Exhibit 10.35


 


RESHAPE LIFESCIENCES INC.

SECOND AMENDED AND RESTATED 2003 STOCK INCENTIVE PLAN


 


Adopted: October 1, 2003

Amended and Restated: May 7, 2014 and December 12, 2016


Amended: December 19, 2017 and May 23,
2018


 


Section 1.               Purpose.


 


The purpose of the Plan is to aid in attracting and retaining
employees, management personnel, other personnel and Non-Employee Directors capable of assuring the future success of the Company,
to offer such personnel and Non-Employee Directors incentives to put forth maximum efforts for the success of the Company’s
business and to afford such personnel and Non-Employee Directors an opportunity to acquire a proprietary interest in the Company.


 


Section 2.              Definitions.


 


As used in the Plan, the following terms shall have the meanings
set forth below:


 


(a)           “Affiliate”
shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and
(ii) any entity in which the Company has a significant equity interest, in each case as determined by the Committee.


 


(b)           “Award”
shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent,
Other Stock Grant or Other Stock-Based Award granted under the Plan.


 


(c)           “Award
Agreement” shall mean any written agreement, contract or other instrument or document evidencing any Award granted under
the Plan.


 


(d)           “Board”
shall mean the Board of Directors of the Company.


 


(e)           “Change
in Control” shall mean the consummation of any of the following:


 


(i)       any
 “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act who did not own shares
of the capital stock of the Company on the date of grant of the Award shall, together with his, her or its Affiliates and Associates
(as such terms are defined in Rule 12b-2 promulgated under the Exchange Act), become the “Beneficial Owner” (as
such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company’s then outstanding securities (any such person being
hereinafter referred to as an “Acquiring Person”);


 


(ii)       the
Continuing Directors cease to constitute a majority of the Company’s Board;


 






     


     


    

 


(iii)      There
should occur (A) any consolidation or merger involving the Company and the Company shall not be the continuing or surviving
corporation or the shares of the Company’s capital stock shall be converted into cash, securities or other property; provided,
however, that this subclause (A) shall not apply to a merger or consolidation in which (1) the Company is the surviving
corporation and (2) the stockholders of the Company immediately prior to the transaction have the same proportionate ownership
of the capital stock of the surviving corporation immediately after the transaction; (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company; or
(C) any liquidation or dissolution of the Company;


 


(iv)     The
majority of the Continuing Directors determine, in their sole and absolute discretion, that there has been a Change in Control;
or


 


(v)      No
Award Agreement issued on or after December 12, 2016 shall provide for accelerated exercisability of any Award or the lapse
of restrictions relating to any Award in connection with a change in control event other than a Change in Control as defined herein.


 


(f)            “Code”
shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.


 


(g)           “Committee”
shall mean either the Board or a committee of the Board appointed by the Board to administer the Plan.


 


(h)           “Common
Stock” shall mean shares of common stock, par value $0.01 per share, of the Company.


 


(i)            “Company”
shall mean ReShape Lifesciences Inc., a Delaware corporation, and any successor corporation.


 


(j)            “Continuing
Director” shall mean any person who is a member of the Board of Directors of the Company, while such person is a member
of the Board of Directors, who is not an Acquiring Person, an Affiliate or Associate of an Acquiring Person or a representative
of an Acquiring Person or of any such Affiliate or Associate and who (i) was a member of the Company’s Board of Directors
on the date of grant of the Option or (ii) subsequently became a member of the Board of Directors, upon the nomination or
recommendation, or with the approval of, a majority of the Continuing Directors.


 


(k)           “Director”
shall mean a member of the Board.


 


(l)            “Dividend
Equivalent” shall mean any right granted under Section 6(e) of the Plan.


 


(m)          “Eligible
Person” shall mean any employee, officer, consultant, independent contractor or Non-Employee Director providing services
to the Company or any Affiliate whom the Committee determines to be an Eligible Person.


 






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(n)           “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.


 


(o)           “Fair
Market Value” shall mean, with respect to any property (including, without limitation, any Shares or other securities),
the fair market value of such property determined by such methods or procedures as shall be established from time to time by the
Committee. Notwithstanding the foregoing, unless otherwise determined by the Committee, the Fair Market Value of Shares on a given
date for purposes of the Plan shall not be less than (i) the closing price as reported for composite transactions, if the
Shares are then listed on a national securities exchange, (ii) the last sale price, if the Shares are then quoted on the NASDAQ
Stock Market or (iii) the average of the closing representative bid and asked prices of the Shares in all other cases, on
the date as of which fair market value is being determined. If on a given date the Shares are not traded in an established securities
market, the Committee shall make a good faith attempt to satisfy the requirements of this clause and in connection therewith shall
take such action as it deems necessary or advisable.


 


(p)           “Incentive
Stock Option” shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements
of Section 422 of the Code or any successor provision.


 


(q)           “Non-Employee
Directors” shall mean members of the Board who are also not employees of the Company.


 


(r)           “Non-Qualified
Stock Option” shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive
Stock Option.


 


(s)           “Option”
shall mean an Incentive Stock Option or a Non-Qualified Stock Option.


 


(t)            “Other
Stock Grant” shall mean any right granted under Section 6(f) of the Plan.


 


(u)           “Other
Stock-Based Award” shall mean any right granted under Section 6(g) of the Plan.


 


(v)           “Participant”
shall mean an Eligible Person designated to be granted an Award under the Plan.


 


(w)          “Performance
Award” shall mean any right granted under Section 6(d) of the Plan.


 


(x)           “Performance
Goal” shall mean one or more of the following performance goals, either individually, alternatively or in any
combination: sales, revenue, costs, expenses, earnings (including one or more of net profit after tax, gross profit,
operating profit, earnings before interest and taxes (“EBIT”), earnings before interest, taxes, depreciation and
amortization (“EBITDA”) and net earnings), EBIT or EBITDA as a percent of net sales, earnings per share (basic or
diluted), earnings per share from continuing operations, operating income, pre-tax income, operating income margin, net
income, margins (including one or more of gross, operating and net income margins), ratios (including one or more of price to
earnings, debt to assets, debt to net assets and ratios regarding liquidity, solvency, fiscal capacity, productivity or
risk), returns (including one or more of return on actual or pro forma assets, net assets, equity, investment, capital and
net capital employed), stockholder return (including total stockholder return relative to an index or peer group), stock
price, market capitalization, cash generation, cash flow (including, without limitation, operating cash flow, free cash flow
and cash flow return on equity), unit volume, working capital, market share, cost reductions, budget comparisons, sales or
profitability of an identifiable business unit or product, economic profit or value added, number of customers, workforce
satisfaction and diversity goals, environmental health and safety goals, employee retention, customer satisfaction,
implementation or completion of key projects and strategic plan development and implementation. Such goals may reflect
absolute entity or business unit performance or a relative comparison to the performance of a peer group of entities or other
external measure of the selected performance criteria. The foregoing measures may relate to the Company, one or more of its
subsidiaries or one or more of its divisions or units, product lines or product categories or any combination of the
foregoing. To the extent consistent with Section 162(m), the Committee may, when it establishes performance criteria,
also provide for the adjustment for charges related to an event or occurrence which the Committee determines is appropriate
for adjustment, including, but not limited to, any of the following events: asset write-downs; litigation or claim judgments
or settlements; changes in tax law, accounting principles or other such laws or provisions affecting reported results;
severance, contract termination and other costs related to exiting certain business activities; acquisitions; gains or losses
from the disposition of businesses or assets or from the early extinguishment of debt; and unusual, extraordinary or
nonrecurring events.


 






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(y)           “Person”
shall mean any individual or entity, including a corporation, partnership, limited liability company, association, joint venture
or trust.


 


(z)            “Plan”
shall mean the ReShape Lifesciences Inc. Second Amended and Restated 2003 Stock Incentive Plan, as amended from time to time.


 


(aa)         “Restricted
Stock” shall mean any Shares granted under Section 6(c) of the Plan.


 


(bb)        “Restricted
Stock Unit” shall mean any unit granted under Section 6(c) of the Plan evidencing the right to receive a Share
(or a cash payment equal to the Fair Market Value of a Share) at some future date.


 


(cc)         “Rule 16b-3”
shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act or any successor rule or
regulation.


 


(dd)        “Section 162(m)”
shall mean Section 162(m) of the Code, or any successor provision, and the applicable Treasury Regulations promulgated
thereunder.


 


(ee)         “Section 409A”
shall mean Section 409A of the Code, or any successor provision and the applicable Treasury Regulations and other applicable
guidance thereunder.


 


(ff)          “Securities
Act” shall mean the Securities Act of 1933, as amended.


 


(gg)        “Share”
or “Shares” shall mean shares of Common Stock or such other securities or property as may become subject to
Awards pursuant to an adjustment made under Section 4(c) of the Plan.


 






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(hh)         “Specified
Employee” shall mean a specified employee as defined in Section 409A(a)(2)(B) of the Code or applicable proposed
or final regulations under Section 409A, determined in accordance with procedures established by the Company and applied uniformly
with respect to all plans maintained by the Company that are subject to Section 409A.


 


(ii)           “Stock
Appreciation Right” shall mean any right granted under Section 6(b) of the Plan.


 


Section 3.               Administration.


 


(a)           Power
and Authority of the Committee. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan
and to applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine
the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered
by (or with respect to which payments, rights or other matters are to be calculated in connection with) each Award; (iv) determine
the terms and conditions of any Award or Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement
and accelerate the exercisability of Options or the lapse of restrictions relating to Restricted Stock, Restricted Stock Units
or other Awards; (vi) determine whether, to what extent and under what circumstances Awards may be exercised in cash, Shares,
other securities, other Awards or other property, or canceled, forfeited or suspended; (vii) determine whether, to what extent
and under what circumstances cash, Shares, other securities, other Awards, other property and other amounts payable with respect
to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or the Committee; (viii) interpret
and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (ix) establish, amend,
suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (x) make any other determination and take any other action that the Committee deems necessary or desirable
for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations
and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be
made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award.


 


(b)           Delegation.
The Committee may delegate its powers and duties under the Plan to one or more officers or Directors of the Company or any Affiliate
or a committee of such officers or Directors, subject to such terms, conditions and limitations as the Committee may establish
in its sole discretion; provided, however, that the Committee shall not delegate such authority (i) with regard to
grants of Awards to be made to officers or directors of the Company or any Affiliate who are subject to Section 16 of the
Exchange Act, (ii) in such a manner as would cause the Plan not to comply with the requirements of Section 162(m) or
(iii) in such a manner as would contravene Section 157 of the Delaware General Corporation Law.


 


Section 4.              Shares
Available for Awards.


 


(a)           Shares
Available. Subject to adjustment as provided in Section 4(c), the aggregate number of Shares that may be issued
under all Awards under the Plan from its inception shall be 15,000,000 (the “Initial Limit”); provided, however,
that the aggregate number of Shares that may be issued under all Awards under the Plan will automatically increase on an
annual basis on the first day of each year beginning in 2019 (the “Annual Increase”) such that the aggregate
number of Shares that may be issued under all Awards under the Plan equals 15% (or such lesser amount determined by the
Board) of the total number of shares of Common Stock outstanding (on an as converted basis) on the last day of the
immediately preceding fiscal year, assuming the conversion of any outstanding shares of preferred stock and the exercise of
any outstanding warrants, but excluding shares issuable upon the exercise or payment of stock options or other equity-based
awards with respect to which shares have not actually been issued (the “Share Limit”). In order that the
applicable regulations under the Code relating to Incentive Stock Options be satisfied, the maximum number of Shares that may
be issued under the Plan upon the exercise of Incentive Stock Options may not exceed the Initial Limit cumulatively increased
on January 1, 2019 and each January 1 thereafter by the lesser of the Annual Increase for such year or 1,200,000
Shares. Notwithstanding the foregoing, to the extent permitted under applicable law and applicable stock exchange rules,
Awards that provide for the delivery of Shares subsequent to the applicable grant date may be granted in excess of the Share
Limit if such Awards provide for the forfeiture or cash settlement of such Awards to the extent that insufficient Shares
remain under the Share Limit at the time that Shares would otherwise be issued in respect of such Award.


 






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(b)           Counting
Shares. For purposes of this Section 4, except as set forth in this Section 4(b) below, if an Award entitles
the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall
be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan.


 


(i)        Shares
Added Back to Reserve. Subject to the limitations in (ii) below, if any Shares covered by an Award or to which an Award
relates are not purchased or are forfeited or are reacquired by the Company, or if an Award otherwise terminates or is cancelled
without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under the Plan
with respect to such Award, to the extent of any such forfeiture, reacquisition by the Company, termination or cancellation, shall
again be available for granting Awards under the Plan.


 


(ii)       Shares
Not Added Back to Reserve. Notwithstanding anything to the contrary in (i) above, the following Shares will not again
become available for issuance under the Plan: (A) any Shares which would have been issued upon any exercise of an Option but
for the fact that the exercise price was paid by a “net exercise” pursuant to the terms of the Option Agreement or
any Shares tendered in payment of the exercise price of an Option; (B) any Shares withheld by the Company or Shares tendered
to satisfy any tax withholding obligation with respect to any Award; (C) Shares covered by a stock-settled Stock Appreciation
Right issued under the Plan that are not issued in connection with settlement in Shares upon exercise; or (D) Shares that
are repurchased by the Company using Option exercise proceeds.


 


(iii)      Cash-Only
Awards. Awards that do not entitle the holder thereof to receive or purchase Shares shall not be counted against the aggregate
number of Shares available for Awards under the Plan.


 






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(iv)     Substitute
Awards Relating to Acquired Entities. Shares issued under Awards granted in substitution for awards previously granted by an
entity that is acquired by or merged with the Company or an Affiliate shall not be counted against the aggregate number of Shares
available for Awards under the Plan.


 


(c)           Adjustments.
In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights
to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that
an adjustment is necessary in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made
available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the
number and type of Shares (or other securities or other property) that thereafter may be made the subject of Awards, (ii) the
number and type of Shares (or other securities or other property) subject to outstanding Awards and (iii) the purchase or
exercise price with respect to any Award; provided, however, that the number of Shares covered by any Award or to which such Award
relates shall always be a whole number.


 


(d)           Award
Limitations under the Plan.


 


(i)        Section 162(m) Limitation
for Certain Types of Awards. No Eligible Person that may be a “covered person” within the meaning of Section 162(m) may
be granted Options, Stock Appreciation Rights or any other Award or Awards under the Plan, the value of which Award or Awards is
based solely on an increase in the value of the Shares after the date of grant of such Award or Awards, and which is intended to
represent “qualified performance-based compensation” within the meaning of Section 162(m), for more than 2,000,000
Shares or, if such Award is payable in cash, for an amount greater than the Fair Market Value of 2,000,000 Shares at the time of
payment (subject, in each case, to adjustment as provided for in Section 4(c) of the Plan) in the aggregate in any calendar
year.


 


(ii)       Section 162(m) Limitations
for Performance Awards.


 


(A)       Performance
Awards Denominated in Shares. No Eligible Person that may be a “covered person” within the meaning of Section 162(m) may
be granted Awards denominated in Shares under the Plan which are intended to represent “qualified performance-based compensation”
within the meaning of Section 162(m) (including, without limitation, Performance Awards, Restricted Stock and Restricted
Stock Units), for more than 2,000,000 Shares (subject to adjustment as provided for in Section 4(c) of the Plan) in the
aggregate in any calendar year. The limitation contained in this Section 4(d)(ii)(A) does not apply to any Award subject
to the limitations contained in Section 4(d)(i) or Section 4(d)(ii)(B).


 


(B)       Performance
Awards Denominated in Cash. The maximum amount payable pursuant to all Performance Awards denominated in cash under the Plan
which are intended to represent “qualified performance-based compensation” within the meaning of Section 162(m) to
any Participant that may be a “covered person” within the meaning of Section 162(m) in the aggregate in
any calendar year shall be $10,000,000 in value, whether payable in cash, Shares or other property. The limitation contained in
this Section 4(d)(ii)(B) does not apply to any Award subject to the limitations contained in Section 4(d)(i) or
Section 4(d)(ii)(A).


 






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(iii)      Limitation
for Awards to Consultants and Advisors. Awards will only be granted to consultants or advisors in compliance with Rule 405
of the Securities Act.


 


(iv)     The
limitations contained in this Section 4(d) shall apply only with respect to Awards granted under this Plan, and limitations
on awards granted under any other stockholder approved executive incentive plan maintained by the Company will be governed solely
by the terms of such other plan.


 


Section 5.               Eligibility.


 


Any Eligible Person of the Company or any Affiliate, shall be
eligible to be designated as a Participant. In determining which Eligible Persons shall receive an Award and the terms of
any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present
and potential contributions to the success of the Company or such other factors as the Committee, in its discretion, shall deem
relevant. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full or part-time employees (which term
as used herein includes, without limitation, officers and directors who are also employees), and an Incentive Stock Option shall
not be granted to an employee of an Affiliate unless such Affiliate is also a “subsidiary corporation” of the Company
within the meaning of Section 424(f) of the Code or any successor provision.


 


Section 6.               Awards.


 


(a)           Options.
The Committee is hereby authorized to grant Options to Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:


 


(i)        Exercise
Price. The purchase price per Share purchasable under an Option shall be determined by the Committee and shall not be less
than 100% of the Fair Market Value of a Share on the date of grant of such Option; provided, however, that the Committee
may designate a purchase price below Fair Market Value on the date of grant if the Option is granted in substitution for a stock
option previously granted by an entity that is acquired by or merged with the Company or an Affiliate.


 


(ii)       Option
Term. The term of each Option shall be fixed by the Committee; provided, however, that the term of an Incentive Stock Option
may not extend more than ten years from the date of grant of such Incentive Stock Option.


 


(iii)      Time
and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in
part and the method or methods by which, and the form or forms (including, without limitation, cash, Shares, other securities,
other Awards or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the applicable
exercise price) in which, payment of the exercise price with respect thereto may be made or deemed to have been made. Alternatively,
the Committee may, in its discretion, permit a Non-Qualified Stock Option (but not an Incentive Stock Option) to be exercised
by delivering to the Participant a number of Shares having an aggregate Fair Market Value (determined as of the date of exercise)
equal to the excess, if positive, of the Fair Market Value of the Shares underlying the Non-Qualified Stock Option being exercised,
on the date of exercise, over the exercise price of the Non-Qualified Stock Option for such Shares.


 






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(iv)     Incentive
Stock Options. Notwithstanding anything in the Plan to the contrary, the following additional provisions shall apply to the
grant of Options which are intended to qualify as Incentive Stock Options:


 


(A)       The
Committee will not grant Incentive Stock Options in which the aggregate Fair Market Value (determined as of the time the Option
is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Participant during
any calendar year (under this Plan and all other plans of the Company and its Affiliates) shall exceed $100,000.


 


(B)       All
Incentive Stock Options must be granted within 10 years from the earlier of the date on which this Plan was adopted by the Board
or the date this Plan was approved by the stockholders of the Company.


 


(C)       Unless
sooner exercised, all Incentive Stock Options shall expire and no longer be exercisable no later than 10 years after the date of
grant; provided, however, that in the case of a grant of an Incentive Stock Option to a Participant who, at the time
such Option is granted, owns (within the meaning of Section 422 of the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of its Affiliate, such Incentive Stock Option shall expire and no longer
be exercisable no later than five years from the date of grant.


 


(D)       The
purchase price per Share for an Incentive Stock Option shall be not less than 100% of the Fair Market Value of a Share on the date
of grant of the Incentive Stock Option; provided, however, that, in the case of the grant of an Incentive Stock Option
to a Participant who, at the time such Option is granted, owns (within the meaning of Section 422 of the Code) stock possessing
more than 10% of the total combined voting power of all classes of stock of the Company or of its Affiliate, the purchase price
per Share purchasable under an Incentive Stock Option shall be not less than 110% of the Fair Market Value of a Share on the date
of grant of the Incentive Stock Option.


 


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


 






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(b)           Stock
Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Participants subject to the terms
of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof
a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise over
(ii) the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than 100%
of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right; provided, however, that
the Committee may designate a grant price below Fair Market Value on the date of grant if the Stock Appreciation Right is granted
in substitution for a stock appreciation right previously granted by an entity that is acquired by or merged with the Company or
an Affiliate. Subject to the terms of the Plan and any applicable Award Agreement, the grant price, term, methods of exercise,
dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be as determined
by the Committee (except that the term of each Stock Appreciation Right shall be subject to the same limitation in Section 6(a)(ii) applicable
to Options). The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may
deem appropriate.


 


(c)           Restricted
Stock and Restricted Stock Units. The Committee is hereby authorized to grant Restricted Stock and Restricted Stock Units to
Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions
of the Plan as the Committee shall determine:


 


(i)        Restrictions.
Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including,
without limitation, a waiver by the Participant of the right to vote or to receive any dividend or other right or property with
respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise
as the Committee may deem appropriate.


 


(ii)       Issuance
and Delivery of Shares. Any Restricted Stock granted under the Plan shall be issued at the time such Awards are granted and
may be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of a stock
certificate or certificates, which certificate or certificates shall be held by the Company or held in nominee name by the stock
transfer agent or brokerage service selected by the Company to provide such services for the Plan. Such certificate or certificates
shall be registered in the name of the Participant and shall bear an appropriate legend referring to the restrictions applicable
to such Restricted Stock. Shares representing Restricted Stock that are no longer subject to restrictions shall be delivered (including
by updating the book-entry registration) to the Participant promptly after the applicable restrictions lapse or are waived. In
the case of Restricted Stock Units, no Shares shall be issued at the time such Awards are granted. Upon the lapse or waiver of
restrictions and the restricted period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall
be issued and delivered to the holder of the Restricted Stock Units.


 






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(iii)      Forfeiture.
Except as otherwise determined by the Committee or as provided in an Award Agreement, upon termination of employment or service
(as determined under criteria established by the Committee) during the applicable restriction period, all Shares of Restricted
Stock and all Restricted Stock Units at such time subject to restriction shall be forfeited and reacquired by the Company at the
original purchase price; provided, however, that the Committee may, when it finds that a waiver would be in the best interest of
the Company, waive in whole or in part Units. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted
Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holders of the Restricted
Stock Units.


 


(d)           Performance
Awards. The Committee is hereby authorized to grant Performance Awards to Participants subject to the terms of the Plan and
any applicable Award Agreement. A Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares
(including, without limitation, Restricted Stock and Restricted Stock Units), other securities, other Awards or other property
and (ii) shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such
Performance Goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan and any applicable
Award Agreement, the Performance Goals to be achieved during any performance period, the length of any performance period, the
amount of any Performance Award granted, the amount of any payment or transfer to be made pursuant to any Performance Award and
any other terms and conditions of any Performance Award shall be determined by the Committee.


 


(e)           Dividend
Equivalents. The Committee is hereby authorized to grant Dividend Equivalents to Participants, subject to the terms of the
Plan and any applicable Award Agreement, under which such Participants shall be entitled to receive payments (in cash, Shares,
other securities, other Awards or other property as determined in the discretion of the Committee) equivalent to the amount of
cash dividends paid by the Company to holders of Shares with respect to a number of Shares determined by the Committee. Notwithstanding
the foregoing, (i) the Committee may not grant Dividend Equivalents to Eligible Persons in connection with grants of Options
or Stock Appreciation Rights to such Eligible Persons, and (ii) no Dividend Equivalent payments shall be made to a Participant
with respect to any Award prior to the date on which all conditions or restrictions relating to such Award (or portion thereof
to which the Dividend Equivalent relates) have been satisfied, waived or lapsed.


 


(f)            Stock
Awards. The Committee is hereby authorized, subject to the terms of the Plan and any applicable Award Agreement, to grant to
Participants Shares without restrictions thereon as are deemed by the Committee to be consistent with the purpose of the Plan.


 


(g)           Other
Stock-Based Awards. The Committee is hereby authorized to grant to Participants subject to the terms of the Plan and any applicable
Award Agreement, such other


 


Awards that are denominated or payable in, valued in whole or
in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into
Shares), as are deemed by the Committee to be consistent with the purpose of the Plan. No Award issued under this Section 6(g) shall
contain a purchase right or an option-like exercise feature.


 






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(h)           General.


 


(i)        No
Cash Consideration for Awards. Awards shall be granted for no cash consideration or for such minimal cash consideration as
may be required by applicable law.


 


(ii)       Awards
May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition
to, in tandem with or in substitution for any other Award or any award granted under any plan of the Company or any Affiliate other
than the Plan. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted
under any such other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from
the grant of such other Awards or awards.


 


(iii)      Forms
of Payment under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be
made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee
shall determine (including, without limitation, cash, Shares, other securities, other Awards or other property or any combination
thereof), and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with
rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions
for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents
with respect to installment or deferred payments.


 


(iv)     Limits
on Transfer of Awards. Except as provided by the Committee or by this Plan, any Award (other than any fully vested and unrestricted
Shares issued pursuant to any Award) and any right under any such Award shall not be transferable by a Participant other than
by will or by the laws of descent and distribution or by transfer of an Award back to the Company. Notwithstanding the immediately
preceding sentence, Awards of Incentive Stock Options shall not be transferable by a Participant other than by will or by the
laws of descent and distribution. The Committee may establish procedures as it deems appropriate for a Participant to designate
a Person or Persons, as beneficiary or beneficiaries, to exercise the rights of the Participant and receive any property distributable
with respect to any Award in the event of the Participant’s death. The Committee, in its discretion and subject to such
additional terms and conditions as it determines, may permit a Participant to transfer a Non-Qualified Stock Option to any “family
member” (as defined in the General Instructions to Form S-8 (or any successor to such Instructions or such Form) under
the Securities Act) at any time that such Participant holds such Option, provided that such transfers may not be for “value”
(as defined in the General Instructions to Form S-8 (or any successor to such Instructions or such Form) under the Securities
Act) and the family member may not make any subsequent transfers other than by will or by the laws of descent and distribution.
Each Award under the Plan or right under any such Award shall be exercisable during the Participant’s lifetime only by the
Participant (except as provided herein or in an Award Agreement or amendment thereto relating to a Non-Qualified Stock Option)
or, if permissible under applicable law, by the Participant’s guardian or legal representative. No Award (other than any
fully vested and unrestricted Shares issued pursuant to any Award) or right under any such Award may be pledged, alienated, attached
or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.


 






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(v)      Term
of Awards. The term of each Award shall be for such period as may be determined by the Committee.


 


(vi)     Restrictions;
Securities Exchange Listing. All Shares or other securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such restrictions as the Committee may deem advisable under the Plan, and to any applicable federal
or state securities laws and regulatory requirements. The Committee may cause appropriate entries to be made or legends to be affixed
to reflect such restrictions. If the Shares or other securities are listed on a securities exchange, the Company shall not be required
to deliver any Shares or other securities covered by an Award until such Shares or other securities have been listed on such securities
exchange.


 


(vii)    Section 409A
Provisions. Notwithstanding anything in the Plan or any Award Agreement to the contrary, to the extent that any amount or benefit
that constitutes “deferred compensation” to a Participant under Section 409A and applicable guidance thereunder
is otherwise payable or distributable to a Participant under the Plan or any Award Agreement solely by reason of the occurrence
of a Change in Control or due to the Participant’s disability or “separation from service” (as defined under
Section 409A), such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance
unless the Committee determines in good faith that (i) the circumstances giving rise to such Change in Control, disability
or separation from service meet the definition of a change in ownership or control, disability or separation from service, as the
case may be, in Section 409A(a)(2)(A) of the Code and applicable proposed or final regulations, or (ii) the payment
or distribution of such amount or benefit would be exempt from the application of Section 409A by reason of the short-term
deferral exemption or otherwise. Any payment or distribution that otherwise would be made to a Participant who is a Specified Employee
(as determined by the Committee in good faith) on account of separation from service may not be made before the date which is six
months after the date of the Specified Employee’s separation from service (or if earlier, upon the Specified Employee’s
death) unless the payment or distribution is exempt from the application of Section 409A by reason of the short-term deferral
exemption or otherwise.


 






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Section 7.               Amendment
and Termination; Adjustments.


 


Except to the extent prohibited by applicable law and unless
otherwise expressly provided in an Award Agreement or in the Plan:


 


(a)           Amendments
to the Plan. The Board may amend, alter, suspend, discontinue or terminate the Plan; provided, however, that, notwithstanding
any other provision of the Plan or any Award Agreement, without the approval of the stockholders of the Company, no such amendment,
alteration, suspension, discontinuation or termination shall be made that, absent such approval:


 


(i)        if
a class of the Company’s securities is then listed on a securities exchange, would cause Rule 16b-3 or the provisions
of Section 162(m)(4)(c) of the Code to become unavailable with respect to the Plan;


 


(ii)       would
violate the rules or regulations of the NASDAQ Stock Market, any other securities exchange or the Financial Industry Regulatory
Authority, Inc. that are applicable to the Company; or


 


(iii)      would
cause the Company to be unable, under the Code, to grant Incentive Stock Options under the Plan.


 


(b)           Amendments
to Awards. Except as otherwise expressly provided in the Plan, the Committee may waive any conditions of or rights of the Company
under any outstanding Award, prospectively or retroactively. Except as otherwise expressly provided in the Plan (specifically including
the next two sentences hereof), the Committee may amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively
or retroactively, but no such action may adversely affect the rights of the holder of such Award without the consent of the Participant
or holder or beneficiary thereof. If any provision of the Plan or an Award Agreement would result in adverse tax consequences under
Section 409A, the Committee may amend that provision (or take any other action reasonably necessary) to avoid any adverse
tax results and no action taken to comply with Section 409A shall be deemed to impair or otherwise adversely affect the rights
of any holder of an Award or beneficiary thereof. In the event of any reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the Company or any other similar corporate transaction or
event involving the Company (or the Company shall enter into a written agreement to undergo such a transaction or event), the Committee
or the Board may, in its sole discretion, provide for any of the following to be effective upon the consummation of the event (or
effective immediately prior to the consummation of the event, provided that the consummation of the event subsequently occurs):


 


(i)        either
(A) termination of any such Award, whether or not vested, in exchange for an amount of cash and/or other property, if any,
equal to the amount that would have been attained upon the exercise of the vested portion of such Award or realization of the Participant’s
vested rights (and, for the avoidance of doubt, if, as of the date of the occurrence of the transaction or event described in this
Section 7(b)(i)(A), the Committee or the Board determines in good faith that no amount would have been attained upon the exercise
of the vested portion of such Award or realization of the Participant’s vested rights, then such Award may be terminated
by the Company without any payment) or (B) the replacement of such Award with other rights or property selected by the Committee
or the Board, in its sole discretion;


 


(ii)       that
such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for
by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and prices;


 






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(iii)      that
such Award shall be exercisable or payable or fully vested with respect to all Shares covered thereby, notwithstanding anything
to the contrary in the applicable Award Agreement; or


 


(iv)     that
the Award cannot vest, be exercised or become payable after a date certain in the future, which may be the effective date of such
event.


 


(c)           Correction
of Defects, Omissions and Inconsistencies. The Committee may correct any defect, supply any omission or reconcile any inconsistency
in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect.


 


Section 8.               Income
Tax Withholding; Tax Bonuses.


 


(a)           Withholding.
In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it
deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are the sole
and absolute responsibility of a Participant are withheld or collected from such Participant. In order to assist a Participant
in paying all or a portion of the federal and state taxes to be withheld or collected upon exercise or receipt of (or the lapse
of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as
it may adopt, may permit the Participant to satisfy such tax obligation by (i) electing to have the Company withhold a portion
of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with
a Fair Market Value equal to the amount of such taxes or (ii) electing to deliver to the Company Shares other than Shares
issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the
amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined.


 


(b)           Tax
Bonuses. The Committee, in its discretion, shall have the authority, at the time of grant of any Award under this Plan or at
any time thereafter, to approve cash bonuses to designated Participants to be paid upon their exercise or receipt of (or the lapse
of restrictions relating to) Awards in order to provide funds to pay all or a portion of federal and state taxes due as a result
of such exercise or receipt (or the lapse of such restrictions). The Committee shall have full authority in its discretion to determine
the amount of any such tax bonus.


 


Section 9.              General
Provisions.


 


(a)           No
Rights to Awards. No Eligible Person, Participant or other Person shall have any claim to be granted any Award under the Plan,
and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards
under the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different
Participants.


 






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(b)           Award
Agreements. No Participant will have rights under an Award granted to such Participant unless and until an Award Agreement
shall have been duly executed on behalf of the Company and, if requested by the Company, signed by the Participant.


 


(c)           No
Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable
or applicable only in specific cases.


 


(d)           No
Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ
of the Company or any Affiliate, nor will it affect in any way the right of the Company or an Affiliate to terminate such employment
at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment
free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.


 


(e)           Governing
Law. The validity, construction and effect of the Plan or any Award, and any rules and regulations relating to the Plan
or any Award, shall be determined in accordance with the laws of the State of Minnesota.


 


(f)            Severability.
If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction
or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of
the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect.


 


(g)           No
Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that
any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any Affiliate.


 


(h)           No
Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash shall be paid in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall
be canceled, terminated or otherwise eliminated.


 


(i)            Headings.
Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.


 


(j)            Other
Benefits. No compensation or benefit awarded to or realized by any Participant under the Plan shall be included for the purpose
of computing such Participant’s compensation under any compensation-based retirement, disability, or similar plan of the
Company unless required by law or otherwise provided by such other plan.


 






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Section 10.             Effective
Date of the Plan.


 


The Plan shall be effective as of the date of its approval and
adoption by the Company’s stockholders. If the Company’s stockholders do not approve the Plan, the Plan shall be null
and void.


 


Section 11.            Term
of the Plan.


 


Awards shall only be granted under the Plan during a 10-year
period beginning on September 27, 2012. However, unless otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award theretofore granted may extend beyond the end of such 10-year period, and the authority of the Committee provided
for hereunder with respect to the Plan and any Awards, and the authority of the Board to amend the Plan and to waive any conditions
or rights of the Company under any Award pursuant to 7(b) hereof, shall extend beyond the termination of the Plan. No Performance
Award intended to qualify as performance-based compensation under Section 162(m) shall be granted under the Plan after
the first stockholder meeting to occur in the fifth year following the year in which stockholders last approved (or re-approved)
the Performance Goals.


 






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