Exhibit 10.5

 

 

 

 

 

 

 

 

 

 

XG SCIENCES, INC.

2017 EQUITY INCENTIVE PLAN

 

 

Effective As Of:

July 18, 2017,

As approved by the Company’s stockholders on July 18, 2017

 

 

 

 

 

 

XG SCIENCES, INC.

2017 EQUITY INCENTIVE PLAN

 

 

 

Section 1.    Purpose. This XG Sciences, Inc. 2017 Equity Incentive Plan (the
“Plan”) is hereby established by XG Sciences, Inc., a Michigan corporation (the
“Company”), to foster and promote the long-term financial success of the Company
and its Subsidiaries and thereby increase stockholder value. The Plan provides
for Awards to those employees, directors, or officers of, or key advisers or
consultants to, the Company or any of its Subsidiaries who are responsible for
or contribute to the management, growth or success of the Company or any of its
Subsidiaries. The Plan was approved by the Company’s Board of Directors on May
4, 2017 and by the Company’s stockholders on July 18, 2017.

Section 2.    Definitions. For purposes of this Plan, the following terms used
herein shall have the following meanings, unless a different meaning is clearly
required by the context.

2.1              “Act” shall have the meaning provided in Section 7 of the Plan.

2.2              “Award” means an award of a Stock Option or Restricted Stock
pursuant to Section 5 of the Plan

2.3              “Award Agreement” means a written agreement between the Company
and a Participant, or notice from the Company or a Subsidiary to a Participant
that evidences and sets out the terms of an Award.

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

2.5       “Cause” shall have the meaning provided in the applicable Employment
Agreement or consulting agreement between the Participant and the Company, if
any, or if there is no such agreement that defines the term, “Cause” shall mean
termination due to any of the following, as determined by the Committee, in its
sole discretion:

 

(a)    failure of Participant to materially perform and discharge his or her
duties and responsibilities under the Employment Agreement or otherwise after
receiving written notice and allowing Participant ten (10) business days to
create a plan to cure such failure(s), such plan being acceptable to the Chief
Executive Officer of the Company, and a further thirty (30) days to cure such
failure(s), if so curable, provided, however, that after one such notice has
been given to Participant and the thirty (30) day cure period has lapsed, the
Company is no longer required to provide time to cure subsequent failures under
this provision, or

(b)   any breach by Participant of the material provisions of Participant’s
Employment Agreement or Non-Compete Agreement, or

(c)    misconduct by Participant which, in the good faith opinion and sole
discretion of the Board, is injurious to the Company; or

 

 

(d)   Participant’s felony conviction involving personal dishonesty or moral
turpitude; or a determination by the Board, after consideration of all available
information, that Participant has willfully and knowingly violated Company
policies or procedures involving discrimination, harassment, or work place
violence; or

(e)    Participant’s engagement in illegal drug use or alcohol abuse which
prevents Participant from performing his or her duties in any manner, or

(f)    any misappropriation, embezzlement or conversion of the Company’s
opportunities or property by Participant; or

(g)   willful misconduct, recklessness or gross negligence by Participant in
respect of Participant’s duties or obligations under this Agreement, the
Employment Agreement, and/or the Non-Compete Agreement.

2.6              “Code” means the Internal Revenue Code of 1986, as amended.

2.7              “Committee” shall have the meaning provided in Section 3 of the
Plan.

2.8              “Common Stock” means the common stock, no par value, of the
Company.

2.9              “Company” shall have the meaning provided in Section 1 of the
Plan.

2.10          “Disability” means a disability within the meaning of Section
22(e)(3) of the Code.

2.11          “Effective Date” shall have the meaning provided in Section 20 of
the Plan.

2.12          “Employment Agreement” shall mean your offer letter or employment
agreement or other contractual agreement to provide services to the Company.

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

2.14          “Fair Market Value” of the Common Stock means: (i) if the Common
Stock is listed on a national securities exchange or traded in the
over-the-counter market and sales prices are regularly reported for the Common
Stock, the closing or last price of the Common Stock on the trading day
immediately preceding the applicable date; (ii) if there are no reported sales
of the Common Stock or if sales prices are not regularly reported for the Common
Stock for the day referred to in clause (i), and if bid and asked prices for the
Common Stock are regularly reported, the mean between the bid and the asked
price for the Common Stock at the close of trading on the trading day
immediately preceding the applicable date; and (iii) if the Common Stock is
neither listed on a national securities exchange nor traded in the
over-the-counter market, such value as the Board, in good faith, shall determine
(but in any event not less than fair market value within the meaning of Section
409A of the Code, and any regulations and other guidance thereunder). For
purposes of this definition, when determining the Fair Market Value for the
grant of an Award, “applicable date” means the date of grant of the Award.

 

 

 

2.15          “Immediate Family” shall have the meaning provided in Section 14
of the Plan.

2.16          “Incentive Stock Option” means a Stock Option granted under the
Plan which is an “incentive stock option” within the meaning of Section 422 of
the Code.

2.17          “Non-Compete Agreement” shall mean that certain Confidentiality,
Non- Solicitation and Non-Compete Agreement or Proprietary Information and
Non-Compete Agreement that each Participant enters into with the Company upon
their employment with or the beginning of service to the Company.

2.18          “Non-Qualified Stock Option” means a Stock Option which is not an
Incentive Stock Option.

2.19          “Parent Company” means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if, at the time of the
granting of the Award, each of the corporations other than the Company owns
stock possessing 50% or more of the combined voting power of all classes of
stock in one of the other corporations in the chain.

2.20          “Participant” shall mean any employee, director or officer of, or
key adviser or consultant to, the Company or any Subsidiary to whom an Award is
granted under the Plan.

2.21          “Plan” shall have the meaning provided in Section 1 of the Plan.

2.22          “Restricted Stock” shall mean restricted shares of Common Stock
granted to a Participant pursuant to Section 5.

2.23          “Stock Option” means any option to purchase shares of Common Stock
granted to a Participant pursuant to Section 5.

2.24          “Subsidiary” means: (i) as it relates to Incentive Stock Options,
any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of the granting of the Stock Option,
each of the corporations (other than the last corporation in the unbroken chain)
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain; and (ii) for all
other purposes, a company, domestic or foreign, of which not less than 50% of
the total voting power is held by the Company or by a Subsidiary, whether or not
such company now exists or is hereafter organized or acquired by the Company or
by a Subsidiary .

2.25          “Transaction” shall have the meaning provided in Section 29 of the
Plan.

Section 3.    Administration. The Plan shall be administered by the Compensation
Committee of the Board or such other committee as may be appointed by the Board
from time to time for the purpose of administering this Plan, and consisting of
two or more members of the Board, each of whom shall qualify as a “non-employee
director” within the meaning of Rule 16b-3 of the Exchange Act, an “outside
director” within the meaning of Section l62(m) of the Code and regulations
pursuant thereto, and an “independent director” as defined under the rules of
any stock exchange on which the Common Stock is regularly traded and in
accordance with rules promulgated by the Securities and Exchange Commission
under The Dodd-Frank Wall Street Reform and Consumer Protection Act. For
purposes of the Plan, the Board acting in this capacity or the Compensation
Committee described in the preceding sentence shall be referred to as the
“Committee”. The Committee shall have the power and authority to grant Awards to
eligible persons pursuant to the terms of the Plan.

 

 

The Committee shall have authority in its discretion to interpret the provisions
of the Plan and to decide all questions of fact arising in its application.
Except as otherwise expressly provided in the Plan, the Committee shall have
authority to select the persons to whom Awards shall be made under the Plan; to
determine whether and to what extent Awards shall be made under the Plan; to
determine the types of Award to be made and the amount, size, terms and
conditions of each such Award; to determine the time when the Awards shall be
granted; to adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it shall from time to time deem advisable; and
to make all other determinations necessary or advisable for the administration
and interpretation of the Plan. Notwithstanding anything in the Plan to the
contrary, in the event that the Committee determines that it is advisable to
grant Awards which shall not qualify for the exception for performance-based
compensation from the tax deductibility limitations of Section 162(m) of the
Code, the Committee may make such grants or Awards, or may amend the Plan to
provide for such grants or Awards, without satisfying the requirements of
Section 162(m) of the Code.

Notwithstanding anything in the Plan to the contrary, the Committee also shall
have authority in its sole discretion to vary the terms of the Plan to the
extent necessary to comply with foreign, federal, state or local law or to meet
the objectives of the Plan. The Committee may, where appropriate, establish one
or more sub-plans for this purpose.

All decisions made by the Committee pursuant to the provisions of the Plan shall
be final and binding on all persons who participate in the Plan.

All expenses and liabilities incurred by the Committee in the administration and
interpretation of the Plan shall be borne by the Company. The Committee may
employ attorneys, consultants, accountants or other persons in connection with
the administration and interpretation of the Plan. The Company, and its officers
and directors, shall be entitled to rely upon the advice, opinions or valuations
of any such persons.

The Committee intends that all Awards granted under the Plan not be considered
to provide for the deferral of compensation under, or to comply with, Section
409A of the Code and, accordingly, this Plan shall be so administered and
construed.  Further, the Committee may modify the Plan and any Award to the
extent necessary to fulfill this intent.

 

 

Section 4.    Common Stock Subject to the Plan.

4.1              Share Reserve. Subject to adjustment as provided in Section 16,
the maximum aggregate number of shares of Common Stock reserved and available
for issuance under the Plan shall be ONE MILLION, TWO HUNDRED THOUSAND
(1,200,000) shares of Common Stock. All such shares of Common Stock available
for issuance under the Plan shall be available for issuance as Incentive Stock
Options.

4.2              Source of Shares. Such shares may consist in whole or in part
of authorized and unissued shares or treasury shares or any combination thereof
as the Committee may determine. Except as otherwise provided herein, any shares
subject to an option or right granted or awarded under the Plan which for any
reason expires or is terminated unexercised, becomes unexercisable, or is
forfeited or otherwise terminated, surrendered or cancelled as to any shares, or
if any shares are not delivered because an Award under the Plan is settled in
cash or the shares are used to satisfy the applicable tax withholding
obligation, such shares shall not be deemed to have been delivered for purposes
of determining the maximum number of shares of Common Stock available for
issuance under the Plan and shall again become eligible for issuance under the
Plan. If the exercise price of any Stock Option or the purchase price for any
Restricted Stock granted under the Plan is satisfied by tendering shares of
Common Stock to the Company (whether by actual delivery or by attestation and
whether or not such surrendered shares were acquired pursuant to any Award
granted under the Plan), only the number of shares of Common Stock issued net of
the shares of Common Stock tendered shall be deemed delivered for purposes of
determining the maximum number of shares of Common Stock available for issuance
under the Plan. No Awards may be granted following the termination or expiration
of the Plan (in accordance with Section 17 of the Plan).

4.3              Code Section 162(m) Limitation. The total number of shares of
Common Stock for which Stock Options may be granted to any employee during any
12 month period shall not exceed THREE HUNDRED THOUSAND (300,000) shares in the
aggregate (as adjusted pursuant to Section 16). This Section 4.3 shall not
become applicable until such time as the Company becomes subject to the
reporting obligations of Section 12 of the Exchange Act.

Section 5.    Eligibility to Receive Awards. An Award may be granted to any
employee, director, or officer of, or key adviser or consultant to, the Company
or any Subsidiary, who is responsible for or contributes to the management,
growth or success of the Company or any Subsidiary, provided that bona fide
services shall be rendered by consultants or advisers to the Company or its
Subsidiaries and, unless otherwise approved by the Committee, such services must
not be in connection with the offer and sale of securities in a capital-raising
transaction and must not directly or indirectly promote or maintain a market for
the Company’s securities. Subject to the preceding sentence, the Committee shall
have the sole authority to select the persons to whom an Award is to be granted
hereunder and to determine what type of Award is to be granted to each such
person. No person shall have any right to participate in the Plan. Any person
selected by the Committee for participation during any one period will not by
virtue of such participation have the right to be selected as a Participant for
any other period.

Section 6.    Terms of Awards

 

 

6.1              Stock Options.

(a)    General. A Stock Option may be an Incentive Stock Option or a
Non-Qualified Stock Option. Only employees of the Company or any Parent Company
or Subsidiary of the Company are eligible to receive Incentive Stock Options. To
the extent that any Stock Option does not qualify as an Incentive Stock Option,
it shall constitute a separate Non-Qualified Stock Option. The terms and
conditions of each Stock Option granted under the Plan shall be specified by the
Committee, in its sole discretion, and shall be set forth in a written Award
Agreement in such form as the Committee shall approve from time to time or as
may be reasonably required in view of the terms and conditions approved by the
Committee from time to time. No person shall have any rights under any Stock
Option granted under the Plan unless and until the Company and the person to
whom such Stock Option shall have been granted shall have executed and delivered
an Award Agreement expressly granting the Stock Option to such person and
containing provisions setting forth the terms and conditions of the Stock
Option. The terms and conditions of any Stock Option granted hereunder need not
be identical to those of any other Stock Option granted hereunder. Each Award
Agreement granting a Stock Option shall contain in substance the following terms
and conditions and may contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.

(b)   Type of Option. Each Award Agreement granting a Stock Option shall
designate the Stock Option represented thereby as intended to be an Incentive
Stock Option or a Non-Qualified Stock Option, as the case may be.

(c)    Option Price. The Incentive Stock Option exercise price shall be fixed by
the Committee but shall in no event be less than 100% (or 110% in the case of an
employee referred to in Section 6.1(g)(ii) below) of the Fair Market Value of
the shares of Common Stock subject to the Incentive Stock Option on the date the
Incentive Stock Option is granted. The Non-Qualified Stock Option exercise price
shall be fixed by the Committee and may be equal to, subject to compliance with
Section 409A of the Code if applicable, more than or less than 100% of the Fair
Market Value of the shares of Common Stock subject to the Non-Qualified Stock
Option at the time the Stock Option is granted.

(d)   Exercise Term. Each Award Agreement granting a Stock Option shall state
the period or periods of time within which the Stock Option may be exercised, in
whole or in part, which shall be such period or periods of time as may be
determined by the Committee, provided that no Stock Option shall be exercisable
after ten years from the date of grant thereof (or, in the case of an Incentive
Stock Option granted to an employee referred to in Section 6.1(g)(ii) below,
such term shall in no event exceed five years from the date on which such
Incentive Stock Option is granted). The Committee shall have the power to permit
an acceleration of previously established exercise period or periods upon such
circumstances and subject to such terms and conditions as the Committee deems
appropriate, including, without limitation, a change of control of the Company.

(e)    Payment for Shares. A Stock Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Award Agreement by the Participant entitled to exercise the
Stock Option and full payment for the shares of Common Stock with respect to
which the Stock Option is exercised has been received by the Company. The
Committee, in its sole discretion, may permit all or part of the payment of the
exercise price to be made, to the extent permitted by applicable statutes and
regulations, either: (i) in cash, by check or wire transfer, or (ii) in any
other form of legal consideration as provided for under the terms of the Award
Agreement. No shares of Common Stock shall be issued to any Participant upon
exercise of a Stock Option until the Company receives full payment therefor as
described above. However, Participant shall have no rights as a stockholder
prior to such time at which certificates representing such Common Stock have
been delivered to the Participant. No adjustment will be made for a dividend or
other right for which the record date is prior to the date on which the Common
Stock is issued, except as provided in Section 16 of the Plan. Each exercise of
a Stock Option shall reduce, by an equal number, the total number of shares of
Common Stock that may thereafter be purchased under such Stock Option.

 

 

(f)    Rights Upon Termination. Except as otherwise set forth in the
Participant’s Award Agreement, in the event that a Participant’s service with
the Company or any Subsidiary, whether as an employee, officer, director,
adviser or consultant, terminates, the Stock Option shall be vested and
exercisable as follows:

(i)                   In the event of the Participant’s death or Disability, the
Participant or his or her successor or legal representative shall have the right
to exercise the vested portion of the Stock Option as of the termination date by
death or Disability until the earlier of (A) twelve (12) months following such
termination date, or (B) the expiration of the term of the Stock Option;

(ii)                 In the event of the Participant’s termination by the
Company and its Subsidiaries without Cause, any rights of the Participant under
any Stock Option shall be as specified in the applicable employment agreement or
consulting agreement between the Participant and the Company, if any, or if
there is no such agreement or the agreement does not specify vesting in the
event of termination without Cause, any Stock Option shall immediately
terminate; provided, however, that the Participant (or any successor or legal
representative) shall have the right to exercise the vested portion of any Stock
Option, until the earlier of (i) the date that is ninety (90) days after the
effective date of such termination, or such other date as determined by the
Committee in its sole discretion, or (ii) the expiration of the term of the
Stock Option, and the unvested portion of such Stock Option shall be forfeited;

(iii)                In the event of the Participant’s termination by the
Company and its Subsidiaries for Cause, the vested portion of such Stock Option
shall terminate immediately and the unvested portion of such Stock Option shall
be forfeited;

(iv)               In the event of the Participant’s termination of services
with the Company and its Subsidiaries for any other reason, the Participant (or
any successor or legal representative) shall have the right to exercise the
vested portion of any Stock Option until the earlier of (i) the date that is
ninety (90) days after the effective date of such termination, or (ii) the
expiration of the term of the Stock Option, and the unvested portion of such
Stock Option shall be forfeited.

 

 

Notwithstanding the foregoing provisions of this Section 6.1(f), or any other
provision of the Plan, the Participant’s Stock Option shall not be exercisable
later than the expiration of the term of the Stock Option.

(g)   Special Incentive Stock Option Rules. Notwithstanding the foregoing, in
the case of an Incentive Stock Option, each Award Agreement shall contain such
other terms, conditions and provisions as the Committee determines necessary or
desirable in order to qualify such Stock Option as an Incentive Stock Option
under the Code including, without limitation, the following:

(i)                   To the extent that the aggregate Fair Market Value
(determined as of the time the Stock Option is granted) of the Common Stock,
with respect to which Incentive Stock Options granted under this Plan (and all
other plans of the Company and its Subsidiaries and Parent Company) become
exercisable for the first time by any person in any calendar year, exceeds the
maximum annual limitation described in Section 422(d) of the Code (which amount
is $100,000 as of the Effective Date), that portion of the Stock Option that
exceeds the foregoing limitation shall be treated as Non-Qualified Stock
Options.

(ii)                 No Incentive Stock Option shall be granted to any employee
if, at the time the Incentive Stock Option is granted, the employee (by reason
of the attribution rules applicable under Section 424(d) of the Code) owns more
than 10% of the combined voting power of all classes of stock of the Company or
any Parent Company or Subsidiary unless at the time such Incentive Stock Option
is granted the Stock Option exercise price is at least 110% of the Fair Market
Value (determined as of the time the Incentive Stock Option is granted) of the
shares of Common Stock subject to the Incentive Stock Option and such Incentive
Stock Option by its terms is not exercisable after the expiration of five years
from the date of grant.

If an Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, such Stock Option
shall thereafter be treated as a Non-Qualified Stock Option.

6.2              Restricted Stock.

(a)    Restrictions. At the time of grant, the Board may establish a period of
time (a “Restricted Period”) and any additional restrictions including the
satisfaction of corporate or individual performance objectives applicable to an
Award of Restricted Stock. Each Award of Restricted Stock may be subject to a
different Restricted Period and additional restrictions. Restricted Stock may
not be sold, transferred, assigned, pledged or otherwise encumbered or disposed
of during the Restricted Period or prior to the satisfaction of any other
applicable restrictions.

(b)   Restricted Stock Certificates. The Company shall issue shares of Common
Stock, in the name of each Participant to whom Restricted Stock has been
granted, stock certificates or other evidence of ownership representing the
total number of shares of Restricted Stock granted to the Participant, as soon
as reasonably practicable after the date of grant of the Restricted Stock. The
Board may provide in an Award Agreement that either (i)  the Company shall hold
such certificates for the Participant’s benefit until such time as the
Restricted Stock is forfeited to the Company or the restrictions lapse or
(ii) such certificates shall be delivered to the Participant; provided, however,
that such certificates shall bear a legend or legends that comply with the
applicable securities laws and regulations and make appropriate reference to the
restrictions imposed under the Plan and the Award Agreement.

 

 

(c)    Rights of Holders of Restricted Stock. Unless otherwise provided in the
applicable Award Agreement, holders of Restricted Stock shall have rights as
stockholders of the Company, including voting and dividend rights.

(d)   Purchase of Restricted Stock. The Participant shall be required, to the
extent required by applicable law, to purchase the Restricted Stock from the
Company at a purchase price equal to the greater of (i) the aggregate par value
of the shares of Common Stock represented by such Restricted Stock or (ii) the
purchase price, if any, specified in the related Award Agreement. If specified
in the Award Agreement, the purchase price may be deemed paid by services
already rendered. The purchase price shall be payable in a form described in
Section 6.1(e) or, if so determined by the Board, in consideration for past
services rendered or for future services to be rendered during the Restricted
Period.

Section 7.            Securities Law Requirements. No shares of Common Stock
shall be issued upon the exercise or payment of any Award unless and until:

(i)                   The shares of Common Stock underlying the Award have been
registered under the Securities Act of 1933, as amended (the “Act”), or the
Company has determined that an exemption from the registration requirements
under the Act is available or the registration requirements of the Act do not
apply to such exercise or payment;

(ii)                 The Company has determined that all applicable listing
requirements of any stock exchange or quotation system on which the shares of
Common Stock are listed have been satisfied; and

(iii)                The Company has determined that any other applicable
provision of state or federal law, including without limitation applicable state
securities laws, has been satisfied.

Section 8.            Representations of Participant; Legends. Regardless of
whether the offering and sale of shares of Common Stock has been registered
under the Act or has been registered or qualified under the securities laws of
any state, the Company may impose restrictions upon the sale, pledge, or other
transfer of such shares, including the placement of appropriate legends on stock
certificates, if, in the judgment of the Company and its counsel, such
restrictions are necessary or desirable in order to achieve compliance with the
provisions of the Act, the securities laws of any state, or any other law. As a
condition to the Participant’s receipt of shares, the Company may require the
Participant to represent that such shares are being acquired for investment, and
not with a view to the sale or distribution thereof, except in compliance with
the Act, and to make such other representations as are deemed necessary or
appropriate by the Company and its counsel. Stock certificates evidencing shares
acquired pursuant to an unregistered transaction to which the Act applies shall
bear a restrictive legend substantially in the following form and such other
restrictive legends as are required or deemed advisable under the Plan or the
provisions of any applicable law:

 

 

 

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1993, AS AMENDED (THE “ACT”), OR QUALIFIEDUNDER THE SECURITIES
LAWS OF ANY STATE. THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF, AND MAY NOT BE
SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION UNDER THE ACT AND QUALIFICATION UNDER ANY APPLICABLE
STATE SECURITIES LAWS, OR WITHOUT AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION OR QUALIFICATION IS NOT
REQUIRED.”

Any determination by the Company and its counsel in connection with any of the
matters set forth in this Section 8 shall be conclusive and binding on all
persons.

 

The Company may, but shall not be obligated to, register or qualify the sale of
shares under the Act or any other applicable law.

 

Section 9.            Single or Multiple Agreements. Multiple forms of Awards or
combinations thereof may be evidenced by a single agreement or multiple
agreements, as determined by the Committee.

Section 10.            Rights of a Stockholder. The recipient of any Award under
the Plan, unless otherwise expressly provided by the Plan, shall have no rights
as a stockholder with respect thereto unless and until shares of Common Stock
are issued to him.

Section 11.            No Right to Continue Employment or Service. Nothing in
the Plan or any instrument executed or Award granted pursuant thereto shall
confer upon any Participant any right to continue to serve the Company, Parent
Company or any Subsidiary in the capacity in effect at the time the Award was
granted or shall affect the right of the Company, Parent Company or any
Subsidiary to terminate (i) the employment of an employee with or without notice
and with or without Cause, (ii) the service of a consultant or adviser pursuant
to the terms of such consultant’s or adviser’s agreement with the Company,
Parent Company or any Subsidiary, if any, or (iii) the service of a director
pursuant to the Bylaws of the Company, Parent Company or any Subsidiary and any
applicable provisions of the corporate law of the state in which the Company,
Parent Company or any Subsidiary is incorporated, as the case may be.

Section 12.            Withholding. The Company’s obligations hereunder in
connection with any Award shall be subject to applicable foreign, federal, state
and local withholding tax requirements. Foreign, federal, state and local
withholding tax due under the terms of the Plan may, to the extent permitted in
the Award Agreement or by the Committee, be paid in cash or shares of Common
Stock (either through the surrender of already-owned shares of Common Stock that
the Participant has held for the period required to avoid a charge to the
Company’s reported earnings or the withholding of shares of Common Stock
otherwise issuable upon the exercise, grant or vesting of such Award) having a
Fair Market Value equal to the required withholding and upon such other terms
and conditions as the Committee shall determine; provided, however, the
Committee, in its sole discretion, may require that such taxes be paid in cash;
and provided, further, any election by a Participant subject to Section 16 of
the Exchange Act to pay his or her withholding tax in shares of Common Stock
shall be subject to and must comply with the rules promulgated under Section 16
of the Exchange Act.

 

 

Section 13.            Indemnification. No member of the Board or the Committee,
nor any officer or employee of the Company or a Subsidiary or Parent Company
acting on behalf of the Board or the Committee, shall be personally liable for
any action, determination or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board or the Committee and each and
any officer or employee of the Company or any Subsidiary or Parent Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.

Section 14.            Non-Assignability. No right or benefit hereunder shall in
any manner be subject to the debts, contracts, liabilities or torts of the
person entitled to such right or benefit. No Award under the Plan shall be
assignable or transferable by the Participant except by will, by the laws of
descent and distribution and by such other means as the Committee may approve
from time to time, and all Awards shall be exercisable, during the Participant’s
lifetime, only by the Participant.

However, the Participant, with the approval of the Committee, may transfer a
Non-Qualified Stock Option for no consideration to or for the benefit of the
Participant’s Immediate Family (including, without limitation, to a trust for
the benefit of the Participant’s Immediate Family or to a partnership or limited
liability company for one or more members of the Participant’s Immediate
Family), subject to such limits as the Committee may establish, and the
transferee shall remain subject to all the terms and conditions applicable to
the Non-Qualified Stock Option prior to such transfer. The foregoing right to
transfer a Non-Qualified Stock Option shall apply to the right to consent to
amendments to the Award Agreement and, in the discretion of the Committee, shall
also apply to the right to transfer ancillary rights associated with the
Non-Qualified Stock Option. The term “Immediate Family” shall mean the
Participant’s spouse, parents, children, stepchildren, adoptive relationships,
sisters, brothers and grandchildren (and, for this purpose, shall also include
the Participant).

At the request of the Participant and subject to the approval of the Committee,
Common Stock purchased upon exercise of a Non-Qualified Stock Option may be
issued or transferred into the name of the Participant and his or her spouse
jointly with rights of survivorship.

Except as set forth above or in an Award Agreement, any attempted assignment,
sale, transfer, pledge, mortgage, encumbrance, hypothecation, or other
disposition of an Award under the Plan contrary to the provisions hereof, or the
levy of any execution, attachment, or similar process upon an Award under the
Plan shall be null and void and without effect.

        

 

 

 

Section 15.            Nonuniform Determinations. The Committee’s determinations
under the Plan (including without limitation determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the agreements evidencing same, and the
establishment of values and performance targets) need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive,
Awards under the Plan, whether or not such persons are similarly situated.

Section 16.            Adjustments. In the event of any change in the
outstanding shares of Common Stock, without the receipt of consideration by the
Company, by reason of a stock dividend, stock split, reverse stock split or
distribution, recapitalization, merger, reorganization, reclassification,
consolidation, split-up, spin-off, combination of shares, exchange of shares or
other change in corporate structure affecting the Common Stock and not involving
the receipt of consideration by the Company, the Committee shall make
appropriate and equitable adjustments in (a) the aggregate number of shares of
Common Stock (i) available for issuance under the Plan, (ii) for which Awards
may be made to any Participant or to any group of Participants (e.g., Outside
Directors), (iii) which are available for issuance under Incentive Stock
Options, (iv) covered by outstanding Awards, (b) the exercise related to
outstanding Awards and (c) the appropriate Fair Market Value and other price
determinations relevant to outstanding Awards and shall make such other
adjustments as may be appropriate under the circumstances; provided, that the
number of shares subject to any Award always shall be a whole number.

Section 17.            Termination and Amendment; Expiration. The Board may
terminate or amend the Plan or any portion thereof at any time and the Committee
may amend the Plan to the extent provided in Section 3, without approval of the
stockholders of the Company, unless stockholder approval is required by
applicable stock exchange or NASDAQ or other quotation system rules, applicable
Code provisions, or other applicable laws or regulations. Unless earlier
terminated by the Board in accordance with this Section 17, the Plan will expire
on the tenth anniversary of the Effective Date.

The Committee shall have discretion to approve a repricing of any Stock Option.
For this purpose, a “repricing” means any of the following (or any other action
that has the same effect as any of the following): (i) changing the terms of a
Stock Option to lower its exercise price; (ii) any other action that is treated
as a “repricing” under generally accepted accounting principles; and (iii)
repurchasing for cash or canceling a Stock Option at a time when its exercise
price is greater than the Fair Market Value of the underlying shares in exchange
for another Award, unless the cancellation and exchange occurs in connection
with a change in capitalization or similar change under Section 16. A
cancellation and exchange under clause (iii) would be considered a “repricing”
regardless of whether it is treated as a “repricing” under generally accepted
accounting principles and regardless of whether it is voluntary on the part of
the Participant.

Section 18.            Severability. If any provision of the Plan is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, and the Plan shall be
reformed, construed and enforced in such jurisdiction so as to best give effect
to the intent of the Company under the Plan.

       

 

 

Section 19.            Effect on Other Plans. Participation in this Plan shall
not affect an employee’s eligibility to participate in any other benefit or
incentive plan of the Company or any Subsidiary and any Awards made pursuant to
this Plan shall not be used in determining the benefits provided under any other
plan of the Company or any Subsidiary unless specifically provided.

Section 20.            Effective Date of the Plan. This Plan, as amended and
restated herein, is effective as of July 18, 2017 (the “Effective Date”), upon
the approval of the stockholders of the Company to the extent required by
applicable Code provisions or other applicable law.

Section 21.            Governing Law. This Plan and all agreements executed in
connection with the Plan shall be governed by, and construed in accordance with,
the laws of the State of Michigan, without regard to its conflicts of law
doctrine.

Section 22.            Gender and Number. Words denoting the masculine gender
shall include the feminine gender, and words denoting the feminine gender shall
include the masculine gender. Words in the plural shall include the singular,
and the singular shall include the plural.

Section 23.            Acceleration of Exercisability and Vesting. The Committee
shall have the power to accelerate the time at which an Award may first be
exercised or the time during which an Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the Award stating
the time at which it may first be exercised or the time during which it will
vest, including, without limitation, pursuant to a change of control of the
Company.

Section 24.            Modification of Awards. Within the limitations of the
Plan and subject to Sections 16 and 29, the Committee may modify outstanding
Awards or accept the cancellation of outstanding Awards for the granting of new
Awards in substitution therefor. Notwithstanding the preceding sentence, except
for any adjustment described in Section 16 or 29, no modification of an Award
shall, without the consent of the Participant, alter or impair any rights or
obligations under any Award previously granted under the Plan in any material
adverse way without the affected Participant’s consent. For purposes of the
preceding sentence, any modification to any of the following terms or conditions
of an outstanding unexercised Award shall be deemed to be a material
modification: (i) the number of shares of Common Stock covered by such Award,
(ii) the exercise price or Fair Market Value determination related to such
Award, (iii) the period of time within which the Award vests and is exercisable
and the terms and conditions of such vesting and exercise, (iv) the type of
Award, and (v) the restrictions on transferability of the Award and of any
shares of Common Stock issued in connection with such Award (including the
Company’s right of repurchase, if any).

         

 

 

 

Section 25.            No Strict Construction. No rule of strict construction
shall be applied against the Company, the Committee, or any other person in the
interpretation of any of the terms of the Plan, any agreement executed in
connection with the Plan, any Award granted under the Plan, or any rule,
regulation or procedure established by the Committee.

Section 26.            Successors. This Plan is binding on and will inure to the
benefit of any successor to the Company, whether by way of merger,
consolidation, purchase, or otherwise.

Section 27.            Plan Provisions Control. The terms of the Plan govern all
Awards granted under the Plan, and in no event will the Committee have the power
to grant any Award under the Plan which is contrary to any of the provisions of
the Plan. In the event any provision of any Award granted under the Plan shall
conflict with any term in the Plan, the term in the Plan shall control.

Section 28.            Headings. The headings used in the Plan are for
convenience only, do not constitute a part of the Plan, and shall not be deemed
to limit, characterize, or affect in any way any provisions of the Plan, and all
provisions of the Plan shall be construed as if no captions had been used in the
Plan.

Section 29.            Merger or Asset Sale. Upon the effectiveness of (i) a
merger, reorganization or consolidation between the Company and another person
or entity (other than a holding company or a Subsidiary or Parent Company) as a
result of which the holders of the Company’s outstanding voting stock
immediately prior to the transaction hold less than a majority of the
outstanding voting stock of the surviving entity immediately after the
transaction, or (ii) the sale of all or substantially all of the assets of the
Company to an unrelated person or entity (in each case, a “Transaction”), unless
provision is made in connection with, and by the parties subject to, the
Transaction for (x) the assumption of all outstanding Awards, or (y) the
substitution of such Awards with new Awards of the successor entity or parent
thereof, with appropriate and equitable adjustment as to the number and kind of
shares and, if appropriate, the per share exercise prices, or (z) the equitable
settlement of such Awards in cash or cash equivalents (i.e., “cash out”
provision), this Plan and all outstanding Awards granted hereunder, except with
respect to specific Awards as the Committee otherwise determines, shall
terminate. In the event of such termination, and to the extent applicable, each
Participant shall be permitted to exercise prior to the anticipated effective
date of the Transaction all outstanding Stock Options held by such Participant
which are then vested and exercisable; provided, however, that the Participant
may, but will not be required to, condition such exercise upon the effectiveness
of the Transaction. In the Committee’s sole discretion, the vesting and
exercisability of all, or a specified portion of, outstanding Awards may be
accelerated.

Section 30.            Compliance with Section 409A. The Plan and Awards made
under the Plan are intended to comply with, or be exempt from, the requirements
of Section 409A of the Code, and the Plan and any Award Agreements shall be
interpreted in a manner consistent with such intent. In addition, and
notwithstanding any provision of the Plan to the contrary, the Company reserves
the right to amend the Plan or any Award granted under the Plan, by action of
the Committee, without the consent of any affected Participant, to the extent
deemed necessary or appropriate for purposes of maintaining compliance with or
an exemption from Section 409A of the Code and the regulations promulgated
thereunder. All Awards granted under the Plan that constitute “non-qualified
deferred compensation” pursuant to Section 409A of the Code (each, a “Section
409A Covered Award”) shall be paid in a manner intended to comply with Section
409A of the Code. In no event whatsoever shall the Company be liable for any
additional tax, interest or penalties that may be imposed on a Participant by
Section 409A of the Code or any damages for failing to comply with Section 409A
of the Code or this Section 30. Notwithstanding anything in the Plan or in an
Award Agreement to the contrary, the following provisions shall apply to Section
409A Covered Awards:

(i)                   A termination of service shall not be deemed to have
occurred for purposes of any provision of a Section 409A Covered Award providing
for payment upon or following a termination of the Participant’s service unless
such termination is also a “Separation from Service” within the meaning of
Section 409A of the Code and, for purposes of any such provision of a Section
409A Covered Award, references to a “termination,” “termination of employment”
or like terms shall mean Separation from Service. Notwithstanding any provision
to the contrary in the Plan or Award Agreement, if the Participant is deemed on
the date of the Participant’s termination of service to be a “specified
employee” within the meaning of that term under Section 409A(a)(2)(B) of the
Code, then with regard to any payment under a Section 409A Covered Award, to the
extent required to be delayed in compliance with Section 409A(a)(2)(B) of the
Code, such payment shall not be made prior to the earlier of (x) the expiration
of the six (6)-month period measured from the date of the Participant’s
Separation from Service, and (y) the date of the Participant’s death.

 

 

(ii)                 Whenever a payment under a Section 409A Covered Award
specifies a payment period with reference to a number of days, the actual date
of payment within the specified period shall be within the sole discretion of
the Company.

(iii)                If under the Section 409A Covered Award an amount is to be
paid in two or more installments, for purposes of Section 409A of the Code, each
installment shall be treated as a separate payment.

Section 31.            Recovery of Compensation in Connection with Financial
Restatement. Notwithstanding any other provision of this Plan or any applicable
Award Agreement to the contrary, if the Board determines that the Company is
required to restate its financial statements due to material noncompliance with
any financial reporting requirement under the law, whether such noncompliance is
the result of misconduct or other circumstances, a Participant shall be required
to reimburse the Company for any amounts earned or payable with respect to an
Award to the extent required by and otherwise in accordance with applicable law
and any Company policies adopted or implemented by the Board or Committee from
time to time.