Exhibit 10.1

 

LPATH, INC.

AMENDED AND RESTATED 2005 EQUITY INCENTIVE PLAN

 

ARTICLE ONE

GENERAL PROVISIONS

 

I.             PURPOSE OF THE PLAN

 

This Amended and Restated 2005 Equity Incentive Plan is intended to promote the
interests of Lpath, Inc., a Nevada corporation, by providing eligible persons in
the Corporation’s employ or service with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to continue in such employ or service.

 

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

 

II.            STRUCTURE OF THE PLAN

 

The Plan shall permit, through the Option Grant Program, the Stock Issuance
Program, and the Award Grant Program, the grant of options, stock appreciation
rights, restricted stock, restricted stock units, performance shares and
performance units.

 

III.          ADMINISTRATION OF THE PLAN

 

A.            The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.
Either the Board or the Committee thus designated by the Board is hereinafter
referred to as the “Plan Administrator.”

 

B.            The Plan Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the Plan and any
outstanding options or stock issuances thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator shall be final and binding on all
parties who have an interest in the Plan or any option or stock issuance
thereunder.

 

C.            The Plan Administrator will have the authority, in its discretion
to: to determine the Fair Market Value; to select the individuals eligible to
receive Awards hereunder; to determine the number of shares of Common Stock to
be covered by each Award granted hereunder; to approve forms of Award Agreements
for use under the Plan; to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Awards may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Award or the shares of Common Stock
relating thereto, based in each case on such factors as the Plan Administrator
will determine; to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan; to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of satisfying applicable foreign laws; to
modify or amend each Award, including but not limited to the discretionary
authority to extend the post-termination exercisability period of Awards and to
extend the maximum term of an option; to allow Participants to satisfy
withholding tax obligations in such manner as prescribed in the Plan; to
authorize any person to execute on behalf of the Corporation any instrument
required to effect the grant of an Award previously granted by the Plan
Administrator; to allow a Participant to defer the receipt of the payment of
cash or the delivery of Shares that would otherwise be due to such Participant
under an Award pursuant to such procedures as the Plan Administrator may
determine; and to make all other determinations deemed necessary or advisable
for administering the Plan. The Plan Administrator shall not have the authority
to reduce the exercise price of an outstanding Award unless pre-approved by the
Corporation’s stockholders. In addition, without stockholder approval, no option
granted hereunder shall be amended to reduce the exercise price under such
option, surrendered in exchange for a replacement option having a lower exercise
price, or surrendered in exchange for cash or another Award.

 

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D.            Different Committees with respect to different groups of eligible
individuals may administer the Plan. To the extent that the Plan Administrator
determines it to be desirable or necessary to qualify Awards granted hereunder
as “performance-based compensation” within the meaning of Section 162(m) of the
Code, the Plan will be administered by a Committee of two or more “outside
directors” within the meaning of Section 162(m) of the Code. To the extent
desirable to qualify transactions hereunder as exempt under Rule 16b-3of the
Exchange Act, the transactions contemplated hereunder will be structured to
satisfy the requirements for exemption under Rule 16b-3.

 

IV.ELIGIBILITY

 

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

 

(i)Employees,

 

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

 

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

 

B.The Plan Administrator shall have full authority to determine, (i) with
respect to the grants made under the Option Grant Program, the Stock Issuance
Program, or the Award Grant Program, which eligible persons are to receive the
option or stock appreciation right grants, the time or times when those grants
are to be made, the number of shares to be covered by each such grant, the
status of the granted option as either an Incentive Option or a Non-Statutory
Option, the time or times when each option and/or stock appreciation right is to
become exercisable, the vesting schedule (if any) applicable to the Award and
the maximum term for which the Award is to remain outstanding, and (ii) with
respect to stock issuances made under the Stock Issuance Program or the Award
Grant Program, which eligible persons are to receive such Awards, the time or
times when those issuances are to be made, the number of shares to be issued to
each Participant, the vesting schedule (if any) applicable to the issued shares
and the consideration to be paid by the Participant for such shares.

 

C.The Plan Administrator shall have the absolute discretion to grant Awards in
accordance with the Option Grant Program, the Stock Issuance Program, or the
Award Grant Program, and to establish and determine such terms and conditions as
the Plan Administrator deems appropriate and necessary under any such program.

 

V.STOCK SUBJECT TO THE PLAN

 

A.The stock issuable under the Plan shall be shares of authorized but unissued
or reacquired Common Stock. The maximum number of shares of Common Stock which
may be issued over the term of the Plan shall not exceed 4,200,000 shares,
unless amended by approval of the Board and the Stockholders.

 

B.Shares of Common Stock subject to outstanding options shall be available for
subsequent issuance under the Plan to the extent the options expire or terminate
for any reason prior to exercise in full. Unvested shares issued under the Plan
and subsequently repurchased by the Corporation, at the option exercise or
direct issue price paid per share, pursuant to the Corporation’s repurchase
rights under the Plan shall be added back to the number of shares of Common
Stock reserved for issuance under the Plan and shall accordingly be available
for reissuance through one or more subsequent option grants or direct stock
issuances under the Plan.  Shares withheld or tendered (actually or through
attestation) to pay the tax and/or exercise price of an Award will not become
available for future grant or sale under the Plan.

 

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C.Should any change be made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation’s receipt of consideration, appropriate adjustments shall be made
to: (i) the maximum number and/or class of securities issuable under the Plan
and (ii) the number and/or class of securities and the exercise price per share
in effect under each outstanding option in order to prevent the dilution or
enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive. In no event shall any such
adjustments be made in connection with the conversion of one or more outstanding
shares of the Corporation’s preferred stock into shares of Common Stock.

 

VI.LIMITATIONS

 

Except as specified in this Section VI, no Employee, or other eligible
individual, shall be granted, in any fiscal year of the Corporation, (A) options
or stock appreciation rights to purchase more than 714,286 of shares of Common
Stock, (B) restricted stock, restricted stock units or performance shares
covering more than 714,286 of shares of Common Stock, or (C) performance units
which could result in any such individual receiving more than $2,000,000.  The
limits in this Section VI are doubled for Awards granted during the fiscal year
in which an Employee, or other eligible individual, first performs Services for
the Corporation.  In addition, for an Award that vests or becomes exercisable
based on attainment of one or more Performance Goals during a Performance Period
longer than one year, the limits in this Section VI are multiplied by the number
of full or partial fiscal years over which the Performance Period spans.

 

ARTICLE TWO

OPTION GRANT PROGRAM

 

I.OPTION TERMS

 

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

 

A.Exercise Price.

 

1.The exercise price per share shall be fixed by the Plan Administrator in
accordance with the following provisions;

 

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

 

(ii)If the person to whom the option is granted is a 10% Stockholder, then the
exercise price per share shall not be less than one hundred ten percent (110%)
of the Fair Market Value per share of Common Stock on the option grant date.

 

2.The exercise price shall become immediately due upon exercise of the option
and shall, subject to the provisions of Section I of Article Four and the
documents evidencing the option, be payable in cash or check made payable to the
Corporation. Should the Common Stock be registered under Section 12 of the 1934
Act at the time the option is exercised, then the exercise price may also be
paid as follows:

 

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

 

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(ii)to the extent the option is exercised for vested shares, through a special
sale and remittance procedure pursuant to which the Optionee shall concurrently
provide irrevocable instructions (A) to a Corporation-designated brokerage firm
to effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and (B) to
the Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale; or

 

(iii)by net exercise through the cancellation of vested shares of Common Stock;

 

(iv)any method approved by the Plan Administration; or

 

(v)any combination of the foregoing methods of payment.

 

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

 

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

 

C.Effect of Termination of Service.

 

1.The following provisions shall govern the exercise of any options held by the
Optionee at the time of cessation of Service or death:

 

(i)Should the Optionee cease to remain in Service for any reason other than
death, Disability or Misconduct, then the Optionee shall have a period of three
(3) months following the date of such cessation of Service during which to
exercise each outstanding option held by such Optionee.

 

(ii)Should Optionee’s Service terminate by reason of Disability, then the
Optionee shall have a period of twelve (12) months following the date of such
cessation of Service during which to exercise each outstanding option held by
such Optionee.

 

(iii)If the Optionee dies while holding an outstanding option, then the personal
representative of his or her estate or the person or persons to whom the option
is transferred pursuant to the Optionee’s will or the laws of inheritance shall
have a twelve (12)-month period following the date of the Optionee’s death to
exercise such option.

 

(iv)Under no circumstances, however, shall any such option be exercisable after
the specified expiration of the option term.

 

(v)During the applicable post-Service exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares for which
the option is exercisable on the date of the Optionee’s cessation of Service.
Upon the expiration of the applicable exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been exercised.
However, the option shall, immediately upon the Optionee’s cessation of Service,
terminate and cease to be outstanding with respect to any and all option shares
for which the option is not otherwise at the time exercisable or in which the
Optionee is not otherwise at that time vested.

 

(vi)Should Optionee’s Service be terminated for Misconduct, then all outstanding
options held by the Optionee shall terminate immediately and cease to remain
outstanding.

 

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

 

(i)extend the period of time for which the option is to remain exercisable
following Optionee’s cessation of Service or death from the limited period
otherwise in effect for that option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond the expiration of
the option term, and/or

 

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

 

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

 

E.Unvested Shares. The Plan Administrator shall have the discretion to grant
options which are exercisable for unvested shares of Common Stock. Should the
Optionee cease Service while holding such unvested shares, the Corporation shall
have the right to repurchase, at the exercise price paid per share, any or all
of those unvested shares. The terms upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.
The Plan Administrator may not impose a vesting schedule upon the option grant
or any shares of Common Stock subject to that option which is more restrictive
than twenty percent (20%) per year vesting, with the initial vesting to occur
not later than one (1) year after the option grant date. However, such
limitation shall not apply (i) at any time applicable law does not require such
mandatory minimum vesting; or (ii) to any grant of stock options to the officers
of the Corporation, non-employee Board members or independent consultants.

 

F.Limited Transferability of Options. During the lifetime of the Optionee, the
option shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following the Optionee’s death.

 

G.Withholding. The Corporation’s obligation to deliver shares of Common Stock
upon the exercise of any options granted under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements.

 

II.INCENTIVE OPTIONS

 

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

 

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

 

B.Exercise Price. The exercise price per share shall not be less than one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.

 

C.Dollar Limitation. The aggregate Fair Market Value of the shares of Common
Stock (determined as of the respective date or dates of grant) for which one or
more options granted to any Employee under the Plan (or any other option plan of
the Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one (1) calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

 

D.10% Stockholder. If any Employee to whom an Incentive Option is granted is a
10% Stockholder, then the option term shall not exceed five (5) years measured
from the option grant date.

 

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III.CORPORATE TRANSACTION

 

A.The shares subject to each option outstanding under the Plan at the time of a
Corporate Transaction shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to that option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, the shares subject to an
outstanding option shall not vest on such an accelerated basis if and to the
extent: (i) such option is assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and the Corporation’s repurchase rights
with respect to the unvested option shares are concurrently assigned to such
successor corporation (or parent thereof) or (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to those unvested option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant.

 

B.All outstanding repurchase rights shall also terminate automatically, and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Corporate Transaction, except to the extent:
(i) those repurchase rights are assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed by the Plan Administrator at
the time the repurchase right is issued.

 

C.Immediately following the consummation of the Corporate Transaction, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof).

 

D.Each option which is assumed in connection with a Corporate Transaction shall
be appropriately adjusted, immediately after such Corporate Transaction, to
apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction, had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to (i) the number and class of securities
available for issuance under the Plan following the consummation of such
Corporate Transaction and (ii) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same.

 

E.The Plan Administrator shall have the discretion, exercisable either at the
time the option is granted or at any time while the option remains outstanding,
to provide for the automatic acceleration (in whole or in part) of one or more
outstanding options (and the immediate termination of the Corporation’s
repurchase rights with respect to the shares subject to those options) upon the
occurrence of a Corporate Transaction, whether or not those options are to be
assumed in the Corporate Transaction.

 

F.The Plan Administrator shall also have full power and authority, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to structure such option so that the shares subject to that option
will automatically vest on an accelerated basis should the Optionee’s Service
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which the option is assumed and the repurchase rights
applicable to those shares do not otherwise terminate. Any option so accelerated
shall remain exercisable for the fully-vested option shares until the earlier of
(i) the expiration of the option term or (ii) the expiration of the one (1)-year
period measured from the effective date of the Involuntary Termination. In
addition, the Plan Administrator may provide that one or more of the
Corporation’s outstanding repurchase rights with respect to shares held by the
Optionee at the time of such Involuntary Termination shall immediately terminate
on an accelerated basis, and the shares subject to those terminated rights shall
accordingly vest at that time.

 

G.The portion of any Incentive Option accelerated in connection with a Corporate
Transaction shall remain exercisable as an Incentive Option only to the extent
the applicable One Hundred Thousand Dollar limitation is not exceeded. To the
extent such dollar limitation is exceeded, the accelerated portion of such
option shall be exercisable as a Non-Statutory Option under the Federal tax
laws.

 

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

 

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ARTICLE THREE

STOCK ISSUANCE PROGRAM

 

I.STOCK ISSUANCE TERMS

 

Shares of Common Stock may be issued under the Stock Issuance Program through
direct and immediate issuances without any intervening option grants. Each such
stock issuance shall be evidenced by a Stock Issuance Agreement which complies
with the terms specified below.

 

A.Purchase Price.

 

1.The purchase price per share shall be fixed by the Plan Administrator but
shall not be less than eighty-five percent (85%) of the Fair Market Value per
share of Common Stock on the issue date. However, the purchase price per share
of Common Stock issued to a 10% Stockholder shall not be less than one hundred
and ten percent (110%) of such Fair Market Value.

 

2.Subject to the provisions of Section I of Article Four, shares of Common Stock
may be issued under the Stock Issuance Program for any of the following items of
consideration which the Plan Administrator may deem appropriate in each
individual instance:

 

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

 

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

 

B.Vesting Provisions.

 

1.Shares of Common Stock issued under the Stock Issuance Program may, in the
discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in one or more installments over the Participant’s period
of Service or upon attainment of Performance Goals. However, the Plan
Administrator may not impose a vesting schedule upon any stock issuance effected
under the Stock Issuance Program which is more restrictive than twenty percent
(20%) per year vesting, with initial vesting to occur not later than one
(1) year after the issuance date. Such limitation shall not apply (i) at any
time applicable law does not require such mandatory minimum vesting; or (ii) to
any Common Stock issuances made to the officers of the Corporation, non-employee
Board members or independent consultants.

 

2.Any new, substituted or additional securities or other property (including
money paid other than as a regular cash dividend) which the Participant may have
the right to receive with respect to the Participant’s unvested shares of Common
Stock by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation’s receipt of
consideration shall be issued subject to (i) the same vesting requirements
applicable to the Participant’s unvested shares of Common Stock and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.

 

3.The Participant shall have full stockholder rights with respect to any shares
of Common Stock issued to the Participant under the Stock Issuance Program,
whether or not the Participant’s interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.

 

4.Should the Participant cease to remain in Service while holding one or more
unvested shares of Common Stock issued under the Stock Issuance Program or
should the performance objectives not be attained with respect to one or more
such unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further stockholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for consideration
paid in cash or cash equivalent (including the Participant’s purchase-money
indebtedness), the Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to such surrendered shares.

 

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5.The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the non-completion of the
vesting schedule applicable to such shares. Such waiver shall result in the
immediate vesting of the Participant’s interest in the shares of Common Stock as
to which the waiver applies. Such waiver may be effected at any time, whether
before or after the Participant’s cessation of Service or the attainment or non-
attainment of the applicable performance objectives.

 

II.CORPORATE TRANSACTION

 

A.Upon the occurrence of a Corporate Transaction, all outstanding repurchase
rights under the Stock Issuance Program shall terminate automatically, and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, except to the extent: (i) those repurchase rights are assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.

 

B.The Plan Administrator shall have the discretionary authority, exercisable
either at the time the unvested shares are issued or any time while the
Corporation’s repurchase rights with respect to those shares remain outstanding,
to provide that those rights shall automatically terminate on an accelerated
basis, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant’s Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those repurchase rights are assigned to the
successor corporation (or parent thereof).

 

III.SHARE ESCROW/LEGENDS

 

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

 

ARTICLE FOUR

AWARD GRANT PROGRAM

 

I. STOCK APPRECIATION RIGHTS

 

Each stock appreciation right shall be evidenced by one or more documents in the
form approved by the Plan Administrator, provided, however, that each such
document shall comply with the terms specified below.

 

The Plan Administrator will have complete discretion to determine the number of
stock appreciation rights grants to any individual and to determine the terms
and conditions of any such Award. Upon exercise of a stock appreciation right, a
Participant will be entitled to receive payment from the Corporation in an
amount determined by multiplying: (i) the difference between the Fair Market
Value of a share of Common Stock on the date of exercise over the exercise
price; times (ii) the number of shares of Common Stock with respect to which the
stock appreciation right is exercised. Other than as provided in this
Article Four, each stock appreciation right shall be subject to all the same
terms and conditions of the Option Grant Program that are applicable to option
grants.

 

II. RESTRICTED STOCK UNITS

 

The Plan Administrator, at any time and from time to time, may grant restricted
stock units in such amounts as the Plan Administrator, in its sole discretion,
will determine. After the Plan Administrator determines that it will grant
restricted stock units under the Plan, it will advise the Participant in an
Award Agreement of the terms, conditions, and restrictions related to the grant,
including the number of restricted stock units.

 

The Plan Administrator will set vesting criteria in its discretion, which,
depending on the extent to which the criteria are met, will determine the number
of restricted stock units that will be paid out to the Participant. The Plan
Administrator may set vesting criteria based upon the achievement of Performance
Goals, or any other Corporation-wide, business unit, or individual goals
(including, but not limited to, continued employment), or any other basis
determined by the Plan Administrator in its discretion.

 

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Upon meeting the applicable vesting criteria, the Participant will be entitled
to receive a payout as determined by the Plan Administrator. Notwithstanding the
foregoing, at any time after the grant of restricted stock units, the Plan
Administrator, in its sole discretion, may reduce or waive any vesting criteria
that must be met to receive a payout.

 

Payment of earned restricted stock units will be made as soon as practicable
after the date(s) determined by the Plan Administrator and set forth in the
Award Agreement. The Plan administrator, in its sole discretion, may only settle
earned restricted stock units in cash, shares of Common Stock, or a combination
of both.

 

On the date set forth in the Award Agreement, all unearned restricted stock
units will be forfeited to the Corporation.

 

III. PERFORMANCE UNITS AND PERFORMANCE SHARES

 

Performance units and performance shares may be granted to eligible individuals
at any time and from time to time, as will be determined by the Plan
Administrator, in its sole discretion. The Plan Administrator will have complete
discretion in determining the number of performance units and performance shares
granted to each Participant.

 

Each performance unit will have an initial value that is established by the Plan
Administrator on or before the date of grant. Each performance share will have
an initial value equal to the Fair Market Value of a share of Common Stock on
the date of grant.

 

The Plan Administrator will set performance objectives or other vesting
provisions (including, without limitation, any Performance Goal, continued
status as an Employee, consultant or director) in its discretion which,
depending on the extent to which they are met, will determine the number or
value of performance units/shares that will be paid out to the Participant. The
time period during which the performance objectives or other vesting provisions
must be met will be called the “Performance Period.” Each Award of performance
units/shares will be evidenced by an Award Agreement that will specify the
Performance Period, and such other terms and conditions as the Plan
Administrator, in its sole discretion, will determine. The Plan Administrator
may set performance objectives based upon the achievement of Performance Goals,
or any other Corporation-wide, divisional, or individual goals, or any other
basis determined by the Plan Administrator in its discretion.  The Plan
Administrator may specify in an Award Agreement that any dividend paid on shares
of Common Stock subject to performance units or performance shares will be
credited as additional performance shares or performance units, as applicable,
and paid at the same time and subject to the same conditions as the underlying
performance shares or performance units.

 

After the applicable Performance Period has ended, the holder of performance
units/shares will be entitled to receive a payout of the number of performance
units/shares earned by the Participant over the Performance Period, to be
determined as a function of the extent to which the corresponding performance
objectives or other vesting provisions have been achieved. After the grant of a
performance unit/share, the Plan Administrator, in its sole discretion, may
reduce or waive any performance objectives or other vesting provisions for such
performance unit/share.

 

Payment of earned performance units/shares will be made as soon as practicable
after the expiration of the applicable Performance Period. The Plan
Administrator, in its sole discretion, may pay earned performance units/shares
in the form of cash, in shares of Common Stock (which have an aggregate Fair
Market Value equal to the value of the earned performance units/shares at the
close of the applicable Performance Period) or in a combination thereof.  On the
date set forth in the Award Agreement, all unearned or unvested performance
units/shares will be forfeited to the Corporation, and again will be available
for grant under the Plan.

 

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ARTICLE FIVE

MISCELLANEOUS

 

I.FINANCING

 

The Plan Administrator may permit any Optionee or Participant to pay the option
exercise price or the purchase price for shares issued to such person under the
Plan by delivering a full-recourse, interest-bearing promissory note payable in
one or more installments and secured by the purchased shares. However, any
promissory note delivered by a consultant must be secured by collateral in
addition to the purchased shares of Common Stock. In no event shall the maximum
credit available to the Optionee or Participant exceed the sum of (i) the
aggregate option exercise price or purchase price payable for the purchased
shares plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.

 

II.EFFECTIVE DATE AND TERM OF PLAN

 

A.The Plan shall become effective when adopted by the Board, but no option
granted under the Plan may be exercised, and no shares shall be issued under the
Plan, until the Plan is approved by the Corporation’s stockholders. If such
stockholder approval is not obtained within twelve (12) months after the date of
the Board’s adoption of the Plan, then all options previously granted under the
Plan shall terminate and cease to be outstanding, and no further options shall
be granted and no shares shall be issued under the Plan. Subject to such
limitation, the Plan Administrator may grant options and issue shares under the
Plan at any time after the effective date of the Plan and before the date fixed
herein for termination of the Plan.

 

B.The Plan shall terminate upon the earliest of (i) the expiration of the ten
(10)-year period measured from the date the Plan is adopted by the Board,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as vested shares or (iii) the termination of all outstanding
options in connection with a Corporate Transaction. All options and unvested
stock issuances outstanding at that time under the Plan shall continue to have
full force and effect in accordance with the provisions of the documents
evidencing such options or issuances.

 

III.AMENDMENT OF THE PLAN

 

A.The Board shall have complete and exclusive power and authority to amend or
modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws and regulations.

 

B.Options may be granted under the Option Grant Program and shares may be issued
under the Stock Issuance Program which are in each instance in excess of the
number of shares of Common Stock then available for issuance under the Plan,
provided any excess shares actually issued under those programs shall be held in
escrow until there is obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance under the
Plan. If such stockholder approval is not obtained within twelve (12) months
after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall terminate
and cease to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees and the Participants the exercise or purchase price paid for any
excess shares issued under the Plan and held in escrow, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and cease
to be outstanding.

 

C.As approved and adopted by the Board of Directors of Lpath, Inc. (then known
as Neighborhood Connections Inc.) on November 29, 2005 and approved by
Stockholders on November 29, 2005. The Board of Directors of Lpath, Inc.
approved the first amendment and restatement of the Plan on August 21, 2007 and
the Stockholders approved such amendment and restatement on October 9, 2007. The
second amendment and restatement of the Plan was approved by the Board of
Directors of Lpath, Inc. on and effective as of April 11, 2013, subject to
approval by the Stockholders and the Stockholders approved such amendment and
restatement on June 19, 2013.  This third amendment and restatement of the Plan
was approved by the Board of Directors of Lpath, Inc. on and effective as of
April 22, 2015, subject to approval by the Stockholders, and the Stockholders
approved such amendment and restatement on June 16, 2015.

 

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IV.USE OF PROCEEDS

 

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

 

V.WITHHOLDING

 

The Corporation’s obligation to deliver shares of Common Stock upon the exercise
of any options or upon the issuance or vesting of any shares issued under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.

 

VI.REGULATORY APPROVALS

 

The implementation of the Plan, the granting of any options under the Plan and
the issuance of any shares of Common Stock (i) upon the exercise of any option
or (ii) under the Stock Issuance Program or Award Grant Program shall be subject
to the Corporation’s procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the options granted
under it and the shares of Common Stock issued pursuant to it.

 

VII. NO EMPLOYMENT OR SERVICE RIGHTS

 

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

 

VIII. FINANCIAL REPORTS

 

The Corporation shall, if required by applicable law, deliver a balance sheet
and an income statement at least annually to each individual holding an
outstanding option under the Plan, unless such individual is a key Employee
whose duties in connection with the Corporation (or any Parent or Subsidiary)
assure such individual access to equivalent information.

 

IX. LEAVES OF ABSENCE

 

Unless the Plan Administrator provides otherwise or except as required by
applicable laws, vesting of Awards granted hereunder will be suspended during
any unpaid leave of absence. A Participant will not cease to be an Employee in
the case of (i) any leave of absence approved by the Corporation or
(ii) transfers between locations of the Corporation or between the Corporation,
its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such
leave may exceed ninety (90) days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract. If reemployment upon expiration of a
leave of absence approved by the Corporation is not so guaranteed, then three
(3) months following the ninety-first (91st) day of such leave any Incentive
Stock Option held by the Participant will cease to be treated as an Incentive
Stock Option and will be treated for tax purposes as a Non-Statutory Stock
Option.

 

X. CONDITIONS UPON ISSUANCE OF SHARES OF COMMON STOCK

 

Shares of Common Stock will not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such shares
will comply with applicable laws and will be further subject to the approval of
counsel for the Corporation with respect to such compliance.

 

As a condition to the exercise of an Award, the Corporation may require the
person exercising such Award to represent and warrant at the time of any such
exercise that the shares of Common Stock are being purchased only for investment
and without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Corporation, such a representation is required.

 

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The inability of the Corporation to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Corporation’s counsel to
be necessary to the lawful issuance and sale of any shares of Common Stock
hereunder, will relieve the Corporation of any liability in respect of the
failure to issue or sell such shares as to which such requisite authority will
not have been obtained.

 

XI.  CLAWBACK OR RECOUPMENT

 

Unless otherwise specified in the Award Agreement or determined in the Plan
Administrator’s sole discretion, all Awards, and all shares of Common Stock and
cash payable under each Award, are subject to any clawback or recoupment policy
adopted by the Company (including any policy required under the Dodd-Frank Wall
Street Reform and Consumer Protection Act or other Applicable Laws), regardless
of whether the policy is adopted after the date on which the Award is granted,
vests or becomes exercisable, or is exercised or settled by issuance of shares
of Common Stock, payment of cash, or a combination of both.

 

APPENDIX

 

The following definitions shall be in effect under the Plan:

 

A.Award shall mean, individually or collectively, a grant under the Plan of
options, stock appreciation rights, restricted stock, restricted stock units,
performance shares or performance units.

 

B.Award Grant Program shall mean the Award grant program in effect under the
Plan.

 

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

 

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

 

E.Committee shall mean a committee of two (2) or more Board members appointed by
the Board to exercise one or more administrative functions under the Plan.

 

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

 

G.Corporate Transaction shall mean either of the following stockholder-approved
transactions to which the Corporation is a party:

 

(i) a merger or consolidation in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation’s
outstanding securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such transaction, or

 

(ii) the sale, transfer or other disposition of all or substantially all of the
Corporation’s assets in complete liquidation or dissolution of the Corporation.

 

H.Corporation shall mean Lpath, Inc., Nevada corporation, and any successor
corporation to all or substantially all of the assets or voting stock of
Lpath, Inc. which shall by appropriate action adopt the Plan.

 

I.Disability shall mean the inability of the Optionee or the Participant to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment and shall be determined by the Plan
Administrator on the basis of such medical evidence as the Plan Administrator
deems warranted under the circumstances.

 

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

 

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

 

L.Fair Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

 

(i) If the Common Stock is at the time traded on the Nasdaq Stock Market (or the
OTC Bulletin Board), then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the Financial Industry Regulatory Authority, Inc. on the Nasdaq
Stock Market (or the OTC Bulletin Board). If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such quotation
exists.

 

(ii) If the Common Stock is at the time listed on any Stock Exchange, then the
Fair Market Value shall be the closing selling price per share of Common Stock
on the date in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

 

(iii) If the Common Stock is at the time neither listed on any Stock Exchange
nor traded on the Nasdaq Stock Market, then the Fair Market Value shall be
determined by the Plan Administrator after taking into account such factors as
the Plan Administrator shall deem appropriate.

 

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

 

N.Involuntary Termination shall mean the termination of the Service of any
individual which occurs by reason of:

 

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

 

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

 

O.Misconduct shall mean the commission of any act of fraud, embezzlement or
dishonesty by the Optionee or Participant, any unauthorized use or disclosure by
such person of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
any Optionee, Participant or other person in the Service of the Corporation (or
any Parent or Subsidiary).

 

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

 

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

 

R.Option Grant Program shall mean the option grant program in effect under the
Plan.

 

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S.Optionee shall mean any person to whom an option is granted under the Plan.

 

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

 

U.Participant shall mean any person who is issued shares of Common Stock under
the Stock Issuance Program.

 

V.Performance Goals shall mean the goal(s) determined by the Plan Administrator
(in its discretion) to be applicable to a Participant with respect to an Award.
As determined by the Plan Administrator, the Performance Goals applicable to an
Award may provide for a targeted level or levels of achievement using one or
more of the following measures: (i) earnings or profitability metrics:
including, but not limited to, earnings/loss (gross, operating, net, or
adjusted); earnings/loss before interest and taxes (“EBIT”); earnings/loss
before interest, taxes, depreciation and amortization (“EBITDA”); profit margin;
operating margin; income (gross, operating or net); expense levels or ratios; in
each case adjusted to eliminate the effect of any one or more of the following:
interest expense, asset impairments, early extinguishment of debt, stock-based
compensation expense, changes in GAAP or critical accounting policies, or other
extraordinary or non-recurring items, as specified by the Plan Administrator
when establishing the performance goals; (ii) return metrics: including, but not
limited to, return on investment, assets, equity or capital (total or invested);
(iii) cash flow metrics: including, but not limited to, operating cash flow;
cash flow sufficient to achieve financial ratios or a specified cash balance;
free cash flow; cash flow return on capital; net cash provided by operating
activities; cash flow per share; working capital; (iv) liquidity metrics:
including, but not limited to, debt reduction; extension of maturity dates of
outstanding debt; debt leverage (debt to capital, net debt-to-capital,
debt-to-EBITDA or other liquidity ratios) or access to capital; debt ratings;
total or net debt; other similar measures approved by the Plan Administrator;
(v) stock price and equity metrics: including, but not limited to, return on
stockholders’ equity; total stockholder return; revenue (gross, operating or
net); revenue growth; stock price; stock price appreciation; market price of
stock; market capitalization; earnings/loss per share (basic or diluted) (before
or after taxes); price-to-earnings ratio; and (vi) strategic metrics: including,
but not limited to, product research and development; completion of an
identified special project; clinical trials; regulatory filings or approvals;
patent application or issuance; manufacturing or process development; sales or
net sales; market share; market penetration; economic value added; customer
service; customer satisfaction; inventory control; balance of cash, cash
equivalents and marketable securities; growth in assets; key hires; employee
satisfaction; employee retention; business expansion; acquisitions,
divestitures, joint ventures; capital or fund raising to support operations;
government grants; license arrangements; collaboration or customer agreements or
arrangements; legal compliance or safety and risk reduction; or such other
measures as determined by the Plan Administrator consistent with these
performance measures. The Performance Goals may differ from Participant to
Participant and from Award to Award. Any criteria used may be measured, as
applicable, (i) in absolute terms, (ii) in relative terms (including, but not
limited to, passage of time and/or against another company or companies),
(iii) on a per-share basis, (iv) against the performance of the Corporation as a
whole or a segment of the Corporation, and (v) on a pre-tax or after-tax basis.

 

W.Plan shall mean the Corporation’s 2005 Equity Incentive Plan, as set forth in
this document, and as amended from time to time.

 

X.Plan Administrator shall mean either the Board or the Committee acting in its
capacity as administrator of the Plan.

 

Y.Service shall mean the provision of services to the Corporation (or any Parent
or Subsidiary) by a person in the capacity of an Employee, a non-employee member
of the board of directors or a consultant or independent advisor, except to the
extent otherwise specifically provided in the documents evidencing the option
grant.

 

Z.Stock Exchange shall mean the American Stock Exchange, the Nasdaq Stock
Market, or the New York Stock Exchange.

 

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