CHELSEA THERAPEUTICS INTERNATIONAL, LTD.

 

2004 STOCK PLAN, AS AMENDED

 

Approved by the Board: January 25 and June 5, 2012

Approved by the Stockholders: June 12, 2012

 

1.             Purpose. The purpose of 2004 Stock Plan, as amended (the “Plan”)
of Chelsea Therapeutics International, Ltd. (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, directors and consultants. Incentives may consist of
opportunities to purchase or receive shares of Common Stock, $0.0001 par value,
of the Company (“Common Stock”) on terms determined under this Plan, including
options granted hereunder that do not qualify as “incentive stock options”
(“ISOs”) or (Nonstatutory Stock Options, or “NSOs”).

 

2.             Administration. The Plan shall be administered by a committee of
the Board of Directors of the Company (the “Committee”). The Committee shall
consist of not less than two directors of the Company who shall be appointed
from time to time by the board of directors of the Company. Each member of the
Committee shall be a “non-employee director” within the meaning of Rule 16b-3 of
the Exchange Act of 1934, as amended (together with the rules and regulations
promulgated thereunder, the “Exchange Act”), and an “outside director” as
defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the
“Code”). The Committee shall have complete authority to determine all provisions
of all Incentives awarded under the Plan (as consistent with the terms of 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. No member of the Committee will
be liable for any action or determination made in good faith with respect to the
Plan or any Incentives granted under the Plan. The Committee will also have the
authority under the Plan to amend or modify the terms of any outstanding
Incentives in any manner; provided, however, that the amended or modified terms
are permitted by the Plan as then in effect and that any recipient of an
Incentive adversely affected by such amended or modified terms has consented to
such amendment or modification. No amendment or modification to an Incentive,
however, whether pursuant to this Section 2 or any other provision of the Plan,
will be deemed to be a re-grant of such Incentive for purposes of this Plan
(notwithstanding that such amendment or modification may be deemed to be a new
grant of an incentive stock option, as such term is defined in Section 422 of
the Code, under the Code). If at any time there is no Committee, then for
purposes of the Plan the term “Committee” shall mean the Company’s Board of
Directors.

 

3.             Eligible Participants. Employees of the Company or its
subsidiaries (including officers and employees of the Company or its
subsidiaries), directors and consultants, advisors or other independent
contractors who provide services to the Company or its subsidiaries (including
members of the Company’s scientific advisory board) shall become 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); and
(e) performance shares (Section 9). Only employees of the Company shall be
entitled to receive incentive stock options under Section 422 of the Code.

 

5.             Shares Subject to the Plan.

 

5.1.          Number of Shares. Subject to adjustment as provided in Section
11.6, the number of shares of Common Stock which may be issued under the Plan is
10,400,000 shares of Common Stock. Of such aggregate number of shares of Common
Stock that may be issued under the Plan, the maximum number of shares that may
be issued as incentive stock options under Section 422 of the Code is
10,400,000. Any shares of Common Stock available for issuance as incentive stock
options may be alternatively issued as other types of Incentives under the Plan.
Shares of Common Stock that are issued under the Plan or that are subject to
outstanding Incentives will be applied to reduce the maximum number of shares of
Common Stock remaining available for issuance under the Plan.

 

5.2.          Cancellation. To the extent that cash in lieu of shares of Common
Stock is delivered upon the exercise of an SAR pursuant to Section 7.4, the
Company shall be deemed, for purposes of applying the limitation on the number
of shares, to have issued the greater of the number of shares of Common Stock
which it was entitled to issue upon such exercise or on the exercise of any
related option. In the event that a stock option or SAR granted hereunder
expires or is terminated or canceled unexercised or unvested as to any shares of
Common Stock, such shares may not be reissued under the Plan either pursuant to
stock options, SARs or otherwise. In the event that shares of Common Stock are
issued as restricted stock or pursuant to a stock award and thereafter are
forfeited or reacquired by the Company pursuant to rights reserved upon issuance
thereof, such forfeited and reacquired shares may not be reissued under the
Plan, either as restricted stock, pursuant to stock awards or otherwise. Shares
of Common Stock which are withheld to pay the exercise price of an option and/or
any related withholding obligations shall not be available for issuance under
the Plan.

 

6.             Stock Options. A stock option is a right to purchase shares of
Common Stock from the Company. The Committee may designate whether an option is
to be considered an incentive stock option or a non-statutory stock option. To
the extent that any incentive stock option granted under the Plan ceases for any
reason to qualify as an “incentive stock option” for purposes of Section 422 of
the Code, such incentive stock option will continue to be outstanding for
purposes of the Plan but will thereafter be deemed to be a non-statutory stock
option. 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 11.6, subject to Section 6.5(e).

 

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6.2.          Number. The number of shares of Common Stock subject to the option
shall be determined by the Committee, subject to adjustment as provided in
Section 11.6. The number of shares of Common Stock subject to a stock option
shall be reduced in the same proportion that the holder thereof exercises a SAR
if any SAR is granted in conjunction with or related to the stock option.

6.3.          Duration and Time for Exercise. Subject to earlier termination as
provided in Section 11.4 and except for incentive stock options which shall be
subject to the provisions of Section 6.5, the term of each stock option shall be
determined by the Committee but shall not exceed ten years from the date of
grant. 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.

 

6.4.          Manner of Exercise. Subject to the conditions contained in this
Plan and in the agreement with the recipient evidencing such option, 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 exercise price shall
be payable (a) in United States dollars upon exercise of the option and may be
paid by cash; uncertified or certified check; bank draft; (b) at the discretion
of the Committee, by delivery of shares of Common Stock that are already owned
by the participant in payment of all or any part of the exercise price, which
shares shall be valued for this purpose at the Fair Market Value on the date
such option is exercised; or (c) at the discretion of the Committee, 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,
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. The
shares of Common Stock delivered by the participant pursuant to Section 6.4(b)
must have been held by the participant for a period of not less than six months
prior to the exercise of the option, unless otherwise determined by the
Committee. Prior to the issuance of shares of Common Stock upon the exercise of
a stock option, a participant shall have no rights as a shareholder. Except as
otherwise provided in the Plan, no adjustment will be made for dividends or
distributions with respect to such stock options as to which there is a record
date preceding the date the participant becomes the holder of record of such
shares, except as the Committee may determine in its discretion.

 

6.5.          Stock Options. Notwithstanding anything in the Plan to the
contrary, the following additional provisions shall apply to the grant of stock
options:

 

(a)            To the extent that 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 (as such term is defined in Section 422 of the
Code) are exercisable for the first time by any participant during any calendar
year (under the Plan and any other incentive stock option plans of the Company
or any subsidiary or parent corporation of the Company) shall exceed $100,000,
such excess portion of the incentive stock options will be treated as
Non-Statutory Stock Options; provided that this provision shall have no force or
effect to the extent that its inclusion in the Plan is not necessary for the
Incentive to qualify as incentive stock options pursuant to Section 422 of the
Code. The determination will be made by taking incentive stock options into
account in the order in which they were granted.

 

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(b)            Any incentive stock option certificate authorized 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 Company’s shareholders.

 

(d)            Unless sooner exercised, all incentive stock options shall expire
no later than 10 years after the date of grant. No incentive stock option may be
exercisable after ten (10) years from its date of grant (or five (5) years from
its date of grant if, at the time the incentive stock option is granted, the
Participant owns, directly or indirectly, more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company).

 

(e)            The exercise price for stock options shall be not less than 100%
of the Fair Market Value of the Common Stock subject thereto on the date of
grant; provided that the exercise price shall be 110% of the Fair Market Value
for incentive stock options if, at the time granted, the participant owns,
directly or indirectly, more than 10% of the total combined voting power of all
classes of stock of the Company or any parent or subsidiary corporation of the
Company.

 

7.             Stock Appreciation Rights. An SAR is a right to receive, without
payment to the Company, a number of shares of Common Stock, cash or any
combination thereof, the amount of which is determined pursuant to the formula
set forth in Section 7.4. 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.          Number; Exercise Price. 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 11.6. In the case of an
SAR granted with respect to a stock option, the number of shares of Common Stock
to which the SAR pertains shall be reduced in the same proportion that the
holder of the option exercises the related stock option. The exercise price of
an SAR will be determined by the Committee, in its discretion, at the date of
grant but may not be less than 100% of the Fair Market Value of the shares of
Common Stock subject thereto on the date of grant.

 

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7.2.          Duration. Subject to earlier termination as provided in Section
11.4, the term of each SAR shall be determined by the Committee but shall not
exceed ten years and one day from the date of grant. 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.

 

7.3.          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 7.4.

 

7.4.          Payment. Subject to the right of the Committee to deliver cash in
lieu of shares of Common Stock (which, as it pertains to officers and directors
of the Company, shall comply with all requirements of the Exchange Act), 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 exercise 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 11.6); by

 

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

 

In lieu of issuing shares of Common Stock upon the exercise of a SAR, the
Committee may elect to pay the holder of the SAR cash equal to the Fair Market
Value on the exercise date of any or all of the shares which would otherwise be
issuable. 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.

 

8.             Stock Awards and Restricted Stock. A stock award consists of the
transfer by the Company to a participant of shares of Common Stock, without
other payment therefor, as additional compensation for services to the Company.
The participant receiving a stock award will have all voting, dividend,
liquidation and other rights with respect to the shares of Common Stock issued
to a participant as a stock award under this Section 8 upon the participant
becoming the holder of record of such shares. 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 determined by the Committee (which price shall be at
least equal to the minimum price required by applicable law for the issuance of
a share of Common Stock) and subject to restrictions on their sale or other
transfer by the participant, which restrictions and conditions may be determined
by the Committee as long as such restrictions and conditions are not
inconsistent with the terms of the Plan. The transfer of Common Stock pursuant
to stock awards and the transfer and sale of restricted stock shall be subject
to the following terms and conditions:

 

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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
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 or granted 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
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, 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), provided that such prohibition shall not
lapse faster than 1/3 per year from the date of grant;

 

(b)            a requirement that the holder of shares of restricted stock
forfeit, or (in the case of shares sold to a participant) resell 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 or consulting engagement during any period
in which such shares are subject to restrictions; or

 

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

 

8.4.          Escrow. In order to enforce the restrictions imposed by the
Committee pursuant to Section 8.3, the participant receiving restricted stock
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 in substantially the
following form:

 

The transferability of this certificate and the shares of Common Stock
represented by it are subject to the terms and conditions (including conditions
of forfeiture) contained in the 2004 Stock Plan of Chelsea Therapeutics
International, Ltd., (the “Company”), as amended from time to time, and an
agreement entered into between the registered owner and the Company. A copy of
the 2004 Stock Plan, as amended from time to time, and the agreement is on file
in the office of the secretary of the Company.

 

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8.5.          End of Restrictions. Subject to Section 11.5, 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.

 

8.6.          Shareholder. 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. Dividends paid in cash or property
other than Common Stock with respect to shares of restricted stock shall be paid
to the participant currently.

 

9.             Performance Shares. A performance share consists of an award
which shall be paid in shares of Common Stock, as described below. The grant of
a performance share shall be subject to such terms and conditions as the
Committee deems appropriate, including the following:

 

9.1.          Performance Objectives. Each performance share will be subject to
performance objectives for the Company or one of its operating units to be
achieved by the participant before the end of a specified period. The number of
performance shares granted shall be determined by the Committee and may be
subject to such terms and conditions, as the Committee shall determine. If the
performance objectives are achieved, each participant will be paid in shares of
Common Stock or cash as determined by the Committee. If such objectives are not
met, each grant of performance shares may provide for lesser payments in
accordance with formulas established in the award.

 

9.2.          Not Shareholder. The grant of performance shares to a participant
shall not create any rights in such participant as a shareholder of the Company,
until the payment of shares of Common Stock with respect to an award.

 

9.3.          No Adjustments. No adjustment shall be made in performance shares
granted on account of cash dividends which may be paid or other rights which may
be issued to the holders of Common Stock prior to the end of any period for
which performance objectives were established.

 

9.4.          Expiration of Performance Share. If any participant’s employment
or consulting engagement with the Company is terminated for any reason other
than normal retirement, death or disability prior to the achievement of the
participant’s stated performance objectives, all the participant’s rights on the
performance shares shall expire and terminate unless otherwise determined by the
Committee. In the event of termination of employment or consulting by reason of
death, disability, or normal retirement, the Committee, in its own discretion
may determine what portions, if any, of the performance shares should be paid to
the participant.

 

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9.5           Vesting. In no event will performance shares vest less than one
year after the date of grant.

 

10.           Change of Control.

 

10.1         Change in Control. For purposes of this Section 10, a “Change in
Control” of the Company will mean the following:

 

(a)           the sale, lease, exchange or other transfer, directly or
indirectly, of substantially all of the assets of the Company (in one
transaction or in a series of related transactions) to a person or entity that
is not controlled by the Company;

 

(b)           the approval by the shareholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company;

 

(c)           any person not a shareholder of the Company on the date of the
Plan becomes after the effective date of the Plan the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (i)
20% or more, but not 50% or more, of the combined voting power of the Company’s
outstanding securities ordinarily having the right to vote at elections of
directors, unless the transaction resulting in such ownership has been approved
in advance by the Continuing Directors (as defined below), or (ii) 50% or more
of the combined voting power of the Company’s outstanding securities ordinarily
having the right to vote at elections of directors (regardless of any approval
by the Continuing Directors); provided that a traditional institutional or
venture capital financing transaction shall be excluded from this definition; or

 

(d)           a merger or consolidation to which the Company is a party if the
shareholders of the Company immediately prior to the effective date of such
merger or consolidation have “beneficial ownership” (as defined in Rule 13d-3
under the Exchange Act), immediately following the effective date of such merger
or consolidation, of securities of the surviving corporation representing (i)
50% or more, but less than 80%, of the combined voting power of the surviving
corporation’s then outstanding securities ordinarily having the right to vote at
elections of directors, unless such merger or consolidation has been approved in
advance by the Continuing Directors, or (ii) less than 50% of the combined
voting power of the surviving corporation’s then outstanding securities
ordinarily having the right to vote at elections of directors (regardless of any
approval by the Continuing Directors).

 

10.2         Continuing Directors. For purposes of this Section 10, “Continuing
Directors” of the Company will mean any individuals who are members of the Board
on the effective date of the Plan and any individual who subsequently becomes a
member of the Board whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the Continuing
Directors (either by specific vote or by approval of the Company’s proxy
statement in which such individual is named as a nominee for director without
objection to such nomination).

 

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10.3         Acceleration of Incentives. Unless otherwise resolved by the
Committee in its sole discretion at such time, if a Change in Control of the
Company occurs whereby the acquiring entity or successor to the Company does not
agree to assume the Incentives or replace them with substantially equivalent
incentive awards (as determined by the Committee in its reasonable discretion),
then (a) all outstanding options and SARs will vest and will become immediately
exercisable in full and, if not exercised on the date of the Change of Control,
will terminate on such date regardless of whether the participant to whom such
options or SARs have been granted remains in the employ or service of the
Company or any subsidiary of the Company or any acquiring entity or successor to
the Company; (b) the restrictions on all shares of restricted stock awards shall
lapse immediately; and (c) all performance shares criteria shall be deemed to be
met and payment made immediately.

 

10.4         Cash Payment for Options. If a Change in Control of the Company
occurs, then the Committee, if approved by the Committee in its sole discretion
either in an agreement evidencing an option at the time of grant or at any time
after the grant of an option, and without the consent of any participant
affected thereby, may determine that:

 

(a)           some or all participants holding outstanding options will receive,
with respect to some or all of the shares of Common Stock subject to such
options, as of the effective date of any such Change in Control of the Company,
cash in an amount equal to the excess of the Fair Market Value of such shares
immediately prior to the effective date of such Change in Control of the Company
over the exercise price per share of such options; and

 

(b)           any options as to which, as of the effective date of any such
Change in Control, the Fair Market Value of the shares of Common Stock subject
to such options is less than or equal to the exercise price per share of such
options, shall terminate as of the effective date of any such Change in Control.

 

If the Committee makes a determination as set forth in subparagraph (a) of this
Section 10.4, then as of the effective date of any such Change in Control of the
Company such options will terminate as to such shares and the participants
formerly holding such options will only have the right to receive such cash
payment(s). If the Committee makes a determination as set forth in subparagraph
(b) of this Section 10.4, then as of the effective date of any such Change in
Control of the Company such options will terminate, become void and expire as to
all unexercised shares of Common Stock subject to such options on such date, and
the participants formerly holding such options will have no further rights with
respect to such options.

 

11.           General.

 

11.1.        Effective Date. The Plan will become effective upon approval by the
Company’s board of directors.

 

11.2.        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 earlier of the tenth anniversary of the date of the adoption
of the Plan or the date the Plan is approved by the shareholders of the Company.

 

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11.3.        Non-transferability of Incentives. 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, unless approved by the Committee,
no stock option, SAR, restricted stock or performance award may be transferred,
pledged or assigned by the holder thereof, either voluntarily or involuntarily,
directly or indirectly, by operation of law or otherwise, and the Company shall
not be required to recognize any attempted assignment of such rights by any
participant. During a participant’s lifetime, an Incentive may be exercised only
by him or her or by his or her guardian or legal representative.

 

11.4.        Effect of Termination or Death. In the event that a participant
ceases to be an employee of or consultant to the Company, or the participants’
other service with the Company is terminated, for any reason, including death,
any Incentives may be exercised or shall expire at such times as may be
determined by the Committee in its sole discretion in the agreement evidencing
an Incentive. Notwithstanding the other provisions of this Section 11.4, upon a
participant’s termination of employment or other service with the Company and
all subsidiaries, the Committee may, in its sole discretion (which may be
exercised at any time on or after the date of grant, including following such
termination), cause options and SARs (or any part thereof) then held by such
participant to become or continue to become exercisable and/or remain
exercisable following such termination of employment or service and Restricted
Stock Awards, Performance Shares and Stock Awards then held by such participant
to vest and/or continue to vest or become free of transfer restrictions, as the
case may be, following such termination of employment or service, in each case
in the manner determined by the Committee; provided, however, that no Incentive
may remain exercisable or continue to vest beyond its expiration date. Any
incentive stock option that remains unexercised more than one (1) year following
termination of employment by reason of death or disability or more than three
(3) months following termination for any reason other than death or disability
will thereafter be deemed to be a Non-Statutory Stock Option.

 

11.5.        Additional Conditions. 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. Notwithstanding any other provision of the Plan or
any agreements entered into pursuant to the Plan, the Company will not be
required to issue any shares of Common Stock under this Plan, and a participant
may not sell, assign, transfer or otherwise dispose of shares of Common Stock
issued pursuant to any Incentives granted under the Plan, unless (a) there is in
effect with respect to such shares a registration statement under the Securities
Act of 1933, as amended (the “Securities Act”), and any applicable state or
foreign securities laws or an exemption from such registration under the
Securities Act and applicable state or foreign securities laws, and (b) there
has been obtained any other consent, approval or permit from any other
regulatory body which the Committee, in its sole discretion, deems necessary or
advisable. The Company may condition such issuance, sale or transfer upon the
receipt of any representations or agreements from the parties involved, and the
placement of any legends on certificates representing shares of Common Stock, as
may be deemed necessary or advisable by the Company in order to comply with such
securities laws or other restrictions. The Committee may restrict the rights of
participants to the extent necessary to comply with Section 16(b) of the
Exchange Act, the Internal Revenue 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.

 

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11.6.        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 restrictions, options or achievements of performance shares, 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.

 

11.7.        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.

 

11.8.        Withholding.

 

(a)           The Company shall have the right to (i) withhold and deduct from
any payments made under the Plan or from future wages of the participant (or
from other amounts that may be due and owing to the participant from the Company
or a subsidiary of the Company), or make other arrangements for the collection
of, all legally required amounts necessary to satisfy any and all foreign,
federal, state and local withholding and employment-related tax requirements
attributable to an Incentive, or (ii) require the participant promptly to remit
the amount of such withholding to the Company before taking any action,
including issuing any shares of Common Stock, with respect to an Incentive. 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, the
participant may satisfy this obligation in whole or in part by electing (the
“Election”) to have the Company withhold from the distribution shares of Common
Stock having a value up to the amount required to be withheld. 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 prior to 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.

 

(c)           If a participant is an officer or director of the Company within
the meaning of Section 16 of the Exchange Act, then an Election is subject to
the following additional restrictions:

 

(1)        No Election shall be effective for a Tax Date which occurs within six
months of the grant or exercise of the award, except that this limitation shall
not apply in the event death or disability of the participant occurs prior to
the expiration of the six-month period.

 

(2)        The Election must be made either six months prior to the Tax Date or
must be made during a period beginning on the third business day following the
date of release for publication of the Company’s quarterly or annual summary
statements of sales and earnings and ending on the twelfth business day
following such date.

 

(d)           If the option granted to a participant hereunder is an incentive
stock option, and if the participant sells or otherwise disposes of any of the
shares of Common Stock acquired pursuant to the incentive stock option on or
before the later of (1) the date two years after the date of grant, or (2) the
date one year after the date of exercise, the participant shall immediately
notify the Company in writing of such disposition. The participant agrees that
the participant may be subject to income tax withholding by the Company on the
compensation income recognized by the participant from the early disposition by
payment in cash or out of the current earnings paid to the participant.

 

11.9.        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 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 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.

 

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11.10.      Deferral Permitted. 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. Payment may be deferred at the option of the
participant if provided in the Incentive.

 

11.11.     No Repricing or Cash Buyouts. No Incentive may be repriced after its
issuance, whether by an adjustment to the individual or aggregate exercise or
purchase price, the aggregate amount of equity securities subject to the
Incentive, or otherwise. No Incentive that is not payable in cash may be
exchanged with the Company for cash, whether by cashless net exercise or
otherwise.

 

11.12.     Amendment of the Plan. The Board may amend, suspend or discontinue
the Plan at any time; provided, however, that no amendments to the Plan will be
effective without approval of the shareholders of the Company if shareholder
approval of the amendment is then required pursuant to Section 422 of the Code,
the regulations promulgated thereunder or the rules of any stock exchange or
Nasdaq or similar regulatory body. No termination, suspension or amendment of
the Plan may adversely affect any outstanding Incentive without the consent of
the affected participant; provided, however, that this sentence will not impair
the right of the Committee to take whatever action it deems appropriate under
Sections 2, 10 and 11 of the Plan.

 

11.13.     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 or
the board of directors of the Company determines in good faith in the exercise
of its reasonable discretion to be 100% of the fair market value of such a share
as of the date in question; provided, however, that notwithstanding the
foregoing, if such shares are listed on a U.S. securities exchange or are quoted
on the Nasdaq National Market System or Nasdaq SmallCap Stock Market (“Nasdaq”),
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 or Nasdaq on the
applicable date. If such U.S. securities exchange or Nasdaq 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 or Nasdaq.

 

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11.14.     Breach of Confidentiality, Assignment of Inventions, or Non-Compete
Agreements. Notwithstanding anything in the Plan to the contrary, in the event
that a participant materially breaches the terms of any confidentiality,
assignment of inventions, or non-compete agreement entered into with the Company
or any subsidiary of the Company, whether such breach occurs before or after
termination of such participant’s employment or other service with the Company
or any subsidiary, the Committee in its sole discretion may immediately
terminate all rights of the participant under the Plan and any agreements
evidencing an Incentive then held by the participant without notice of any kind.

 

11.15.     Governing Law. The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed exclusively in accordance
with the laws of the State of North Carolina, notwithstanding the conflicts of
laws principles of any jurisdictions.

 

11.16.     Successors and Assigns. The Plan will be binding upon and inure to
the benefit of the successors and permitted assigns of the Company and the
participants in the Plan.

 

 

 

 

 

Amended by the Board on January 25 and June 5, 2012

 

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