Exhibit
10.3


 


TRANS1 INC.


 


2007 STOCK INCENTIVE PLAN


(ORIGINALLY ADOPTED ON JULY 19, 2007,
SUBSEQUENTLY AMENDED ON APRIL


23, 2009 AND APRIL 12, 2011)


 




    	 



    	 



    

 


TRANS1 INC.


2007 STOCK INCENTIVE PLAN


 


The 2007 STOCK INCENTIVE
PLAN (the “Plan”) is hereby established and adopted this 19th day of July, 2007 (the “Effective Date”)
by TranS1 Inc., a Delaware corporation (the “Company”).


 


ARTICLE
1.


 


PURPOSES
OF THE PLAN


 


1.1          Purposes.
The purposes of the Plan are (a) to enhance the Company’s ability to attract and retain the services of qualified employees,
officers, directors, consultants and other service providers upon whose judgment, initiative and efforts the successful conduct
and development of the Company’s business largely depends, and (b) to provide additional incentives to such persons
or entities to devote their utmost effort and skill to the advancement and betterment of the Company, by providing them an opportunity
to participate in the ownership of the Company that is tied to the Company’s performance, thereby giving them an interest
in the success and increased value of the Company.


 


ARTICLE
2.


 


DEFINITIONS


 


For purposes of this
Plan, the following terms shall have the meanings indicated:


 


2.1          Administrator.
“Administrator” means the Board or, if the Board delegates responsibility for any matter to the Committee, the term
Administrator shall mean the Committee.


 


2.2          Affiliated
Company. “Affiliated Company” means:


 


(a)          with
respect to Incentive Options, any “parent corporation” or “subsidiary corporation” of the Company, whether
now existing or hereafter created or acquired, as those terms are defined in Sections 424(e) and 424(f) of the Code, respectively;
and


 


(b)          with
respect to Nonqualified Options, Stock Appreciation Rights and Restricted Stock Awards, any entity described in paragraph (a)
of this Section 2.2 above, plus any other corporation, limited liability company (“LLC”), partnership or joint
venture, whether now existing or hereafter created or acquired, with respect to which the Company beneficially owns more than fifty
percent (50%) of: (1) the total combined voting power of all outstanding voting securities or (2) the capital or profits
interests of an LLC, partnership or joint venture.


 


2.3          Base
Value. “Base Value” shall have the meaning as set forth in Section 8.3 below.


 


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


 




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2.5          Change
in Control. “Change in Control” means (i) the acquisition, directly or indirectly, by any person or group
(within the meaning of Section 13(d)(3) of the Exchange Act) of the beneficial ownership of securities of the Company possessing
more than fifty percent (50%) of the total combined voting power of all outstanding securities of the Company; (ii) a merger
or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated; (iii) a reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding
securities are transferred to or acquired by a person or persons different from the persons holding those securities immediately
prior to such merger; (iv) the sale, transfer or other disposition of all or substantially all of the assets of the Company;
or (v) a complete liquidation or dissolution of the Company.


 


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


 


2.7          Committee.
“Committee” means a committee of two or more members of the Board appointed to administer the Plan, as set forth in
Section 9.1 hereof.


 


2.8          Common
Stock. “Common Stock” means the Common Stock of the Company, subject to adjustment pursuant to Section 4.2
hereof.


 


2.9          Company.
“Company” means TranS1 Inc., a Delaware corporation, or any entity that is a successor to the Company.


 


2.10        Continuous
Service. “Continuous Service” means (a) Participant’s employment by either the Company or any Affiliated
Company, or by a successor entity following a Change in Control, which is uninterrupted except for vacations, illness (not including
permanent Disability), or leaves of absence which are approved in writing by the Company or any of such other employer corporations,
as applicable, (b) service as a member of the Board until the Participant resigns, is removed from office, or Participant’s
term of office expires and he or she is not reelected, or (c) so long as the Participant is engaged as a Service Provider.


 


2.11        Covered
Employee. “Covered Employee” means the Chief Executive Officer of the Company (or the individual acting in a similar
capacity) and the four (4) other individuals that are the highest compensated executive officers of the Company for the relevant
taxable year for whom total compensation is required to be reported to stockholders under the Exchange Act.


 


2.12        Disability.
“Disability” means permanent and total disability as defined in Section 22(e)(3) of the Code. The Administrator’s
determination of a Disability or the absence thereof shall be conclusive and binding on all interested parties.


 


2.13        DRO.
“DRO” means a domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security
Act of 1974, as amended, or the regulations thereunder.


 


2.14        Effective
Date. “Effective Date” means the date on which the Plan was originally adopted by the Board, as set forth on the
first page hereof.


 


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


 


2.16        Exercise
Price. “Exercise Price” means the purchase price per share of Common Stock payable by the Optionee to the Company
upon exercise of an Option.


 




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2.17        Fair
Market Value. “Fair Market Value” on any given date means the value of one share of Common Stock, determined as
follows:


 


(a)          If
the Common Stock is then listed or admitted to trading on a stock exchange which reports closing sale prices, the Fair Market Value
shall be the closing sale price on the date of valuation on such principal stock exchange on which the Common Stock is then listed
or admitted to trading, or, if no closing sale price is quoted on such day, then the Fair Market Value shall be the closing sale
price of the Common Stock on such exchange on the next preceding day on which a closing sale price is reported.


 


(b)          If
the Common Stock is not then listed or admitted to trading on a stock exchange which reports closing sale prices, the Fair Market
Value shall be the average of the closing bid and asked prices of the Common Stock in the over-the-counter market on the date of
valuation.


 


(c)          If
neither (a) nor (b) is applicable as of the date of valuation, then the Fair Market Value shall be determined by the Administrator
in good faith using any reasonable method of evaluation, which determination shall be conclusive and binding on all interested
parties.


 


2.18        FINRA
Dealer. “FINRA Dealer” means a broker-dealer that is a member of the Financial Industry Regulatory Authority.


 


2.19        Incentive
Option. “Incentive Option” means any Option designated and qualified as an “incentive stock option”
as defined in Section 422 of the Code.


 


2.20        Incentive
Option Agreement. “Incentive Option Agreement” means an Option Agreement with respect to an Incentive Option.


 


2.21        Nonqualified
Option. “Nonqualified Option” means any Option that is not an Incentive Option. To the extent that any Option designated
as an Incentive Option fails in whole or in part to qualify as an Incentive Option, including, without limitation, for failure
to meet the limitations applicable to a 10% Stockholder or because it exceeds the annual limit provided for in Section 5.5
below, it shall to that extent constitute a Nonqualified Option.


 


2.22        Nonqualified
Option Agreement. “Nonqualified Option Agreement” means an Option Agreement with respect to a Nonqualified Option.


 


2.23        Option.
“Option” means any option to purchase Common Stock granted pursuant to the Plan.


 


2.24        Option
Agreement. “Option Agreement” means the written agreement entered into between the Company and the Optionee with
respect to an Option granted under the Plan.


 


2.25        Optionee.
“Optionee” means any Participant who holds an Option.


 


2.26        Participant.
“Participant” means an individual or entity that holds an Option, Stock Appreciation Right, shares of Restricted Stock
or Restricted Stock Units under the Plan.


 




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2.27        Performance
Criteria. “Performance Criteria” means one or more of the following as established by the Administrator, which
may be stated as a target percentage or dollar amount, a percentage increase over a base period percentage or dollar amount or
the occurrence of a specific event or events:


 


(a)          Sales;


 


(b)          Operating
income;


 


(c)          Pre-tax
income;


 


(d)          Earnings
before interest, taxes, depreciation and amortization;


 


(e)          Earnings
per share of Common Stock on a fully-diluted basis;


 


(f)           Consolidated
net income of the Company divided by the average consolidated common stockholders equity;


 


(g)          Cash
and cash equivalents derived from either (i) net cash flow from operations, or (ii) net cash flow from operations, financings
and investing activities;


 


(h)          Adjusted
operating cash flow return on income;


 


(i)           Cost
containment or reduction;


 


(j)           The
percentage increase in the market price of the Common Stock over a stated period;


 


(k)          Return
on assets;


 


(l)           New
Company product introductions;


 


(m)         Obtaining
regulatory approvals for new or existing products; and


 


(n)          Individual
business objectives.


 


2.28        Purchase
Price. “Purchase Price” means the purchase price payable to purchase a share of Restricted Stock, or a Restricted
Stock Unit, which, in the sole discretion of the Administrator, may be zero, subject to limitations under applicable law.


 


2.29        Repurchase
Right. “Repurchase Right” means the right of the Company to repurchase either unvested shares of Restricted Stock
pursuant to Section 6.6 or to cancel unvested Restricted Stock Units pursuant to Section 7.6.


 


2.30        Restricted
Stock. “Restricted Stock” means shares of Common Stock issued pursuant to Article 6 hereof, subject to any restrictions
and conditions as are established pursuant to such Article 6.


 


2.31        Restricted
Stock Award. “Restricted Stock Award” means either the issuance of Restricted Stock or the grant of Restricted
Stock Units under the Plan.


 




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2.32        Restricted
Stock Award Agreement. “Restricted Stock Award Agreement” means the written agreement entered into between the
Company and a Participant evidencing the issuance of Restricted Stock or the grant of Restricted Stock Units under the Plan.


 


2.33        Restricted
Stock Unit. “Restricted Stock Unit” means the right to receive one share of Common Stock issued pursuant to Article
7 hereof, subject to any restrictions and conditions as are established pursuant to such Article 7.


 


2.34        Service
Provider. “Service Provider” means a consultant or other person or entity the Administrator authorizes to become
a Participant in the Plan and who provides services to (i) the Company, (ii) an Affiliated Company, or (iii) any
other business venture designated by the Administrator in which the Company or an Affiliated Company has a significant ownership
interest.


 


2.35        Stock
Appreciation Right. “Stock Appreciation Right” means a contractual right granted to a Participant under Section 8
hereof the exercise of which entitles the Participant to receive shares of the Company’s Common Stock having a Fair Market
Value equal to the difference between the Base Value per share, as set forth in Section 8.3 below, of the right and the Fair
Market Value of a share of Common Stock multiplied by the number of shares subject to the right at such time, subject to such conditions,
as are set forth in this Plan and the applicable Stock Appreciation Rights Award Agreement.


 


2.36        Stock
Appreciation Right Agreement. “Stock Appreciation Right Agreement” means the written agreement entered into between
the Company and a Participant evidencing the issuance of Stock Appreciation Rights under the Plan.


 


2.37        Stock
Appreciation Rights Holder. “Stock Appreciation Rights Holder” means any Participant who holds a Stock Appreciation
Right.


 


2.38        10%
Stockholder. “10% Stockholder” means a person who, as of a relevant date, owns or is deemed to own (by reason of
the attribution rules applicable under Section 424(d) of the Code) stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of an Affiliated Company.


 


2.39        Terminated
Without Cause. “Terminated Without Cause” means the Participant’s Continuous Service has been terminated
by the Company (or its successor) for any reason other than (a) the commission by Participant of a material breach of his
or her duty of loyalty to the Company, (b) the commission by Participant of any felony, or a misdemeanor if the misdemeanor
involves moral turpitude or is reasonably likely, in the judgment of the Company to have a material adverse effect upon the business
or reputation of the Company within its industry or among the Company’s suppliers or among its prospective customers, or
(c) Participant’s material failure or refusal to perform his or her assigned duties. In addition to the foregoing, if
the Participant’s Continuous Service is terminated by the Company or by the Participant for any of the following reasons
after a Change in Control, such Participant shall be deemed to be “Terminated Without Cause”: (a) the relocation
of Participant more than 50 miles from his or her current place of Continuous Service, (b) a material diminution of the Participant’s
duties, responsibilities or title, (c) a material diminution in Participant’s compensation or benefits; or (d) a
material breach of the Company’s obligations to pay compensation or provide benefits to Participant.


 




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ARTICLE
3.


 


ELIGIBILITY


 


3.1          Incentive
Options. Only employees of the Company or of an Affiliated Company (including members of the Board if they are employees of
the Company or of an Affiliated Company) are eligible to receive Incentive Options under the Plan.


 


3.2          Nonqualified
Options, Stock Appreciation Rights and Restricted Stock Awards. Employees of the Company or of an Affiliated Company, members
of the Board (whether or not employed by the Company or an Affiliated Company), and Service Providers are eligible to receive Nonqualified
Options, Stock Appreciation Rights or Restricted Stock Awards under the Plan.


 


3.3          Section 162(m)
Limitation. In no event shall any Participant be granted Options or Stock Appreciation Rights in any one calendar year pursuant
to which the aggregate number of shares of Common Stock that may be acquired thereunder exceeds Two Hundred Fifty Thousand (250,000)
shares, subject to adjustment as to the number and kind of shares pursuant to Section 4.2 hereof. In no event shall any Participant
be granted Restricted Stock Awards in any one calendar year pursuant to which the aggregate number of shares of Common Stock governed
by such Restricted Stock Awards exceeds Two Hundred Fifty Thousand (250,000), subject to adjustment as to the number and kind of
shares pursuant to Section 4.2 hereof.


 


ARTICLE
4.


 


PLAN
SHARES


 


4.1          Shares
Subject to the Plan.


 


The number of shares
of Common Stock that may be issued under the Plan shall be Three Million Six Hundred Thousand (3,600,000) shares. For purposes
of this limitation, in the event that (a) all or any portion of any Option granted under the Plan can no longer under any
circumstances be exercised, or (b) any shares of Common Stock are reacquired by the Company pursuant to an Option Agreement
or Restricted Stock Award Agreement, the shares of Common Stock allocable to the unexercised portion of such Option or the shares
so reacquired shall again be available for grant or issuance under the Plan.


 


4.2          Changes
in Capital Structure. In the event that the outstanding shares of Common Stock are hereafter increased or decreased or changed
into or exchanged for a different number or kind of shares or other securities of the Company by reason of a recapitalization,
stock split, reverse stock split, reclassification, stock dividend, or other change in the capital structure of the Company, then
appropriate adjustments shall be made by the Administrator to the aggregate number and kind of shares subject to this Plan, the
number and kind of shares and the price per share subject to outstanding Option Agreements, Stock Appreciation Rights Agreements
and Restricted Stock Award Agreements and the limits on the number of shares under Sections 3.3 and 4.2 all in order to preserve,
as nearly as practical, but not to increase, the benefits to Participants.


 




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ARTICLE
5.


 


OPTIONS


 


5.1          Grant
of Stock Options. The Administrator shall have the right to grant pursuant to this Plan, Options subject to such terms, restrictions
and conditions as the Administrator may determine at the time of grant. Such conditions may include, but are not limited to, continued
employment or the achievement of specified performance goals or objectives established by the Committee with respect to one or
more Performance Criteria.


 


5.2          Option
Agreements. Each Option granted pursuant to this Plan shall be evidenced by an Option Agreement which shall specify the number
of shares subject thereto, vesting provisions relating to such Option, the Exercise Price per share, and whether the Option is
an Incentive Option or Nonqualified Option. As soon as is practical following the grant of an Option, an Option Agreement shall
be duly executed and delivered by or on behalf of the Company to the Optionee to whom such Option was granted. Each Option Agreement
shall be in such form and contain such additional terms and conditions, not inconsistent with the provisions of this Plan, as the
Administrator shall, from time to time, deem desirable.


 


5.3          Exercise
Price. The Exercise Price per share of Common Stock covered by each Option shall be determined by the Administrator, subject
to the following: (a) the Exercise Price of an Incentive Option shall not be less than 100% of Fair Market Value on the date
the Incentive Option is granted, (b) the Exercise Price of a Nonqualified Option shall not be less than 100% of Fair Market
Value on the date the Nonqualified Option is granted, and (c) if the person to whom an Incentive Option is granted is a 10%
Stockholder on the date of grant, the Exercise Price shall not be less than 110% of Fair Market Value on the date the Incentive
Option is granted. However, an Option may be granted with an exercise price lower than that set forth in the preceding sentence
if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of
Section 424 of the Code.


 


5.4          Payment
of Exercise Price. Payment of the Exercise Price shall be made upon exercise of an Option and may be made, in the discretion
of the Administrator, subject to any legal restrictions, by: (a) cash; (b) check; (c) the surrender of shares of
Common Stock owned by the Optionee (provided that shares acquired pursuant to the exercise of options granted by the Company must
have been held by the Optionee for the requisite period necessary to avoid a charge to the Company’s earnings for financial
reporting purposes, if any), which surrendered shares shall be valued at Fair Market Value as of the date of such exercise; (d) a
“Net Exercise,” which provides that, without the payment of cash, the Optionee receives that number of shares of Common
Stock otherwise issuable upon exercise of the Option less that number of shares having an aggregate trading price on the trading
day of exercise equal to the sum of the aggregate Exercise Price that would have been paid by the Optionee to acquire such shares
and the combined income tax withholding and employment taxes payable by the Optionee, (e) the surrender and cancellation of
then vested options, which shall mean the simultaneous Net Exercise of this Option, as described in (d) of this Section 5.4,
and the surrender of the shares acquired thereby for the purpose of exercising any additional vested Options that the Optionee
holds in accordance with the method described in (c) of this Section 5.4, to purchase shares of common stock, owned by the
Optionee, which surrendered and cancelled options shall be valued at the Common Stock’s Fair Market Value as of the date
of such exercise minus the exercise price of such option; (f) the cancellation of indebtedness of the Company to the Optionee;
(g) the waiver of compensation due or accrued to the Optionee for services rendered; (h) provided that a public market
for the Common Stock exists, a “same day sale” commitment from the Optionee and an FINRA Dealer whereby the Optionee
irrevocably elects to exercise the Option and to sell a portion of the shares so purchased to pay for the Exercise Price and whereby
the FINRA Dealer irrevocably commits upon receipt of such shares to forward the Exercise Price directly to the Company; (i) provided
that a public market for the Common Stock exists, a “margin” commitment from the Optionee and an FINRA Dealer whereby
the Optionee irrevocably elects to exercise the Option and to pledge the shares so purchased to the FINRA Dealer in a margin account
as security for a loan from the FINRA Dealer in the amount of the Exercise Price, and whereby the FINRA Dealer irrevocably commits
upon receipt of such shares to forward the Exercise Price directly to the Company; or (j) any combination of the foregoing
methods of payment or any other consideration or method of payment as shall be permitted by applicable law.


 




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5.5          Term
and Termination of Options. Except for issuances of Incentive Options to 10% Stockholders, the term and provisions for termination
of each Option shall be as fixed by the Administrator, but no Option may be exercisable more than ten (10) years after the date
it is granted. With respect to the issuance of Incentive Options to 10% Stockholders, the term and provisions for termination of
each such Incentive Option shall not exceed five (5) years after the date it is granted.


 


5.6          Vesting
and Exercise of Options. Each Option shall vest and become exercisable in one or more installments at such time or times and
subject to such conditions, including without limitation the achievement of specified performance goals or objectives established
with respect to one or more Performance Criteria, as shall be determined by the Administrator.


 


5.7          Annual
Limit on Incentive Options. To the extent required for “incentive stock option” treatment under Section 422
of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the Common Stock with respect to which Incentive
Options granted under this Plan and any other plan of the Company or any Affiliated Company become exercisable for the first time
by an Optionee during any calendar year shall not exceed $100,000.


 


5.8          Nontransferability
of Options. Except as otherwise provided in this Section 5.8, Options shall not be assignable or transferable except by
will, the laws of descent and distribution or pursuant to a DRO entered by a court in settlement of marital property rights, and
during the life of the Optionee, Options shall be exercisable only by the Optionee. At the discretion of the Committee and in accordance
with rules it establishes from time to time, Optionees may be permitted to transfer some or all of their Nonqualified Options to
one or more “family members,” which is not a “prohibited transfer for value,” provided that (i) the
Optionee (or such Optionee’s estate or representative) shall remain obligated to satisfy all income or other tax withholding
obligations associated with the exercise of such Nonqualified Option; (ii) the Optionee shall notify the Company in writing
that such transfer has occurred and disclose to the Company the name and address of the “family member” or “family
members” and their relationship to the Optionee, and (iii) such transfer shall be effected pursuant to transfer documents
in a form approved by the Committee. For purposes of the foregoing, the terms “family members” and “prohibited
transfer for value” have the meaning ascribed to them in the General Instructions to form S-8 (or any successor form) promulgated
under the Securities Act of 1933, as amended.


 




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5.9          Non-Employee
Directors. Each non-employee director of the Company shall automatically be granted a Nonqualified Option to purchase 30,000
shares of Common Stock (subject to vesting as provided below) upon his or her commencement of service on the Board of Directors
from and after the date hereof and on the date of every annual meeting of stockholders thereafter shall automatically be granted
a Nonqualified Option to purchase 10,000 shares of the Common Stock (provided, that on such date he or she is a non-employee of
the Company and provided further that he or she has been a director for at least six months). The exercise price of such Nonqualified
Options, in the case of the initial grant, shall be at the Fair Market Value of the Common Stock on the date of commencement of
such director’s service on the Board of Directors and, thereafter, shall be at the Fair Market Value of the Common Stock
on the date of grant. The Nonqualified Options granted for the initial election to the board shall vest in four equal annual installments
on the anniversary date of such grant and all other such Nonqualified Options shall become exercisable immediately on the date
of the grant. The term of such Nonqualified Options shall be ten years.


 


5.10        Rights
as a Stockholder. An Optionee or permitted transferee of an Option shall have no rights or privileges as a stockholder with
respect to any shares covered by an Option until such Option has been duly exercised and certificates representing shares purchased
upon such exercise have been issued to such person.


 


5.11        Repricing
Prohibited. Subject to Section 4.2 hereof, without the prior approval of the Company’s stockholders, evidenced by
a majority of votes cast, neither the Committee nor the Board shall cause the cancellation, substitution or amendment of an Option
Agreement that would have the effect of reducing the exercise price of such an Option previously granted under the Plan, or otherwise
approve any modification to such an Option that would be treated as a “repricing” under the then applicable rules,
regulations or listing requirements adopted by the Nasdaq Stock Market.


 


5.12        Compliance
with Code Section 409A. Notwithstanding anything in this Article 5 to the contrary, all Option Agreements must be structured
to satisfy the requirements of Code Section 409A, as determined by the Committee.


 


ARTICLE
6.


 


RESTRICTED
STOCK


 


6.1          Issuance
of Restricted Stock. The Administrator shall have the right to issue pursuant to this Plan, at a Purchase Price determined
by the Administrator, shares of Common Stock subject to such terms, restrictions and conditions as the Administrator may determine
at the time of grant. Such conditions may include, but are not limited to, continued employment or the achievement of specified
performance goals or objectives established by the Committee with respect to one or more Performance Criteria, which require the
Committee to certify in writing whether and the extent to which such performance goals were achieved before such restrictions are
considered to have lapsed.


 


6.2          Restricted
Stock Agreements. A Participant shall have no rights with respect to the shares of Restricted Stock covered by a Restricted
Stock Award Agreement until the Participant has paid the full Purchase Price, if any, to the Company in the manner set forth in
Section 6.3(b) hereof and has executed and delivered to the Company the applicable Restricted Stock Award Agreement. Each
Restricted Stock Award Agreement shall be in such form, and shall set forth the Purchase Price, if any, and such other terms, conditions
and restrictions of the Restricted Stock Award Agreement, not inconsistent with the provisions of this Plan, as the Administrator
shall, from time to time, deem desirable. Each such Restricted Stock Award Agreement may be different from each other Restricted
Stock Award Agreement.


 




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6.3          Purchase
Price.


 


(a)          Amount.
Restricted Stock may be issued to Participants for such consideration as is determined by the Administrator in its sole discretion,
including no consideration or such minimum consideration as may be required by applicable law.


 


(b)          Payment.
Payment of the Purchase Price, if any, may be made, in the discretion of the Administrator, subject to any legal restrictions,
by: (a) cash; (b) check; (c) the surrender of shares of Common Stock owned by the Participant (provided that shares
acquired pursuant to the exercise of options granted by the Company shall have been held by the Participant for the requisite period
necessary to avoid a charge to the Company’s earnings for financial reporting purposes), which surrendered shares shall be
valued at Fair Market Value as of the date of such acceptance; (d) the cancellation of indebtedness of the Company to the
Participant; (e) the waiver of compensation due or accrued to the Participant for services rendered; or (f) any combination
of the foregoing methods of payment or any other consideration or method of payment as shall be permitted by applicable law.


 


6.4          Vesting
of Restricted Stock. The Restricted Stock Award Agreement shall specify the date or dates the performance goals, if any, established
by the Committee with respect to one or more Performance Criteria that must be achieved, and any other conditions on which the
Restricted Stock may vest.


 


6.5          Rights
as a Stockholder. Upon complying with the provisions of Section 6.2 hereof, a Participant shall have the rights of a stockholder
with respect to the Restricted Stock acquired pursuant to a Restricted Stock Award Agreement, including voting and dividend rights,
subject to the terms, restrictions and conditions as are set forth in such Restricted Stock Award Agreement. Unless the Administrator
shall determine otherwise, certificates evidencing shares of Restricted Stock shall remain in the possession of the Company until
such shares have vested in accordance with the terms of the Restricted Stock Award Agreement.


 


6.6          Restrictions.
Until vested, shares of Restricted Stock may not be sold, pledged or otherwise encumbered or disposed of and shall not be assignable
or transferable except by will, the laws of descent and distribution or pursuant to a DRO entered by a court in settlement of marital
property rights, except as specifically provided in the Restricted Stock Award Agreement or as authorized by the Administrator.
In the event of termination of a Participant’s employment, service as a director of the Company or Service Provider status
for any reason whatsoever (including death or disability), the Restricted Stock Award Agreement may provide, in the discretion
of the Administrator, that the Company may, at the discretion of the Administrator, exercise a Repurchase Right to repurchase at
the original Purchase Price the shares of Restricted Stock that have not vested as of the date of termination.


 


6.7          Compliance
with Code Section 409A. Notwithstanding anything in this Article 6 to the contrary, all Restricted Stock Award Agreements
must be structured to satisfy the requirements of Code Section 409A, as determined by the Committee.


 




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ARTICLE
7.


 


RESTRICTED
STOCK UNITS


 


7.1          Grants
of Restricted Stock Units. The Administrator shall have the right to grant Restricted Stock Units pursuant to this Plan, subject
to such terms, restrictions and conditions as the Administrator may determine at the time of grant. Such conditions may include,
but are not limited to, continued employment or the achievement of specified performance goals or objectives established by the
Committee with respect to one or more Performance Criteria, which require the Committee to certify in writing whether and the extent
to which such performance goals were achieved before such restrictions are considered to have lapsed.


 


7.2          Restricted
Stock Unit Agreements. A Participant shall have no rights with respect to the Restricted Stock Units covered by a Restricted
Stock Unit Award Agreement until the Participant has executed and delivered to the Company the applicable Restricted Stock Unit
Award Agreement. Each Restricted Stock Unit Award Agreement shall be in such form, and shall set forth the Purchase Price, if any,
and such other terms, conditions and restrictions of the Restricted Stock Unit Award Agreement, not inconsistent with the provisions
of this Plan, as the Administrator shall, from time to time, deem desirable. Each such Restricted Stock Unit Award Agreement may
be different from each other Restricted Stock Unit Award Agreement.


 


7.3          Purchase
Price.


 


(a)          Amount.
Restricted Stock Units may be issued to Participants for such consideration as is determined by the Administrator in its sole discretion,
including no consideration or such minimum consideration as may be required by applicable law.


 


(b)          Payment.
Payment of the Purchase Price, if any, may be made, in the discretion of the Administrator, subject to any legal restrictions,
by: (a) cash; (b) check; (c) the surrender of shares of Common Stock owned by the Participant (provided that shares
acquired pursuant to the exercise of options granted by the Company shall have been held by the Participant for the requisite period
necessary to avoid a charge to the Company’s earnings for financial reporting purposes), which surrendered shares shall be
valued at Fair Market Value as of the date of such acceptance; (d) the cancellation of indebtedness of the Company to the
Participant; (e) the waiver of compensation due or accrued to the Participant for services rendered; or (f) any combination
of the foregoing methods of payment or any other consideration or method of payment as shall be permitted by applicable law.


 


7.4          Vesting
of Restricted Stock Units. The Restricted Stock Unity Award Agreement shall specify the date or dates, the performance goals,
if any, established by the Committee with respect to one or more Performance Criteria that must be achieved, and any other conditions
on which the Restricted Stock Units and may vest.


 


7.5          Rights
as a Stockholder. Holders of Restricted Stock Units shall not be entitled to vote or to receive dividends unless or until they
become owners of the shares of Common Stock pursuant to their Restricted Stock Unit Award Agreement and the terms and conditions
of the Plan.


 




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7.6          Restrictions.
Until vested, Restricted Stock Units may not be sold, pledged or otherwise encumbered or disposed of and shall not be assignable
or transferable except by will, the laws of descent and distribution or pursuant to a DRO entered by a court in settlement of marital
property rights, except as specifically provided in the Restricted Stock Unit Award Agreement or as authorized by the Administrator.
In the event of termination of a Participant’s employment, service as a director of the Company or Service Provider status
for any reason whatsoever (including death or disability), the Restricted Stock Unit Award Agreement may provide that all Restricted
Stock Units that have not vested as of such date shall be automatically forfeited by the Participant. However, if, with respect
to such unvested Restricted Stock Units the Participant paid a Purchase Price, the Administrator shall have the right, exercisable
at the discretion of the Administrator, to


 


7.7          Compliance
with Code Section 409A. Notwithstanding anything in this Article 7 to the contrary, all Restricted Stock Award Agreements
must be structured to satisfy the requirements of Code Section 409A, as determined by the Committee.


 


ARTICLE
8.


 


STOCK
APPRECIATION RIGHTS


 


8.1          Grant
of Stock Appreciation Rights. A Stock Appreciation Right may be granted to any Participant selected by the Committee. Stock
Appreciation Rights may be granted on a basis that allows for the exercise of the right by the Participant or that provides for
the automatic settlement of the right upon a specified date or event. Stock Appreciation Rights shall be exercisable or subject
to settlement at such time or times and upon conditions as may be approved by the Committee, provided that the Committee may accelerate
the exercisability or settlement of a Stock Appreciation Right at any time.


 


8.2          Stock
Appreciation Right Agreements. Each Stock Appreciation Right granted pursuant to this Plan shall be evidenced by a Stock Appreciation
Right Agreement, which shall specify the number of shares subject thereto, vesting provisions relating to such Stock Appreciation
Right and the Base Value per share. As soon as is practicable following the grant of a Stock Appreciation Right, a Stock Appreciation
Right Agreement shall be duly executed and delivered by or on behalf of the Company to the Participant to whom such Stock Appreciation
Right was granted. Each Stock Appreciation Right Agreement shall be in such form and contain such additional terms and conditions,
not inconsistent with the provisions of this Plan, as the Administrator shall, from time to time, deem desirable.


 


8.3          Base
Value. The Base Value per share of Common Stock covered by each Stock Appreciation Right shall be determined by the Administrator,
except that the Base Value of a Stock Appreciation Right shall not be less than 100% of Fair Market Value of the Common Stock on
the date the Stock Appreciation Right is granted.


 


8.4          Term
and Termination of Stock Appreciation Rights. The term and provisions for termination of each Stock Appreciation Right shall
be fixed by the Administrator, but no Stock Appreciation Right may be exercisable or subject to settlement more than ten (10) years
after the date it is granted.


 


8.5          Vesting
of Stock Appreciation Rights. Each Stock Appreciation Right shall vest and become exercisable in one or more installments at
such time or times and subject to such conditions, including without limitation the achievement of specified performance goals
or objectives established with respect to one or more Performance Criteria, as shall be determined by the Administrator. A Stock
Appreciation Right will be exercisable or payable at such time or times as determined by the Committee, provided that the maximum
term of a Stock Appreciation Right shall be ten (10) years from the Date of Grant.


 




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8.6          Exercise
or Settlement of Stock Appreciation Rights. A Stock Appreciation Right will entitle the holder, upon exercise or other settlement
of the Stock Appreciation Right, as applicable, to receive an amount determined by multiplying: (i) the excess of the Fair
Market Value of a share of Common Stock on the date of exercise or settlement of the Stock Appreciation Right over the Base Value
of such Stock Appreciation Right, by (ii) the number of shares as to which such Stock Appreciation Right is exercised or settled.
Upon such exercise or settlement, the Company shall issue to the holder of the Stock Appreciation Right a number of shares of Common
Stock determined by dividing the amount determined under the preceding sentence by the Fair Market Value of such shares on the
date of exercise or settlement, subject to applicable tax withholding requirements and to such conditions, as are set forth in
this Plan and the applicable Stock Appreciation Rights Award Agreement.


 


8.7          Repricing
Prohibited. Subject to Section 4.2 hereof, without the prior approval of the Company’s stockholders, evidenced by
a majority of votes cast, neither the Committee nor the Board shall cause the cancellation, substitution or amendment of a Stock
Appreciation Right Award that would have the effect of reducing the base price of such a Stock Appreciation Right previously granted
under the Plan, or otherwise approve any modification to such a Stock Appreciation Right Award that would be treated as a “repricing”
under the then applicable rules, regulations or listing requirements adopted by the Nasdaq Stock Market.


 


8.8          Nontransferability
of Stock Appreciation Rights. Except as otherwise provided in this Section 8.8, Stock Appreciation Rights shall not be
assignable or transferable except by will, the laws of descent and distribution or pursuant to a DRO entered by a court in settlement
of marital property rights, and during the life of the holder of Stock Appreciation Rights, Stock Appreciation Rights shall be
exercisable only by such holder. At the discretion of the Committee and in accordance with rules it establishes from time to time,
holders of Stock Appreciation Rights may be permitted to transfer some or all of their Stock Appreciation Rights to one or more
“family members,” which is not a “prohibited transfer for value,” provided that (i) the Stock Appreciation
Rights holder (or such holder’s estate or representative) shall remain obligated to satisfy all income or other tax withholding
obligations associated with the exercise of such Stock Appreciation Right; (ii) the Stock Appreciation Rights holder shall
notify the Company in writing that such transfer has occurred and disclose to the Company the name and address of the “family
member” or “family members” and their relationship to the holder, and (iii) such transfer shall be effected
pursuant to transfer documents in a form approved by the Committee. For purposes of the foregoing, the terms “family members”
and “prohibited transfer for value” have the meaning ascribed to them in the General Instructions to form S-8 (or any
successor form) promulgated under the Securities Act of 1933, as amended.


 


8.9          Rights
as a Stockholder. A Stock Appreciation Right holder or permitted transferee of a Stock Appreciation Right holder shall have
no rights or privileges as a stockholder with respect to any shares covered by a Stock Appreciation Right until such Stock Appreciation
Right has been duly exercised or settled and certificates representing shares issued upon such exercise or settlement have been
issued to such person.


 




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8.10          Compliance
with Code Section 409A. Notwithstanding anything in this Article 8 to the contrary, all Stock Appreciation Rights Awards
must be structured to satisfy the requirements of Code Section 409A, as determined by the Committee.


 


ARTICLE
9.


 


ADMINISTRATION
OF THE PLAN


 


9.1          Administrator.
Authority to control and manage the operation and administration of the Plan shall be vested in the Board, which may delegate such
responsibilities in whole or in part to a committee consisting of two (2) or more members of the Board (the “Committee”).
Members of the Committee may be appointed from time to time by, and shall serve at the pleasure of, the Board. The Board may limit
the composition of the Committee to those persons necessary to comply with the requirements of Section 162(m) of the Code
and Section 16 of the Exchange Act. As used herein, the term “Administrator” means the Board or, with respect
to any matter as to which responsibility has been delegated to the Committee, the term Administrator shall mean the Committee.


 


9.2          Powers
of the Administrator. In addition to any other powers or authority conferred upon the Administrator elsewhere in the Plan or
by law, the Administrator shall have full power and authority: (a) to determine the persons to whom, and the time or times
at which, Incentive Options, Nonqualified Options, Stock Appreciation Rights or Restricted Stock Awards shall be granted, the number
of shares to be represented by each Option or Stock Appreciation Right and the number of shares of Common Stock to be subject to
Restricted Stock Awards, and the consideration to be received by the Company upon the exercise of such Options or sale of the Restricted
Stock or the Restricted Stock Units governed by such Restricted Stock Awards; (b) to interpret the Plan; (c) to create,
amend or rescind rules and regulations relating to the Plan; (d) to determine the terms, conditions and restrictions contained
in, and the form of, Option Agreements, Stock Appreciation Right Agreements and Restricted Stock Award Agreements; (e) to
determine the identity or capacity of any persons who may be entitled to exercise a Participant’s rights under any Option
Agreement, Stock Appreciation Right Agreement or Restricted Stock Award Agreement under the Plan; (f) to correct any defect
or supply any omission or reconcile any inconsistency in the Plan or in any Option Agreement, Stock Appreciation Right Agreement
or Restricted Stock Award Agreement; (g) to accelerate the vesting of any Option or Stock Appreciation Right Agreement or
waive any repurchase rights of the Company with respect to Restricted Stock Awards; (h) to extend the expiration date of any
Option or Stock Appreciation Right Agreement; (i) to amend outstanding Option Agreements, Stock Appreciation Right Agreements
and Restricted Stock Award Agreements to provide for, among other things, any change or modification which the Administrator could
have included in the original Agreement or in furtherance of the powers provided for herein; and (j) to make all other determinations
necessary or advisable for the administration of the Plan, but only to the extent not contrary to the express provisions of the
Plan. Any action, decision, interpretation or determination made in good faith by the Administrator in the exercise of its authority
conferred upon it under the Plan shall be final and binding on the Company and all Participants.


 


9.3          Limitation
on Liability. No employee of the Company or member of the Board or Committee shall be subject to any liability with respect
to duties under the Plan unless the person acts fraudulently or in bad faith. To the extent permitted by law, the Company shall
indemnify each member of the Board or Committee, and any employee of the Company with duties under the Plan, who was or is a party,
or is threatened to be made a party, to any threatened, pending or completed proceeding, whether civil, criminal, administrative
or investigative, by reason of such person’s conduct in the performance of duties under the Plan.


 




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ARTICLE
10.


 


CHANGE
IN CONTROL


 


10.1        Options
and Stock Appreciation Rights. In order to preserve a Participant’s rights with respect to any outstanding Options and
Stock Appreciation Rights in the event of a Change in Control of the Company:


 


(a)          Vesting
of all outstanding Options and Stock Appreciation Rights shall accelerate automatically effective as of immediately prior to the
consummation of the Change in Control unless the Options and Stock Appreciation Rights are to be assumed by the acquiring or successor
entity (or parent thereof) or new options or new stock appreciation rights under a new stock incentive program (“New Incentives”)
are to be issued in exchange therefor, as provided in subsection (b) below.


 


(b)          Vesting
of outstanding Options and Stock Appreciation Right Agreements shall not accelerate if and to the extent that: (i) the Options
and Stock Appreciation Rights (including the unvested portion thereof) are to be assumed by the acquiring or successor entity (or
parent thereof) or new options and stock appreciation rights of comparable value are to be issued in exchange therefor pursuant
to the terms of the Change in Control transaction, or (ii) the Options and Stock Appreciation Rights (including the unvested
portions thereof) are to be replaced by the acquiring or successor entity (or parent thereof) with New Incentives containing such
terms and provisions as the Administrator in its discretion may consider equitable. If outstanding Options or Stock Appreciation
Rights are assumed, or if New Incentives of comparable value are issued in exchange therefor, then each such Option and Stock Appreciation
Right or new stock option or new stock appreciation right shall be appropriately adjusted, concurrently with the Change in Control,
to apply to the number and class of securities or other property that the Optionee or Stock Appreciation Rights Holder would have
received pursuant to the Change in Control transaction in exchange for the shares issuable upon exercise of the Option or Stock
Appreciation Right had the Option or Stock Appreciation Right been exercised immediately prior to the Change in Control, and appropriate
adjustment also shall be made to the Exercise Price such that the aggregate Exercise Price of each such Option or new option and
the aggregate Base Value of each such Stock Appreciation Right or new stock appreciation right shall remain the same as nearly
as practicable.


 


(c)          If
any Option or Stock Appreciation Right is assumed by an acquiring or successor entity (or parent thereof) or a New Incentive is
issued in exchange therefor pursuant to the terms of a Change in Control transaction, the vesting of the Option, the Stock Appreciation
Right or the New Incentive shall accelerate if and at such time as the Optionee’s or Stock Appreciation Rights Holder’s
service as an employee, director, officer, consultant or other service provider to the acquiring or successor entity (or a parent
or subsidiary thereof) is Terminated Without Cause within twelve (12) months following consummation of the Change in Control.


 


(d)          If
vesting of outstanding Options will accelerate pursuant to subsection (a) above, the Administrator in its discretion may provide,
in connection with the Change in Control transaction, for the purchase or exchange of each Option for an amount of cash or other
property having a value equal to the difference (or “spread”) between: (x) the value of the cash or other property
that the Optionee would have received pursuant to the Change in Control transaction in exchange for the shares issuable upon exercise
of the Option had the Option been exercised immediately prior to the Change in Control, and (y) the Exercise Price of the
Option.


 




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(e)          The
Administrator shall have the discretion to provide in each Option Agreement and Stock Appreciation Rights Agreement other terms
and conditions that relate to (i) vesting of such Option or Stock Appreciation Right in the event of a Change in Control,
and (ii) assumption of such Options and Stock Appreciation Rights or issuance of comparable securities or New Incentives in
the event of a Change in Control. The aforementioned terms and conditions may vary in each Option Agreement and Stock Appreciation
Agreement, and may be different from and have precedence over the provisions set forth in Sections 10.1(a) - 10.1(d) above.


 


(f)          Outstanding
Options and Stock Appreciation Rights shall terminate and cease to be exercisable upon consummation of a Change in Control except
to the extent that the Options or Stock Appreciation Rights are assumed by the successor entity (or parent thereof) pursuant to
the terms of the Change in Control transaction.


 


(g)          If
outstanding Options or Stock Appreciation Rights will not be assumed by the acquiring or successor entity (or parent thereof),
the Administrator shall cause written notice of a proposed Change in Control transaction to be given to Optionees and Stock Appreciation
Rights Holders not less than fifteen (15) days prior to the anticipated effective date of the proposed transaction.


 


10.2        Restricted
Stock Awards. In order to preserve a Participant’s rights with respect to any outstanding Restricted Stock Awards in
the event of a Change in Control of the Company:


 


(a)          All
Repurchase Rights shall automatically terminate immediately prior to the consummation of such Change in Control and any shares
of Restricted Stock or Restricted Stock Units subject to such terminated Repurchase Rights, or Restricted Stock Units, whether
or not subject to such terminated Repurchase Rights shall immediately vest in full, except to the extent that in connection with
such Change in Control, the acquiring or successor entity (or parent thereof) provides for the continuance or assumption of Restricted
Stock Award Agreements or the substitution of new agreements of comparable value covering shares of a successor corporation, with
appropriate adjustments as to the number and kind of shares and purchase price.


 


(b)          If,
upon a Change in Control, the acquiring or successor entity (or parent thereof) assumes such Restricted Stock Award Agreement or
substitutes new agreements of comparable value covering shares of a successor corporation (with appropriate adjustments as to the
number and kind of shares and purchase price), then any Repurchase Right provided for in such Restricted Stock Award Agreement
shall terminate, and the shares of Common Stock subject to the terminated Repurchase Right or any substituted shares shall immediately
vest in full, if the Participant’s service as an employee, director, officer, consultant or other service provider to the
acquiring or successor entity (or a parent or subsidiary thereof) is Terminated Without Cause within twelve (12) months following
consummation of a Change in Control.


 




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ARTICLE
11.


 


AMENDMENT
AND TERMINATION OF THE PLAN


 


11.1        Amendments.
The Board may from time to time alter, amend, suspend or terminate the Plan in such respects as the Board may deem advisable. No
such alteration, amendment, suspension or termination shall be made which shall substantially affect or impair the rights of any
Participant under an outstanding Option Agreement or Restricted Stock Award Agreement without such Participant’s consent.
The Board may alter or amend the Plan to comply with requirements under the Code relating to Incentive Options or other types of
options which give Optionees more favorable tax treatment than that applicable to Options granted under this Plan as of the date
of its adoption. Upon any such alteration or amendment, any outstanding Option granted hereunder may, if the Administrator so determines
and if permitted by applicable law, be subject to the more favorable tax treatment afforded to an Optionee pursuant to such terms
and conditions.


 


11.2        Plan
Termination. Unless the Plan shall theretofore have been terminated, the Plan shall terminate on the tenth (10th) anniversary
of the Effective Date and no Options or Restricted Stock Awards may be granted under the Plan thereafter, but Option Agreements
and Restricted Stock Award Agreements then outstanding shall continue in effect in accordance with their respective terms.


 


ARTICLE
12.


 


TAX
WITHHOLDING


 


12.1        Withholding.
The Company shall have the power to withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy
any applicable Federal, state, and local tax withholding requirements with respect to any Options exercised or, with respect to
the issuance of Restricted Stock, the date that the shares are issued, if the Purchaser makes the election set forth in Code Section 83(b),
or, if the Purchaser does not make such election, then, then with respect to the Restricted Stock Award, as of the date that the
applicable restrictions set forth in the Restricted Stock Award Agreement and the Plan lapse. To the extent permissible under applicable
tax, securities and other laws, the Administrator may, in its sole discretion and upon such terms and conditions as it may deem
appropriate, permit a Participant to satisfy his or her obligation to pay any such tax, in whole or in part, up to an amount determined
on the basis of the highest marginal tax rate applicable to such Participant, by (a) directing the Company to apply shares
of Common Stock to which the Participant is entitled as a result of the exercise of an Option or as a result of the purchase of
or lapse of restrictions on Restricted Stock Awards or (b) delivering to the Company shares of Common Stock owned by the Participant.
The shares of Common Stock so applied or delivered in satisfaction of the Participant’s tax withholding obligation shall
be valued at their Fair Market Value as of the date of measurement of the amount of income subject to withholding.


 


ARTICLE
13.


 


MISCELLANEOUS


 


13.1        Benefits
Not Alienable. Other than as provided above, benefits under the Plan may not be assigned or alienated, whether voluntarily
or involuntarily. Any unauthorized attempt at assignment, transfer, pledge or other disposition shall be without effect.


 




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13.2        No
Enlargement of Employee Rights. This Plan is strictly a voluntary undertaking on the part of the Company and shall not be deemed
to constitute a contract between the Company and any Participant to be consideration for, or an inducement to, or a condition of,
the employment of any Participant. Nothing contained in the Plan shall be deemed to give the right to any Participant to be retained
as an employee of the Company or any Affiliated Company or to interfere with the right of the Company or any Affiliated Company
to discharge any Participant at any time.


 


13.3        Application
of Funds. The proceeds received by the Company from the sale of Common Stock pursuant to Option Agreements and Restricted Stock
Award Agreements, except as otherwise provided herein, will be used for general corporate purposes.


 


13.4        Annual
Reports. During the term of this Plan, if required by applicable law or the rules and regulations of a national securities
exchange, the Company will furnish to each Participant who does not otherwise receive such materials, copies of all reports, proxy
statements and other communications that the Company distributes generally to its stockholders. 


 




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