EXHIBIT 10.2







 


 





ARNO THERAPEUTICS, INC.


 


2005
Stock Option Plan


 


(as amended through October 29, 2013)


 


1.Purpose.
The purpose of the 2005 Stock Option Plan (the “Plan”) of Arno Therapeutics, Inc. (the “Company”)
is to increase shareholder value and to advance the interests of the Company by furnishing a variety of economic incentives (“Incentives”)
designed to attract, retain and motivate employees, directors and consultants. Incentives may consist of opportunities to purchase
or receive shares of Common Stock, $0.0001 par value, of the Company (“Common Stock”), monetary payments or
both on terms determined under this Plan.


 


2.Administration.


 


2.1The Plan shall be
administered by a committee of the Board of Directors of the Company (the “Committee”). The Committee shall
consist of not less than two directors of the Company who shall be appointed from time to time by the board of directors of the
Company. Each member of the Committee shall be a “non-employee director” within the meaning of Rule 16b-3 of the Exchange
Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the “Exchange Act”),
and an “outside director” as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).
The Committee shall have complete authority to determine all provisions of all Incentives awarded under the Plan (as consistent
with the terms of the Plan), to interpret the Plan, and to make any other determination which it believes necessary and advisable
for the proper administration of the Plan. The Committee’s decisions and matters relating to the Plan shall be final and
conclusive on the Company and its participants. No member of the Committee will be liable for any action or determination made
in good faith with respect to the Plan or any Incentives granted under the Plan. The Committee will also have the authority under
the Plan to amend or modify the terms of any outstanding Incentives in any manner; provided, however, that the amended or modified
terms are permitted by the Plan as then in effect and that any recipient on an Incentive adversely affected by such amended or
modified terms has consented to such amendment or modification. No amendment or modification to an Incentive, however, whether
pursuant to this Section 2 or any other provisions of the Plan, will be deemed to be a re-grant of such Incentive for purposes
of this Plan. If at any time there is no Committee, then for purposes of the Plan the term “Committee” shall mean the
Company’s Board of Directors.


 


2.2In the event of (i) any
reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination
of shares, rights offering, extraordinary dividend or divestiture (including a spin-off) or any other similar change in corporate
structure or shares, (ii) any purchase, acquisition, sale or disposition of a significant amount of assets or a significant
business, (iii) any change in accounting principles or practices, or (iv) any other similar change, in each case with
respect to the Company or any other entity whose performance is relevant to the grant or vesting of an Incentive, the Committee
(or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation)
may, without the consent of any affected participant, amend or modify the vesting criteria of any outstanding Incentive that is
based in whole or in part on the financial performance of the Company (or any subsidiary or division thereof) or such other entity
so as equitably to reflect such event, with the desired result that the criteria for evaluating such financial performance of the
Company or such other entity will be substantially the same (in the sole discretion of the Committee or the board of directors
of the surviving corporation) following such event as prior to such event; provided, however, that the amended or modified terms
are permitted by the Plan as then in effect.


 






    	 



    	 



    

 


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


 


4.Types of Incentives.
Incentives under the Plan may be granted in any one or a combination of the following forms: (a) incentive stock options and non-statutory
stock options (Section 6); (b) stock appreciation rights (“SARs”) (Section 7); (c) stock awards (Section 8);
(d) restricted stock (Section 8); and (e) performance shares (Section 9).


 


5.Shares Subject
to the Plan.


 


5.1.Number
of Shares. Subject to adjustment as provided in Section 11.6, the number of shares of Common Stock which may be issued under
the Plan shall not exceed 11,155,295[1] shares of Common
Stock. Shares of Common Stock that are issued under the Plan or that are subject to outstanding Incentives will be applied to reduce
the maximum number of shares of Common Stock remaining available for issuance under the Plan. 


 


5.2.Cancellation.
To the extent that cash in lieu of shares of Common Stock is delivered upon the exercise of an SAR pursuant to Section 7.4, the
Company shall be deemed, for purposes of applying the limitation on the number of shares, to have issued the greater of the number
of shares of Common Stock which it was entitled to issue upon such exercise or on the exercise of any related option. In the event
that a stock option or SAR granted hereunder expires or is terminated or canceled unexercised or unvested as to any shares of Common
Stock, such shares may again be issued under the Plan either pursuant to stock options, SARs or otherwise. In the event that shares
of Common Stock are issued as restricted stock or pursuant to a stock award and thereafter are forfeited or reacquired by the Company
pursuant to rights reserved upon issuance thereof, such forfeited and reacquired shares may again be issued under the Plan, either
as restricted stock, pursuant to stock awards or otherwise. The Committee may also determine to cancel, and agree to the cancellation
of, stock options in order to make a participant eligible for the grant of a stock option at a lower price than the option to be
canceled.


 


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


 


 


 







[1] Reflects a one-for eight reverse stock split
effective October 29, 2013. 


 






    	-2-



    	 



    




 


6.1.Price.
The option price per share shall be determined by the Committee, subject to adjustment under Section 11.6.


 


6.2.Number.
The number of shares of Common Stock subject to the option shall be determined by the Committee, subject to adjustment as provided
in Section 11.6. The number of shares of Common Stock subject to a stock option shall be reduced in the same proportion that the
holder thereof exercises a SAR if any SAR is granted in conjunction with or related to the stock option. No individual may receive
options to purchase more than 11,155,295 shares in any year.


 


6.3.Duration
and Time for Exercise. Subject to earlier termination as provided in Section 11.4, the term of each stock option shall be determined
by the Committee but shall not exceed ten years and one day from the date of grant. Each stock option shall become exercisable
at such time or times during its term as shall be determined by the Committee at the time of grant. The Committee may accelerate
the exercisability of any stock option. Subject to the foregoing and with the approval of the Committee, all or any part of the
shares of Common Stock with respect to which the right to purchase has accrued may be purchased by the Company at the time of such
accrual or at any time or times thereafter during the term of the option.


 


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


 


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


 


(a)The
aggregate Fair Market Value (determined as of the time the option is granted) of the shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any participant during any calendar year (under the Plan and any
other incentive stock option plans of the Company or any subsidiary or parent corporation of the Company) shall not exceed $100,000.
The determination will be made by taking incentive stock options into account in the order in which they were granted.


 






    	-3-



    	 



    

 


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


 


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


 


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


 


(e)The
exercise price for Incentive Stock Options shall be not less than 100% of the Fair Market Value of one share of Common Stock on
the date of grant with respect to an Incentive Stock Option; provided that the exercise price shall be 110% of the Fair Market
Value if, at the time the Incentive Stock Option is granted, the participant owns, directly or indirectly, more than 10% of the
total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company.


 


7.Stock Appreciation
Rights. An SAR is a right to receive, without payment to the Company, a number of shares of Common Stock, cash or any combination
thereof, the amount of which is determined pursuant to the formula set forth in Section 7.4. An SAR may be granted (a) with respect
to any stock option granted under this Plan, either concurrently with the grant of such stock option or at such later time as determined
by the Committee (as to all or any portion of the shares of Common Stock subject to the stock option), or (b) alone, without reference
to any related stock option. Each SAR granted by the Committee under this Plan shall be subject to the following terms and conditions:


 


7.1.Number;
Exercise Price. Each SAR granted to any participant shall relate to such number of shares of Common Stock as shall be determined
by the Committee, subject to adjustment as provided in Section 11.6. In the case of an SAR granted with respect to a stock option,
the number of shares of Common Stock to which the SAR pertains shall be reduced in the same proportion that the holder of the option
exercises the related stock option. The exercise price of an SAR will be determined by the Committee, in its discretion, at the
date of grant but may not be less than 100% of the Fair Market Value of one share of Common Stock on the date of grant.


 


7.2.Duration.
Subject to earlier termination as provided in Section 11.4, the term of each SAR shall be determined by the Committee but shall
not exceed ten years and one day from the date of grant. Unless otherwise provided by the Committee, each SAR shall become exercisable
at such time or times, to such extent and upon such conditions as the stock option, if any, to which it relates is exercisable.
The Committee may in its discretion accelerate the exercisability of any SAR.


 


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


 






    	-4-



    	 



    

 


7.4.Payment.
Subject to the right of the Committee to deliver cash in lieu of shares of Common Stock (which, as it pertains to officers and
directors of the Company, shall comply with all requirements of the Exchange Act), the number of shares of Common Stock which shall
be issuable upon the exercise of an SAR shall be determined by dividing:


 


(a)the
number of shares of Common Stock as to which the SAR is exercised multiplied by the amount of the appreciation in such shares (for
this purpose, the “appreciation” shall be the amount by which the Fair Market Value of the shares of Common Stock subject
to the SAR on the exercise date exceeds (1) in the case of an SAR related to a stock option, the exercise price of the shares of
Common Stock under the stock option or (2) in the case of an SAR granted alone, without reference to a related stock option, an
amount which shall be determined by the Committee at the time of grant, subject to adjustment under Section 11.6); by


 


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


 


In lieu of
issuing shares of Common Stock upon the exercise of a SAR, the Committee may elect to pay the holder of the SAR cash equal to the
Fair Market Value on the exercise date of any or all of the shares which would otherwise be issuable. No fractional shares of Common
Stock shall be issued upon the exercise of an SAR; instead, the holder of the SAR shall be entitled to receive a cash adjustment
equal to the same fraction of the Fair Market Value of a share of Common Stock on the exercise date or to purchase the portion
necessary to make a whole share at its Fair Market Value on the date of exercise.


 


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


 


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


 


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


 


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


 






    	-5-



    	 



    

 


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


 


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


 


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


 


8.4.Escrow.
In order to enforce the restrictions imposed by the Committee pursuant to Section 8.3, the participant receiving restricted stock
shall enter into an agreement with the Company setting forth the conditions of the grant. Shares of restricted stock shall be registered
in the name of the participant and deposited, together with a stock power endorsed in blank, with the Company. Each such certificate
shall bear a legend in substantially the following form:


 


The transferability of this certificate
and the shares of Common Stock represented by it are subject to the terms and conditions (including conditions of forfeiture) contained
in the 2005 Stock Option Plan of Arno Therapeutics, Inc., (the “Company”), and an agreement entered into between the
registered owner and the Company. A copy of the 2005 Stock Option Plan and the agreement is on file in the office of the secretary
of the Company.


 


8.5.End
of Restrictions. Subject to Section 11.5, at the end of any time period during which the shares of restricted stock are subject
to forfeiture and restrictions on transfer, such shares will be delivered free of all restrictions to the participant or to the
participant’s legal representative, beneficiary or heir.


 


8.6.Shareholder.
Subject to the terms and conditions of the Plan, each participant receiving restricted stock shall have all the rights of a shareholder
with respect to shares of stock during any period in which such shares are subject to forfeiture and restrictions on transfer,
including without limitation, the right to vote such shares. Dividends paid in cash or property other than Common Stock with respect
to shares of restricted stock shall be paid to the participant currently. Unless the Committee determines otherwise in its sole
discretion, any dividends or distributions (including regular quarterly cash dividends) paid with respect to shares of Common Stock
subject to the restrictions set forth above will be subject to the same restrictions as the shares to which such dividends or distributions
relate. In the event the Committee determines not to pay dividends or distributions currently, the Committee will determine in
its sole discretion whether any interest will be paid on such dividends or distributions. In addition, the Committee in its sole
discretion may require such dividends and distributions to be reinvested (and in such case the participant consents to such reinvestment)
in shares of Common Stock that will be subject to the same restrictions as the shares to which such dividends or distributions
relate.


 


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


 






    	-6-



    	 



    

 


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


 


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


 


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


 


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


 


10.Change of
Control.


 


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


 


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


 


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


 


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


 


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


 






    	-7-



    	 



    

 


(e)after the date the Company’s
securities are first sold in a registered public offering, the Continuing Directors cease for any reason to constitute at least
a majority of the Board.


 


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


 


10.3Acceleration
of Incentives. Without limiting the authority of the Committee under the Plan, if a Change in Control of the Company occurs
whereby the acquiring entity or successor to the Company does not assume the Incentives or replace them with substantially equivalent
incentive awards, then, unless otherwise provided by the Committee in its sole discretion in the agreement evidencing an Incentive
at the time of grant, then as of the date of the Change of Control (a) all outstanding options and SARs will vest and will become
immediately exercisable in full and will remain exercisable for the remainder of their terms, regardless of whether the participant
to whom such options or SARs have been granted remains in the employ or service of the Company or any subsidiary of the Company
or any acquiring entity or successor to the Company; (b) the restrictions on all shares of restricted stock awards shall lapse
immediately; and (c) all performance shares shall be deemed to be met and payment made immediately.


 


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


 


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


 


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


 


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



 


 






    	-8-



    	 



    

 


11.General.


 


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


 


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


 


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


 


11.4.Effect
of Termination or Death. In the event that a participant ceases to be an employee of or consultant to the Company, or the participants
other service with the Company is terminated, for any reason, including death, any Incentives may be exercised or shall expire
at such times as may be determined by the Committee in its sole discretion in the agreement evidencing an Incentive. Notwithstanding
the other provisions of this Section 10.4, upon a participant’s termination of employment or other service with the
Company and all subsidiaries, the Committee may, in its sole discretion (which may be exercised at any time on or after the date
of grant, including following such termination), cause options and SARs (or any part thereof) then held by such participant to
become or continue to become exercisable and/or remain exercisable following such termination of employment or service and Restricted
Stock Awards, Performance Shares and Stock Awards then held by such participant to vest and/or continue to vest or become free
of transfer restrictions, as the case may be, following such termination of employment or service, in each case in the manner determined
by the Committee; provided, however, that no Incentive may remain exercisable or continue to vest beyond its expiration date. Any
Incentive Stock Option that remains unexercised more than one (1) year following termination of employment by reason of death or
disability or more than three (3) months following termination for any reason other than death or disability will thereafter be
deemed to be a Non-Statutory Stock Option.


 


11.5.Additional
Conditions. Notwithstanding anything in this Plan to the contrary: (a) the Company may, if it shall determine it necessary
or desirable for any reason, at the time of award of any Incentive or the issuance of any shares of Common Stock pursuant to any
Incentive, require the recipient of the Incentive, as a condition to the receipt thereof or to the receipt of shares of Common
Stock issued pursuant thereto, to deliver to the Company a written representation of present intention to acquire the Incentive
or the shares of Common Stock issued pursuant thereto for his or her own account for investment and not for distribution; and (b)
if at any time the Company further determines, in its sole discretion, that the listing, registration or qualification (or any
updating of any such document) of any Incentive or the shares of Common Stock issuable pursuant thereto is necessary on any securities
exchange or under any federal or state securities or blue sky law, or that the consent or approval of any governmental regulatory
body is necessary or desirable as a condition of, or in connection with the award of any Incentive, the issuance of shares of Common
Stock pursuant thereto, or the removal of any restrictions imposed on such shares, such Incentive shall not be awarded or such
shares of Common Stock shall not be issued or such restrictions shall not be removed, as the case may be, in whole or in part,
unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Company. Notwithstanding any other provision of the Plan or any agreements entered into pursuant to the Plan,
the Company will not be required to issue any shares of Common Stock under this Plan, and a participant may not sell, assign, transfer
or otherwise dispose of shares of Common Stock issued pursuant to any Incentives granted under the Plan, unless (a) there
is in effect with respect to such shares a registration statement under the Securities Act of 1933, as amended (the “Securities
Act”), and any applicable state or foreign securities laws or an exemption from such registration under the Securities
Act and applicable state or foreign securities laws, and (b) there has been obtained any other consent, approval or permit
from any other regulatory body which the Committee, in its sole discretion, deems necessary or advisable. The Company may condition
such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement
of any legends on certificates representing shares of Common Stock, as may be deemed necessary or advisable by the Company in order
to comply with such securities law or other restrictions.


 






    	-9-



    	 



    

 


11.6.Adjustment.
In the event of any merger, consolidation or reorganization of the Company with any other corporation or corporations, there shall
be substituted for each of the shares of Common Stock then subject to the Plan, including shares subject to restrictions, options,
or achievement of performance share objectives, the number and kind of shares of stock or other securities to which the holders
of the shares of Common Stock will be entitled pursuant to the transaction. In the event of any recapitalization, reclassification,
stock dividend, stock split, combination of shares or other similar change in the corporate structure of the Company or shares
of the Company, the exercise price of an outstanding Incentive and the number of shares of Common Stock then subject to the Plan,
including shares subject to restrictions, options or achievements of performance shares, shall be adjusted in proportion to the
change in outstanding shares of Common Stock in order to prevent dilution or enlargement of the rights of the participants. In
the event of any such adjustments, the purchase price of any option, the performance objectives of any Incentive, and the shares
of Common Stock issuable pursuant to any Incentive shall be adjusted as and to the extent appropriate, in the discretion of the
Committee, to provide participants with the same relative rights before and after such adjustment.


 


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


 


11.8.Withholding.


 


(a)The
Company shall have the right to (i) withhold and deduct from any payments made under the Plan or from future wages of the participant
(or from other amounts that may be due and owing to the participant from the Company or a subsidiary of the Company), or make other
arrangements for the collection of, all legally required amounts necessary to satisfy any and all foreign, federal, state and local
withholding and employment-related tax requirements attributable to an Incentive, or (ii) require the participant promptly to remit
the amount of such withholding to the Company before taking any action, including issuing any shares of Common Stock, with respect
to an Incentive. At any time when a participant is required to pay to the Company an amount required to be withheld under applicable
income tax laws in connection with a distribution of Common Stock or upon exercise of an option or SAR, the participant may satisfy
this obligation in whole or in part by electing (the “Election”) to have the Company withhold from the distribution
shares of Common Stock having a value up to the amount required to be withheld. The value of the shares to be withheld shall be
based on the Fair Market Value of the Common Stock on the date that the amount of tax to be withheld shall be determined (“Tax
Date”).


 






    	-10-



    	 



    

 


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


 


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


 


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


 


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


 


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


 


11.10.Deferral
Permitted. Payment of cash or distribution of any shares of Common Stock to which a participant is entitled under any Incentive
shall be made as provided in the Incentive. Payment may be deferred at the option of the participant if provided in the Incentive.


 


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


 






    	-11-



    	 



    

 


 


11.12.Definition
of Fair Market Value. For purposes of this Plan, the “Fair Market Value” of a share of Common Stock at a
specified date shall, unless otherwise expressly provided in this Plan, be the amount which the Committee or the board of directors
of the Company determines in good faith in the exercise of its reasonable discretion to be 100% of the fair market value of such
a share as of the date in question; provided, however, that notwithstanding the foregoing, if such shares are listed on a U.S.
securities exchange or are quoted on the Nasdaq National Market System or Nasdaq SmallCap Stock Market (“Nasdaq”),
then Fair Market Value shall be determined by reference to the last sale price of a share of Common Stock on such U.S. securities
exchange or Nasdaq on the applicable date. If such U.S. securities exchange or Nasdaq is closed for trading on such date, or if
the Common Stock does not trade on such date, then the last sale price used shall be the one on the date the Common Stock last
traded on such U.S. securities exchange or Nasdaq.


 


11.13Breach
of Confidentiality, Assignment of Inventions, or Non-Compete Agreements. Notwithstanding anything in the Plan to the contrary,
in the event that a participant materially breaches the terms of any confidentiality, assignment of inventions, or non-compete
agreement entered into with the Company or any subsidiary of the Company, whether such breach occurs before or after termination
of such participant’s employment or other service with the Company or any subsidiary, the Committee in its sole discretion
may immediately terminate all rights of the participant under the Plan and any agreements evidencing an Incentive then held by
the participant without notice of any kind.


 


11.13Governing
Law. The validity, construction, interpretation, administration and effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed exclusively in accordance with the laws of the State of Minnesota, notwithstanding
the conflicts of laws principles of any jurisdictions.


 


11.14Successors
and Assigns. The Plan will be binding upon and inure to the benefit of the successors and permitted assigns of the Company
and the participants in the Plan.


 






    	-12-