EXHIBIT 10.1
 
 
ALLIQUA, INC.
 
2011 LONG-TERM INCENTIVE PLAN
 
The Alliqua, Inc. 2011 Long-Term Incentive Plan (the “Plan”) was adopted by the
Board of Directors of Alliqua, Inc., a Florida corporation (the “Company”),
effective as of November 8, 2011, subject to approval by the Company’s
shareholders.
 
ARTICLE 1
PURPOSE
 
The purpose of the Plan is to attract and retain the services of key Employees,
key Contractors, and Outside Directors of the Company and its Subsidiaries and
to provide such persons with a proprietary interest in the Company through the
granting of Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance
Awards, Dividend Equivalent Rights, and Other Awards, whether granted singly, or
in combination, or in tandem, that will:
 
(a) increase the interest of such persons in the Company’s welfare;
 
(b) furnish an incentive to such persons to continue their services for the
Company or its Subsidiaries; and
 
(c) provide a means through which the Company may attract able persons as
Employees, Contractors, and Outside Directors.
 
With respect to Reporting Participants, the Plan and all transactions under the
Plan are intended to comply with all applicable conditions of Rule 16b-3
promulgated under the Exchange Act.  To the extent any provision of the Plan or
action by the Committee fails to so comply, such provision or action shall be
deemed null and void ab initio, to the extent permitted by law and deemed
advisable by the Committee.
 
ARTICLE 2
DEFINITIONS
 
For the purpose of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
 
2.1 “Applicable Law” means all legal requirements relating to the administration
of equity incentive plans and the issuance and distribution of shares of Common
Stock, if any, under applicable corporate laws, applicable securities laws, the
rules of any exchange or inter-dealer quotation system upon which the Company’s
securities are listed or quoted, and any other applicable law, rule or
restriction.
 
2.2 “Award” means the grant of any Incentive Stock Option, Nonqualified Stock
Option, Restricted Stock, SAR, Restricted Stock Units, Performance Award,
Dividend Equivalent Right or Other Award, whether granted singly or in
combination or in tandem (each individually referred to herein as an
“Incentive”).
 
 
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2.3 “Award Agreement” means a written agreement between a Participant and the
Company which sets out the terms of the grant of an Award.
 
2.4 “Award Period” means the period set forth in the Award Agreement during
which one or more Incentives granted under an Award may be exercised.
 
2.5 “Board” means the board of directors of the Company.
 
2.6 “Change in Control” means any of the following, except as otherwise provided
herein:  (i) any consolidation, merger or share exchange of the Company in which
the Company is not the continuing or surviving corporation or pursuant to which
shares of the Company’s Common Stock would be converted into cash, securities or
other property, other than a consolidation, merger or share exchange of the
Company in which the holders of the Company’s Common Stock immediately prior to
such transaction have the same proportionate ownership of Common Stock of the
surviving corporation immediately after such transaction; (ii) any sale, lease,
exchange or other transfer (excluding transfer by way of pledge or
hypothecation) in one transaction or a series of related transactions, of all or
substantially all of the assets of the Company; (iii) the shareholders of the
Company approve any plan or proposal for the liquidation or dissolution of the
Company; (iv) the cessation of control (by virtue of their not constituting a
majority of directors) of the Board by the individuals (the “Continuing
Directors”) who (x) at the date of this Plan were directors or (y) become
directors after the date of this Plan and whose election or nomination for
election by the Company’s shareholders was approved by a vote of at least
two-thirds (2/3rds) of the directors then in office who were directors at the
date of this Plan or whose election or nomination for election was previously so
approved; (v) the acquisition of beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act) of an aggregate of fifty percent (50%) or
more of the voting power of the Company’s outstanding voting securities by any
person or group (as such term is used in Rule 13d-5 under the Exchange Act) who
beneficially owned less than fifty percent (50%) of the voting power of the
Company’s outstanding voting securities on the date of this Plan; provided,
however, that notwithstanding the foregoing, an acquisition shall not constitute
a Change in Control hereunder if the acquirer is (x) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company and
acting in such capacity, (y) a Subsidiary of the Company or a corporation owned,
directly or indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of voting securities of the Company or (z)
any other person whose acquisition of shares of voting securities is approved in
advance by a majority of the Continuing Directors; or (vi) in a Title 11
bankruptcy proceeding, the appointment of a trustee or the conversion of a case
involving the Company to a case under Chapter 7.
 
Notwithstanding the foregoing provisions of this Section 2.6, in the event an
Award issued under the Plan is subject to Section 409A of the Code, then, in
lieu of the foregoing definition and to the extent necessary to comply with the
requirements of Section 409A of the Code, the definition of “Change in Control”
for purposes of such Award shall be as follows:
 
“Change in Control” of the Company occurs upon a change in the Company’s
ownership, its effective control or the ownership of a substantial portion of
its assets, as follows:
 
(a) Change in Ownership.  A change in ownership of the Company occurs on the
date that any “Person” (as defined in Section 2.6(d) below), other than (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding stock pursuant to an
offering of such stock, or (iv) a corporation owned, directly or indirectly, by
the shareholders of the Company in substantially the same proportions as their
ownership of the Company’s stock, acquires ownership of the Company’s stock
that, together with stock held by such Person, constitutes more than fifty
percent (50%) of the total fair market value or total voting power of the
Company’s stock.  However, if any Person is considered to own already more than
fifty percent (50%) of the total fair market value or total voting power of the
Company’s stock, the acquisition of additional stock by the same Person is not
considered to be a Change of Control.  In addition, if any Person has effective
control of the Company through ownership of thirty percent (30%) or more of the
total voting power of the Company’s stock, as discussed in paragraph (b) below,
the acquisition of additional control of the Company by the same Person is not
considered to cause a Change in Control pursuant to this paragraph (a); or
 
 
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(b) Change in Effective Control.  Even though the Company may not have undergone
a change in ownership under paragraph (a) above, a change in the effective
control of the Company occurs on either of the following dates:
 
(i) the date that any Person acquires (or has acquired during the twelve (12)
month period ending on the date of the most recent acquisition by such Person)
ownership of the Company’s stock possessing thirty percent (30%) or more of the
total voting power of the Company’s stock.  However, if any Person owns thirty
percent (30%) or more of the total voting power of the Company’s stock, the
acquisition of additional control of the Company by the same Person is not
considered to cause a Change in Control pursuant to this subparagraph (b)(i);
 
(ii) the date during any twelve (12) month period when a majority of members of
the Board is replaced by directors whose appointment or election is not endorsed
by a majority of the Board before the date of the appointment or election;
provided, however, that any such director shall not be considered to be endorsed
by the Board if his or her initial assumption of office occurs as a result of an
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board;
 
(c) Change in Ownership of Substantial Portion of Assets.  A change in the
ownership of a substantial portion of the Company’s assets occurs on the date
that a Person acquires (or has acquired during the twelve (12) month period
ending on the date of the most recent acquisition by such Person) assets of the
Company, that have a total gross fair market value equal to at least eighty
percent (80%) of the total gross fair market value of all of the Company’s
assets immediately before such acquisition or acquisitions.  However, there is
no Change in Control when there is such a transfer to (i) a shareholder of the
Company (immediately before the asset transfer) in exchange for or with respect
to the Company’s stock; (ii) an entity, at least fifty percent (50%) of the
total value or voting power of the stock of which is owned, directly or
indirectly, by the Company; (iii) a Person that owns directly or indirectly, at
least fifty percent (50%) of the total value or voting power of the Company’s
outstanding stock; or (iv) an entity, at least fifty percent (50%) of the total
value or voting power of the stock of which is owned by a Person that owns,
directly or indirectly, at least fifty percent (50%) of the total value or
voting power of the Company’s outstanding stock.
 
(d) Definitions.  For purposes of subparagraphs (a), (b), and (c) above:
 
(i) “Person” shall have the meaning given in Section 7701(a)(1) of the
Code.  Person shall include more than one Person acting as a group as defined by
the Final Treasury Regulations issued under Section 409A of the Code.
 
(ii) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act.
 
 
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(e) Interpretation.  The provisions of this Section 2.6 shall be interpreted in
accordance with the requirements of the Final Treasury Regulations under Section
409A of the Code, it being the intent of the parties that this Section 2.6 shall
be in compliance with the requirements of said Code section and said
regulations.
 
2.7  “Code” means the United States Internal Revenue Code of 1986, as amended.
 
2.8 “Committee” means the committee appointed or designated by the Board to
administer the Plan in accordance with Article 3 of this Plan.
 
2.9 “Common Stock” means the common stock, par value $0.001 per share, which the
Company is currently authorized to issue or may in the future be authorized to
issue, or any securities into which or for which the common stock of the Company
may be converted or exchanged, as the case may be, pursuant to the terms of this
Plan.
 
2.10 “Company” means Alliqua, Inc., a Florida corporation, and any successor
entity.
 
2.11 “Contractor” means any natural person, who is not an Employee, rendering
bona fide services to the Company or a Subsidiary, with compensation, pursuant
to a written independent contractor agreement between such person (or any entity
employing such person) and the Company or a Subsidiary, provided that such
services are not rendered in connection with the offer or sale of securities in
a capital raising transaction and do not directly or indirectly promote or
maintain a market for the Company’s securities.
 
2.12 “Corporation” means any entity that (i) is defined as a corporation under
Section 7701 of the Code and (ii) is the Company or is in an unbroken chain of
corporations (other than the Company) beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing a majority of the total combined voting power of all classes of stock
in one of the other corporations in the chain.  For purposes of clause (ii)
hereof, an entity shall be treated as a “corporation” if it satisfies the
definition of a corporation under Section 7701 of the Code.
 
2.13 “Date of Grant” means the effective date on which an Award is made to a
Participant as set forth in the applicable Award Agreement; provided, however,
that solely for purposes of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder, the Date of Grant of an Award shall be the
date of shareholder approval of the Plan if such date is later than the
effective date of such Award as set forth in the Award Agreement.
 
2.14 “Dividend Equivalent Right” means the right of the holder thereof to
receive credits based on the cash dividends that would have been paid on the
shares of Common Stock specified in the Award if such shares were held by the
Participant to whom the Award is made.
 
2.15 “Employee” means common law employee (as defined in accordance with the
Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company or any Subsidiary of the Company.
 
2.16 “Exchange Act” means the United States Securities Exchange Act of 1934, as
amended.
 
2.17 “Executive Officer” means an officer of the Company or a Subsidiary subject
to Section 16 of the Exchange Act or a “covered employee” as defined in Section
162(m)(3) of the Code.
 
 
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2.18 “Fair Market Value” means, as of a particular date, (a) if the shares of
Common Stock are listed on any established national securities exchange, the
closing sales price per share of Common Stock on the consolidated transaction
reporting system for the principal securities exchange for the Common Stock on
that date, or, if there shall have been no such sale so reported on that date,
on the last preceding date on which such a sale was so reported; (b) if the
shares of Common Stock are not so listed, but are quoted on an automated
quotation system, the closing sales price per share of Common Stock reported on
the automated quotation system on that date, or, if there shall have been no
such sale so reported on that date, on the last preceding date on which such a
sale was so reported; (c) if the Common Stock is not so listed or quoted, the
mean between the closing bid and asked price on that date, or, if there are no
quotations available for such date, on the last preceding date on which such
quotations shall be available, as reported by the National Association of
Securities Dealers, Inc.’s OTC Bulletin Board or Pink OTC Markets, Inc.
(previously known as National Quotation Bureau, Inc.); or (d) if none of the
above is applicable, such amount as may be determined by the Committee (acting
on the advice of an Independent Third Party, should the Committee elect in its
sole discretion to utilize an Independent Third Party for this purpose), in good
faith, to be the fair market value per share of Common Stock.  The determination
of Fair Market Value shall, where applicable, be in compliance with Section 409A
of the Code.
 
2.19 “Incentive” is defined in Section 2.2 hereof.
 
2.20 “Incentive Stock Option” means an incentive stock option within the meaning
of Section 422 of the Code, granted pursuant to this Plan.
 
2.21 “Independent Third Party” means an individual or entity independent of the
Company having experience in providing investment banking or similar appraisal
or valuation services and with expertise generally in the valuation of
securities or other property for purposes of this Plan.  The Committee may
utilize one or more Independent Third Parties.
 
2.22 “Nonqualified Stock Option” means a nonqualified stock option, granted
pursuant to this Plan, which is not an Incentive Stock Option.
 
2.23 “Option Price” means the price which must be paid by a Participant upon
exercise of a Stock Option to purchase a share of Common Stock.
 
2.24 “Other Award” means an Award issued pursuant to Section 6.9 hereof.
 
2.25 “Outside Director” means a director of the Company who is not an Employee
or a Contractor.
 
2.26 “Participant” means an Employee, Contractor or Outside Director of the
Company or a Subsidiary to whom an Award is granted under this Plan.
 
2.27 “Performance Award” means an Award hereunder of cash, shares of Common
Stock, units or rights based upon, payable in, or otherwise related to, Common
Stock pursuant to Section 6.7 hereof.
 
2.28 “Performance Goal” means any of the goals set forth in Section 6.10 hereof.
 
2.29 “Plan” means this Alliqua, Inc. 2011 Long-Term Incentive Plan, as amended
from time to time.
 
 
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2.30 “Reporting Participant” means a Participant who is subject to the reporting
requirements of Section 16 of the Exchange Act.
 
2.31 “Restricted Stock” means shares of Common Stock issued or transferred to a
Participant pursuant to Section 6.4 of this Plan which are subject to
restrictions or limitations set forth in this Plan and in the related Award
Agreement.
 
2.32 “Restricted Stock Units” means units awarded to Participants pursuant to
Section 6.6 hereof, which are convertible into Common Stock at such time as such
units are no longer subject to restrictions as established by the Committee.
 
2.33 “Retirement” means any Termination of Service solely due to retirement upon
or after attainment of age sixty-five (65), or permitted early retirement as
determined by the Committee.
 
2.34 “SAR” or “Stock Appreciation Right” means the right to receive an amount,
in cash and/or Common Stock, equal to the excess of the Fair Market Value of a
specified number of shares of Common Stock as of the date the SAR is exercised
(or, as provided in the Award Agreement, converted) over the SAR Price for such
shares.
 
2.35 “SAR Price” means the exercise price or conversion price of each share of
Common Stock covered by a SAR, determined on the Date of Grant of the SAR.
 
2.36 “Stock Option” means a Nonqualified Stock Option or an Incentive Stock
Option.
 
2.37 “Subsidiary” means (i) any corporation in an unbroken chain of corporations
beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing a majority of the total
combined voting power of all classes of stock in one of the other corporations
in the chain, (ii) any limited partnership, if the Company or any corporation
described in item (i) above owns a majority of the general partnership interest
and a majority of the limited partnership interests entitled to vote on the
removal and replacement of the general partner, and (iii) any partnership or
limited liability company, if the partners or members thereof are composed only
of the Company, any corporation listed in item (i) above or any limited
partnership listed in item (ii) above.  “Subsidiaries” means more than one of
any such corporations, limited partnerships, partnerships or limited liability
companies.
 
2.38 “Termination of Service” occurs when a Participant who is (i) an Employee
of the Company or any Subsidiary ceases to serve as an Employee of the Company
and its Subsidiaries, for any reason; (ii) an Outside Director of the Company or
a Subsidiary ceases to serve as a director of the Company and its Subsidiaries
for any reason; or (iii) a Contractor of the Company or a Subsidiary ceases to
serve as a Contractor of the Company and its Subsidiaries for any
reason.  Except as may be necessary or desirable to comply with applicable
federal or state law, a “Termination of Service” shall not be deemed to have
occurred when a Participant who is an Employee becomes an Outside Director or
Contractor or vice versa.  If, however, a Participant who is an Employee and who
has an Incentive Stock Option ceases to be an Employee but does not suffer a
Termination of Service, and if that Participant does not exercise the Incentive
Stock Option within the time required under Section 422 of the Code upon ceasing
to be an Employee, the Incentive Stock Option shall thereafter become a
Nonqualified Stock Option.  Notwithstanding the foregoing provisions of this
Section 2.38, in the event an Award issued under the Plan is subject to Section
409A of the Code, then, in lieu of the foregoing definition and to the extent
necessary to comply with the requirements of Section 409A of the Code, the
definition of “Termination of Service” for purposes of such Award shall be the
definition of “separation from service” provided for under Section 409A of the
Code and the regulations or other guidance issued thereunder.
 
 
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2.39 “Total and Permanent Disability” means a Participant is qualified for
long-term disability benefits under the Company’s or Subsidiary’s disability
plan or insurance policy; or, if no such plan or policy is then in existence or
if the Participant is not eligible to participate in such plan or policy, that
the Participant, because of a physical or mental condition resulting from bodily
injury, disease, or mental disorder, is unable to perform his or her duties of
employment for a period of six (6) continuous months, as determined in good
faith by the Committee, based upon medical reports or other evidence
satisfactory to the Committee; provided that, with respect to any Incentive
Stock Option, Total and Permanent Disability shall have the meaning given it
under the rules governing Incentive Stock Options under the
Code.  Notwithstanding the foregoing provisions of this Section 2.39, in the
event an Award issued under the Plan is subject to Section 409A of the Code,
then, in lieu of the foregoing definition and to the extent necessary to comply
with the requirements of Section 409A of the Code, the definition of “Total and
Permanent Disability” for purposes of such Award shall be the definition of
“disability” provided for under Section 409A of the Code and the regulations or
other guidance issued thereunder.
 
ARTICLE 3
ADMINISTRATION
 
Subject to the terms of this Article 3, the Plan shall be administered by the
Board or such committee of the Board as is designated by the Board to administer
the Plan (the “Committee”).  The Committee shall consist of not fewer than two
persons.  Any member of the Committee may be removed at any time, with or
without cause, by resolution of the Board.  Any vacancy occurring in the
membership of the Committee may be filled by appointment by the Board.  At any
time there is no Committee to administer the Plan, any references in this Plan
to the Committee shall be deemed to refer to the Board.
 
If necessary to satisfy the requirements of Section 162(m) of the Code and/or
Rule 16b-3 promulgated under the Exchange Act, membership on the Committee shall
be limited to those members of the Board who are “outside directors” under
Section 162(m) of the Code and/or “non-employee directors” as defined in Rule
16b-3 promulgated under the Exchange Act.  The Committee shall select one of its
members to act as its Chairman.  A majority of the Committee shall constitute a
quorum, and the act of a majority of the members of the Committee present at a
meeting at which a quorum is present shall be the act of the Committee.
 
The Committee shall determine and designate from time to time the eligible
persons to whom Awards will be granted and shall set forth in each related Award
Agreement, where applicable, the Award Period, the Date of Grant, and such other
terms, provisions, limitations, and performance requirements, as are approved by
the Committee, but not inconsistent with the Plan.  The Committee shall
determine whether an Award shall include one type of Incentive or two or more
Incentives granted in combination or two or more Incentives granted in tandem
(that is, a joint grant where exercise of one Incentive results in cancellation
of all or a portion of the other Incentive).  Although the members of the
Committee shall be eligible to receive Awards, all decisions with respect to any
Award, and the terms and conditions thereof, to be granted under the Plan to any
member of the Committee shall be made solely and exclusively by the other
members of the Committee, or if such member is the only member of the Committee,
by the Board.
 
The Committee, in its discretion, shall (i) interpret the Plan and Award
Agreements, (ii) prescribe, amend, and rescind any rules and regulations, as
necessary or appropriate for the administration of the Plan, (iii) establish
performance goals for an Award and certify the extent of their achievement, and
(iv) make such other determinations or certifications and take such other action
as it deems necessary or advisable in the administration of the Plan.  Any
interpretation, determination, or other action made or taken by the Committee
shall be final, binding, and conclusive on all interested parties.
 
 
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The Committee may delegate to officers of the Company, pursuant to a written
delegation, the authority to perform specified functions under the Plan.  Any
actions taken by any officers of the Company pursuant to such written delegation
of authority shall be deemed to have been taken by the
Committee.  Notwithstanding the foregoing, to the extent necessary to satisfy
the requirements of Section 162(m) of the Code and/or Rule 16b-3 promulgated
under the Exchange Act, any function relating to a Reporting Participant or a
covered employee (as defined in Section 162(m) of the Code) shall be performed
solely by the Committee.
 
With respect to restrictions in the Plan that are based on the requirements of
Rule 16b-3 promulgated under the Exchange Act, Section 422 of the Code, Section
162(m) of the Code, the rules of any exchange or inter-dealer quotation system
upon which the Company’s securities are listed or quoted, or any other
Applicable Law, to the extent that any such restrictions are no longer required
by Applicable Law, the Committee shall have the sole discretion and authority to
grant Awards that are not subject to such mandated restrictions and/or to waive
any such mandated restrictions with respect to outstanding Awards.
 
ARTICLE 4
ELIGIBILITY
 
Any Employee (including an Employee who is also a director or an officer),
Contractor or Outside Director of the Company whose judgment, initiative, and
efforts contributed or may be expected to contribute to the successful
performance of the Company is eligible to participate in the Plan; provided that
only Employees of a Corporation shall be eligible to receive Incentive Stock
Options.  The Committee, upon its own action, may grant, but shall not be
required to grant, an Award to any Employee, Contractor or Outside Director of
the Company or any Subsidiary.  Awards may be granted by the Committee at any
time and from time to time to new Participants, or to then Participants, or to a
greater or lesser number of Participants, and may include or exclude previous
Participants, as the Committee shall determine.  Except as required by this
Plan, Awards granted at different times need not contain similar
provisions.  The Committee’s determinations under the Plan (including without
limitation determinations of which Employees, Contractors or Outside Directors,
if any, are to receive Awards, the form, amount and timing of such Awards, the
terms and provisions of such Awards and the agreements evidencing same) need not
be uniform and may be made by it selectively among Participants who receive, or
are eligible to receive, Awards under the Plan.
 
ARTICLE 5
SHARES SUBJECT TO PLAN
 
5.1 Number Available for Awards.  Subject to adjustment as provided in Articles
11 and 12, the maximum number of shares of Common Stock that may be delivered
pursuant to Awards granted under the Plan is forty million (40,000,000) shares,
of which one hundred percent (100%) may be delivered pursuant to Incentive Stock
Options.  Subject to adjustment pursuant to Articles 11 and 12, the maximum
number of shares of Common Stock with respect to which  Stock Options or SARs
may be granted to an Executive Officer during any calendar year is five million
(5,000,000) shares of Common Stock.  Shares to be issued may be made available
from authorized but unissued Common Stock, Common Stock held by the Company in
its treasury, or Common Stock purchased by the Company on the open market or
otherwise.  During the term of this Plan, the Company will at all times reserve
and keep available the number of shares of Common Stock that shall be sufficient
to satisfy the requirements of this Plan.
 
 
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5.2 Reuse of Shares.  To the extent that any Award under this Plan shall be
forfeited, shall expire or be canceled, in whole or in part, then the number of
shares of Common Stock covered by the Award or stock option so forfeited,
expired or canceled may again be awarded pursuant to the provisions of this
Plan.  In the event that previously acquired shares of Common Stock are
delivered to the Company in full or partial payment of the exercise price for
the exercise of a Stock Option granted under this Plan, the number of shares of
Common Stock available for future Awards under this Plan shall be reduced only
by the net number of shares of Common Stock issued upon the exercise of the
Stock Option.  Awards that may be satisfied either by the issuance of shares of
Common Stock or by cash or other consideration shall be counted against the
maximum number of shares of Common Stock that may be issued under this Plan only
during the period that the Award is outstanding or to the extent the Award is
ultimately satisfied by the issuance of shares of Common Stock.  Awards will not
reduce the number of shares of Common Stock that may be issued pursuant to this
Plan if the settlement of the Award will not require the issuance of shares of
Common Stock, as, for example, a SAR that can be satisfied only by the payment
of cash.  Notwithstanding any provisions of the Plan to the contrary, only
shares forfeited back to the Company, shares canceled on account of termination,
expiration or lapse of an Award, shares surrendered in payment of the exercise
price of an option or shares withheld for payment of applicable employment taxes
and/or withholding obligations resulting from the exercise of an option shall
again be available for grant of Incentive Stock Options under the Plan, but
shall not increase the maximum  number of shares described in Section 5.1 above
as the maximum number of shares of Common Stock that may be delivered pursuant
to Incentive Stock Options.
 
ARTICLE 6
GRANT OF AWARDS
 
6.1 In General.
 
(a) The grant of an Award shall be authorized by the Committee and shall be
evidenced by an Award Agreement setting forth the Incentive or Incentives being
granted, the total number of shares of Common Stock subject to the Incentive(s),
the Option Price (if applicable), the Award Period, the Date of Grant, and such
other terms, provisions, limitations, and performance objectives, as are
approved by the Committee, but (i) not inconsistent with the Plan, (ii) to the
extent an Award issued under the Plan is subject to Section 409A of the Code, in
compliance with the applicable requirements of Section 409A of the Code and the
regulations or other guidance issued thereunder, and (iii) to the extent the
Committee determines that an Award shall comply with the requirements of Section
162(m) of the Code, in compliance with the applicable requirements of Section
162(m) of the Code and the regulations and other guidance issued
thereunder.  The Company shall execute an Award Agreement with a Participant
after the Committee approves the issuance of an Award.  Any Award granted
pursuant to this Plan must be granted within ten (10) years of the date of
adoption of this Plan. The Plan shall be submitted to the Company’s shareholders
for approval; however, the Committee may grant Awards under the Plan prior to
the time of shareholder approval.  Any such Award granted prior to such
shareholder approval shall be made subject to such shareholder approval.  The
grant of an Award to a Participant shall not be deemed either to entitle the
Participant to, or to disqualify the Participant from, receipt of any other
Award under the Plan.
 
(b) If the Committee establishes a purchase price for an Award, the Participant
must accept such Award within a period of thirty (30) days (or such shorter
period as the Committee may specify) after the Date of Grant by executing the
applicable Award Agreement and paying such purchase price.
 
 
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(c) Any Award under this Plan that is settled in whole or in part in cash on a
deferred basis may provide for interest equivalents to be credited with respect
to such cash payment. Interest equivalents may be compounded and shall be paid
upon such terms and conditions as may be specified by the grant.
 
6.2 Option Price.  The Option Price for any share of Common Stock which may be
purchased under a Nonqualified Stock Option for any share of Common Stock may be
equal to or greater than the Fair Market Value of the share on the Date of
Grant.  The Option Price for any share of Common Stock which may be purchased
under an Incentive Stock Option must be at least equal to the Fair Market Value
of the share on the Date of Grant; if an Incentive Stock Option is granted to an
Employee who owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than  ten percent (10%) of the combined voting
power of all classes of stock of the Company (or any parent or Subsidiary), the
Option Price shall be at least one hundred ten percent (110%) of the Fair Market
Value of the Common Stock on the Date of Grant.
 
6.3 Maximum ISO Grants.  The Committee may not grant Incentive Stock Options
under the Plan to any Employee which would permit the aggregate Fair Market
Value (determined on the Date of Grant) of the Common Stock with respect to
which Incentive Stock Options (under this and any other plan of the Company and
its Subsidiaries) are exercisable for the first time by such Employee during any
calendar year to exceed $100,000.  To the extent any Stock Option granted under
this Plan which is designated as an Incentive Stock Option exceeds this limit or
otherwise fails to qualify as an Incentive Stock Option, such Stock Option (or
any such portion thereof) shall be a Nonqualified Stock Option.  In such case,
the Committee shall designate which stock will be treated as Incentive Stock
Option stock by causing the issuance of a separate stock certificate and
identifying such stock as Incentive Stock Option stock on the Company’s stock
transfer records.
 
6.4 Restricted Stock.  If Restricted Stock is granted to or received by a
Participant under an Award (including a Stock Option), the Committee shall set
forth in the related Award Agreement: (i) the number of shares of Common Stock
awarded, (ii) the price, if any, to be paid by the Participant for such
Restricted Stock and the method of payment of the price, (iii) the time or times
within which such Award may be subject to forfeiture, (iv) specified Performance
Goals of the Company, a Subsidiary, any division thereof or any group of
Employees of the Company, or other criteria, which the Committee determines must
be met in order to remove any restrictions (including vesting) on such Award,
and (v) all other terms, limitations, restrictions, and conditions of the
Restricted Stock, which shall be consistent with this Plan, to the extent
applicable and in the event the Committee determines that an Award shall comply
with the requirements of Section 162(m) of the Code, in compliance with the
requirements of Section 162(m) of the Code and the regulations and other
guidance issued thereunder and, to the extent Restricted Stock granted under the
Plan is subject to Section 409A of the Code, in compliance with the applicable
requirements of Section 409A of the Code and the regulations or other guidance
issued thereunder.  The provisions of Restricted Stock need not be the same with
respect to each Participant.
 
(a) Legend on Shares; Electronic Issuance.  Each Participant who is awarded or
receives Restricted Stock may be issued a stock certificate or certificates in
respect of such shares of Common Stock.  Such certificate(s) shall be registered
in the name of the Participant, and shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Restricted Stock,
substantially as provided in Section 15.10 of the Plan.  Alternatively, the
Company may electronically register the Restricted Stock awarded to a
Participant in the name of such Participant, which shall bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, substantially as provided in Section 15.10 of the Plan.  With
respect to such electronically registered shares, no stock certificate or
certificates shall be issued, unless, following the expiration of the
Restriction Period (as defined in Section 6.4(b)(i)) without forfeiture in
respect of such shares of Common Stock, the Participant requests delivery of the
certificate or certificates by submitting a written request to the Committee (or
such party designated by the Company) requesting deliver of the
certificates.  The Company shall deliver the certificates requested by the
Participant to the Participant as soon as administratively practicable following
the Company’s receipt of such request.
 
 
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(b) Restrictions and Conditions.  Shares of Restricted Stock shall be subject to
the following restrictions and conditions:
 
(i) Subject to the other provisions of this Plan and the terms of the particular
Award Agreements, during such period as may be determined by the Committee
commencing on the Date of Grant or the date of exercise of an Award (the
“Restriction Period”), the Participant shall not be permitted to sell, transfer,
pledge or assign shares of Restricted Stock. Except for these limitations, the
Committee may in its sole discretion, remove any or all of the restrictions on
such Restricted Stock whenever it may determine that, by reason of changes in
Applicable Laws or other changes in circumstances arising after the date of the
Award, such action is appropriate.
 
(ii) Except as provided in sub-paragraph (i) above or in the applicable Award
Agreement, the Participant shall have, with respect to his or her Restricted
Stock, all of the rights of a shareholder of the Company, including the right to
vote the shares, and the right to receive any dividends thereon.  Certificates
for shares of Common Stock free of restriction under this Plan shall be
delivered to the Participant promptly after, and only after, the Restriction
Period shall expire without forfeiture in respect of such shares of Common Stock
or after any other restrictions imposed on such shares of Common Stock by the
applicable Award Agreement or other agreement have expired.  Certificates for
the shares of Common Stock forfeited under the provisions of the Plan and the
applicable Award Agreement shall be promptly returned to the Company by the
forfeiting Participant.  Each Award Agreement shall require that each
Participant, in connection with the issuance of a certificate for Restricted
Stock, shall endorse such certificate in blank or execute a stock power in form
satisfactory to the Company in blank and deliver such certificate and executed
stock power to the Company.
 
(iii) The Restriction Period of Restricted Stock shall commence on the Date of
Grant or the date of exercise of an Award, as specified in the Award Agreement,
and, subject to Article 12 of the Plan, unless otherwise established by the
Committee in the Award Agreement setting forth the terms of the Restricted
Stock, shall expire upon satisfaction of the conditions set forth in the Award
Agreement; such conditions may provide for vesting based on such Performance
Goals, as may be determined by the Committee in its sole discretion.
 
(iv) Except as otherwise provided in the particular Award Agreement, upon
Termination of Service for any reason during the Restriction Period, the
nonvested shares of Restricted Stock shall be forfeited by the Participant.  In
the event a Participant has paid any consideration to the Company for such
forfeited Restricted Stock, the Committee shall specify in the Award Agreement
that either (i) the Company shall be obligated to, or (ii) the Company may, in
its sole discretion, elect to, pay to the Participant, as soon as practicable
after the event causing forfeiture, in cash, an amount equal to the lesser of
the total consideration paid by the Participant for such forfeited shares or the
Fair Market Value of such forfeited shares as of the date of Termination of
Service, as the Committee, in its sole discretion shall select. Upon any
forfeiture, all rights of a Participant with respect to the forfeited shares of
the Restricted Stock shall cease and terminate, without any further obligation
on the part of the Company.
 
 
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6.5 SARs.  The Committee may grant SARs to any Participant, either as a separate
Award or in connection with a Stock Option.  SARs shall be subject to such terms
and conditions as the Committee shall impose, provided that such terms and
conditions are (i) not inconsistent with the Plan, (ii) to the extent a SAR
issued under the Plan is subject to Section 409A of the Code, in compliance with
the applicable requirements of Section 409A of the Code and the regulations or
other guidance issued thereunder, and (iii) to the extent the Committee
determines that a SAR shall comply with the requirements of Section 162(m) of
the Code, in compliance with the applicable requirements of Section 162(m) and
the regulations and other guidance issued thereunder.  The grant of the SAR may
provide that the holder may be paid for the value of the SAR either in cash or
in shares of Common Stock, or a combination thereof.  In the event of the
exercise of a SAR payable in shares of Common Stock, the holder of the SAR shall
receive that number of whole shares of Common Stock having an aggregate Fair
Market Value on the date of exercise equal to the value obtained by multiplying
(i) the difference between the Fair Market Value of a share of Common Stock on
the date of exercise over the SAR Price as set forth in such SAR (or other value
specified in the agreement granting the SAR), by (ii) the number of shares of
Common Stock as to which the SAR is exercised, with a cash settlement to be made
for any fractional shares of Common Stock.  The SAR Price for any share of
Common Stock subject to a SAR may be  equal to  or greater than the Fair Market
Value of the share on the Date of Grant.  The Committee, in its sole discretion,
may place a ceiling on the amount payable upon exercise of a SAR, but any such
limitation shall be specified at the time that the SAR is granted.
 
6.6 Restricted Stock Units.  Restricted Stock Units may be awarded or sold to
any Participant under such terms and conditions as shall be established by the
Committee, provided, however, that such terms and conditions are (i) not
inconsistent with the Plan, (ii) to the extent a Restricted Stock Unit issued
under the Plan is subject to Section 409A of the Code, in compliance with the
applicable requirements of Section 409A of the Code and the regulations or other
guidance issued thereunder, and (iii) to the extent the Committee determines
that a Restricted Stock Unit award shall comply with the requirements of Section
162(m) of the Code, in compliance with the applicable requirements of Section
162(m) and the regulations and other guidance issued thereunder.  Restricted
Stock Units shall be subject to such restrictions as the Committee determines,
including, without limitation, (a) a prohibition against sale, assignment,
transfer, pledge, hypothecation or other encumbrance for a specified period; or
(b) a requirement that the holder forfeit (or in the case of shares of Common
Stock or units sold to the Participant, resell to the Company at cost) such
shares or units in the event of Termination of Service during the period of
restriction.
 
6.7 Performance Awards.
 
(a) The Committee may grant Performance Awards to one or more Participants.  The
terms and conditions of Performance Awards shall be specified at the time of the
grant and may include provisions establishing the performance period, the
Performance Goals to be achieved during a performance period, and the maximum or
minimum settlement values, provided that such terms and conditions are (i) not
inconsistent with the Plan and (ii) to the extent a Performance Award issued
under the Plan is subject to Section 409A of the Code, in compliance with the
applicable requirements of Section 409A of the Code and the regulations or other
guidance issued thereunder.  If the Performance Award is to be in shares of
Common Stock, the Performance Awards may provide for the issuance of the shares
of Common Stock at the time of the grant of the Performance Award or at the time
of  the certification by the Committee that the Performance Goals for the
performance period have been met; provided, however, if shares of Common Stock
are issued at the time of the grant of the Performance Award and if, at the end
of the performance period, the Performance Goals are not certified by the
Committee to have been fully satisfied, then, notwithstanding any other
provisions of this Plan to the contrary, the Common Stock shall be forfeited in
accordance with the terms of the grant to the extent the Committee determines
that the Performance Goals were not met.  The forfeiture of shares of Common
Stock issued at the time of the grant of the Performance Award due to failure to
achieve the established Performance Goals shall be separate from and in addition
to any other restrictions provided for in this Plan that may be applicable to
such shares of Common Stock.  Each Performance Award granted to one or more
Participants shall have its own terms and conditions.
 
 
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To the extent the Committee determines that a Performance Award shall comply
with the requirements of Section 162(m) of the Code and the regulations and
other guidance issued thereunder, and if it is determined to be necessary in
order to satisfy Section 162(m) of the Code, at the time of the grant of a
Performance Award (other than a Stock Option) and to the extent permitted under
Section 162(m) of the Code and the regulations issued thereunder, the Committee
shall provide for the manner in which the Performance Goals shall be reduced to
take into account the negative effect on the achievement of specified levels of
the Performance Goals which may result from enumerated corporate transactions,
extraordinary events, accounting changes and other similar occurrences which
were unanticipated at the time the Performance Goal was initially
established.  In no event, however, may the Committee increase the amount earned
under such a Performance Award, unless the reduction in the Performance Goals
would reduce or eliminate the amount to be earned under the Performance Award
and the Committee determines not to make such reduction or elimination.
 
With respect to a Performance Award that is not intended to satisfy the
requirements of Code Section 162(m), if the Committee determines, in its sole
discretion, that the established performance measures or objectives are no
longer suitable because of a change in the Company’s business, operations,
corporate structure, or for other reasons that the Committee deemed
satisfactory, the Committee may modify the performance measures or objectives
and/or the performance period.
 
(b) Performance Awards may be valued by reference to the Fair Market Value of a
share of Common Stock or according to any formula or method deemed appropriate
by the Committee, in its sole discretion, including, but not limited to,
achievement of Performance Goals or other specific financial, production, sales
or cost performance objectives that the Committee believes to be relevant to the
Company’s business and/or remaining in the employ of the Company for a specified
period of time.  Performance Awards may be paid in cash, shares of Common Stock,
or other consideration, or any combination thereof.  If payable in shares of
Common Stock, the consideration for the issuance of such shares may be the
achievement of the performance objective established at the time of the grant of
the Performance Award.  Performance Awards may be payable in a single payment or
in installments and may be payable at a specified date or dates or upon
attaining the performance objective.  The extent to which any applicable
performance objective has been achieved shall be conclusively determined by the
Committee.
 
(c) Notwithstanding the foregoing, in order to comply with the requirements of
Section 162(m) of the Code, if applicable, no Participant may receive in any
calendar year Performance Awards intended to comply with the requirements of
Section 162(m) of the Code which have an aggregate value of more than
$1,500,000, and if such Performance Awards involve the issuance of shares of
Common Stock, said aggregate value shall be based on the Fair Market Value of
such shares on the time of the grant of the Performance Award.  In no event,
however, shall any Performance Awards not intended to comply with the
requirements of Section 162(m) of the Code be issued contingent upon the failure
to attain the Performance Goals applicable to any Performance Awards granted
hereunder that the Committee intends to comply with the requirements of Section
162(m) of the Code.
 
 
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6.8 Dividend Equivalent Rights.  The Committee may grant a Dividend Equivalent
Right to any Participant, either as a component of another Award or as a
separate Award. The terms and conditions of the Dividend Equivalent Right shall
be specified by the grant.  Dividend equivalents credited to the holder of a
Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional shares of Common Stock (which may thereafter accrue
additional dividend equivalents).  Any such reinvestment shall be at the Fair
Market Value at the time thereof.  Dividend Equivalent Rights may be settled in
cash or shares of Common Stock, or a combination thereof, in a single payment or
in installments.  A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon
exercise, settlement, or payment of, or lapse of restrictions on, such other
Award, and that such Dividend Equivalent Right granted as a component of another
Award may also contain terms and conditions different from such other Award.
 
6.9 Other Awards.  The Committee may grant to any Participant other forms of
Awards, based upon, payable in, or otherwise related to, in whole or in part,
shares of Common Stock, if the Committee determines that such other form of
Award is consistent with the purpose and restrictions of this Plan.  The terms
and conditions of such other form of Award shall be specified by the
grant.  Such Other Awards may be granted for no cash consideration, for such
minimum consideration as may be required by Applicable Law, or for such other
consideration as may be specified by the grant.
 
6.10 Performance Goals.  Awards of Restricted Stock, Restricted Stock Units,
Performance Award and Other Awards (whether relating to cash or shares of Common
Stock) under the Plan may be made subject to the attainment of Performance Goals
relating to one or more business criteria which, where applicable, shall be
within the meaning of Section 162(m) of the Code and consist of one or more or
any combination of the following criteria:  cash flow; cost; revenues; sales;
ratio of debt to debt plus equity; net borrowing, credit quality or debt
ratings; profit before tax; economic profit; earnings before interest and taxes;
earnings before interest, taxes, depreciation and amortization; gross margin;
earnings per share (whether on a pre-tax, after-tax, operational or other
basis); operating earnings; capital expenditures; expenses or expense levels;
economic value added; ratio of operating earnings to capital spending or any
other operating ratios; free cash flow; net profit; net sales; net asset value
per share; the accomplishment of mergers, acquisitions, dispositions, public
offerings or similar extraordinary business transactions; sales growth; price of
the Company’s Common Stock; return on assets, equity or shareholders’ equity;
market share; inventory levels, inventory turn or shrinkage; or total return to
shareholders (“Performance Criteria”).  Any Performance Criteria may be used to
measure the performance of the Company as a whole or any business unit of the
Company and may be measured relative to a peer group or index.  Any Performance
Criteria may include or exclude (i) extraordinary, unusual and/or non-recurring
items of gain or loss, (ii) gains or losses on the disposition of a business,
(iii) changes in tax or accounting regulations or laws, (iv) the effect of a
merger or acquisition, as identified in the Company’s quarterly and annual
earnings releases, or (v) other similar occurrences.  In all other respects,
Performance Criteria shall be calculated in accordance with the Company’s
financial statements, under generally accepted accounting principles, or under a
methodology established by the Committee prior to the issuance of an Award which
is consistently applied and identified in the audited financial statements,
including footnotes, or the Compensation Discussion and Analysis section of the
Company’s annual report.  However, to the extent Section 162(m) of the Code is
applicable, the Committee may not in any event increase the amount of
compensation payable to an individual upon the attainment of a Performance Goal.
 
 
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6.11 Tandem Awards.  The Committee may grant two or more Incentives in one Award
in the form of a “tandem Award,” so that the right of the Participant to
exercise one Incentive shall be canceled if, and to the extent, the other
Incentive is exercised.  For example, if a Stock Option and a SAR are issued in
a tandem Award, and the Participant exercises the SAR with respect to one
hundred (100) shares of Common Stock, the right of the Participant to exercise
the related Stock Option shall be canceled to the extent of one hundred (100)
shares of Common Stock.
 
ARTICLE 7
AWARD PERIOD; VESTING
 
7.1 Award Period.  Subject to the other provisions of this Plan, the Committee
may, in its discretion, provide that an Incentive may not be exercised in whole
or in part for any period or periods of time or beyond any date specified in the
Award Agreement.  Except as provided in the Award Agreement, an Incentive may be
exercised in whole or in part at any time during its term.  The Award Period for
an Incentive shall be reduced or terminated upon Termination of Service.  No
Incentive granted under the Plan may be exercised at any time after the end of
its Award Period.  No portion of any Incentive may be exercised after the
expiration of ten (10) years from its Date of Grant.  However, if an Employee
owns or is deemed to own (by reason of the attribution rules of Section 424(d)
of the Code) more than ten percent (10%) of the combined voting power of all
classes of stock of the Company (or any parent or Subsidiary) and an Incentive
Stock Option is granted to such Employee, the term of such Incentive Stock
Option (to the extent required by the Code at the time of grant) shall be no
more than five (5) years from the Date of Grant.
 
7.2 Vesting.  The Committee, in its sole discretion, may determine that an
Incentive will be immediately vested in whole or in part, or that all or any
portion may not be vested until a date, or dates, subsequent to its Date of
Grant, or until the occurrence of one or more specified events, subject in any
case to the terms of the Plan.  If the Committee imposes conditions upon
vesting, then, subsequent to the Date of Grant, the Committee may, in its sole
discretion, accelerate the date on which all or any portion of the Incentive may
be vested.
 
ARTICLE 8
EXERCISE OR CONVERSION OF INCENTIVE
 
8.1 In General.  A vested Incentive may be exercised or converted, during its
Award Period, subject to limitations and restrictions set forth in the Award
Agreement.
 
8.2 Securities Law and Exchange Restrictions.  In no event may an Incentive be
exercised or shares of Common Stock be issued pursuant to an Award if a
necessary listing or quotation of the shares of Common Stock on a stock exchange
or inter-dealer quotation system or any registration under state or federal
securities laws required under the circumstances has not been accomplished.
 
8.3 Exercise of Stock Option.
 
(a) In General.  If a Stock Option is exercisable prior to the time it is
vested, the Common Stock obtained on the exercise of the Stock Option shall be
Restricted Stock which is subject to the applicable provisions of the Plan and
the Award Agreement.  If the Committee imposes conditions upon exercise, then
subsequent to the Date of Grant, the Committee may, in its sole discretion,
accelerate the date on which all or any portion of the Stock Option may be
exercised.  No Stock Option may be exercised for a fractional share of Common
Stock.  The granting of a Stock Option shall impose no obligation upon the
Participant to exercise that Stock Option.
 
 
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(b) Notice and Payment.  Subject to such administrative regulations as the
Committee may from time to time adopt, a Stock Option may be exercised by the
delivery of written notice to the Committee setting forth the number of shares
of Common Stock with respect to which the Stock Option is to be exercised and
the date of exercise thereof (the “Exercise Date”) which shall be at least three
(3) days after giving such notice unless an earlier time shall have been
mutually agreed upon.  On the Exercise Date, the Participant shall deliver to
the Company consideration with a value equal to the total Option Price of the
shares to be purchased, payable as provided in the Award Agreement, which may
provide for payment in any one or more of the following ways:  (a) cash or
check, bank draft, or money order payable to the order of the Company, (b)
Common Stock (including Restricted Stock) owned by the Participant on the
Exercise Date, valued at its Fair Market Value on the Exercise Date, and which
the Participant has not acquired from the Company within six (6) months prior to
the Exercise Date, (c) by delivery (including by FAX) to the Company or its
designated agent of an executed irrevocable option exercise form together with
irrevocable instructions from the Participant to a broker or dealer, reasonably
acceptable to the Company, to sell certain of the shares of Common Stock
purchased upon exercise of the Stock Option or to pledge such shares as
collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price, and/or (d) in any other form
of valid consideration that is acceptable to the Committee in its sole
discretion.  In the event that shares of Restricted Stock are tendered as
consideration for the exercise of a Stock Option, a number of shares of Common
Stock issued upon the exercise of the Stock Option equal to the number of shares
of Restricted Stock used as consideration therefor shall be subject to the same
restrictions and provisions as the Restricted Stock so tendered.
 
(c) Issuance of Certificate.  Except as otherwise provided in Section 6.4 hereof
(with respect to shares of Restricted Stock) or in the applicable Award
Agreement, upon payment of all amounts due from the Participant, the Company, in
its sole discretion, shall cause either (i) certificates for the Common Stock
then being purchased to be delivered as directed by the Participant (or the
person exercising the Participant’s Stock Option in the event of his death) at
its principal business office promptly after the Exercise Date; or (ii) the
Common Stock then being purchased to be registered in the Participant’s name (or
the person exercising the Participant’s Stock Option in the event of his or her
death), but shall not issue certificates for the Common Stock unless the
Participant or such other person requests delivery of the certificates for the
Common Stock, in writing in accordance with the procedures established by the
Committee.  If the Participant has exercised an Incentive Stock Option, the
Company may at its option retain physical possession of the certificate (if any)
evidencing the shares acquired upon exercise until the expiration of the holding
periods described in Section 422(a)(1) of the Code.  Any obligation of the
Company to deliver shares of Common Stock shall, however, be subject to the
condition that, if at any time the Committee shall determine in its discretion
that the listing, registration, or qualification of the Stock Option or the
Common Stock upon any securities exchange or inter-dealer quotation system or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary as a condition of, or in connection with, the
Stock Option or the issuance or purchase of shares of Common Stock thereunder,
the Stock Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent, or approval shall have been effected or
obtained free of any conditions not reasonably acceptable to the Committee.
 
 
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(d) Failure to Pay.  Except as may otherwise be provided in an Award Agreement,
if the Participant fails to pay for any of the Common Stock specified in such
notice or fails to accept delivery thereof, that portion of the Participant’s
Stock Option and right to purchase such Common Stock may be forfeited by the
Participant.
 
8.4 SARs.  Subject to the conditions of this Section 8.4 and such administrative
regulations as the Committee may from time to time adopt, a SAR may be exercised
by the delivery (including by FAX) of written notice to the Committee setting
forth the number of shares of Common Stock with respect to which the SAR is to
be exercised and the date of exercise thereof (the “Exercise Date”) which shall
be at least three (3) days after giving such notice unless an earlier time shall
have been mutually agreed upon.  Subject to the terms of the Award Agreement and
only if permissible under Section 409A of the Code and the regulations or other
guidance issued thereunder (or, if not so permissible, at such time as permitted
by Section 409A of the Code and the regulations or other guidance issued
thereunder), the Participant shall receive from the Company in exchange therefor
in the discretion of the Committee, and subject to the terms of the Award
Agreement:
 
(a) cash in an amount equal to the excess (if any) of the Fair Market Value (as
of the date of the exercise, or if provided in the Award Agreement, conversion,
of the SAR) per share of Common Stock over the SAR Price per share specified in
such SAR, multiplied by the total number of shares of Common Stock of the SAR
being surrendered;
 
(b) that number of shares of Common Stock having an aggregate Fair Market Value
(as of the date of the exercise, or if provided in the Award Agreement,
conversion, of the SAR) equal to the amount of cash otherwise payable to the
Participant, with a cash settlement to be made for any fractional share
interests; or
 
(c) the Company may settle such obligation in part with shares of Common Stock
and in part with cash.
 
The distribution of any cash or Common Stock pursuant to the foregoing sentence
shall be made at such time as set forth in the Award Agreement.
 
8.5 Disqualifying Disposition of Incentive Stock Option.  If shares of Common
Stock acquired upon exercise of an Incentive Stock Option are disposed of by a
Participant prior to the expiration of either two (2) years from the Date of
Grant of such Stock Option or one (1) year from the transfer of shares of Common
Stock to the Participant pursuant to the exercise of such Stock Option, or in
any other disqualifying disposition within the meaning of Section 422 of the
Code, such Participant shall notify the Company in writing of the date and terms
of such disposition.  A disqualifying disposition by a Participant shall not
affect the status of any other Stock Option granted under the Plan as an
Incentive Stock Option within the meaning of Section 422 of the Code.
 
ARTICLE 9
AMENDMENT OR DISCONTINUANCE
 
Subject to the limitations set forth in this Article 9, the Board may at any
time and from time to time, without the consent of the Participants, alter,
amend, revise, suspend, or discontinue the Plan in whole or in part; provided,
however, that no amendment for which shareholder approval is required either (i)
by any securities exchange or inter-dealer quotation system on which the Common
Stock is listed or traded or (ii) in order for the Plan and Incentives awarded
under the Plan to continue to comply with Sections 162(m), 421, and 422 of the
Code, including any successors to such Sections, or other Applicable Law, shall
be effective unless such amendment shall be approved by the requisite vote of
the shareholders of the Company entitled to vote thereon.  Any such amendment
shall, to the extent deemed necessary or advisable by the Committee, be
applicable to any outstanding Incentives theretofore granted under the Plan,
notwithstanding any contrary provisions contained in any Award Agreement.  In
the event of any such amendment to the Plan, the holder of any Incentive
outstanding under the Plan shall, upon request of the Committee and as a
condition to the exercisability thereof, execute a conforming amendment in the
form prescribed by the Committee to any Award Agreement relating
thereto.  Notwithstanding anything contained in this Plan to the contrary,
unless required by law, no action contemplated or permitted by this Article 9
shall adversely affect any rights of Participants or obligations of the Company
to Participants with respect to any Incentive theretofore granted under the Plan
without the consent of the affected Participant.
 
 
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ARTICLE 10
TERM
 
The Plan shall be effective from the date that this Plan is approved by the
Board.  Unless sooner terminated by action of the Board, the Plan will terminate
on November 8, 2021, but Incentives granted before that date will continue to be
effective in accordance with their terms and conditions.
 
ARTICLE 11
CAPITAL ADJUSTMENTS
 
In the event that any dividend or other distribution (whether in the form of
cash, Common Stock, other securities, or other property), recapitalization,
stock split, reverse stock split, rights offering, reorganization, merger,
consolidation, split-up, spin-off, split-off, combination, subdivision,
repurchase, or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event
affects the fair value of an Award, then the Committee shall adjust any or all
of the following so that the fair value of the Award immediately after the
transaction or event is equal to the fair value of the Award immediately prior
to the transaction or event (i) the number of shares and type of Common Stock
(or the securities or property) which thereafter may be made the subject of
Awards, (ii) the number of shares and type of Common Stock (or other securities
or property) subject to outstanding Awards, (iii) the number of shares and type
of Common Stock (or other securities or property) specified as the annual
per-participant limitation under Section 5.1 of the Plan, (iv) the Option Price
of each outstanding Award, (v) the amount, if any, the Company pays for
forfeited shares of Common Stock in accordance with Section 6.4, and (vi) the
number of or SAR Price of shares of Common Stock then subject to outstanding
SARs previously granted and unexercised under the Plan to the end that the same
proportion of the Company’s issued and outstanding shares of Common Stock in
each instance shall remain subject to exercise at the same aggregate SAR Price;
provided however, that the number of shares of Common Stock (or other securities
or property) subject to any Award shall always be a whole
number.  Notwithstanding the foregoing, no such adjustment shall be made or
authorized to the extent that such adjustment would cause the Plan or any Stock
Option to violate Section 422 of the Code or Section 409A of the Code.  Such
adjustments shall be made in accordance with the rules of any securities
exchange, stock market, or stock quotation system to which the Company is
subject.
 
Upon the occurrence of any such adjustment, the Company shall provide notice to
each affected Participant of its computation of such adjustment which shall be
conclusive and shall be binding upon each such Participant.
 
 
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ARTICLE 12
RECAPITALIZATION, MERGER AND CONSOLIDATION
 
12.1 No Effect on Company’s Authority.  The existence of this Plan and
Incentives granted hereunder shall not affect in any way the right or power of
the Company or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company’s capital
structure and its business, or any Change in Control, or any merger or
consolidation of the Company, or any issuance of bonds, debentures, preferred or
preference stocks ranking prior to or otherwise affecting the Common Stock or
the rights thereof (or any rights, options, or warrants to purchase same), or
the dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
 
12.2 Conversion of Incentives Where Company Survives.  Subject to any required
action by the shareholders and except as otherwise provided by Section 12.4
hereof or as may be required to comply with Section 409A of the Code and the
regulations or other guidance issued thereunder, if the Company shall be the
surviving or resulting corporation in any merger, consolidation or share
exchange, any Incentive granted hereunder shall pertain to and apply to the
securities or rights (including cash, property, or assets) to which a holder of
the number of shares of Common Stock subject to the Incentive would have been
entitled.
 
12.3 Exchange or Cancellation of Incentives Where Company Does Not
Survive.  Except as otherwise provided by Section 12.4 hereof or as may be
required to comply with Section 409A of the Code and the regulations or other
guidance issued thereunder, in the event of any merger, consolidation or share
exchange pursuant to which the Company is not the surviving or resulting
corporation, there shall be substituted for each share of Common Stock subject
to the unexercised portions of outstanding Incentives, that number of shares of
each class of stock or other securities or that amount of cash, property, or
assets of the surviving, resulting or consolidated company which were
distributed or distributable to the shareholders of the Company in respect to
each share of Common Stock held by them, such outstanding Incentives to be
thereafter exercisable for such stock, securities, cash, or property in
accordance with their terms.
 
12.4 Cancellation of Incentives.  Notwithstanding the provisions of Sections
12.2 and 12.3  hereof, and except as may be required to comply with Section 409A
of the Code and the regulations or other guidance issued thereunder, all
Incentives granted hereunder may be canceled by the Company, in its sole
discretion, as of the effective date of any Change in Control, merger,
consolidation or share exchange, or any issuance of bonds, debentures, preferred
or preference stocks ranking prior to or otherwise affecting the Common Stock or
the rights thereof (or any rights, options, or warrants to purchase same), or of
any proposed sale of all or substantially all of the assets of the Company, or
of any dissolution or liquidation of the Company, by either:
 
(a) giving notice to each holder thereof or his personal representative of its
intention to cancel those Incentives for which the issuance of shares of Common
Stock involved payment by the Participant for such shares, and permitting the
purchase during the thirty (30) day period next preceding such effective date of
any or all of the shares of Common Stock subject to such outstanding Incentives,
including in the Board’s discretion some or all of the shares as to which such
Incentives would not otherwise be vested and exercisable; or
 
(b) in the case of Incentives that are either (i) settled only in shares of
Common Stock, or (ii) at the election of the Participant, settled in shares of
Common Stock, paying the holder thereof an amount equal to a reasonable estimate
of the difference between the net amount per share payable in such transaction
or as a result of such transaction, and the price per share of such Incentive to
be paid by the Participant (hereinafter the “Spread”), multiplied by the number
of shares subject to the Incentive.  In cases where the shares constitute, or
would after exercise, constitute Restricted Stock, the Company, in its
discretion, may include some or all of those shares in the calculation of the
amount payable hereunder.  In estimating the Spread, appropriate adjustments to
give effect to the existence of the Incentives shall be made, such as deeming
the Incentives to have been exercised, with the Company receiving the exercise
price payable thereunder, and treating the shares receivable upon exercise of
the Incentives as being outstanding in determining the net amount per share.  In
cases where the proposed transaction consists of the acquisition of assets of
the Company, the net amount per share shall be calculated on the basis of the
net amount receivable with respect to shares of Common Stock upon a distribution
and liquidation by the Company after giving effect to expenses and charges,
including but not limited to taxes, payable by the Company before such
liquidation could be completed.
 
 
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(c) An Award that by its terms would be fully vested or exercisable upon a
Change in Control will be considered vested or exercisable for purposes of
Section 12.4(a) hereof.
 
ARTICLE 13
LIQUIDATION OR DISSOLUTION
 
Subject to Section 12.4 hereof, in case the Company shall, at any time while any
Incentive under this Plan shall be in force and remain unexpired, (i) sell all
or substantially all of its property, or (ii) dissolve, liquidate, or wind up
its affairs, then each Participant shall be entitled to receive, in lieu of each
share of Common Stock of the Company which such Participant would have been
entitled to receive under the Incentive, the same kind and amount of any
securities or assets as may be issuable, distributable, or payable upon any such
sale, dissolution, liquidation, or winding up with respect to each share of
Common Stock of the Company.  If the Company shall, at any time prior to the
expiration of any Incentive, make any partial distribution of its assets, in the
nature of a partial liquidation, whether payable in cash or in kind (but
excluding the distribution of a cash dividend payable out of earned surplus and
designated as such) and an adjustment is determined by the Committee to be
appropriate to prevent the dilution of the benefits or potential benefits
intended to be made available under the Plan, then the Committee shall, in such
manner as it may deem equitable, make such adjustment in accordance with the
provisions of Article 11 hereof.
 
ARTICLE 14
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER ENTITIES
 
Incentives may be granted under the Plan from time to time in substitution for
similar instruments held by employees, independent contractors or directors of a
corporation, partnership, or limited liability company who become or are about
to become Employees, Contractors or Outside Directors of the Company or any
Subsidiary as a result of a merger or consolidation of the employing corporation
with the Company, the acquisition by the Company of equity of the employing
entity, or any other similar transaction pursuant to which the Company becomes
the successor employer.  The terms and conditions of the substitute Incentives
so granted may vary from the terms and conditions set forth in this Plan to such
extent as the Committee at the time of grant may deem appropriate to conform, in
whole or in part, to the provisions of the Incentives in substitution for which
they are granted.
 
 
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ARTICLE 15
MISCELLANEOUS PROVISIONS
 
15.1 Investment Intent.  The Company may require that there be presented to and
filed with it by any Participant under the Plan, such evidence as it may deem
necessary to establish that the Incentives granted or the shares of Common Stock
to be purchased or transferred are being acquired for investment and not with a
view to their distribution.
 
15.2 No Right to Continued Employment.  Neither the Plan nor any Incentive
granted under the Plan shall confer upon any Participant any right with respect
to continuance of employment by the Company or any Subsidiary.
 
15.3 Indemnification of Board and Committee.  No member of the Board or the
Committee, nor any officer or Employee of the Company acting on behalf of the
Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board and the Committee, each officer of the
Company, and each Employee of the Company acting on behalf of the Board or the
Committee shall, to the extent permitted by law, be fully indemnified and
protected by the Company in respect of any such action, determination, or
interpretation.
 
15.4 Effect of the Plan.  Neither the adoption of this Plan nor any action of
the Board or the Committee shall be deemed to give any person any right to be
granted an Award or any other rights except as may be evidenced by an Award
Agreement, or any amendment thereto, duly authorized by the Committee and
executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.
 
15.5 Compliance With Other Laws and Regulations.  Notwithstanding anything
contained herein to the contrary, the Company shall not be required to sell or
issue shares of Common Stock under any Incentive if the issuance thereof would
constitute a violation by the Participant or the Company of any provisions of
any law or regulation of any governmental authority or any national securities
exchange or inter-dealer quotation system or other forum in which shares of
Common Stock are quoted or traded (including without limitation Section 16 of
the Exchange Act and Section 162(m) of the Code); and, as a condition of any
sale or issuance of shares of Common Stock under an Incentive, the Committee may
require such agreements or undertakings, if any, as the Committee may deem
necessary or advisable to assure compliance with any such law or
regulation.  The Plan, the grant and exercise of Incentives hereunder, and the
obligation of the Company to sell and deliver shares of Common Stock, shall be
subject to all applicable federal and state laws, rules and regulations and to
such approvals by any government or regulatory agency as may be required.
 
15.6 Foreign Participation.  To assure the viability of Awards granted to
Participants employed in foreign countries, the Committee may provide for such
special terms as it may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom.  Moreover, the Committee may
approve such supplements to, or amendments, restatements or alternative versions
of, this Plan as it determines is necessary or appropriate for such
purposes.  Any such amendment, restatement or alternative versions that the
Committee approves for purposes of using this Plan in a foreign country will not
affect the terms of this Plan for any other country.
 
15.7 Tax Requirements.  The Company or, if applicable, any Subsidiary (for
purposes of this Section 15.7, the term “Company” shall be deemed to include any
applicable Subsidiary), shall have the right to deduct from all amounts paid in
cash or other form in connection with the Plan, any Federal, state, local, or
other taxes required by law to be withheld in connection with an Award granted
under this Plan.  The Company may, in its sole discretion, also require the
Participant receiving shares of Common Stock issued under the Plan to pay the
Company the amount of any taxes that the Company is required to withhold in
connection with the Participant’s income arising with respect to the
Award.  Such payments shall be required to be made when requested by Company and
may be required to be made prior to the delivery of any certificate representing
shares of Common Stock.  Such payment may be made (i) by the delivery of cash to
the Company in an amount that equals or exceeds (to avoid the issuance of
fractional shares under (iii) below) the required tax withholding obligations of
the Company; (ii) if the Company, in its sole discretion, so consents in
writing, the actual delivery by the exercising Participant to the Company of
shares of Common Stock that the Participant has not acquired from the Company
within six (6) months prior to the date of exercise, which shares so delivered
have an aggregate Fair Market Value that equals or exceeds (to avoid the
issuance of fractional shares under (iii) below) the required tax withholding
payment; (iii) if the Company, in its sole discretion, so consents in writing,
the Company’s withholding of a number of shares to be delivered upon the
exercise of the Stock Option, which shares so withheld have an aggregate fair
market value that equals (but does not exceed) the required tax withholding
payment; or (iv) any combination of (i), (ii), or (iii).  The Company may, in
its sole discretion, withhold any such taxes from any other cash remuneration
otherwise paid by the Company to the Participant.  The Committee may in the
Award Agreement impose any additional tax requirements or provisions that the
Committee deems necessary or desirable.
 
 
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15.8 Assignability.  Incentive Stock Options may not be transferred, assigned,
pledged, hypothecated or otherwise conveyed or encumbered other than by will or
the laws of descent and distribution and may be exercised during the lifetime of
the Participant only by the Participant or the Participant’s legally authorized
representative, and each Award Agreement in respect of an Incentive Stock Option
shall so provide.  The designation by a Participant of a beneficiary will not
constitute a transfer of the Stock Option.  The Committee may waive or modify
any limitation contained in the preceding sentences of this Section 15.8 that is
not required for compliance with Section 422 of the Code.
 
Except as otherwise provided herein, Nonqualified Stock Options and SARs may not
be transferred, assigned, pledged, hypothecated or otherwise conveyed or
encumbered other than by will or the laws of descent and distribution.  The
Committee may, in its discretion, authorize all or a portion of a Nonqualified
Stock Option or SAR to be granted to a Participant on terms which permit
transfer by such Participant to (i) the spouse (or former spouse), children or
grandchildren of the Participant (“Immediate Family Members”), (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members, (iii) a
partnership in which the only partners are (1) such Immediate Family Members
and/or (2) entities which are controlled by Immediate Family Members, (iv) an
entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code
or any successor provision, or (v) a split interest trust or pooled income fund
described in Section 2522(c)(2) of the Code or any successor provision, provided
that (x) there shall be no consideration for any such transfer, (y) the Award
Agreement pursuant to which such Nonqualified Stock Option or SAR is granted
must be approved by the Committee and must expressly provide for transferability
in a manner consistent with this Section, and (z) subsequent transfers of
transferred Nonqualified Stock Options or SARs shall be prohibited except those
by will or the laws of descent and distribution.
 
Following any transfer, any such Nonqualified Stock Option and SAR shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Articles 8, 9, 11,
13 and 15 hereof the term “Participant” shall be deemed to include the
transferee.  The events of Termination of Service shall continue to be applied
with respect to the original Participant, following which the Nonqualified Stock
Options and SARs shall be exercisable or convertible by the transferee only to
the extent and for the periods specified in the Award Agreement.  The Committee
and the Company shall have no obligation to inform any transferee of a
Nonqualified Stock Option or SAR of any expiration, termination, lapse or
acceleration of such Stock Option or SAR.  The Company shall have no obligation
to register with any federal or state securities commission or agency any Common
Stock issuable or issued under a Nonqualified Stock Option or SAR that has been
transferred by a Participant under this Section 15.8.
 
 
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15.9 Use of Proceeds.  Proceeds from the sale of shares of Common Stock pursuant
to Incentives granted under this Plan shall constitute general funds of the
Company.
 
15.10 Legend.  Each certificate representing shares of Restricted Stock issued
to a Participant shall bear the following legend, or a similar legend deemed by
the Company to constitute an appropriate notice of the provisions hereof (any
such certificate not having such legend shall be surrendered upon demand by the
Company and so endorsed):
 
On the face of the certificate:
 
“Transfer of this stock is restricted in accordance with conditions printed on
the reverse of this certificate.”
 
On the reverse:
 
“The shares of stock evidenced by this certificate are subject to and
transferable only in accordance with that certain Alliqua, Inc. 2011 Long-Term
Incentive Plan, a copy of which is on file at the principal office of the
Company in New York, New York and that certain Restricted Stock Award Agreement
dated as of _______________, 20___, by and between the Company and
______________________.  No transfer or pledge of the shares evidenced hereby
may be made except in accordance with and subject to the provisions of said Plan
and Award Agreement.  By acceptance of this certificate, any holder, transferee
or pledgee hereof agrees to be bound by all of the provisions of said Plan and
Award Agreement.”
 
The following legend shall be inserted on a certificate evidencing Common Stock
issued under the Plan if the shares were not issued in a transaction registered
under the applicable federal and state securities laws:
 
“Shares of stock represented by this certificate have been acquired by the
holder for investment and not for resale, transfer or distribution, have been
issued pursuant to exemptions from the registration requirements of applicable
state and federal securities laws, and may not be offered for sale, sold or
transferred other than pursuant to effective registration under such laws, or in
transactions otherwise in compliance with such laws, and upon evidence
satisfactory to the Company of compliance with such laws, as to which the
Company may rely upon an opinion of counsel satisfactory to the Company.”

A copy of this Plan shall be kept on file in the principal office of the Company
in New York, New York.

***************
 
 
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IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of
December 19, 2011, by its President and Secretary pursuant to prior action taken
by the Board.
 
 

  ALLIQUA, INC.          
 
By:
/s/ Richard Rosenblum      Name:    Richard Rosenblum       Title:  President  
         

 
Attest:

 

By:  /s/ Steven Berger    Name:   Steven Berger 
                                                                           
Title: Secretary 
                                                                                          

 
 
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