selected by the Committee. Stock Appreciation
Rights may be granted on a basis that allows for the exercise of the right by
the Participant or that provides for the automatic payment of the right upon a
specified date or event.

 

7.2            Base Price. The base price of a Stock Appreciation Right shall be
determined by the Committee in its sole discretion; provided, however, that the
base price for any grant of a Stock Appreciation Right shall not be less than
100% of the Fair Market Value of a share of Common Stock on the Date of Grant,
subject to adjustments as provided for under Section 4.2.

 

7.3           Vesting Stock Appreciation Rights. The Committee shall in its
discretion prescribe the time or times at which, or the conditions upon which, a
Stock Appreciation Right or portion thereof shall become vested and/or
exercisable. The requirements for vesting and exercisability of a Stock
Appreciation Right may be based on the continued Service of a Participant with
the Company or a Subsidiary for a specified time period (or periods) or on the
attainment of a specified performance goal (or goals) established by the
Committee in its discretion. The Committee may, in its discretion, accelerate
the vesting or exercisability of any Stock Appreciation Right at any time.

 

 
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7.4            Term of Stock Appreciation Rights. The Committee shall in its
discretion prescribe in an Award Agreement the period during which a vested
Stock Appreciation Right may be exercised, provided that the maximum term of a
Stock Appreciation Right shall be ten (10) years from the Date of Grant. A Stock
Appreciation Right may be earlier terminated as specified by the Committee and
set forth in an Award Agreement upon or following the termination of a
Participant’s Service with the Company or any Subsidiary, including by reason of
voluntary resignation, death, Disability, termination for Cause or any other
reason. Except as otherwise provided in this Section 7 or in an Award Agreement
as such agreement may be amended from time to time upon authorization of the
Committee, no Stock Appreciation Right may be exercised at any time during the
term thereof unless the Participant is then in the Service of the Company or one
of its Subsidiaries.

  

7.5          Payment of Stock Appreciation Rights. Subject to such terms and
conditions as shall be specified in an Award Agreement, a vested Stock
Appreciation Right may be exercised in whole or in part at any time during the
term thereof by notice in the form required by the Company and payment of any
exercise price. Upon the exercise of a Stock Appreciation Right and payment of
any applicable exercise price, a Participant shall be entitled to receive an
amount determined by multiplying: (i) the excess of the Fair Market Value of a
share of Common Stock on the date of exercise of the Stock Appreciation Right
over the base price of such Stock Appreciation Right, by (ii) the number of
shares as to which such Stock Appreciation Right is exercised. Payment of the
amount determined under the immediately preceding sentence may be made, as
approved by the Committee and set forth in the Award Agreement, in shares of
Common Stock valued at their Fair Market Value on the date of exercise, in cash,
or in a combination of shares of Common Stock and cash, subject to applicable
tax withholding requirements set forth in Section 17.5. If Stock Appreciation
Rights are settled in shares of Common Stock, then as soon as practicable
following the date of settlement the Company shall deliver to the Participant
evidence of book entry shares of Common Stock, or upon the Participant’s
request, Common Stock certificates in an appropriate amount.

 

 
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8.           Restricted Stock Awards

 

8.1           Grant of Restricted Stock Awards. A Restricted Stock Award may be
granted to any Eligible Person selected by the Committee. The Committee may
require the payment by the Participant of a specified purchase price in
connection with any Restricted Stock Award. The Committee may provide in an
Award Agreement for the payment of dividends and distributions to the
Participant at such times as paid to stockholders generally or at the times of
vesting or other payment of the Restricted Stock Award. If any dividends or
distributions are paid in stock while a Restricted Stock Award is subject to
restrictions under Section 8.3 of the Plan or Code Section 162(m), the dividends
or other distributions shares shall be subject to the same restrictions on
transferability as the shares of Common Stock to which they were paid unless
otherwise set forth in the Award Agreement. The Committee may also subject the
grant of any Restricted Stock Award to the execution of a voting agreement with
the Company or with any Affiliate of the Company.

 

8.2           Vesting Requirements. The restrictions imposed on shares of Common
Stock granted under a Restricted Stock Award shall lapse in accordance with the
vesting requirements specified by the Committee in the Award Agreement. Upon
vesting of a Restricted Stock Award, such Award shall be subject to the tax
withholding requirement set forth in Section 17.5. The requirements for vesting
of a Restricted Stock Award may be based on the continued Service of the
Participant with the Company or its Subsidiaries for a specified time period (or
periods) or on the attainment of a specified performance goal (or goals)
established by the Committee in its discretion. The Committee may, in its
discretion, accelerate the vesting of a Restricted Stock Award at any time. If
the vesting requirements of a Restricted Stock Award shall not be satisfied, the
Award shall be forfeited and the shares of Common Stock subject to the Award
shall be returned to the Company. In the event that the Participant paid any
purchase price with respect to such forfeited shares, unless otherwise provided
by the Committee in an Award Agreement, the Company will refund to the
Participant the lesser of (i) such purchase price and (ii) the Fair Market Value
of such shares on the date of forfeiture.

  

8.3           Restrictions. Shares granted under any Restricted Stock Award may
not be transferred, assigned or subject to any encumbrance, pledge, or charge
until all applicable restrictions are removed or have expired, unless otherwise
allowed by the Committee. The Committee may require in an Award Agreement that
certificates representing the shares granted under a Restricted Stock Award bear
a legend making appropriate reference to the restrictions imposed, and that
certificates representing the shares granted or sold under a Restricted Stock
Award will remain in the physical custody of an escrow holder until all
restrictions are removed or have expired.

 

 
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8.4           Rights as Stockholder. Subject to the foregoing provisions of this
Section 8 and the applicable Award Agreement, the Participant to whom a
Restricted Stock Award is made shall have all rights of a stockholder with
respect to the shares granted to the Participant under the Restricted Stock
Award, including the right to vote the shares and receive all dividends and
other distributions paid or made with respect thereto, unless the Committee
determines otherwise at the time the Restricted Stock Award is granted.

 

8.5           Section 83(b) Election. If a Participant makes an election
pursuant to Section 83(b) of the Code with respect to a Restricted Stock Award,
the Participant shall file, within 30 days following the Date of Grant, a copy
of such election with the Company (directed to the Secretary thereof) and with
the Internal Revenue Service, in accordance with the regulations under Section
83 of the Code. The Committee may provide in an Award Agreement that the
Restricted Stock Award is conditioned upon the Participant’s making or
refraining from making an election with respect to the Award under Section 83(b)
of the Code.

 

9.           Stock Unit Awards

 

9.1           Grant of Stock Unit Awards. A Stock Unit Award may be granted to
any Eligible Person selected by the Committee. The value of each stock unit
under a Stock Unit Award is equal to the Fair Market Value of the Common Stock
on the applicable date or time period of determination, as specified by the
Committee. A Stock Unit Award shall be subject to such restrictions and
conditions as the Committee shall determine. A Stock Unit Award may be granted
together with a dividend equivalent right with respect to the shares of Common
Stock subject to the Award, which may be accumulated and may be deemed
reinvested in additional stock units, as determined by the Committee in its
discretion. If any dividend equivalents are paid while a Stock Unit Award is
subject to restrictions under Section 9 of the Plan or Code Section 162(m), the
dividend equivalents shall be subject to the same restrictions on
transferability as the Stock Units to which they were paid, unless otherwise set
forth in the Award Agreement.

 

9.2           Vesting of Stock Unit Awards. On the Date of Grant, the Committee
shall, in its discretion, determine any vesting requirements with respect to a
Stock Unit Award, which shall be set forth in the Award Agreement. The
requirements for vesting of a Stock Unit Award may be based on the continued
Service of the Participant with the Company or its Subsidiaries for a specified
time period (or periods) or on the attainment of a specified performance goal
(or goals) established by the Committee in its discretion. The Committee may, in
its discretion, accelerate the vesting of a Stock Unit Award at any time. A
Stock Unit Award may also be granted on a fully vested basis, with a deferred
payment date as may be determined by the Committee or elected by the Participant
in accordance with rules established by the Committee.

 

 
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9.3           Payment of Stock Unit Awards. A Stock Unit Award shall become
payable to a Participant at the time or times determined by the Committee and
set forth in the Award Agreement, which may be upon or following the vesting of
the Award. Payment of a Stock Unit Award may be made, at the discretion of the
Committee, in cash or in shares of Common Stock, or in a combination thereof as
described in the Award Agreement, subject to applicable tax withholding
requirements set forth in Section 17.5. Any cash payment of a Stock Unit Award
shall be made based upon the Fair Market Value of the Common Stock, determined
on such date or over such time period as determined by the Committee.
Notwithstanding the foregoing, unless specified otherwise in the Award
Agreement, any Stock Unit, whether settled in Common Stock or cash, shall be
paid no later than two and one-half months after the later of the calendar year
or fiscal year in which the Stock Units vest. If Stock Unit Awards are settled
in shares of Common Stock, then as soon as practicable following the date of
settlement, the Company shall deliver to the Participant evidence of book entry
shares of Common Stock, or upon the Participant’s request, Common Stock
certificates in an appropriate amount.

 

10.           Performance Shares

 

10.1         Grant of Performance Shares. Performance Shares may be granted to
any Eligible Person selected by the Committee. A Performance Share Award shall
be subject to such restrictions and condition as the Committee shall specify. A
Performance Share Award may be granted with a dividend equivalent right with
respect to the shares of Common Stock subject to the Award, which may be
accumulated and may be deemed reinvested in additional stock units, as
determined by the Committee in its discretion.

 

10.2         Value of Performance Shares. Each Performance Share shall have an
initial value equal to the Fair Market Value of a Share on the Date of Grant.
The Committee shall set performance goals in its discretion that, depending on
the extent to which they are met over a specified time period, shall determine
the number of Performance Shares that shall be paid to a Participant.

 

10.3         Earning of Performance Shares. After the applicable time period has
ended, the number of Performance Shares earned by the Participant over such time
period shall be determined as a function of the extent to which the applicable
corresponding performance goals have been achieved. This determination shall be
made solely by the Committee. The Committee may, in its discretion, waive any
performance or vesting conditions relating to a Performance Share Award.

 

 
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10.4         Form and Timing of Payment of Performance Shares. The Committee
shall pay at the close of the applicable Performance Period, or as soon as
practicable thereafter, any earned Performance Shares in the form of cash or in
shares of Common Stock or in a combination thereof, as specified in a
Participant’s Award Agreement, subject to applicable tax withholding
requirements set forth in Section 17.5. Notwithstanding the foregoing, unless
otherwise specified in an Award Agreement, all Performance Shares shall be paid
no later than two and one-half months following the later of the calendar year
or fiscal year in which such Performance Shares vest. Any shares of Common Stock
paid to a Participant under this Section 10.4 may be subject to any restrictions
deemed appropriate by the Committee. If Performance Shares are settled in shares
of Common Stock, then as soon as practicable following the date of settlement
the Company shall deliver to the Participant evidence of book entry shares of
Common Stock, or upon the Participant’s request, Common Stock certificates in an
appropriate amount.

  

11.           Performance Units

 

11.1         Grant of Performance Units. Performance Units may be granted to any
Eligible Person selected by the Committee. A Performance Unit Award shall be
subject to such restrictions and condition as the Committee shall specify in a
Participant’s Award Agreement.

 

11.2         Value of Performance Units. Each Performance Unit shall have an
initial notional value equal to a dollar amount determined by the Committee, in
its sole discretion. The Committee shall set performance goals in its discretion
that, depending on the extent to which they are met over a specified time
period, will determine the number of Performance Units that shall be settled and
paid to the Participant.

 

11.3         Earning of Performance Units. After the applicable time period has
ended, the number of Performance Units earned by the Participant, and the amount
payable in cash, in shares or in a combination thereof, over such time period
shall be determined as a function of the extent to which the applicable
corresponding performance goals have been achieved. This determination shall be
made solely by the Committee. The Committee may, in its discretion, waive any
performance or vesting conditions relating to a Performance Unit Award.

 

 
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11.4         Form and Timing of Payment of Performance Units. The Committee
shall pay at the close of the applicable Performance Period, or as soon as
practicable thereafter, any earned Performance Units in the form of cash or in
shares of Common Stock or in a combination thereof, as specified in a
Participant’s Award Agreement, subject to applicable tax withholding
requirements set forth in Section 17.5. Notwithstanding the foregoing, unless
otherwise specified in an Award Agreement, all Performance Units shall be paid
no later than two and one-half months following the later of the calendar year
or fiscal year in which such Performance Units vest. Any shares of Common Stock
paid to a Participant under this Section 11.4 may be subject to any restrictions
deemed appropriate by the Committee. If Performance Units are settled in shares
of Common Stock, then as soon as practicable following the date of settlement
the Company shall deliver to the Participant evidence of book entry shares of
Common Stock, or upon the Participant’s request, Common Stock certificates in an
appropriate amount.

 

12.           Incentive Bonus Awards

 

12.1         Incentive Bonus Awards. The Committee, at its discretion, may grant
Incentive Bonus Awards to such Participants as it may designate from time to
time. The terms of a Participant’s Incentive Bonus Award shall be set forth in
the Participant’s Award Agreement. Each Award Agreement shall specify such
general terms and conditions as the Committee shall determine.

  

12.2         Incentive Bonus Award Performance Criteria. The determination of
Incentive Bonus Awards for a given year or years may be based upon the
attainment of specified levels of Company or Subsidiary performance as measured
by pre-established, objective performance criteria determined at the discretion
of the Committee, including any or all of the Performance Measures set forth in
Exhibit A hereto. The Committee shall (i) select those Participants who shall be
eligible to receive an Incentive Bonus Award, (ii) determine the performance
period, (iii) determine target levels of performance, and (iv) determine the
level of Incentive Bonus Award to be paid to each selected Participant upon the
achievement of each performance level. The Committee generally shall make the
foregoing determinations prior to the commencement of services to which an
Incentive Bonus Award relates (or for Incentive Bonus Awards intended to satisfy
Code Section 162(m), within the permissible time period established for
exemption under Code Section 162(m) and the regulations promulgated thereunder),
to the extent applicable, and while the outcome of the performance goals and
targets is uncertain.

 

12.3         Payment of Incentive Bonus Awards.

 

(a) Incentive Bonus Awards shall be paid in cash or Common Stock, as set forth
in a Participant’s Award Agreement. Payments shall be made following a
determination by the Committee that the performance targets were attained and
shall be made within two and one-half months after the later of the end of the
fiscal or calendar year in which the Incentive Award is no longer subject to a
substantial risk of forfeiture.

 

 
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(b) The amount of an Incentive Bonus Award to be paid upon the attainment of
each targeted level of performance shall equal a percentage of a Participant’s
base salary for the fiscal year, a fixed dollar amount, or such other formula,
as determined by the Committee.

 

13.           Other Cash-Based Awards and Other Stock-Based Awards

 

13.1         Other Cash-Based and Stock-Based Awards. The Committee may grant
other types of equity-based or equity-related Awards not otherwise described by
the terms of this Plan (including the grant or offer for sale of unrestricted
Shares) in such amounts and subject to such terms and conditions, as the
Committee shall determine. Such Awards may involve the transfer of actual shares
of Common Stock to a Participant, or payment in cash or otherwise of amounts
based on the value of shares of Common Stock. In addition, the Committee, at any
time and from time to time, may grant Cash-Based Awards to a Participant in such
amounts and upon such terms as the Committee shall determine, in its sole
discretion.

 

13.2         Value of Cash-Based Awards and Other Stock-Based Awards. Each Other
Stock-Based Award shall be expressed in terms of shares of Common Stock or units
based on shares of Common Stock, as determined by the Committee, in its sole
discretion. Each Other Cash-Based Award shall specify a payment amount or
payment range as determined by the Committee, in its sole discretion. If the
Committee exercises its discretion to establish performance goals, the value of
Other Cash-Based Awards that shall be paid to the Participant will depend on the
extent to which such performance goals are met.

 

13.3         Payment of Cash-Based Awards and Other Stock-Based Awards. Payment,
if any, with respect to Other Cash-Based Awards and Other Stock-Based Award
shall be made in accordance with the terms of the Award, in cash or Shares as
the Committee determines.

  

14.           Code Section 162(m) Awards

 

14.1         Awards Granted Under Code Section 162(m). The Committee, at its
discretion, may designate that a Restricted Stock, Stock Unit, Performance
Share, Performance Unit, Incentive Bonus, Other Stock Award or Other Cash Award
shall be granted as a Code Section 162(m) Award. Such an Award must comply with
the following additional requirements, which shall control over any other
provision that pertains to such Award.

 

 
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14.2         Performance Measures.

 

(a)          Each Code Section 162(m) Award shall be based upon the attainment
of specified levels of pre-established, objective Performance Measures that are
intended to satisfy the performance based compensation exemption requirements of
Code Section 162(m) and the regulations promulgated thereunder. Further, at the
discretion of the Committee, an Award also may be subject to goals and
restrictions in addition to the Performance Measures.

 

(b)          “Performance Measures” means the measures of performance of the
Company and its Subsidiaries used to determine a Participant’s entitlement to an
Award under the Plan. Such performance measures shall have the same meanings as
used in the Company’s financial statements, or, if such terms are not used in
the Company’s financial statements, they shall have the meaning applied pursuant
to generally accepted accounting principles, or as used generally in the
Company’s industry. Performance Measures shall be calculated with respect to the
Company and each Subsidiary consolidated therewith for financial reporting
purposes or such division or other business unit as may be selected by the
Committee. For purposes of the Plan, the Performance Measures shall be
calculated in accordance with generally accepted accounting principles to the
extent applicable, but, unless otherwise determined by the Committee, prior to
the accrual or payment of any Award under this Plan for the same performance
period and excluding the effect (whether positive or negative) of any change in
accounting standards or any extraordinary, unusual or nonrecurring item, as
determined by the Committee, occurring after the establishment of the
performance goals. Performance Measures shall be based on one or more of the
criteria set forth in Exhibit A which is hereby incorporated by reference, as
determined by the Committee.

 

(c)          For each Code Section 162(m) Award, the Committee shall (i) select
the Participant who shall be eligible to receive a Code Section 162(m) Award,
(ii) determine the applicable performance period, (iii) determine the target
levels of the Company or Subsidiary Performance Measures, and (iv) determine the
number of shares of Common Stock or cash or other property (or combination
thereof) subject to an Award to be paid to each selected Participant. The
Committee shall make the foregoing determinations prior to the commencement of
services to which an Award relates (or within the permissible time period
established under Code Section 162(m)) and while the outcome of the performance
goals and targets is uncertain.

 

 
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14.3         Attainment of Code Section 162(m) Goals.

 

(a)          After each performance period, the Committee shall certify in
writing (which may include the written minutes for any meeting of the
Committee): (i) if the Company has attained the performance targets, and (ii)
the number of shares pursuant to the Award that are to become freely
transferable, if applicable, or the cash or other property payable under the
Award. The Committee shall have no discretion to waive all or part of the
conditions, goals and restrictions applicable to the receipt of full or partial
payment of an Award except in the case of a Change in Control of the Corporation
or the death or Disability of a Participant.

 

(b)          Notwithstanding the foregoing, the Committee may, in its
discretion, reduce any Award based on such factors as may be determined by the
Committee, including, without limitation, a determination by the Committee that
such a reduction is appropriate in light of pay practices of competitors, or the
performance of the Company, a Subsidiary or a Participant relative to the
performance of competitors, or performance with respect to the Company’s
strategic business goals.

 

14.4         Individual Participant Limitations. Subject to adjustment as
provided in Section 4.2, with respect to Awards intended to be Code Section
162(m) Awards and Stock Option and Stock Appreciation Rights Awards intended to
be exempt from the deductibility limitation in Code Section 162(m), (i) no
Participant in any one fiscal year of the Company may be granted (x) Stock
Options or Stock Appreciation Rights with respect to more than 3,000,000 shares
of Common Stock in the aggregate, and (y) Restricted Stock, Stock Units,
Performance Shares Awards, Incentive Bonus Awards and Other Stock Based Awards
that are denominated in shares of Common Stock with respect to more than
3,000,000 shares in the aggregate, and (ii) the maximum dollar value payable to
any Participant in any one (1) fiscal year of the Company with respect to Stock
Units, Performance Units or Incentive Bonus Awards or Other Stock-Based Awards
that may be settled in cash or other property (other than Common Stock) is
$3,000,000. If an Award is cancelled, the cancelled Award shall continue to be
counted towards the applicable limitations.

 

15.           Change in Control

 

15.1         Effect of Change in Control.

 

(a)          The Committee may, at the time of the grant of an Award and as set
forth in an Award Agreement, provide for the effect of a “Change in Control” on
an Award. Such provisions may include any one or more of the following: (i) the
acceleration or extension of time periods for purposes of exercising, vesting
in, or realizing gain from any Award, (ii) the elimination or modification of
performance or other conditions related to the payment or other rights under an
Award, (iii) provision for the cash settlement of an Award for an equivalent
cash value, as determined by the Committee, or (iv) such other modification or
adjustment to an Award as the Committee deems appropriate to maintain and
protect the rights and interests of Participants upon or following a Change in
Control. To the extent necessary for compliance with Section 409A of the Code,
an Award Agreement shall provide that an Award subject to the requirements of
Section 409A that would otherwise become payable upon a Change in Control shall
only become payable to the extent that the requirements for a “change in
control” for purposes of Section 409A have been satisfied.

 

 
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(b)          Notwithstanding anything to the contrary set forth in the Plan,
unless otherwise provided by an Award Agreement, upon or in anticipation of any
Change in Control, the Committee may, in its sole and absolute discretion and
without the need for the consent of any Participant, take one or more of the
following actions contingent upon the occurrence of that Change in Control: (i)
cause any or all outstanding Stock Options and Stock Appreciation Rights held by
Participants affected by the Change in Control to become vested and immediately
exercisable, in whole or in part; (ii) cause any or all outstanding Restricted
Stock, Stock Units, Performance Shares, Performance Units, Incentive Bonus Award
and any other Award held by Participants affected by the Change in Control to
become non-forfeitable, in whole or in part; (iii) cancel any Stock Option or
Stock Appreciation Right in exchange for a substitute option in a manner
consistent with the requirements of Treasury Regulation. §1.424-1(a)
(notwithstanding the fact that the original Stock Option may never have been
intended to satisfy the requirements for treatment as an Incentive Stock
Option); (iv) cancel any Restricted Stock, Stock Units, Performance Shares or
Performance Units held by a Participant in exchange for restricted stock or
performance shares of or stock or performance units in respect of the capital
stock of any successor corporation; (v) redeem any Restricted Stock held by a
Participant affected by the Change in Control for cash and/or other substitute
consideration with a value equal to the Fair Market Value of an unrestricted
share of Common Stock on the date of the Change in Control; (vi) cancel any
Stock Option or Stock Appreciation Right held by a Participant affected by the
Change in Control in exchange for cash and/or other substitute consideration
with a value equal to (A) the number of shares of Common Stock subject to that
Stock Option or Stock Appreciation Right, multiplied by (B) the difference, if
any, between the Fair Market Value per share of Common Stock on the date of the
Change in Control and the exercise price of that Stock Option or Stock
Appreciation Right; provided, that if the Fair Market Value per share of Common
Stock on the date of the Change in Control does not exceed the exercise price of
any such Stock Option or Stock Appreciation Right, the Committee may cancel that
Stock Option or Stock Appreciation Right without any payment of consideration
therefor; (vii) cancel any Stock Unit or Performance Unit held by a Participant
affected by the Change in Control in exchange for cash and/or other substitute
consideration with a value equal to the Fair Market Value per share of Common
Stock on the date of the Change in Control (provided that such cancelation and
exchange does not violate Section 409A of the Code); or (ix) make such other
modifications, adjustments or amendments to outstanding Awards or this Plan as
the Committee deems necessary or appropriate.

 

 
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16.           General Provisions

 

16.1         Award Agreement. To the extent deemed necessary by the Committee,
an Award under the Plan shall be evidenced by an Award Agreement in a written or
electronic form approved by the Committee setting forth the number of shares of
Common Stock or units subject to the Award, the exercise price, base price, or
purchase price of the Award, the time or times at which an Award will become
vested, exercisable or payable and the term of the Award. The Award Agreement
may also set forth the effect on an Award of termination of Service under
certain circumstances. The Award Agreement shall be subject to and incorporate,
by reference or otherwise, all of the applicable terms and conditions of the
Plan, and may also set forth other terms and conditions applicable to the Award
as determined by the Committee consistent with the limitations of the Plan.
Award Agreements evidencing Incentive Stock Options shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section 422
of the Code. The grant of an Award under the Plan shall not confer any rights
upon the Participant holding such Award other than such terms, and subject to
such conditions, as are specified in the Plan as being applicable to such type
of Award (or to all Awards) or as are expressly set forth in the Award
Agreement.

 

16.2         Forfeiture Events/Representations. The Committee may specify in an
Award Agreement at the time of the Award that the Participant’s rights, payments
and benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture or recoupment upon the occurrence of certain specified
events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Such events shall include, but shall not be limited to,
termination of Service for Cause, violation of material Company policies, breach
of noncompetition, confidentiality or other restrictive covenants that may apply
to the Participant, or other conduct by the Participant that is detrimental to
the business or reputation of the Company. The Committee may also specify in an
Award Agreement that the Participant’s rights, payments and benefits with
respect to an Award shall be conditioned upon the Participant making a
representation regarding compliance with noncompetition, confidentiality or
other restrictive covenants that may apply to the Participant and providing that
the Participant’s rights, payments and benefits with respect to an Award shall
be subject to reduction, cancellation, forfeiture or recoupment on account of a
breach of such representation. In addition and without limitation of the
foregoing, any amounts paid hereunder shall be subject to recoupment in
accordance with The Dodd–Frank Wall Street Reform and Consumer Protection Act
and any implementing regulations thereunder, any “clawback” policy adopted by
the Company or as is otherwise required by applicable law or stock exchange
listing condition.

 

 
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16.3         No Assignment or Transfer; Beneficiaries.

 

(a)          Awards under the Plan shall not be assignable or transferable by
the Participant, except by will or by the laws of descent and distribution, and
shall not be subject in any manner to assignment, alienation, pledge,
encumbrance or charge. Notwithstanding the foregoing, the Committee may provide
in an Award Agreement that the Participant shall have the right to designate a
beneficiary or beneficiaries who shall be entitled to any rights, payments or
other benefits specified under an Award following the Participant’s death.
During the lifetime of a Participant, an Award shall be exercised only by such
Participant or such Participant’s guardian or legal representative. In the event
of a Participant’s death, an Award may, to the extent permitted by the Award
Agreement, be exercised by the Participant’s beneficiary as designated by the
Participant in the manner prescribed by the Committee or, in the absence of an
authorized beneficiary designation, by the legatee of such Award under the
Participant’s will or by the Participant’s estate in accordance with the
Participant’s will or the laws of descent and distribution, in each case in the
same manner and to the same extent that such Award was exercisable by the
Participant on the date of the Participant’s death.

  

(b)          Limited Transferability Rights. Notwithstanding anything else in
this Section 16.3 to the contrary, the Committee may in its discretion provide
in an Award Agreement that an Award in the form of a Nonqualified Stock Option,
share-settled Stock Appreciation Right, Restricted Stock, Performance Share or
share-settled Other Stock-Based Award may be transferred, on such terms and
conditions as the Committee deems appropriate, either (i) by instrument to the
Participant’s “Immediate Family” (as defined below), (ii) by instrument to an
inter vivos or testamentary trust (or other entity) in which the Award is to be
passed to the Participant’s designated beneficiaries, or (iii) by gift to
charitable institutions. Any transferee of the Participant’s rights shall
succeed and be subject to all of the terms of the applicable Award Agreement and
the Plan. “Immediate Family” means 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, and shall include adoptive relationships.

 

 
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16.4         Rights as Stockholder. A Participant shall have no rights as a
holder of shares of Common Stock with respect to any unissued securities covered
by an Award until the date the Participant becomes the holder of record of such
securities. Except as provided in Section 4.2 hereof, no adjustment or other
provision shall be made for dividends or other stockholder rights, except to the
extent that the Award Agreement provides for dividend payments or dividend
equivalent rights.

 

16.5         Employment or Service. Nothing in the Plan, in the grant of any
Award or in any Award Agreement shall confer upon any Eligible Person or
Participant any right to continue in the Service of the Company or any of its
Subsidiaries, or interfere in any way with the right of the Company or any of
its Subsidiaries to terminate the employment or other service relationship of an
Eligible Person or Participant for any reason at any time.

 

16.6         Fractional Shares. In the case of any fractional share or unit
resulting from the grant, vesting, payment or crediting of dividends or dividend
equivalents under an Award, the Committee shall have the discretionary authority
to (i) disregard such fractional share or unit, (ii) round such fractional share
or unit to the nearest lower or higher whole share or unit, or (iii) convert
such fractional share or unit into a right to receive a cash payment.

 

16.7         Other Compensation and Benefit Plans. The amount of any
compensation deemed to be received by a Participant pursuant to an Award shall
not constitute includable compensation for purposes of determining the amount of
benefits to which a Participant is entitled under any other compensation or
benefit plan or program of the Company or any Subsidiary, including, without
limitation, under any bonus, pension, profit-sharing, life insurance, salary
continuation or severance benefits plan, except to the extent specifically
provided by the terms of any such plan.

 

16.8         Plan Binding on Transferees. The Plan shall be binding upon the
Company, its transferees and assigns, and the Participant, the Participant’s
executor, administrator and permitted transferees and beneficiaries. In
addition, all obligations of the Company under this Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

  

16.9         Foreign Jurisdictions. The Committee may adopt, amend and terminate
such arrangements and grant such Awards, not inconsistent with the intent of the
Plan, as it may deem necessary or desirable to comply with any tax, securities,
regulatory or other laws of other jurisdictions with respect to Awards that may
be subject to such laws. The terms and conditions of such Awards may vary from
the terms and conditions that would otherwise be required by the Plan solely to
the extent the Committee deems necessary for such purpose. Moreover, the Board
may approve such supplements to or amendments, restatements or alternative
versions of the Plan, not inconsistent with the intent of the Plan, as it may
consider necessary or appropriate for such purposes, without thereby affecting
the terms of the Plan as in effect for any other purpose.

 

 
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16.10         Substitute Awards in Corporate Transactions. Nothing contained in
the Plan shall be construed to limit the right of the Committee to grant Awards
under the Plan in connection with the acquisition, whether by purchase, merger,
consolidation or other corporate transaction, of the business or assets of any
corporation or other entity. Without limiting the foregoing, the Committee may
grant Awards under the Plan to an employee or director of another corporation
who becomes an Eligible Person by reason of any such corporate transaction in
substitution for awards previously granted by such corporation or entity to such
person. The terms and conditions of the substitute Awards may vary from the
terms and conditions that would otherwise be required by the Plan solely to the
extent the Committee deems necessary for such purpose. Any shares of Common
Stock subject to these substitute Awards shall not be counted against any of the
maximum share limitations set forth in the Plan.

 

17.           Legal Compliance

 

17.1         Securities Laws. No shares of Common Stock will be issued or
transferred pursuant to an Award unless and until all then applicable
requirements imposed by Federal and state securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction, and by any
exchanges upon which the shares of Common Stock may be listed, have been fully
met. As a condition precedent to the issuance of shares pursuant to the grant or
exercise of an Award, the Company may require the Participant to take any
reasonable action to meet such requirements. The Committee may impose such
conditions on any shares of Common Stock issuable under the Plan as it may deem
advisable, including, without limitation, restrictions under the Securities Act,
as amended, under the requirements of any exchange upon which such shares of the
same class are then listed, and under any blue sky or other securities laws
applicable to such shares. The Committee may also require the Participant to
represent and warrant at the time of issuance or transfer that the shares of
Common Stock are being acquired only for investment purposes and without any
current intention to sell or distribute such shares. All Common Stock issued
pursuant to the terms of this Plan shall constitute “restricted securities,” as
that term is defined in Rule 144 promulgated pursuant to the Securities Act, and
may not be transferred except in compliance herewith and with the registration
requirements of the Securities Act or an exemption therefrom. Certificates
representing Common Stock acquired pursuant to an Award may bear such legend as
the Company may consider appropriate under the circumstances. If an Award is
made to an Eligible Person who is subject to Chinese jurisdiction, and approval
of the Award by China’s State Administration of Foreign Exchange is needed, the
Award may be converted to cash or other equivalent amount if and to the extent
that such approval is not obtained.

 

 
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17.2         Incentive Arrangement. The Plan is designed to provide an on-going,
pecuniary incentive for Participants to produce their best efforts to increase
the value of the Company. The Plan is not intended to provide retirement income
or to defer the receipt of payments hereunder to the termination of a
Participant’s employment or beyond. The Plan is thus intended not to be a
pension or welfare benefit plan that is subject to Employee Retirement Income
Security Act of 1974 (“ERISA”), and shall be construed accordingly. All
interpretations and determinations hereunder shall be made on a basis consistent
with the Plan’s status as not an employee benefit plan subject to ERISA.

 

17.3         Unfunded Plan. The adoption of the Plan and any reservation of
shares of Common Stock or cash amounts by the Company to discharge its
obligations hereunder shall not be deemed to create a trust or other funded
arrangement. Except upon the issuance of Common Stock pursuant to an Award, any
rights of a Participant under the Plan shall be those of a general unsecured
creditor of the Company, and neither a Participant nor the Participant’s
permitted transferees or estate shall have any other interest in any assets of
the Company by virtue of the Plan. Notwithstanding the foregoing, the Company
shall have the right to implement or set aside funds in a grantor trust, subject
to the claims of the Company’s creditors or otherwise, to discharge its
obligations under the Plan.

 

17.4         Section 409A Compliance. To the extent applicable, it is intended
that the Plan and all Awards hereunder comply with the requirements of Section
409A of the Code or an exemption thereto, and the Plan and all Award Agreements
shall be interpreted and applied by the Committee in a manner consistent with
this intent in order to avoid the imposition of any additional tax under Section
409A of the Code. Notwithstanding anything in the Plan or an Award Agreement to
the contrary, in the event that any provision of the Plan or an Award Agreement
is determined by the Committee, in its sole discretion, to not comply with the
requirements of Section 409A of the Code or an exemption thereto, the Committee
shall, in its sole discretion, have the authority to take such actions and to
make such interpretations or changes to the Plan or an Award Agreement as the
Committee deems necessary, regardless of whether such actions, interpretations,
or changes shall adversely affect a Participant, subject to the limitations, if
any, of applicable law. In no event whatsoever shall the Company be liable for
any additional tax, interest or penalties that may be imposed on any Participant
by Section 409A of the Code or any damages for failing to comply with Section
409A of the Code.

 

 
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17.5         Tax Withholding.

 

(a)          The Company shall have the power and the right to deduct or
withhold, or require a participant to remit to the Company, the minimum
statutory amount to satisfy federal, state, and local taxes, domestic or
foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of this Plan, but in no event shall such
deduction or withholding or remittance exceed the minimum statutory withholding
requirements. Notwithstanding the foregoing, if a minimum statutory amount of
withholding does not apply under the laws of any foreign jurisdiction, the
Company may withhold such amount for remittance to the applicable taxing
authority of such jurisdiction as the Company determines in its discretion,
uniformly applied, to be appropriate.

  

(b)          A Participant may, in order to fulfill the withholding obligation,
tender previously-acquired shares of Common Stock or have shares of stock
withheld from the exercise, provided that the shares have an aggregate Fair
Market Value sufficient to satisfy in whole or in part the applicable
withholding taxes. The broker-assisted exercise procedure described in Section
6.5 may also be utilized to satisfy the withholding requirements related to the
exercise of a Stock Option.

 

(c)          Notwithstanding the foregoing, a Participant may not use shares of
Common Stock to satisfy the withholding requirements to the extent that (i)
there is a substantial likelihood that the use of such form of payment or the
timing of such form of payment would subject the Participant to a substantial
risk of liability under Section 16 of the Exchange Act; or (ii) such withholding
would constitute a violation of the provisions of any law or regulation
(including the Sarbanes-Oxley Act of 2002).

 

17.6         No Guarantee of Tax Consequences. Neither the Company, the Board,
the Committee nor any other Person make any commitment or guarantee that any
federal, state, local or foreign tax treatment will apply or be available to any
Participant or any other person hereunder.

 

17.7         Severability. If any provision of the Plan or any Award Agreement
shall be determined to be illegal or unenforceable by any court of law in any
jurisdiction, the remaining provisions hereof and thereof shall be severable and
enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.

 

 
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17.8         Stock Certificates; Book Entry Form. Notwithstanding any provision
of the Plan to the contrary, unless otherwise determined by the Committee or
required by any applicable law, rule or regulation, any obligation set forth in
the Plan pertaining to the delivery or issuance of stock certificates evidencing
shares of Common Stock may be satisfied by having issuance and/or ownership of
such shares recorded on the books and records of the Company (or, as applicable,
its transfer agent or stock plan administrator).

 

17.9         Governing Law. The Plan and all rights hereunder shall be subject
to and interpreted in accordance with the laws of the State of Delaware, without
reference to the principles of conflicts of laws, and to applicable Federal
securities laws.

 

18.           Effective Date, Amendment and Termination

 

18.1         Effective Date. The effective date of the Plan shall be the date on
which the Plan is approved by the requisite percentage of the holders of the
Common Stock of the Company; provided, however, that Awards granted under the
Plan subsequent to the approval of the Plan by the Board shall be valid if such
stockholder approval occurs within one year of the date on which such Board
approval occurs.

  

18.2         Amendment; Termination. The Board may suspend or terminate the Plan
(or any portion thereof) at any time and may amend the Plan at any time and from
time to time in such respects as the Board may deem advisable or in the best
interests of the Company or any Subsidiary; provided, however, that (a) no such
amendment, suspension or termination shall materially and adversely affect the
rights of any Participant under any outstanding Awards, without the consent of
such Participant, (b) to the extent necessary and desirable to comply with any
applicable law, regulation, or stock exchange rule, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required, and (c) stockholder approval is required for any amendment to the
Plan that (i) increases the number of shares of Common Stock available for
issuance under the Plan, or (ii) changes the persons or class of persons
eligible to receive Awards. The Plan will continue in effect until terminated in
accordance with this Section 18.2; provided, however, that no Award will be
granted hereunder on or after the 10th anniversary of the date of the Plan’s
initial adoption by the Board; but provided further, that Awards granted prior
to such 10th anniversary may extend beyond that date.

 

 
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INITIAL BOARD APPROVAL: March 25, 2016, Effective Following Name Corporate Name
Change from Atrinsic, Inc. to Protagenic Therapeutics, Inc., and Stockholder
Approval

 

INITIAL STOCKHOLDER APPROVAL: 6/17/2016 

 

 
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EXHIBIT A

 

PERFORMANCE MEASURES

 

Code Section 162(m) Awards shall be based on the attainment of objective
performance goals that are established by the Committee and relate to one or
more Performance Measures, in each case on specified date or over any period, up
to 10 years, as determined by the Committee.

 

“Performance Measures” means the following business criteria (or any combination
thereof) with respect to one or more of the Company, any Subsidiary or any
division or operating unit thereof:

 

● pre-tax income,

 

● after-tax income,

 

● net income (meaning net income as reflected in the Company’s financial reports
for the applicable period, on an aggregate, diluted and/or per share basis, or
economic net income),

 

● operating income or profit,

 

● cash flow, free cash flow, cash flow return on investment (discounted or
otherwise), net cash provided by operations, or cash flow in excess of cost of
capital,

 

● earnings per share (basic or diluted),

 

● return on equity,

 

● returns on sales or revenues,

 

● return on invested capital or assets (gross or net),

 

● cash, funds or earnings available for distribution,

 

● appreciation in the fair market value of the Common Stock,

 

● operating expenses,

 

● implementation or completion of critical projects or processes,

 

 
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● return on investment,

 

● total return to stockholders (meaning the aggregate Common Stock price
appreciation and dividends paid (assuming full reinvestment of dividends) during
the applicable period),

 

● net earnings growth,

  

● return measures (including but not limited to return on assets, capital,
equity, or sales),

 

● increase in revenues,

 

● the Company’s published ranking against its peer group of pharmaceutical
companies based on total stockholder return,

 

● net earnings,

 

● changes (or the absence of changes) in the per share price of the Company’s
Common Stock,

 

● clinical or regulatory milestones,

 

●Earnings before or after any one or more of the following items: interest,
taxes, depreciation or amortization, as reflected in the Company’s financial
reports for the applicable period,

 

●Total revenue growth (meaning the increase in total revenues after the date of
grant of an award and during the applicable period, as reflected in the
Company’s financial reports for the applicable period),

 

●Economic value created,

 

●Operating margin or profit margin,

 

●Share price or total shareholder return,

 

●Cost targets, reductions and savings, productivity and efficiencies,

 

 
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●Strategic business criteria, consisting of one or more objectives based on
meeting objectively determinable criteria: specified market penetration,
geographic business expansion, investor satisfaction, employee satisfaction,
human resources management, supervision of litigation, information technology,
and goals relating to acquisitions, divestitures, joint ventures and similar
transactions, and budget comparisons,

 

●Objectively determinable personal or professional objectives, including any of
the following performance goals: the implementation of policies and plans, the
negotiation of transactions, the development of long term business goals,
formation of joint ventures, research or development collaborations, and the
completion of other corporate transactions, and

 

●Any combination of, or a specified increase or improvement in, any of the
foregoing.

 

 

Where applicable, the Performance Measures may be expressed in terms of
attaining a specified level of the particular criteria or the attainment of a
percentage increase or decrease in the particular criteria, and may be applied
to one or more of the Company, a Subsidiary or affiliate, or a division or
strategic business unit of the Company, or may be applied to the performance of
the Company relative to a market index, a group of other companies or a
combination thereof, all as determined by the Committee.

 

The Performance Measures may include a threshold level of performance below
which no payment shall be made (or no vesting shall occur), levels of
performance at which specified payments shall be made (or specified vesting
shall occur), and a maximum level of performance above which no additional
payment shall be made (or at which full vesting shall occur).

 

Except as otherwise expressly provided, all financial terms are used as defined
under Generally Accepted Accounting Principles (“GAAP”) and all determinations
shall be made in accordance with GAAP, as applied by the Company in the
preparation of its periodic reports to stockholders.

 

To the extent permitted by Section 162(m) of the Code, unless the Committee
provides otherwise at the time of establishing the performance goals, for each
fiscal year of the Company, the Committee shall have the authority to make
equitable adjustments to the Performance Measures in recognition of unusual or
non-recurring events affecting the Company or any Subsidiary or affiliate or the
financial statements of the Company or any Subsidiary or affiliate and may
provide for objectively determinable adjustments, as determined in accordance
with GAAP, to any of the Performance Measures described above for one or more of
the items of gain, loss, profit or expense: (A) determined to be extraordinary
or unusual in nature or infrequent in occurrence, (B) related to the disposal of
a segment of a business, (C) related to a change in accounting principle under
GAAP or a change in applicable laws or regulations, (D) related to discontinued
operations that do not qualify as a segment of a business under GAAP, and (E)
attributable to the business operations of any entity acquired by the Company
during the fiscal year.

 

 

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