Exhibit 10.1

 

PRECISION THERAPEUTICS INC.

AMENDED AND RESTATED 2012 STOCK INCENTIVE PLAN

Effective March 22, 2019

 

TABLE OF CONTENTS

 

 

1.   Purpose   3                 2.   Administration   3                 3.  
Eligible Participants   3                 4.   Types of Incentives   3          
      5.   Shares Subject to the Plan   3       5.1. Number of Shares   4      
5.2. Cancellation   4       5.3. Type of Common Stock   4       5.4. Limitation
on Certain Grants   4                 6.   Stock Options   4       6.1. Price  
4       6.2. Number   4       6.3. Duration and Time for Exercise   4       6.4.
Manner of Exercise   5       6.5. Incentive Stock Options   5                 7.
  Stock Appreciation Rights   6       7.1. Price   6       7.2. Number   6      
7.3. Duration   6       7.4. Exercise   6       7.5. Issuance of Shares Upon
Exercise   6                 8.   Stock Awards, Restricted Stock and Restricted
Stock Units   7       8.1. Number of Shares   7       8.2. Sale Price   7      
8.3. Restrictions   7       8.4. Enforcement of Restrictions   7       8.5. End
of Restrictions   7       8.6. Rights of Holders of Restricted Stock and
Restricted Stock Units   8       8.7. Settlement of Restricted Stock Units   8  
    8.8. Dividend Equivalents   8                 9.   Performance Awards   8  
    9.1. Performance Conditions   8       9.2. Performance Awards Granted to
Designated Covered Employees   8  

 

 

 

    9.3. Written Determinations   9       9.4. Status of Performance Awards
Under Code Section 162(m)   10                              

10.   General   10       10.1. Plan Effective Date and Shareholder Approval;
Termination of Plan   10       10.2. Duration   10       10.3.
Non-transferability of Incentives   10       10.4. Effect of Termination or
Death   11       10.5. Restrictions under Securities Laws   11       10.6.
Adjustment   11       10.7. Incentive Plans and Agreements   11       10.8.
Withholding   11       10.9. No Continued Employment, Engagement or Right to
Corporate Assets   12       10.10. Payments Under Incentives   12       10.11.
Amendment of the Plan   12       10.12. Amendment of Agreements for Incentives;
No Repricing   12       10.13. Vesting Upon Change In Control   12       10.14.
Sale, Merger, Exchange or Liquidation   14       10.15. Definition of Fair
Market Value   15       10.16. Definition of Grant Date   15       10.17.
Compliance with Code Section 409A   15       10.18. Prior Plan   16  

 

 

 

 

 

 

 

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PRECISION THERAPEUTICS INC.

AMENDED AND RESTATED 2012 STOCK INCENTIVE PLAN

 

1. Purpose. The purpose of the Amended and Restated 2012 Stock Incentive Plan
(the “Plan”) of Precision Therapeutics Inc. (the “Company”) is to increase
shareholder value and to advance the interests of the Company by furnishing a
variety of economic incentives (“Incentives”) designed to attract, retain and
motivate employees, certain key consultants and directors of the Company.
Incentives may consist of opportunities to purchase or receive shares of Common
Stock, $0.01 par value, of the Company (“Common Stock”) or other incentive
awards on terms determined under this Plan.

 

2. Administration. The Plan shall be administered by the board of directors of
the Company (the “Board of Directors”) or by a stock option or compensation
committee (the “Committee”) of the Board of Directors. The Committee shall
consist of not less than two directors of the Company and shall be appointed
from time to time by the Board of Directors. Each member of the Committee shall
be (a) a “non-employee director” within the meaning of Rule 16b-3 of the
Securities Exchange Act of 1934 (including the regulations promulgated
thereunder, the “1934 Act”) (a “Non-Employee Director”), and (b) shall be an
“outside director” within the meaning of Section 162(m) under the Internal
Revenue Code of 1986, as amended (the “Code”) and the regulations promulgated
thereunder (“Code Section 162(m)”). The Committee shall have complete authority
to award Incentives under the Plan, to interpret the Plan, and to make any other
determination which it believes necessary and advisable for the proper
administration of the Plan. The Committee’s decisions and matters relating to
the Plan shall be final and conclusive on the Company and its participants. If
at any time there is no stock option or compensation committee, the term
“Committee”, as used in the Plan, shall refer to the Board of Directors.
Notwithstanding the foregoing or anything else to the contrary contained in the
Plan, the Company’s Chief Executive Officer or Chief Financial Officer may, on a
discretionary basis and without the Committee’s review or approval, grant Stock
Options to purchase up to 25,000 shares each to employees of the Company who are
not officers of the Company. Such discretionary Stock Option grants shall not
exceed 100,000 shares in total in any fiscal year. Subject to the foregoing
limitations, the Chief Executive Officer or Chief Financial Officer shall
determine from time to time (i) the employees to whom grants will be made, (ii)
the number of shares to be granted and (iii) the terms and provisions of each
Stock Option (which need not be identical).

 

3. Eligible Participants. Officers of the Company, employees of the Company or
its subsidiaries, members of the Board of Directors, and consultants or other
independent contractors who provide services to the Company or its subsidiaries
shall be eligible to receive Incentives under the Plan when designated by the
Committee. Participants may be designated individually or by groups or
categories (for example, by pay grade) as the Committee deems appropriate.
Participation by officers of the Company or its subsidiaries and any performance
objectives relating to such officers must be approved by the Committee.
Participation by others and any performance objectives relating to others may be
approved by groups or categories (for example, by pay grade) and authority to
designate participants who are not officers and to set or modify such targets
may be delegated.

 

4. Types of Incentives. Incentives under the Plan may be granted in any one or a
combination of the following forms: (a) incentive stock options and
non-statutory stock options (Section 6); (b) stock appreciation rights (“SARs”)
(Section 7); (c) stock awards (Section 8); (d) restricted stock (Section 8);
restricted stock units (Section 8) and performance awards (Section 9). Subject
to the specific limitations provided in this Plan, payment of Incentives may be
in the form of cash, Common Stock or combinations thereof as the Committee shall
determine, and with such other restrictions as it may impose.

 

5. Shares Subject to the Plan.

 

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5.1. Number of Shares. Subject to adjustment as provided in Section 10.6, the
number of shares of Common Stock which may be issued under the Plan shall not
exceed 10,000,000 shares of Common Stock. In addition, as of the Effective Date,
any shares available in the reserve of the Prior Plan (as defined in Section
10.18) shall be added to the Plan share reserve and be available for issuance
under the Plan. Any Shares delivered under the Plan may consist, in whole or in
part, of authorized and unissued shares or treasury shares. Shares of Common
Stock that are issued under the Plan or are subject to Incentives awarded under
the Plan will be applied to reduce the maximum number of shares of Common Stock
remaining available for issuance under the Plan.

 

5.2. Cancellation. If an Incentive granted under the Plan or under the Prior
Plan expires or is terminated or canceled unexercised as to any shares of Common
Stock or forfeited or reacquired by the Company pursuant to rights reserved upon
issuance thereof, such forfeited and reacquired shares may again be issued under
the Plan pursuant to another Incentive. If any Shares subject to an Incentive
granted under the Plan or under the Prior Plan are withheld or applied as
payment in connection with the exercise of an Incentive (including the
withholding of Shares on the exercise of a stock option or the exercise of an
SAR that is settled in Shares) or the withholding or payment of taxes related
thereto, such Shares shall not again be available for grant under the Plan.

  

5.3. Type of Common Stock. Common Stock issued under the Plan in connection with
Incentives will be authorized and unissued shares.

 

5.4.       Limitation on Certain Grants. During any one fiscal year, no person
shall receive Incentives under the Plan that could result in that person
receiving, earning or acquiring, subject to the adjustments described in Section
10.6: (a) Stock Options and SARs for, in the aggregate, more than 2,000,000
shares of Common Stock; or (b) Performance Awards, in the aggregate, for more
than 1,000,000 shares of Common Stock or, if payable in cash, with a maximum
amount payable exceeding $2,000,000.

 

6. Stock Options. A stock option is a right to purchase shares of Common Stock
from the Company. Each stock option granted by the Committee under this Plan
shall be subject to the following terms and conditions:

 

6.1. Price. The option price per share shall be determined by the Committee,
subject to adjustment under Section 10.6. Notwithstanding the foregoing
sentence, the option price per share shall not be less than the Fair Market
Value (as defined in Section 10.15) of the Common Stock on the Grant Date (as
defined in Section 10.16).

  

6.2. Number. The number of shares of Common Stock subject to a stock option
shall be determined by the Committee, subject to adjustment as provided in
Section 10.6. The number of shares of Common Stock subject to a stock option
shall be reduced in the same proportion that the holder thereof exercises an SAR
if any SAR is granted in conjunction with or related to the stock option. If the
number of shares subject to a stock option is reduced pursuant to the preceding
sentence, the number of shares subject to the original grant will continue to
count against the limitation on grants under Section 5.4.

 

6.3. Duration and Time for Exercise. Subject to earlier termination as provided
in Section 10.3, the term of each stock option shall be determined by the
Committee but shall not exceed ten years and one day from the Grant Date. Each
stock option shall become exercisable at such time or times during its term as
shall be determined by the Committee at the time of grant. The Committee may
accelerate the exercisability of any stock option. Subject to the first sentence
of this paragraph, the Committee may extend the term of any stock option to the
extent provided in Section 10.4.

 

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6.4. Manner of Exercise. A stock option may be exercised, in whole or in part,
by giving written notice to the Company, specifying the number of shares of
Common Stock to be purchased and accompanied by the full purchase price for such
shares. The option price shall be payable (a) in United States dollars upon
exercise of the option and may be paid by cash, uncertified or certified check
or bank draft; (b) unless otherwise provided in the option agreement, by
delivery of shares of Common Stock in payment of all or any part of the option
price, which shares shall be valued for this purpose at the Fair Market Value on
the date such option is exercised; or (c) unless otherwise provided in the
option agreement, by instructing the Company to withhold from the shares of
Common Stock issuable upon exercise of the stock option shares of Common Stock
in payment of all or any part of the exercise price and/or any related
withholding tax obligations consistent with Section 10.8, which shares shall be
valued for this purpose at the Fair Market Value or in such other manner as may
be authorized from time to time by the Committee. Before the issuance of shares
of Common Stock upon the exercise of a stock option, a participant shall have no
rights as a shareholder.

 

6.5. Incentive Stock Options. Notwithstanding anything in the Plan to the
contrary, the following additional provisions shall apply to the grant of stock
options which are intended to qualify as Incentive Stock Options (as such term
is defined in Code Section 422):

 

(a)    The aggregate Fair Market Value (determined as of the time the option is
granted) of the shares of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by any participant during any
calendar year (under all of the Company’s plans) shall not exceed $100,000. The
determination will be made by taking Incentive Stock Options into account in the
order in which they were granted. If such excess only applies to a portion of an
Incentive Stock Option, the Committee, in its discretion, will designate which
shares will be treated as shares to be acquired upon exercise of an Incentive
Stock Option.

  

(b)   Any option agreement for an Incentive Stock Option under the Plan shall
contain such other provisions as the Committee shall deem advisable, but shall
in all events be consistent with and contain all provisions required in order to
qualify the options as Incentive Stock Options.

 

(c)    All Incentive Stock Options must be granted within ten years from the
earlier of the date on which this Plan was adopted by Board of Directors or the
date this Plan was approved by the shareholders.

 

(d)   Unless sooner exercised, all Incentive Stock Options shall expire no later
than ten years after the Grant Date.

 

(e)    The option price for Incentive Stock Options shall be not less than the
Fair Market Value of the Common Stock subject to the option on the Grant Date.

 

(f)    If Incentive Stock Options are granted to any participant who, at the
time such option is granted, would own (within the meaning of Code Section 422)
stock possessing more than 10% of the total combined voting power of all classes
of stock of the employer corporation or of its parent or subsidiary corporation,
(i) the option price for such Incentive Stock Options shall be not less than
110% of the Fair Market Value of the Common Stock subject to the option on the
Grant Date and (ii) such Incentive Stock Options shall expire no later than five
years after the Grant Date.

 

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7. Stock Appreciation Rights. An SAR is a right to receive, without payment to
the Company, a number of shares of Common Stock, the amount of which is
determined pursuant to the formula set forth in Section 7.5. An SAR may be
granted (a) with respect to any stock option granted under this Plan, either
concurrently with the grant of such stock option or at such later time as
determined by the Committee (as to all or any portion of the shares of Common
Stock subject to the stock option), or (b) alone, without reference to any
related stock option. Each SAR granted by the Committee under this Plan shall be
subject to the following terms and conditions:

 

7.1. Price. The exercise price per share of any SAR granted without reference to
a stock option shall be determined by the Committee, subject to adjustment under
Section 10.6. Notwithstanding the foregoing sentence, the exercise price per
share shall not be less than the Fair Market Value of the Common Stock on the
Grant Date.

 

7.2. Number. Each SAR granted to any participant shall relate to such number of
shares of Common Stock as shall be determined by the Committee, subject to
adjustment as provided in Section 10.6. In the case of an SAR granted with
respect to a stock option, the number of shares of Common Stock to which the SAR
relates shall be reduced in the same proportion that the holder of the option
exercises the related stock option. If the number of shares subject to an SAR is
reduced pursuant to the preceding sentence, the number of shares subject to the
original grant will continue to count against the limitation on grants under
Section 5.4.

 

7.3. Duration. Subject to earlier termination as provided in Section 10.3, the
term of each SAR shall be determined by the Committee but shall not exceed ten
years and one day from the Grant Date. Unless otherwise provided by the
Committee, each SAR shall become exercisable at such time or times, to such
extent and upon such conditions as the stock option, if any, to which it relates
is exercisable. The Committee may in its discretion accelerate the
exercisability of any SAR. Subject to the first sentence of this paragraph, the
Committee may extend the term of any SAR to the extent provided in Section 10.4.

  

7.4. Exercise. An SAR may be exercised, in whole or in part, by giving written
notice to the Company, specifying the number of SARs which the holder wishes to
exercise. Upon receipt of such written notice, the Company shall, within 90 days
thereafter, deliver to the exercising holder certificates for the shares of
Common Stock or cash or both, as determined by the Committee, to which the
holder is entitled pursuant to Section 7.5.

 

7.5. Issuance of Shares Upon Exercise. The number of shares of Common Stock
which shall be issuable upon the exercise of an SAR shall be determined by
dividing:

 

(a)    the number of shares of Common Stock as to which the SAR is exercised
multiplied by the amount of the appreciation in such shares (for this purpose,
the “appreciation” shall be the amount by which the Fair Market Value of the
shares of Common Stock subject to the SAR on the exercise date exceeds (1) in
the case of an SAR related to a stock option, the purchase price of the shares
of Common Stock under the stock option or (2) in the case of an SAR granted
alone, without reference to a related stock option, an amount which shall be
determined by the Committee at the time of grant, subject to adjustment under
Section 10.6); by

 

(b)   the Fair Market Value of a share of Common Stock on the exercise date.

 

No fractional shares of Common Stock shall be issued upon the exercise of an
SAR; instead, the holder of the SAR shall be entitled to receive a cash
adjustment equal to the same fraction of the Fair Market Value of a share of
Common Stock on the exercise date or to purchase the portion necessary to make a
whole share at its Fair Market Value on the date of exercise.

 

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8. Stock Awards, Restricted Stock and Restricted Stock Units. A stock award
consists of the transfer by the Company to a participant of shares of Common
Stock, with or without other payment therefor, as additional compensation for
services to the Company. A share of restricted stock consists of shares of
Common Stock which are sold or transferred by the Company to a participant at a
price, if any, determined by the Committee and subject to restrictions on their
sale or other transfer by the participant. Restricted stock units represent the
right to receive shares of Common Stock at a future date. The transfer of Common
Stock pursuant to stock awards, ,the transfer or sale of restricted stock and
restricted stock units shall be subject to the following terms and conditions:

 

8.1. Number of Shares. The number of shares to be transferred or sold by the
Company to a participant pursuant to a stock award or as restricted stock, or
the number of shares that may be issued pursuant to a restricted stock unit,
shall be determined by the Committee.

 

8.2. Sale Price. The Committee shall determine the price, if any, at which
shares of restricted stock shall be sold to a participant, which may vary from
time to time and among participants and which may be below the Fair Market Value
of such shares of Common Stock at the date of sale.

 

8.3. Restrictions. All shares of restricted stock transferred or sold by the
Company hereunder, and all restricted stock units granted hereunder, shall be
subject to such restrictions as the Committee may determine, including, without
limitation any or all of the following:

 

(a)    a prohibition against the sale, transfer, pledge or other encumbrance of
the shares of restricted stock, or the delivery of shares pursuant to restricted
stock units, such prohibition to lapse at such time or times as the Committee
shall determine (whether in annual or more frequent installments, at the time of
the death, disability or retirement of the holder of such shares, or otherwise);

 

(b)   a requirement that the holder of shares of restricted stock or restricted
stock units forfeit, or (in the case of shares sold to a participant) re-sell
back to the Company at his or her cost, all or a part of such shares in the
event of termination of his or her employment, service on the Board of Directors
or consulting engagement during any period in which such shares are subject to
restrictions; and

 

(c)    such other conditions or restrictions as the Committee may deem
advisable. 

 

8.4. Enforcement of Restrictions. In order to enforce the restrictions imposed
by the Committee pursuant to Section 8.3, the participant receiving restricted
stock or restricted stock units shall enter into an agreement with the Company
setting forth the conditions of the grant. Shares of restricted stock shall be
registered in the name of the participant and deposited, together with a stock
power endorsed in blank, with the Company. Each such certificate shall bear a
legend that refers to the Plan and the restrictions imposed under the applicable
agreement. At the Committee’s election, shares of restricted stock may be held
in book entry form subject to the Company’s instructions until any restrictions
relating to the restricted stock grant lapse.

 

8.5. End of Restrictions. Subject to Section 10.5, at the end of any time period
during which the shares of restricted stock are subject to forfeiture and
restrictions on transfer, such shares will be delivered free of all restrictions
to the participant or to the participant’s legal representative, beneficiary or
heir. Subject to Section 10.5, upon the lapse or waiver of restrictions
applicable to restricted stock units, or at a later time specified in the
agreement governing the grant of restricted stock units, any shares derived from
the restricted stock units shall be issued and delivered to the holder of the
restricted stock units.

 

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8.6. Rights of Holders of Restricted Stock and Restricted Stock Units. Subject
to the terms and conditions of the Plan, each participant receiving restricted
stock shall have all the rights of a shareholder with respect to shares of stock
during any period in which such shares are subject to forfeiture and
restrictions on transfer, including without limitation, the right to vote such
shares. Any holder of restricted stock units shall not be, and shall not have
rights and privileges of, a shareholder with respect to any shares that may be
derived from the restricted stock units unless and until such shares have been
issued.

  

8.7. Settlement of Restricted Stock Units.  Restricted stock units may be
satisfied by delivery of shares of stock, cash equal to the Fair Market Value of
the specified number of shares covered by the restricted stock units, or a
combination thereof, as determined by the Committee at the date of grant or
thereafter.

 

8.8. Dividend Equivalents. In connection with any award of restricted stock
units, the Committee may grant the right to receive cash, shares of stock or
other property equal in value to dividends paid with respect to the number of
shares represented by the restricted stock units (“Dividend Equivalents”).
Unless otherwise determined by the Committee at the date of grant, any Dividend
Equivalents that are granted with respect to any award of restricted stock units
shall be either (a) paid with respect to such restricted stock units at the
dividend payment date in cash or in shares of unrestricted stock having a Fair
Market Value equal to the amount of such dividends, or (b) deferred with respect
to such restricted stock units and the amount or value thereof automatically
deemed reinvested in additional restricted stock units until the time for
delivery of shares (if any) pursuant to the terms of the restricted stock unit
award.

 

9. Performance Awards.

 

9.1. Performance Conditions. The right of a participant to exercise or receive a
grant or settlement of any Incentive, and the timing thereof, may be subject to
such performance conditions as may be specified by the Committee (such an
Incentive is referred to as a “Performance Award”). The Committee may use such
business criteria and other measures of performance as it may deem appropriate
in establishing any performance conditions, and may exercise its discretion to
reduce the amounts payable under any Incentive subject to performance
conditions, except as limited under Section 9.2 hereof in the case of a
Performance Award intended to qualify under Code Section 162(m). If and to the
extent required under Code Section 162(m), any power or authority relating to a
Performance Award intended to qualify under Code Section 162(m), shall be
exercised by the Committee as the Committee and not the Board.

 

9.2. Performance Awards Granted to Designated Covered Employees. If and to the
extent the Committee determines that a Performance Award to be granted to a
person who is designated by the Committee as likely to be a covered employee
within the meaning of Code Section 162(m) and regulations thereunder (a “Covered
Employee”) should qualify as "performance-based compensation" for purposes of
Code Section 162(m), the grant, exercise, and/or settlement of such Performance
Award shall be contingent upon achievement of pre-established performance goals
and other terms set forth in this Section 9.2.

   

(a)    Performance Goals Generally. The performance goals for such Performance
Awards shall consist of one or more business criteria and a targeted level or
levels of performance with respect to each of such criteria, as specified by the
Committee consistent with this Section 9.2. Performance goals shall be objective
and shall otherwise meet the requirements of Code Section 162(m), including but
not limited to the requirement that the level or levels of performance targeted
by the Committee result in the achievement of performance goals being
"substantially uncertain" at the time the Performance Award is granted. The
Committee may determine that such Performance Awards shall be granted,
exercised, and/or settled upon achievement of any one performance goal, or that
two or more of the performance goals must be achieved as a condition to grant,
exercise, and/or settlement of such Performance Awards. Performance goals may
differ for Performance Awards granted to any one participant or to different
participants.

 

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(b)   Business Criteria. One or more of the following business criteria for the
Company, on a consolidated basis, and/or specified subsidiaries or business
units of the Company, shall be used exclusively by the Committee in establishing
performance goals for such Performance Awards as are intended to qualify as
“performance-based” compensation within the meaning of Section 162(m) of the
Code: earnings per share, operating income or profit, net income, gross or net
sales, expenses, expenses as a percentage of net sales, inventory turns, cash
flow (including, but not limited to, operating cash flow, free cash flow, cash
flow return on equity, and cash flow return on investment), gross profit,
margins, working capital, earnings before interest and tax (EBIT), earnings
before interest, tax, depreciation and amortization (EBITDA), return measures
(including, but not limited to, return on assets, capital, invested capital,
equity, sales, or revenue), revenue growth, share price (including, but not
limited to, growth measures and total shareholder return), operating efficiency,
productivity ratios, market share, economic value added and safety (or any of
the above criteria as compared to the performance of a group of comparable
companies, or any published or special index that the Committee, in its sole
discretion, deems appropriate), or the Committee may select criteria based on
the Company’s share price as compared to various stock market indices. The
Committee, in its sole discretion, may modify the performance goals if it
determines that circumstances have changed and modification is required to
reflect the original intent of the performance goals; provided, however, that no
such change or modification may be made to the extent it increases the amount of
compensation payable to any participant who is a Covered Employee.

 

(c)    Performance Period; Timing For Establishing Performance Goals.
Achievement of performance goals in respect of such Performance Awards shall be
measured over a performance period of up to ten (10) years, as specified by the
Committee. Performance goals shall be established not later than ninety (90)
days after the beginning of any performance period applicable to such
Performance Awards, or at such other date as may be required or permitted for
"performance-based compensation" under Code Section 162(m).

  

(d)   Settlement of Performance Awards; Other Terms. Settlement of such
Performance Awards shall be in cash, stock, other Incentives or other property,
in the discretion of the Committee. The Committee may, in its discretion, reduce
the amount of a settlement otherwise to be made in connection with such
Performance Awards. The Committee shall specify the circumstances in which such
Performance Awards shall be paid or forfeited in the event of termination of
continuous service by the participant before the end of a performance period or
the settlement date of Performance Awards.

 

9.3. Written Determinations. All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award pool or
potential individual Performance Awards, and as to the achievement of
performance goals relating to Performance Awards under Section 9.2(a), shall be
made in writing in the case of any Performance Award intended to qualify under
Code Section 162(m). The Committee may not delegate any responsibility relating
to such Performance Awards if and to the extent required to comply with Code
Section 162(m).

 

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9.4. Status of Performance Awards Under Code Section 162(m). It is the intent of
the Company that Performance Awards granted under this Section 9 to persons who
are designated by the Committee as likely to be Covered Employees shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m). Accordingly, the terms
of Sections 9.2, 9.3 and 9.4, including the definitions of Covered Employee and
other terms used therein, shall be interpreted in a manner consistent with Code
Section 162(m). Notwithstanding the foregoing, because the Committee cannot
determine with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the Committee, at
the time of grant of Performance Awards, as likely to be a Covered Employee with
respect to that fiscal year. If any provision of the Plan or any agreement
relating to such Performance Awards does not comply or is inconsistent with the
requirements of Code Section 162(m), such provision shall be construed or deemed
amended to the extent necessary to conform to such requirements.

 

10.       General.

 

10.1. Plan Effective Date and Shareholder Approval; Termination of Plan. The
Plan shall become effective on the Effective Date, subject to subsequent
approval within twelve (12) months of its adoption by the Board by shareholders
of the Company eligible to vote in the election of directors, by a vote
sufficient to meet the requirements of Code Sections 162(m) (if applicable) and
422, Rule 16b-3 under the Exchange Act (if applicable), applicable requirements
of any stock exchange, if any, and other laws, regulations, and obligations of
the Company applicable to the Plan. Awards may be granted subject to shareholder
approval, but may not be exercised or otherwise settled in the event shareholder
approval is not obtained. The Plan shall terminate no later than ten (10) years
from the date of the later of (x) the Effective Date and (y) the date an
increase in the number of shares reserved for issuance under the Plan is
approved by the Board (so long as such increase is also approved by the
shareholders).

 

10.2. Duration. The Plan shall remain in effect until all Incentives granted
under the Plan have either been satisfied by the issuance of shares of Common
Stock or the payment of cash or been terminated under the terms of the Plan and
all restrictions imposed on shares of Common Stock in connection with their
issuance under the Plan have lapsed. No Incentives may be granted under the Plan
after the tenth anniversary of the Effective Date of the Plan.

 

10.3. Non-transferability of Incentives. No stock option, SAR, restricted stock
or stock award may be transferred, pledged or assigned by the holder thereof
(except, in the event of the holder’s death, by will or the laws of descent and
distribution to the limited extent provided in the Plan or the Incentive, or
pursuant to a qualified domestic relations order as defined by the Code or Title
I of the Employee Retirement Income Security Act, or the rules thereunder), and
the Company shall not be required to recognize any attempted assignment of such
rights by any participant. Notwithstanding the preceding sentence, stock options
(other than stock options intended to qualify as Incentive Stock Options
pursuant to Section 6.5) may be transferred by the holder thereof to the
holder’s spouse, children, grandchildren or parents (collectively, the “Family
Members”), to trusts for the benefit of Family Members, to partnerships or
limited liability companies in which Family Members are the only partners or
shareholders, or to entities exempt from federal income taxation pursuant to
Code Section 501(c)(3). During a participant’s lifetime, a stock option may be
exercised only by him or her, by his or her guardian or legal representative or
by the transferees permitted by this Section 10.3.

 

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10.4. Effect of Termination or Death. If a participant ceases to be an employee
of or consultant to the Company for any reason, including death or disability,
any Incentives may be exercised or shall expire at such times as may be set
forth in the agreement, if any, applicable to the Incentive, or otherwise as
determined by the Committee; provided, however, the term of an Incentive may not
be extended beyond the term originally prescribed when the Incentive was
granted, unless the Incentive satisfies (or is amended to satisfy) the
requirements of Code Section 409A, including the rules and regulations
promulgated thereunder (together, “Code Section 409A”); and provided further
that the term of an Incentive may not be extended beyond the maximum term
permitted under this Plan.

 

10.5. Restrictions under Securities Laws. Notwithstanding anything in this Plan
to the contrary: (a) the Company may, if it shall determine it necessary or
desirable for any reason, at the time of award of any Incentive or the issuance
of any shares of Common Stock pursuant to any Incentive, require the recipient
of the Incentive, as a condition to the receipt thereof or to the receipt of
shares of Common Stock issued pursuant thereto, to deliver to the Company a
written representation of present intention to acquire the Incentive or the
shares of Common Stock issued pursuant thereto for his or her own account for
investment and not for distribution; and (b) if at any time the Company further
determines, in its sole discretion, that the listing, registration or
qualification (or any updating of any such document) of any Incentive or the
shares of Common Stock issuable pursuant thereto is necessary on any securities
exchange or under any federal or state securities or blue sky law, or that the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with the award of any Incentive,
the issuance of shares of Common Stock pursuant thereto, or the removal of any
restrictions imposed on such shares, such Incentive shall not be awarded or such
shares of Common Stock shall not be issued or such restrictions shall not be
removed, as the case may be, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.

  

10.6. Adjustment. In the event of any recapitalization, stock dividend, stock
split, combination of shares or other change in the Common Stock, the number of
shares of Common Stock then subject to the Plan, including shares subject to
outstanding Incentives, and the other numbers of shares of Common Stock provided
in the Plan, shall be adjusted in proportion to the change in outstanding shares
of Common Stock. In the event of any such adjustments, the purchase price of any
option, the performance objectives of any Incentive, and the shares of Common
Stock issuable pursuant to any Incentive shall be adjusted as and to the extent
appropriate, in the discretion of the Committee, to provide participants with
the same relative rights before and after such adjustment.

 

10.7. Incentive Plans and Agreements. Except in the case of stock awards, the
terms of each Incentive shall be stated in a plan or agreement approved by the
Committee. The Committee may also determine to enter into agreements with
holders of options to reclassify or convert certain outstanding options, within
the terms of the Plan, as Incentive Stock Options or as non-statutory stock
options and in order to eliminate SARs with respect to all or part of such
options and any other previously issued options. The Committee shall communicate
the key terms of each award to the participant promptly after the Committee
approves the grant of such award.

 

10.8. Withholding.

 

(a)    The Company shall have the right to withhold from any payments made under
the Plan or to collect as a condition of payment, any taxes required by law to
be withheld. If so permitted by the Committee at the time of the award of any
Incentive or at a later time, at any time when a participant is required to pay
to the Company an amount required to be withheld under applicable income tax
laws in connection with a distribution of Common Stock or upon exercise of an
option or SAR or upon vesting of restricted stock, the participant may satisfy
this obligation in whole or in part by electing (the “Election”) to have the
Company withhold, from the distribution or from such shares of restricted stock,
shares of Common Stock having a value up to the minimum amount of withholding
taxes required to be collected on the transaction. The value of the shares to be
withheld shall be based on the Fair Market Value of the Common Stock on the date
that the amount of tax to be withheld shall be determined (“Tax Date”).

 

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(b)   Each Election must be made before the Tax Date. The Committee may
disapprove of any Election, may suspend or terminate the right to make
Elections, or may provide with respect to any Incentive that the right to make
Elections shall not apply to such Incentive. An Election is irrevocable.

 

10.9. No Continued Employment, Engagement or Right to Corporate Assets. No
participant under the Plan shall have any right, because of his or her
participation, to continue in the employ of the Company for any period of time
or to any right to continue his or her present or any other rate of
compensation. Nothing contained in the Plan shall be construed as giving an
employee, a consultant, such persons’ beneficiaries or any other person any
equity or interests of any kind in the assets of the Company or creating a trust
of any kind or a fiduciary relationship of any kind between the Company and any
such person.

 

10.10. Payments Under Incentives. Payment of cash or distribution of any shares
of Common Stock to which a participant is entitled under any Incentive shall be
made as provided in the Incentive. Except as permitted under Section 10.17,
payments and distributions may not be deferred under any Incentive unless the
deferral complies with the requirements of Code Section 409A.

 

10.11. Amendment of the Plan. The Board of Directors may amend or discontinue
the Plan at any time. However, no such amendment or discontinuance shall
adversely change or impair, without the consent of the recipient, an Incentive
previously granted. Further, no such amendment shall, without approval of the
shareholders of the Company, (a) increase the maximum number of shares of Common
Stock which may be issued to all participants under the Plan, (b) change or
expand the types of Incentives that may be granted under the Plan, (c) change
the class of persons eligible to receive Incentives under the Plan, or (d)
materially increase the benefits accruing to participants under the Plan.

 

10.12. Amendment of Agreements for Incentives; No Repricing. Except as otherwise
provided in this Section 10.12 or Section 10.17, the terms of an existing
Incentive may be amended by agreement between the Committee and the participant.
Notwithstanding the foregoing sentence, in the case of a stock option or SAR, no
such amendment shall (a) without shareholder approval, lower the exercise price
of a previously granted stock option or SAR, cancel a stock option or SAR when
the exercise price per share exceeds the Fair Market Value of the underlying
shares in exchange for another Incentive or cash, or take any other action with
respect to a stock option that may be treated as a repricing under the federal
securities laws or generally accepted accounting principles; or (b) extend the
term of the Incentive, except as provided in Sections 10.4 and 10.17.

  

10.13. Vesting Upon Change In Control. Upon the occurrence of an event
satisfying the definition of “Change in Control” with respect to a particular
Incentive, unless otherwise provided in the agreement for the Incentive, such
Incentive shall become vested and all restrictions shall lapse. The Committee
may, in its discretion, include such further provisions and limitations in any
agreement for an Incentive as it may deem desirable. For purposes of this
Section 10.13, “Change in Control” means the occurrence of any one or more of
the following:

 

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

 

(b)   any transaction or series of related transactions pursuant to which any
person or any group of persons comprising a “group” within the meaning of Rule
13d-5(b)(1) under the Securities Exchange Act of 1934, as amended (other than
the Company or a person that, prior to such transaction or series of related
transactions, directly or indirectly controls, is controlled by or is under
common control with, the Company) becomes directly or indirectly the beneficial
owner (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended) of securities possessing (or convertible into or exercisable for
securities possessing) thirty percent (30%) or more of the total combined voting
power of the securities (determined by the power to vote with respect to the
elections of Board members) outstanding immediately after the consummation of
such transaction or series of related transactions, whether such transaction
involves a direct issuance from the Company or the acquisition of outstanding
securities held by one or more of the Company’s shareholders;

 

(c)    there is consummated a sale, lease, exclusive license, or other
disposition of all or substantially all of the consolidated assets of the
Company and its subsidiaries, other than a sale, lease, license, or other
disposition of all or substantially all of the consolidated assets of the
Company and its subsidiaries to an entity, more than fifty percent (50%) of the
combined voting power of the voting securities of which are owned by
shareholders of the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale, lease, license, or
other disposition; or

 

(d)   individuals who, on the Effective Date, are Directors (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Directors;
provided, however, that if the appointment or election (or nomination for
election) of any new Director was approved or recommended by a majority vote of
the members of the Incumbent Board then still in office, such new member shall,
for purposes of this Plan, be considered as a member of the Incumbent Board.

  

Notwithstanding the foregoing or any other provision of this Plan, (i) the
definition of Change in Control (or any analogous term) in an individual written
agreement between the Company and the Participant shall supersede the foregoing
definition with respect to Incentives subject to such agreement (it being
understood, however, that if no definition of Change in Control or any analogous
term is set forth in such an individual written agreement, the foregoing
definition shall apply); (ii) for clarification, a “Change in Control” shall not
be deemed to have occurred for purposes of the foregoing clause (b) as the
result of the acquisition of additional securities by Dr. Samuel Herschkowitz,
Joshua Kornberg or their affiliates; and (iii) a “Change in Control” shall not
be deemed to have occurred for purposes of the foregoing clause (b) solely as
the result of a repurchase or other acquisition of securities by Company which,
by reducing the number of shares of Voting Securities outstanding, increases the
proportionate number of Voting Securities beneficially owned by any person to
thirty percent (30%) or more of the combined voting power of all of the then
outstanding Voting Securities; provided, however, that if any person referred to
in this clause (iii) shall thereafter become the beneficial owner of any
additional shares of Voting Securities (other than pursuant to a stock split,
stock dividend, or similar transaction or as a result of an acquisition of
securities directly from Company) and immediately thereafter beneficially owns
thirty percent (30%) or more of the combined voting power of all of the then
outstanding Voting Securities, then a “Change in Control” shall be deemed to
have occurred for purposes of the foregoing clause (b).

 

 13 

 

10.14. Sale, Merger, Exchange or Liquidation. Unless otherwise provided in the
agreement for an Incentive, in the event of an acquisition of the Company
through the sale of substantially all of the Company’s assets or through a
merger, exchange, reorganization or liquidation of the Company or a similar
event as determined by the Committee (collectively a “transaction”), the
Committee shall be authorized, in its sole discretion, to take any and all
action it deems equitable under the circumstances, including but not limited to
any one or more of the following:

 

(a)    providing that the Plan and all Incentives shall terminate and the
holders of (i) all outstanding vested options shall receive, in lieu of any
shares of Common Stock they would be entitled to receive under such options,
such stock, securities or assets, including cash, as would have been paid to
such participants if their options had been exercised and such participant had
received Common Stock immediately before such transaction (with appropriate
adjustment for the exercise price, if any), (ii) SARs that entitle the
participant to receive Common Stock shall receive, in lieu of any shares of
Common Stock each participant was entitled to receive as of the date of the
transaction pursuant to the terms of such Incentive, if any, such stock,
securities or assets, including cash, as would have been paid to such
participant if such Common Stock had been issued to and held by the participant
immediately before such transaction, and (iii) any Incentive under the
Employment Agreement which does not entitle the participant to receive Common
Stock shall be equitably treated as determined by the Committee.

 

(b)   providing that participants holding outstanding vested Common Stock based
Incentives shall receive, with respect to each share of Common Stock issuable
pursuant to such Incentives as of the effective date of any such transaction, at
the determination of the Committee, cash, securities or other property, or any
combination thereof, in an amount equal to the excess, if any, of the Fair
Market Value of such Common Stock on a date within ten days before the effective
date of such transaction over the option price or other amount owed by a
participant, if any, and that such Incentives shall be cancelled, including the
cancellation without consideration of all options that have an exercise price
below the per share value of the consideration received by the Company in the
transaction.

 

(c)    providing that the Plan (or replacement plan) shall continue with respect
to Incentives not cancelled or terminated as of the effective date of such
transaction and provide to participants holding such Incentives the right to
earn their respective Incentives on a substantially equivalent basis (taking
into account the transaction and the number of shares or other equity issued by
such successor entity) with respect to the equity of the entity succeeding the
Company by reason of such transaction.

 

(d)   to the extent that the vesting of any Incentives is not accelerated
pursuant to Section 10.13, providing that all unvested, unearned or restricted
Incentives, including but not limited to restricted stock for which restrictions
have not lapsed as of the effective date of such transaction, shall be void and
deemed terminated, or, in the alternative, for the acceleration or waiver of any
vesting, earning or restrictions on any Incentive.

  

 14 

 

The Board of Directors may restrict the rights of participants or the
applicability of this Section 10.14 to the extent necessary to comply with
Section 16(b) of the 1934 Act, the Code or any other applicable law or
regulation. The grant of an Incentive award pursuant to the Plan shall not limit
in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, exchange or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.

 

10.15. Definition of Fair Market Value. For purposes of this Plan, the “Fair
Market Value” of a share of Common Stock at a specified date shall, unless
otherwise expressly provided in this Plan, be the amount which the Committee
determines in good faith to be 100% of the fair market value of such a share as
of the date in question. Notwithstanding the foregoing:

 

(a)    If such shares are listed on a U.S. securities exchange, then Fair Market
Value shall be determined by reference to the last sale price of a share of
Common Stock on such U.S. securities exchange on the applicable date. If such
U.S. securities exchange is closed for trading on such date, or if the Common
Stock does not trade on such date, then the last sale price used shall be the
one on the date the Common Stock last traded on such U.S. securities exchange.

 

(b)   If such shares are publicly traded but are not listed on a U.S. securities
exchange, then Fair Market Value shall be determined by reference to the trading
price of a share of Common Stock on such date (or, if the applicable market is
closed on such date, the last date on which the Common Stock was publicly
traded), by a method consistently applied by the Committee.

 

(c)    If such shares are not publicly traded, then the Committee’s
determination will be based upon a good faith valuation of the Company’s Common
Stock as of such date, which shall be based upon such factors as the Committee
deems appropriate. The valuation shall be accomplished in a manner that complies
with Code Section 409A and shall be consistently applied to Incentives under the
Plan.

 

10.16. Definition of Grant Date. For purposes of this Plan, the “Grant Date” of
an Incentive shall be the date on which the Committee approved the award or, if
later, the date established by the Committee as the date of grant of the
Incentive.

 

10.17. Compliance with Code Section 409A.

 

(a)    Except to the extent such acceleration or deferral is permitted by the
requirements of Code Section 409A, neither the Committee nor a participant may
accelerate or defer the time or schedule of any payment of, or the amount
scheduled to be paid under, an Incentive that constitutes Deferred Compensation
(as defined in paragraph(d) below); provided, however, that payment shall be
permitted if it is in accordance with a “specified time” or “fixed schedule” or
on account of “separation from service,” “disability,” death, “change in
control” or “ unforeseeable emergency” (as those terms are defined under Code
Section 409A) that is specified in the agreement evidencing the Incentive.

 

(b)   Notwithstanding anything in this Plan, unless the agreement evidencing the
Incentive specifically provides otherwise, if a participant is treated as a
Specified Employee (as defined in paragraph (d) and as determined under Code
Section 409A by the Committee in good faith) as of the date of his or her
“separation from service” as defined for purposes of Code Section 409A, the
Company may not make payment to the participant of any Incentive that
constitutes Deferred Compensation, earlier than 6 months following the
participant’s separation from service (or if earlier, upon the Specified
Employee’s death), except as permitted under Code Section 409A. Any payments
that otherwise would be payable to the Specified Employee during the foregoing
6-month period will be accumulated and payment delayed until the first date
after the 6-month period. The Committee may specify in the Incentive agreement,
that the amount of the Deferred Compensation delayed under this paragraph shall
accumulate interest, earnings or Dividend Equivalents (as applicable) during the
period of such delay.

 

 15 

 

(c)    The Committee may, however, reform any provision in an Incentive that is
intended to comply with (or be exempt from) Code Section 409A, to maintain to
the maximum extent practicable the original intent of the applicable provision
without violating the provisions of Code Section 409A.

 

(d)   For purposes of this Section 10.17, "Deferred Compensation" means any
Incentive under this Plan that provides for the “deferral of compensation” under
a “nonqualified deferred compensation plan” (as those terms are defined under
Code Section 409A) and that would be subject to the taxes specified in Code
Section 409A(a)(1) if and to the extent that the Plan and the agreement
evidencing the Incentive do not meet or are not operated in compliance with the
requirements of paragraphs (a)(2), (a)(3) and (a)(4) of Code Section 409A .
Deferred Compensation shall not include any amount that is otherwise exempt from
the requirements of Code Section 409A. A “Specified Employee” means a
Participant who is a “key employee” as described in Code Section 416 (i)
(disregarding paragraph (5) thereof) at any time during the Company’s fiscal
year ending on January 31, or such other “identification date” that applies
consistently for all plans of the Company that provide “deferred compensation”
that is subject to the requirements of Code Section 409A. Each participant will
be identified as a Specified Employee in accordance with Code Section 409A,
including with respect to the merger of the Company with any other company or
any spin-off or similar transaction, and such identification shall apply for the
12-month period commencing on the first day of the fourth month following the
identification date. Notwithstanding the foregoing, no participant shall be a
Specified Employee unless the stock of the Company (or other member of a
“controlled group of corporations” as determined under Code Section 1563) is
publicly traded on an established securities market (or otherwise) as of the
date of the participant’s “separation from service” as defined in Code Section
409A.

 

10.18. Prior Plan. Notwithstanding the adoption of this Plan by the Board of
Directors and its approval by the shareholders, the Company’s 2008 Equity
Incentive Plan, as it has been amended from time to time (the “Prior Plan”),
shall remain in effect, and all grants and awards made under the Prior Plan
shall be governed by the terms of the Prior Plan. From and after the Effective
Date, no further grants and awards shall be made under the Prior Plan.

 

 

 

 

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