Document:

ex_316964.htm

Exhibit 10.14

 

 

 

 

 

 

 

TECHNICAL COMMUNICATIONS CORPORATION

 

2021 EQUITY INCENTIVE PLAN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

	 	Page
	
			 

				 
	
			ARTICLE 1.         ESTABLISHMENT, PURPOSE AND DURATION         

				1
	 	 
	
			ARTICLE 2.         DEFINITIONS         

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			ARTICLE 3.         ADMINISTRATION         

				4
	 	 
	
			ARTICLE 4.         SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS         

				5
	 	 
	
			ARTICLE 5.         ELIGIBILITY AND PARTICIPATION         

				6
	 	 
	
			ARTICLE 6.         STOCK OPTIONS         

				7
	 	 
	
			ARTICLE 7.         STOCK APPRECIATION RIGHTS         

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			ARTICLE 8.         RESTRICTED STOCK AND RESTRICTED STOCK UNITS         

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			ARTICLE 9.         OTHER STOCK AND STOCK-BASED AWARDS         

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			ARTICLE 10.         BENEFICIARY DESIGNATION         

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			ARTICLE 11.         DEFERRALS         

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			ARTICLE 12.         RETENTION RIGHTS; TERMINATION FOR CAUSE         

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			ARTICLE 13.         AMENDMENT, MODIFICATION, TERMINATION AND ADJUSTMENTS         

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			ARTICLE 14.         PARACHUTE LIMITATIONS         

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			ARTICLE 15.         CHANGE IN CONTROL         

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			ARTICLE 16.         WITHHOLDING         

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			ARTICLE 17.         INDEMNIFICATION         

				17
	 	 
	
			ARTICLE 18.         SUCCESSORS         

				17
	 	 
	
			ARTICLE 19.         LEGAL CONSTRUCTION; MISCELLANEOUS         

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ARTICLE 1. ESTABLISHMENT, PURPOSE AND DURATION

 

1.1.    Establishment of the Plan; Effective Date. Technical Communications Corporation, a Massachusetts corporation (the “Company”), hereby establishes an incentive compensation plan to be known as the “Technical Communications Corporation 2021 Equity Incentive Plan” (the “Plan”), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units and Other Stock and Stock-Based Awards. The Plan was adopted by the Board of Directors on May 6, 2021 (the “Effective Date”), and shall remain in effect as provided in Section 1.3 hereof.

 

1.2.    Purpose of the Plan. The purpose of the Plan is to promote the success and interests of the Company and its stockholders by permitting Participants to obtain a proprietary interest in the Company through the grant of Awards that are consistent with the Company’s goals and that link the personal interests of Participants to those of the Company’s stockholders. The Plan is further intended to enable the Company to attract, retain and motivate Participants whose services are critical to the success of the Company and align the interests of such individuals with those of the Company.

 

1.3.    Duration of the Plan. The Plan shall commence on the Effective Date and shall remain in effect, subject to the right of the Board of Directors of the Company to amend or terminate the Plan at any time pursuant to Article 13 hereof, until all Shares subject to the Plan shall have been purchased or acquired according to the Plan’s provisions; provided, that no Awards shall be granted under the Plan after the expiration of ten (10) years from the Effective Date, but Awards previously granted may extend beyond that date and shall continue to have force and effect in accordance with the instruments evidencing such Awards.

 

ARTICLE 2. DEFINITIONS

 

Whenever used in the Plan, the following terms shall have the meanings set forth below, and when that meaning is intended, the initial letter of the word shall be capitalized:

 

2.1.“    Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations promulgated under the Exchange Act.

 

2.2.“    Award” means, individually or collectively, a grant under the Plan of Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units or Other Stock and Stock-Based Awards.

 

2.3.“    Award Agreement” means an agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted to the Participant under this Plan.

 

2.4.“    Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such terms in Rule 13d-3 of the General Rules and Regulations promulgated under the Exchange Act.

 

2.5.“    Benefit Arrangement” shall have the meaning set forth in Article 14 hereof.

 

 

 

 

2.6.“    Board” or “Board of Directors” means the Board of Directors of the Company.

 

2.7.“    Cause” shall have the meaning set forth in Section 12.3 hereof.

 

2.8.“    Change in Control” shall have the meaning set forth in Section 15.1 hereof.

 

2.9.“    Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.

 

2.10.“    Committee” means any committee appointed by the Board to administer the Plan in accordance with and as specified in Article 3 hereof, and includes the full Board acting as the Committee as specified therein.

 

2.11.“    Common Stock” means the common stock, par value $0.10 per share, of the Company.

 

2.12.“    Company” shall have the meaning ascribed to such term in Section 1.1 hereof, and shall include any present or future Parents, Subsidiaries and Affiliates, and any successor thereto as provided in Article 15 hereof, unless the context otherwise requires.

 

2.13.“    Consultant” means any person who is engaged as a consultant or advisor and provides bona fide services as an independent contractor. Service as a Consultant shall be considered employment for all purposes of the Plan.

 

2.14.“    Director” means any individual who is a member of the Board of Directors of the Company or any Affiliate.

 

2.15.“    Disability” shall have the meaning ascribed to such term in the Participant’s governing long-term disability plan, or if no such plan exists, shall mean a disability described in Section 422(c)(6) of the Code, the existence of which is determined at the discretion of the Committee.

 

2.16.“    Dividend Equivalent” shall have the meaning set forth in Section 8.5(b) hereof.

 

2.17.“    Effective Date” shall have the meaning set forth in Section 1.1 hereof.

 

2.18.“    Employee” means any full-time, active employee of the Company or its Affiliates, including officers and Directors.

 

2.19.“    Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor thereto.

 

2.20.“    Fair Market Value” of a share of Common Stock means, as of any given date, (a) the closing sale price on such date of a share of Common Stock on the Composite Tape, as reported by The Wall Street Journal, on the principal national securities exchange on which the Common Stock is then traded, or (b) if the Common Stock is not then traded on a national securities exchange, the average of the closing bid and asked prices of the Common Stock as reported by an automated quotation system on such date; provided, however, that if there are no sales reported on such date, fair market value shall be computed as of the last trading date preceding such date on which a sale was reported; provided, further, that if any such exchange or quotation system is closed on the date of determination or such date of determination is not otherwise a trading day, fair market value shall be determined as of the first trading day immediately preceding such date on which such exchange or quotation system was open for trading. If the Common Stock is not admitted to trade on a securities exchange or quoted on an automated quotation system, the fair market value shall be as determined in good faith by the Board in a manner consistent with the valuation principles under Code Section 409A, taking into account such facts and circumstances deemed to be material to the value of the Common Stock, except as the Board expressly determines otherwise. The Board can substitute a particular time of day or other measure of “closing sale price” or “bid and asked prices” if appropriate because of exchange or market procedures or can, in its sole discretion, use weighted averages either on a daily basis or such longer period as complies with Code Section 409A.

 

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2.21.“    Freestanding SAR” means an SAR that is granted independently of any options, as described in Article 7 hereof.

 

2.22.“    New Payment Date” shall have the meaning set forth in Section 19.6(b) hereof

 

2.23.“    Non-Employee Director” shall mean a Director who is not also an Employee. Service as a Non-Employee Director shall be considered employment for all purposes of the Plan.

 

2.24.“    Nonqualified Stock Option” or “NQSO” means an option to purchase Shares granted under Article 6 hereof that is not intended to meet the requirements of Code Section 422 or otherwise qualify as an incentive stock option.

 

2.25.“    Option” means a Nonqualified Stock Option, as described in Article 6 hereof.

 

2.26.“    Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.

 

2.27.“    Other Agreement” shall have the meaning set forth in Article 14 hereof.

 

2.28.“    Other Stock and Stock-Based Award” shall have the meaning set forth in Section 9.1 hereof.

 

2.29.“    Parachute Payment” shall have the meaning set forth in Article 14 hereof.

 

2.30.“    Parent” shall have the meaning given to the term “parent corporation” in Section 424(e) of the Code.

 

2.31.“    Participant” means an Employee, Non-Employee Director or Consultant who has been selected to receive an Award or who has outstanding an Award granted under the Plan.

 

2.32.“    Period of Restriction” means the period during which the transfer of Shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance goals or upon the occurrence of other events as determined by the Committee, at its discretion), and the Shares are subject to a substantial risk of forfeiture, as provided in Article 8 hereof.

 

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2.33.“    Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.

 

2.34.“    Plan” shall have the meaning ascribed to such term in Section 1.1 hereof, as the same is amended from time to time.

 

2.35.“    Restricted Stock” means an Award granted to a Participant pursuant to Article 8 hereof.

 

2.36.“    Restricted Stock Award” shall have the meaning set forth in Section 8.1 hereof.

 

2.37.“    Restricted Stock Unit” or “RSU” means an Award designated as an RSU pursuant to Article 8 hereof.

 

2.38.“    Section 409A” shall have the meaning set forth in Section 19.6(a) hereof.

 

2.39.“    Securities Act” means the Securities Act of 1933, as amended from time to time, or any successor thereto.

 

2.40.“    Shares” means the shares of the Common Stock of the Company, as the same may be adjusted in accordance with Section 4.3 herein.

 

2.41.“    Stock Appreciation Right” or “SAR” means an Award designated as a SAR pursuant to Article 7 hereof.

 

2.42.“    Subsidiary” shall have the meaning given to the term “subsidiary corporation” in Section 424(f) of the Code.

 

ARTICLE 3. ADMINISTRATION

 

3.1.    The Committee. The Plan shall be administered by (a) the Compensation, Nominating and Governance Committee of the Board (or any successor thereto) consisting of not less than two (2) members who meet the “non-employee director” requirements of Rule 16b-3 promulgated under the Exchange Act, the “outside director” requirements of Code Section 162(m), and the rules and regulations of any national securities exchange on which the securities of the Company are listed from time to time; (b) by any other committee appointed by the Board, provided the members of any such committee meet all of the foregoing requirements, including those imposed by the rules and regulations of any national securities exchange on which the securities of the Company are listed from time to time; or (c) by the full Board acting as the Committee with the powers and duties set forth herein. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Awards granted under the Plan. A majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee under the Plan may be made at a meeting at which a quorum is present by the vote of a majority of those present, or by a writing in lieu of a meeting signed by all members of the Committee, unless otherwise required by law. Meetings may be held by telephone conference or similar communication equipment by means of which all persons participating can hear each other.

 

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3.2.    Authority of the Committee. Except as limited by law or by the Articles of Organization or Bylaws of the Company, and subject to the provisions hereof, the Committee shall have full power and authority to (a) determine the Participants to whom Awards shall be granted under the Plan; (b) determine the timing, size and type of Awards; (c) determine the terms, conditions and restrictions (if any) applicable to Awards in a manner consistent with the Plan, including but not limited to price, method of payment, vesting, exercisability and termination; (d) establish performance targets and measures for Awards, which may be chosen from among the measures of net income (either before or after taxes), market share, customer satisfaction, profits, share price, earnings per share, total stockholder return, return on assets, return on equity, operating income, return on capital or investments, or economic value added (including, but not limited to, any or all of such measures in comparison to the Company’s competitors, the industry or some other comparable group), and determine whether (and to what degree) such measures have been attained and to adjust the thresholds and/or determinations of such attainment; (e) establish the Fair Market Value of a Share in accordance with the Plan; (f) establish one or more form agreements to evidence and memorialize the grant of an Award; (g) construe and interpret the Plan and any agreement or instrument entered into under the Plan; (h) establish, amend, waive or repeal rules and regulations for the Plan’s administration; and (i) subject to the provisions of Article 13 and Section 19.6 hereof, amend, modify or adjust the terms and conditions of any outstanding Award, including acceleration of vesting and extension of exercise terms, to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee shall make all other determinations that may be necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authority as identified herein to one or more officers of the Company or other authorized persons as permitted by applicable securities law, the rules and regulations of any national securities exchange on which the securities of the Company are listed from time to time, and the law of the Commonwealth of Massachusetts.

 

3.3.    Decisions Binding. All determinations, decisions and interpretations made by the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Board and the Committee shall be final, conclusive and binding on all persons, including the Company, its stockholders, Employees, Participants and their estates and beneficiaries.

 

ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS

 

4.1.    Number of Shares Available for Grant. Subject to Sections 4.2 and 4.3 hereof, the maximum number of Shares that may be issued in the aggregate pursuant to Awards granted to Participants under the Plan shall be three Hundred Thousand (300,000) Shares. Shares issued under the Plan shall be authorized but unissued Common Stock.

 

4.2.    Share Counting. For purposes of counting the number of Shares available for the grant of Awards under the Plan (a) all Shares covered by Freestanding SARs shall be counted against the number of Shares available for the grant of Awards; provided, however, that Freestanding SARs that may be settled only in cash shall not be so counted; and (b) if any Award granted under this Plan is canceled, terminates, expires or lapses for any reason without having been exercised in full, is surrendered or forfeited in whole or in part, or results in any Common Stock not being issued (including as a result of a Freestanding SAR that was settleable either in cash or in stock actually being settled in cash), any Shares subject to such Award that remain unpurchased shall be available for the future grant of an Award under the Plan; provided, however, in the case of Freestanding SARs, that the full number of Shares subject to any stock-settled SAR shall be counted against the Shares available under the Plan in proportion to the portion of the SAR actually exercised regardless of the number of Shares actually used to settle such SAR upon exercise. In addition, any Shares retained or withheld by the Company upon exercise of an Award in order to satisfy the exercise price of such Award, or any withholding taxes due with respect to such exercise, shall be treated as not issued and shall continue to be available under the Plan. Notwithstanding any other provision of the Plan, shares issued and later repurchased by the Company shall not become available for future grant or sale under the Plan.

 

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4.3.    Adjustments to Common Stock; Substitute Awards. In the event of any stock split, reverse stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination of shares, exchange of shares, liquidation, spin-off, split-up, or other similar change in capitalization or event, (a) the number and class of securities available under the Plan, (b) the share counting rules set forth in 4.2 above, (c) the number and class of securities, vesting schedule and exercise or measurement price per share of each outstanding Award, (d) the repurchase price per security subject to repurchase, and (e) the terms of each outstanding Other Stock and Stock-Based Award, shall be equitably adjusted by the Company (or substituted Awards may be made) to the extent the Committee shall determine, in good faith, that such an adjustment (or substitution) is appropriate. Notwithstanding the foregoing, such adjustments shall be made to the extent necessary and in such a manner as to avoid any Award granted hereunder being classified as a deferral of compensation within the meaning of Code Section 409A, and the regulations and/or guidance issued thereunder. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Committee deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall not count against the overall Share limit set forth in Section 4.1.

 

ARTICLE 5. ELIGIBILITY AND PARTICIPATION

 

5.1.    Eligibility. Persons eligible to participate in this Plan include Consultants, Non-Employee Directors and Employees of the Company with the potential to contribute to the success of the Company, including Employees who are members of the Board.

 

5.2.    Actual Participation; Committee Discretion. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Participants those to whom Awards shall be granted, and shall determine the nature and amount of each Award. The Committee shall consider such factors as it deems relevant in selecting Participants to receive Awards and the terms, provisions and restrictions with respect thereto. The grant of an Award in one year or at any particular time shall not require the grant of an Award in any other year or at any other time. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Committee need not treat Participants uniformly.

 

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ARTICLE 6. STOCK OPTIONS

 

6.1.    Grant of Options; Timing. Subject to the terms and provisions of the Plan and applicable law, Options may be granted at any time and from time to time to Participants in such number, at such Option Price, and upon such terms and conditions as shall be determined by the Committee. The date of grant of an Option shall, for all purposes, be the date on which the Board makes the determination to and approves the grant of such Option. Notice of the determination shall be given to the Participant within a reasonable time after the date of grant.

 

6.2.    Option Award Agreement. Each Option grant shall be evidenced by an Award Agreement in such form or forms as the Committee shall approve, which shall specify the date of grant, the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine, including but not limited to vesting periods, performance targets and restrictions on transfer. All Options granted hereunder shall be, and shall be treated as, an NQSO. In the event of a conflict between any Option Award Agreement and the Plan, the Plan shall control, and in no event shall the Committee have the power to grant an Option or execute an Option Award Agreement that is contrary to the provisions of the Plan or applicable law.

 

6.3.    Option Price. The Committee shall establish the Option Price for each Option and specify such price in the applicable Option Award Agreement. The Option Price for each grant of an Option under this Plan shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted; provided that, if the Committee approves the grant of an Option with an exercise price to be determined on a future date, the Option Price shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on such future date.

 

6.4.    Duration of Options. Each Option granted to a Participant shall specify the date of grant and shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no Option shall have a term greater than, or be exercisable after, the tenth (10th) anniversary date of its date of grant.

 

6.5.    Exercise of Options. Options granted under this Article 6 shall be exercisable in whole or in part at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which restrictions and conditions need not be the same for each grant or for each Participant. Options granted under this Article 6 shall be deemed to be exercised when written notice of such exercise has been given to the Company at its principal office (Attention: Chief Financial Officer) in accordance with the terms of the Option Award Agreement by the person entitled to exercise the Option, setting forth the number of Shares with respect to which the Option is to be exercised, payment in full for such Shares in accordance with Section 6.6 herein has been received by the Company, and all conditions to exercise have been satisfied or waived.

 

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6.6.    Payment.

 

(a)    Form of Payment. The Option Price upon exercise of any Option shall be payable to the Company in full in a form as determined by the Committee either: (i) in cash (or its equivalent) or bank or cashier’s check made payable to the Company; (ii) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option Price (provided that, under certain circumstances, the Shares that are tendered must have been held by the Participant for at least six (6) months prior to their tender); (iii) by withholding Shares that otherwise would be acquired on exercise having an aggregate Fair Market Value at the time of exercise equal to the total Option Price; or (iv) by any combination of the foregoing methods of payment. If the Company is then allowing the exercise of Options pursuant to a same-day sale/cashless exercise program, the consideration received by the Company from a broker pursuant to such program (provided that such program shall not involve the Company’s extending or arranging for the extension of credit to a Participant) may also be acceptable consideration hereunder. In no circumstance shall (1) a Participant be entitled to pay the Option Price with a promissory note, and (2) the Company make a loan to a Participant to permit such Participant to exercise any Option.

 

(b)    Issuance of Shares. Subject to any governing laws, rules or regulations, as soon as practicable after receipt of a written notification of exercise and full payment, the Company shall issue to the Participant, in the Participant’s name, Shares in an appropriate amount based upon the number of Shares purchased under the Option(s). Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of such Shares, no right to vote or receive dividends or any other right of a shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Shares are deemed issued, except as otherwise provided in this Plan.

 

6.7.    Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.

 

6.8.    Termination of Employment or Consulting Arrangement. Subject to Article 12, each Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s employment or consulting arrangement with the Company. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination of employment.

 

6.9.    Non-transferability of Options. No NQSO granted under this Article 6 may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all NQSOs granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant or the Participant’s legal representative. Notwithstanding the foregoing, the Committee may in its sole discretion permit a Participant to transfer all or some of such Participant’s NQSOs to such Participant’s immediate family members or a trust or trusts for the benefit of such immediate family members. For purposes hereof, “immediate family members” means a Participant’s spouse, children and grandchildren.

 

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ARTICLE 7. STOCK APPRECIATION RIGHTS

 

7.1.    Grant of SARS; Price. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee, and may be granted in tandem with, or independently of, Options granted under the Plan. The Committee shall have complete discretion in determining the type of SAR, the number of SARs granted to each Participant (subject to Article 4 hereof), the grant price and, consistent with the provisions of the Plan and applicable law, the terms and conditions pertaining to such SARs. The grant price of a SAR shall be no less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant of the SAR, provided that if the Board approves the grant of a SAR with a measurement price to be determined on a future date, the measurement price shall be not less than one hundred percent (100%) of the Fair Market Value on such future date.

 

7.2.    Exercise of SARS.

 

(a)    Freestanding SARs. Freestanding SARs may be exercised at such time or times and upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them.

 

(b)    Tandem SARs. When SARs are expressly granted in tandem with Options, (i) the SAR will be exercisable only at such time or times, and to the extent, that the related Option is exercisable (except to the extent designated by the Board in connection with a Change in Control) and will be exercisable in accordance with the procedure required for exercise of the related Option; (ii) the SAR will terminate and no longer be exercisable upon the termination or exercise of the related Option (except to the extent designated by the Board in connection with a Change in Control), except that a SAR granted with respect to less than the full number of shares covered by an Option will not be reduced until the number of shares as to which the related Option has been exercised or has terminated exceeds the number of shares not covered by the SAR; (iii) the Option will terminate and no longer be exercisable upon the exercise of the related SAR; and (iv) the SAR will be transferable only with the related Option.

 

(c)    General. SARS shall be deemed to be exercised when written notice of such exercise has been given to the Company at its principal office (Attention: Chief Financial Officer) in accordance with the terms of the SAR Award Agreement by the person entitled to exercise the SAR setting forth the number of Shares with respect to which the SAR is to be exercised, and the other provisions of this Article 7 with respect to exercise have been satisfied or waived.

 

7.3.    SAR Agreements. Each SAR grant shall be evidenced by a SAR Award Agreement in such form or forms as the Committee shall approve, which shall specify the grant date, the grant price, the term of the SAR, and such other provisions as the Committee shall determine. In the event of a conflict between any SAR Award Agreement and the Plan, the Plan shall control, and in no event shall the Committee have the power to grant a SAR or execute a SAR Award Agreement that is contrary to the provisions of the Plan.

 

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7.4.    Term of SARS. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that such term shall not exceed ten (10) years from the date of grant.

 

7.5.    Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying (a) the difference between the Fair Market Value of a Share on the date of exercise and the grant price; by (b) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. The Committee’s determination regarding the form of SAR payment shall be set forth in the Award Agreement pertaining to the grant of the SAR.

 

7.6.    Termination of Employment or Consulting Arrangement. Each SAR Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employment or consulting arrangement with the Company and/or its Affiliates. Subject to Section 12.3 herein, such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of employment.

 

7.7.    Non-transferability of SARS. No SAR granted under the Plan may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant or the Participant’s legal representative. Notwithstanding the foregoing, the Committee may in its sole discretion permit a Participant to transfer all or some of such Participant’s SARs to such Participant’s immediate family members or a trust or trusts for the benefit of such immediate family members. Following any such transfer, any transferred SARs shall continue to be subject to the same terms and conditions as were applicable immediately prior to the transfer.

 

ARTICLE 8. RESTRICTED STOCK AND RESTRICTED STOCK UNITS

 

8.1.    Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant (a) Shares of Restricted Stock to Participants in such amounts, at such prices and upon such terms and conditions as the Committee shall determine, and (b) Awards of Restricted Stock Units entitling the Participant to receive Shares or cash to be delivered at the time such Award vests. The Committee shall determine the terms and conditions of a Restricted Stock Award (as defined herein), including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any. Restricted Stock and Restricted Stock Units are each referred to herein as a “Restricted Stock Award”.

 

8.2.    Restricted Stock Award Agreement. Each Restricted Stock Award shall be evidenced by a Restricted Stock Award Agreement in such form or forms as the Committee shall approve, which shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or RSUs granted, and such other provisions as the Committee shall determine. In the event of a conflict between any Restricted Stock Award Agreement and the Plan, the Plan shall control, and in no event shall the Committee have the power to grant Shares of Restricted Stock or RSUs or execute a Restricted Stock Award Agreement that is contrary to the provisions of the Plan.

 

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8.3.    Transferability. Neither the Shares of Restricted Stock nor RSUs granted under the Plan may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Award Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Restricted Stock Award Agreement. All rights with respect to the Restricted Stock and RSUs granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant or the Participant’s legal representatives.

 

8.4.    Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock and RSUs granted pursuant to the Plan as it may deem advisable, including without limitation restrictions based upon the achievement of specific performance goals (Company-wide, divisional and/or individual), time-based restrictions on vesting following the attainment of the performance goals, and/or restrictions under applicable federal or state securities laws. The Company may retain the certificates representing Shares of Restricted Stock in the Company’s possession, or otherwise require that they be deposited in escrow, along with a stock power endorsed in blank, until such time as all conditions and/or restrictions applicable to such Shares have been satisfied, and may imprint on such certificates appropriate legends referring to the term, conditions and restrictions applicable to such Shares. Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the applicable Period of Restriction. Upon the expiration of the Period of Restriction or other lapse or waiver of any restrictions relating to Shares of Restricted Stock, the Company shall deliver certificates without legends (other than those required by applicable securities laws) to the Participant.

 

8.5.    Voting Rights; Dividends and Dividend Equivalents; Settlement.

 

(a)    Restricted Stock Voting and Dividends. The Participant shall have the right to vote all Shares of Restricted Stock during the Period of Restriction. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may be credited with dividends and distributions paid with respect to the underlying Shares while they are so held. The Committee may apply any restrictions to the dividends and distributions that the Committee deems appropriate.

 

(b)    RSU Voting and Dividend Equivalents. The Participant shall have no voting rights with respect to Restricted Stock Units. To the extent provided by the Committee, in its sole discretion, a grant of Restricted Stock Units may provide Participants with the right to receive an amount equal to any dividends or other distributions declared and paid on an equal number of outstanding shares of Common Stock (“Dividend Equivalents”). Dividend Equivalents may be paid currently or credited to an account for the Participants, may be settled in cash and/or Shares, and may be subject to the same restrictions on transfer and forfeitability as the Restricted Stock Units with respect to which paid, as determined by the Committee in its sole discretion, subject in each case to such terms and conditions as the Committee shall establish.

 

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8.6.    Settlement of RSUs. Upon the vesting of and/or lapsing of any other restrictions (i.e., settlement) with respect to each Restricted Stock Unit, the Participant shall be entitled to receive from the Company one share of Common Stock or an amount of cash equal to the Fair Market Value of one share of Common Stock, as provided in the applicable Restricted Stock Award Agreement. The Committee may, in its discretion, provide that settlement of Restricted Stock Units shall be deferred, on a mandatory basis or at the election of the Participant, in a manner that complies with Code Section 409A.

 

8.7.    Termination of Employment or Consulting Arrangement. Each Restricted Stock Award Agreement shall set forth the extent to which the Participant shall have the right to receive unvested Shares of Restricted Stock following termination of the Participant’s employment or consulting arrangement with the Company. Subject to Section 12.3 herein, such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock issued pursuant to the Plan and may reflect distinctions based on the reasons for termination of employment.

 

ARTICLE 9. OTHER STOCK AND STOCK-BASED AWARDS

 

9.1.    General. Other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property may be granted hereunder to Participants (“Other Stock and Stock-Based-Awards”), including without limitation Awards entitling recipients to receive shares of Common Stock to be delivered in the future and shares of Common Stock without restrictions. Such Other Stock and Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock and Stock-Based Awards may be paid in shares of Common Stock or cash, as the Committee shall determine.

 

9.2.    Terms and Conditions. Subject to the provisions of the Plan, the Committee shall determine the terms and conditions of each Other Stock and Stock-Based Award, including any purchase price applicable thereto.

 

ARTICLE 10. BENEFICIARY DESIGNATION

 

Each Participant under the Plan may, from time to time, designate any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such designation, the Participant’s benefits shall be paid to the Participant’s estate.

 

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ARTICLE 11. DEFERRALS

 

The Committee may permit or require a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, or the lapse or waiver of restrictions with respect to Restricted Stock or RSUs. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals. Any such deferrals shall be made in a manner that complies with Code Section 409A.

 

ARTICLE 12. RETENTION RIGHTS; TERMINATION FOR CAUSE

 

12.1.    Employment. Neither the Plan nor any Award granted hereunder shall confer upon any Participant any right with respect to continuation of any employment, consulting or advisory relationship or directorship with the Company, nor shall it interfere in any way with his or her right or the Company’s right to terminate his or her employment, consulting or advisory relationship or directorship at any time.

 

12.2.    Participation. No Participant shall have the right, in and of itself, to be selected to receive an Award under this Plan or, having been so selected, to be selected to receive a future Award.

 

12.3.    Terminations for Cause. Notwithstanding anything herein to the contrary, in the event of the termination of a Participant’s employment or consulting arrangement with the Company for Cause (as defined herein), then such Participant’s rights under any then-outstanding Awards shall immediately terminate as of the time of such termination. “Termination for Cause” shall mean any termination for Cause as defined in any employment or similar agreement by and between the Company and the Participant and, if no such agreement is then in effect, shall include but not be limited to Participant’s (a) commission of an act of fraud, embezzlement, misappropriation or theft, or a felony, (b) gross negligence, willful misconduct, insubordination or habitual neglect of duty in carrying out his or her duties as a Employee, Consultant or Non-Employee Director; (c) non-compliance with any policy of the Company or the Company’s Code of Business Conduct and Ethics and failure to cure such noncompliance within fifteen (15) days of notice thereof from the Company, or (d) breach of any material term of any agreement, contract or other arrangement between the Participant and the Company regarding Participant’s employment by or engagement with the Company, or breach of any duty owed by the Participant to the Company and/or its stockholders, in each case as determined by the Board. In addition to and not in lieu of the foregoing, if the Board reasonably believes that a Participant has engaged in any of the activities described in clauses (a) – (d) of this Section 12.3, the Board may suspend the Participant’s right to exercise or receive any Award pending a determination by the Board.

 

ARTICLE 13. AMENDMENT, MODIFICATION, TERMINATION AND ADJUSTMENTS

 

13.1.    Amendment, Modification and Termination of Plan. Subject to the terms of the Plan, the Board, upon recommendation of the Committee, may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part; provided, that the Board shall not amend the Plan in any manner that requires stockholder, regulatory or other approval(s) under applicable law, rule or regulation without obtaining such approval(s), including any approval required under the Code or the rules and regulations of any national securities exchange on which the Company’s securities are listed from time to time.

 

13

 

 

13.2.    Adjustment of Awards Upon the Occurrence of Certain Unusual or Non-recurring Events. The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or non-recurring events (including, without limitation, the events described in Section 4.3 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, rules, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan; provided that unless the Committee determines otherwise, no such adjustment shall be authorized to the extent that such authority would be inconsistent with the Plan or Awards meeting the requirements of Code Section 162(m), as from time to time amended.

 

13.3.    Awards Previously Granted. The Committee may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type and changing the date of exercise or realization. The Participant’s consent to such action shall be required unless (a) the Committee determines that the action, taking into account any related action, would not materially and adversely affect the Participant’s rights under the Plan or (b) the change is permitted under Section 4.3 or Article 15 hereof.

 

13.4.    Compliance with Code Section 162(m). At all times when Code Section 162(m) is applicable, all Awards granted under this Plan shall comply with the requirements of Code Section 162(m); provided, however, that in the event the Committee determines that such compliance is not desired with respect to any Award or Awards available for grant under the Plan, then compliance with Code Section 162(m) will not be required. In addition, in the event that changes are made to Code Section 162(m) to permit greater flexibility with respect to any Award or Awards available under the Plan, or in the event that modifications are necessary to the Plan or any Awards to comply with Section 162(m), the Committee may, subject to this Article 13, make any adjustments and amendments to the Plan and any Awards that the Committee deems appropriate. If any provision of the Plan would be in violation of Section 162(m) if applied as written, such provision shall not have effect as written and shall be given effect so as to comply with Section 162(m) as determined by the Committee in its discretion.

 

ARTICLE 14.  PARACHUTE LIMITATIONS

 

Notwithstanding any other provision of this Plan or of any other agreement, contract or understanding heretofore or hereafter entered into by a Participant with the Company or any Affiliate, except an agreement, contract or understanding hereafter entered into that expressly modifies or excludes application of this Article 14 (hereinafter referred to as an “Other Agreement”), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Participant (including groups or classes of Participants or beneficiaries of which the Participant is a member), whether or not such compensation is deferred, is in cash or is in the form of a benefit to or for the Participant (hereinafter referred to as a “Benefit Arrangement”), if the Participant is a “disqualified individual,” as defined in Code Section 280G(c), any Option or Restricted Stock held by the Participant and any right to receive any payment or other benefit under this Plan shall not become exercisable or vested (a) to the extent that such right to exercise, vesting, payment or benefit, taking into account all other rights, payments or benefits to or for the Participant under this Plan, all Other Agreements and all Benefit Arrangements, would cause any payment or benefit to the Participant under this Plan to be considered a “parachute payment” within the meaning of Code Section 280G(b) as then in effect (a “Parachute Payment”), and (b) if, as a result of receiving a Parachute Payment, the aggregate after-tax amounts received by the Participant from the Company under this Plan, all Other Agreements and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by the Participant without causing any such payment or benefit to be considered a Parachute Payment. In the event that the receipt of any such right to exercise, vesting, payment or benefit under this Plan, in conjunction with all other rights, payments or benefits to or for the Participant under any Other Agreements or any Benefit Arrangement would cause the Participant to be considered to have received a Parachute Payment under this Plan that would have the effect of decreasing the after-tax amount received by the Participant as described in clause (ii) of the preceding sentence, then the Participant shall have the right, in the Participant’s sole discretion, to designate those rights, payments or benefits under this Plan, any Other Agreements and any Benefit Arrangements that should be reduced or eliminated so as to avoid having the payment or benefit to the Participant under this Plan be deemed to be a Parachute Payment.

 

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ARTICLE 15. CHANGE IN CONTROL

 

15.1.    Definition. For purposes of this Plan, a “Change in Control” of the Company shall mean any of the following:

 

(a)    the Beneficial Ownership of securities representing more than thirty-three percent (33%) of the combined voting power of the Company is acquired by any “person” or “group”, as such terms are defined in Section 13(d) and 14(d) of the Exchange Act, other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company; or

 

(b)    the stockholders of the Company (i) approve a definitive agreement to (1) merge or consolidate the Company with or into another entity (other than a merger or consolidation which would result in the voting securities of the Company immediately prior to such transaction continuing to represent fifty percent (50%) or more of the combined voting power of the surviving entity immediately after such transaction), or (2) to sell, exchange, transfer or otherwise dispose of all or substantially all of the Company’s assets, or (ii) adopt a plan of liquidation or dissolution; or

 

(c)    during any period of three (3) consecutive years, individuals who at the beginning of such period were members of the Board cease for any reason to constitute at least a majority thereof (unless the election, or the nomination for election by the Company’s stockholders, of each new director was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period or whose election or nomination was previously so approved).

 

15.2.    Treatment of Outstanding Awards. Subject to Section 15.3 hereof, upon the occurrence of a Change in Control, the Committee may take any one or more of the following actions as to all or any portion of outstanding Awards:

 

(a)    provide for the assumption of all outstanding Awards, or the substitution of outstanding Awards for new Awards, for equity securities of the surviving, successor or purchasing Person, or a Parent or Subsidiary thereof, with appropriate adjustments as to the number, kind and prices of Shares subject to such Awards as determined in good faith by the Board;

 

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(b)    provide that the vesting of any and all Options and SARs granted hereunder that remain outstanding shall be accelerated and that such Awards shall become fully and immediately exercisable;

 

(c)    provide that any restrictions and deferral limitations applicable to any Restricted Stock or RSUs shall lapse and that all such shares shall be deemed fully vested and free of all restrictions;

 

(d)    provide that each outstanding unexercised Award shall terminate immediately prior to the consummation of such action or such other date as fixed by the Board and provide Participants the right to exercise such Award prior to such date; and/or

 

(e)    make any and all other adjustments and/or settlements of outstanding Awards as it deems appropriate and consistent with the Plan’s purposes.

 

15.3.    Termination, Amendment and Modifications of Change-in-Control Provisions. Notwithstanding any other provision of the Plan or any Award Agreement provision, the provisions of this Article 15 may not be terminated, amended or modified on or after the date of an event that is likely to give rise to a Change in Control to affect adversely any Award theretofore granted under the Plan without the prior written consent of the Participant with respect to said Participant’s outstanding Awards.

 

ARTICLE 16. WITHHOLDING

 

16.1.    Tax Withholding. Each Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock under an Award. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company in lieu of withholding, an amount sufficient to satisfy all federal, state and local taxes, domestic or foreign, required by law or regulation to be withheld or paid with respect to any taxable event arising as a result of this Plan and an Award made hereunder, and the Company may defer the issuance of Shares upon the grant or exercise of an Award unless indemnified to its satisfaction against any liability for any such taxes.

 

16.2.    Share Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of Awards granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the total tax that could be imposed with respect to said transaction. All such elections shall be irrevocable, made in writing, and signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

 

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16.3.    Determinations; Procedure. The amount of withholding or tax payment shall be determined by the Committee or its delegate and shall be payable by the Participant at such time or times as the Board determines. A Participant shall be permitted to satisfy his or her tax or withholding obligation by (a) having cash withheld from the Participant’s salary or other compensation payable by the Company, (b) the payment of cash by the Participant to the Company, (c) the payment in shares of Common Stock already owned by the Participant valued at Fair Market Value, and/or (d) the withholding from the Award, at the appropriate time, of a number of shares of Common Stock sufficient, based upon the Fair Market Value of such Common Stock, to satisfy such tax or withholding requirements as set forth in Section 16.2 above. The Committee shall be authorized, in its sole and absolute discretion, to establish rules and procedures relating to any such withholding methods it deems necessary or appropriate (including, without limitation, rules and procedures relating to elections by Participants who are subject to the provisions of Section 16 of the Exchange Act to have shares of Common Stock withheld from an award to meet those withholding obligations).

 

ARTICLE 17. INDEMNIFICATION

 

Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf and provided further that indemnification shall not be available for any action taken or failure to act by such person in bad faith or any fraud on the part of such person. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Organization or Bylaws, as a matter of law or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

 

ARTICLE 18. SUCCESSORS

 

All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect acquisition by purchase, merger, consolidation or otherwise, of the Company or all or substantially all of its business or assets.

 

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ARTICLE 19. LEGAL CONSTRUCTION; MISCELLANEOUS

 

19.1.    Reservation of Shares. The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan and outstanding Awards granted under the Plan. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

 

19.2.    Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

 

19.3.    Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

 

19.4.    Requirements of Law.

 

(a)    Compliance. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or securities exchanges as may be required. Shares shall not be issued pursuant to the exercise or receipt of an Award unless the exercise or receipt of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of applicable law, including, without limitation, the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, the so-called state “blue sky” or securities laws, and the requirements of any securities exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise or receipt of an Award, the Company may require the person exercising or receiving such Award to represent and warrant at the time of any such exercise or receipt that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law.

 

(b)    Consents and Approvals. In addition to and not in lieu of subsection (a) above, each Award shall be subject to the requirement that if at any time the Committee shall determine, in its discretion, that the listing, registration or qualification of the Shares subject to the Award upon any securities exchange or under any federal, state or foreign securities or other law or regulation, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to or in connection with the granting of such Award or the issue or purchase of Shares thereunder, no such Award may be exercised or paid in Shares of Common Stock in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained, and the holder of each such Award will supply the Company with such certificates, representations and information as the Company shall request which are reasonably necessary or desirable in order for the Company to obtain such required listing, and shall otherwise cooperate with the Company in obtaining such required listing.

 

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19.5.    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 under the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

 

19.6.    Section 409A of the Code.

 

(a)    Drafting and Interpretation. The Plan and all Awards granted hereunder will be interpreted to the greatest extent possible in a manner that makes the Plan and such Awards exempt from Section 409A of the Code and the rules, regulations and other guidance promulgated thereunder (collectively, “Section 409A”), or, to the extent not so exempt, in compliance with Section 409A. Accordingly, this Plan and all Awards shall be read and interpreted to the extent necessary to be exempt from or comply with Section 409A. Notwithstanding the foregoing, neither the Company nor any of the Company’s or its affiliates’ respective stockholders, members, unitholders, subsidiaries, successors, assigns, trustees, directors, officers, limited or general partners, managers, joint venturers, employees, or any of the agents or advisors of any of the foregoing, including any successors and assigns of any of the foregoing, make any representations that the payments and benefits provided under this Plan or any Award are exempt from, or comply with, Section 409A, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by a Participant on account of non-compliance with Section 409A.

 

(b)         Specified Employees. Except as provided in individual Award agreements initially or by amendment, if and to the extent any portion of any payment, compensation or other benefit provided to a Participant in connection with his or her employment termination is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the Participant is a “specified employee” as defined in Section 409A(a)(2)(B)(i) of the Code, as determined by the Company in accordance with its procedures, by which determination the Participant (through accepting the Award) agrees that he or she is bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six (6) months plus one (1) day after the date of “separation from service” (as determined under Section 409A) (the “New Payment Date”), except as Section 409A may then permit. The aggregate of any payments that otherwise would have been paid to the Participant during the period between the date of separation from service and the New Payment Date shall be paid to the Participant in a lump sum on such New Payment Date, and any remaining payments will be paid on their original schedule.

 

19.7.    Governing Law. To the extent not preempted by federal law, the Plan, and all agreements entered into, actions taken and determinations made hereunder, shall be construed in accordance with and governed by the laws of the Commonwealth of Massachusetts, without regard to such jurisdiction’s conflicts of laws principles.

 

19.8.    Authorization of Sub-Plans. The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable securities or tax laws of various jurisdictions. The Board shall establish such sub-plans by adopting supplements to the Plan containing (a) such limitations on the Committee’s discretion under the Plan as the Board deems necessary or desirable or (b) such additional terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction, and the Company shall not be required to provide copies of any supplement to Participants in any jurisdiction which is not the subject of such supplement.

 

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19.9.    Non-U.S. Employees. Awards may be granted to Participants who are non-U.S. citizens or residents employed outside the United States, or both, on such terms and conditions different from those applicable to Awards to Participants employed in the United States as may, in the judgment of the Board, be necessary or desirable in order to recognize differences in local law or tax policy. The Board also may impose conditions on the exercise or vesting of Awards in order to minimize the Board’s obligation with respect to tax equalization for Participants on assignments outside their home country. The Board may approve such supplements to or amendments, restatements or alternative versions of the Plan as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as this Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20REPLACEMENT REVOLVING LINE NOTE

New York

	December 17, 2021 	   $8,500,000.00
	 	 

BORROWER (Name): Corning Natural Gas Corporation

(Organizational Structure): Corporation 

(State Law organized under): New York 

(Address of residence/chief executive office): 330
West William Street, Corning, New York 14830

 

		BANK:	M&T BANK, a New York banking corporation with its banking offices at One M&T Plaza, Buffalo, New
York 14203 Attention: Office of the General Counsel

 

Promise to Pay. For value received, and intending
to be legally bound, Borrower promises to pay to the order of the Bank, ON DEMAND, the principal sum of Eight Million Five Hundred
Thousand and 00/100 Dollars ($8,500,000.00) (the “Maximum Principal Amount”) or the outstanding principal amount
of this Note (the “Outstanding Principal Amount”), if less; plus interest as agreed below and all fees and costs (including
without limitation attorneys’ fees and disbursements, whether for internal or outside counsel) the Bank incurs in order to administer,
service or modify the credit facility evidenced by this Note, to collect any amount due under this Note, to negotiate or document a workout
or restructuring, or to preserve its rights or realize upon any guaranty or other security for the payment of this Note (“Expenses”).

 

Authorized Representatives. This Note is issued
by Borrower to the Bank in connection with a certain line of credit or loan limit made available by the Bank to Borrower (the “Credit”).
The Bank may make any loan or advance pursuant to the Credit (collectively, “Loan(s)”) in reliance upon any oral, telephonic,
written, teletransmitted or other request (the “Request(s)”) that the Bank in good faith believes to be valid and to have
been made by Borrower or on behalf of Borrower by Michael I. German, President, or Charles Lenns, Vice President and CFO
or any other officer, employee or representative of Borrower who is authorized or designated as a signer of loan documents under the provisions
of Borrower’s most recent resolutions or similar documents on file with the Bank (each an “Authorized Person”). Notwithstanding
that individual names may have been provided to the Bank, the Bank shall be permitted at any time to rely solely on an individual’s
title to ascertain whether that individual is an Authorized Person. The Bank may act on the Request of any Authorized Person until the
Bank shall have received from Borrower, and had a reasonable time to act on, written notice revoking the authority of such Authorized
Person. Borrower acknowledges that the transmission between Borrower and Bank of any Request or other instructions with respect to the
Credit involves the possibility of errors, omissions, misinterpretations, fraud and mistakes, and agrees to adopt such internal measures
and operational procedures as may be necessary to prevent such occurrences. By reason thereof, Borrower hereby assumes all risk of loss
and responsibility for, and releases and discharges the Bank from any and all responsibility or liability for, and agrees to indemnify,
reimburse on demand and hold Bank harmless from, any and all claims, actions, damages, losses, liability and expenses by reason of, arising
out of, or in any way connected with or related to: (i) Bank’s accepting, relying on and acting upon any Request or other instructions
with respect to the Credit; or (ii) any such error, omission, misinterpretation, fraud or mistake, provided such error, omission, misinterpretation,
fraud or mistake is not directly caused by the Bank’s gross negligence or willful misconduct. The Bank shall incur no liability
to Borrower or to any other person as a direct or indirect result of making any Loan pursuant to this paragraph.

 

Discretionary Facility. The Bank may modify,
restrict, suspend or terminate the Credit at any time for any reason and without affecting Borrower’s then existing obligations
under this Note. Any Request for a Loan hereunder shall be limited in amount, such that the sum of (i) the principal amount of such Request;
(ii) the Outstanding Principal Amount under this Note; and (iii) the aggregate face amounts of (or, if greater, Borrower’s aggregate
reimbursement obligations to the Bank (or any of its affiliates) in connection with) any letters of credit issued by the Bank (or any
of its affiliates) at the request (or for the benefit) of Borrower, pursuant to this Credit; does not exceed the Maximum Principal Amount
under this Note. Notwithstanding the above, the Bank shall have the sole and absolute discretion whether to make any Loan (or any portion
of any Loan) requested by Borrower, regardless of any general availability under the Maximum Principal Amount.

 

Revolving Credit. This Note evidences a revolving
Credit. Subject to all applicable provisions in this Note and in any and all other agreements between the Borrower and the Bank related
hereto, the Borrower may borrow, pay, prepay and reborrow hereunder at any time prior to demand for payment in full of the Outstanding
Principal Amount. Notwithstanding that, from time to time, there may be no amounts outstanding respecting this Note, this Note shall continue
in full force and effect until all obligations and liabilities evidenced by this Note are paid in full and the Credit evidenced by this
Note has been terminated by the Bank. This Note is subject to and incorporates by reference the Sixth Amended Replacement and Restated
Credit Agreement (the “Credit Agreement”) of even date herewith.

 

Interest. The Outstanding Principal Amount
of this Note, as may fluctuate from time to time based on the disbursement of Loans and any repayments, shall earn interest calculated
on the basis of a 360-day year for the actual number of days of each year (365 or 366), from and including the dates the proceeds of any
Loans are disbursed to, but not including, the date all amounts hereunder are paid in full, at a rate per year which shall be:

 

    1 

     

    

 

 

The applicable SOFR Loan Rate (as defined in
the attached SOFR Rate Rider) or (i) .50% (the “SOFR Index Floor”) plus the interest rate spread as provided below:
See attached SOFR Rate Rider, the terms of which are incorporated herein by reference, for definitions and additional provisions.

 

 

	Pricing Level	Funded Debt/EBITDA Leverage Ratio	Interest Rate Spread
	
         Level I

     
	Less than or equal to 2.0	1.70%
	     Level II	
    Greater than 2.0 but less than or equal to 2.5

     
	2.00%
	     Level III	
    Greater than 2.5 but less than or equal to 3.0

     
	2.30%
	     Level IV	Greater than 3.0	2.60%

 

 

For purposes of this computation, Funded
Debt/EBITDA Leverage Ratio shall mean the current and long term portion of term debt, but excluding the balance outstanding on the revolver
and line of credit obligations, divided by EBITDA which shall be defined as net income after tax, plus depreciation, plus amortization,
plus interest expense, plus non-cash expenses, less non-cash income, all as determined in accordance with G.A.A.P., as defined in the
Credit Agreement.

 

If no rate is specified above, interest shall accrue
at the Maximum Legal Rate (defined below).

 

Maximum Legal Rate. It is the intent of the
Bank and of Borrower that in no event shall interest be payable at a rate in excess of the maximum rate permitted by applicable law (the
“Maximum Legal Rate”). Solely to the extent necessary to prevent interest under this Note from exceeding the Maximum Legal
Rate, Borrower agrees that any amount that would be treated as excessive under a final judicial interpretation of applicable law shall
be deemed to have been a mistake and automatically canceled, and, if received by the Bank, shall be refunded to Borrower, without interest.

 

Demand Facility. This is a pay-on-demand Note
and all Loans hereunder are made at the Bank’s discretion and shall become immediately due and payable upon demand by the Bank;
provided, however, that the Outstanding Principal Amount of this Note and all accrued and unpaid interest shall automatically become immediately
due and payable if Borrower or any guarantor or endorser of this Note commences or has commenced against it any bankruptcy or insolvency
proceeding. Borrower hereby waives protest, presentment and notice of any kind in connection with this Note. Absent demand for payment
in full, interest shall be due and payable monthly, as invoiced by the Bank.

 

Payments. Payments shall be made in immediately
available United States funds at any banking office of the Bank.

 

Preauthorized Transfers from Deposit Account.
If a deposit account number is provided in the following blank, Borrower hereby authorizes the Bank to debit Borrower’s deposit
account #_____________________with the Bank automatically for any amount which becomes due under this Note.

 

Interest Accrual; Application of Payments.
Interest will continue to accrue on the Outstanding Principal Amount until the Outstanding Principal Amount is paid in full. In connection
with any daily adjusting interest rate, payment invoices may reflect estimated interest accruals for a portion of each billing period
(to facilitate timely distribution of invoices in advance of each payment date), followed by appropriate interest accrual adjustments
reflected in the invoice for the succeeding billing period. All installment payments (excluding voluntary prepayments of principal) will
be applied as of the date each payment is received and processed. Payments may be applied in any order in the sole discretion of the Bank,
but, prior to demand for payment in full, may be applied chronologically (i.e., oldest invoice first) to unpaid amounts due and owing,
in the following order: first to accrued interest, then to principal, then to late charges and other fees, and then to all other Expenses.

 

Late Charge. If Borrower fails to pay, within
five (5) days of its due date, any amount due and owing pursuant to this Note or any other agreement executed and delivered to the Bank
in connection with this Note, Borrower shall immediately pay to the Bank a late charge equal to the greatest of (a) $50.00, (b) five percent
(5%) of the delinquent amount, or (c) the Bank’s then current late charge as announced by the Bank from time to time. Notwithstanding
the above, if this Note is secured by a one- to six-family owner-occupied residence, the late charge shall equal 2% of the delinquent
amount and shall be payable if payment is not received within fifteen days of its due date.

 

Default Rate. If the Borrower fails to make
any payment when due under this Note, the interest rate on the Outstanding Principal Amount shall immediately and automatically increase
to five (5) percentage points above the otherwise applicable rate per year (“Default Rate”), and any judgment entered hereon
or otherwise in connection with any suit to collect amounts due hereunder shall bear interest at such Default Rate.

 

Increased Costs. If the Bank shall determine
that, due to either (a) the introduction of any change in (or in the interpretation of) any requirement of law or (b) compliance with
any guideline or request from any central bank or other governmental or regulatory authority (whether or not having the force of law),
there shall be any increase in the cost to the Bank of agreeing to make or making, funding or maintaining any loans hereunder, then Borrower
shall be liable for, and shall from time to time, upon demand therefor by the Bank, pay to the Bank such additional amounts as are sufficient
to compensate the Bank for such increased costs.

 

Right of Setoff. The Bank shall have the right
to set off against the amounts owing under this Note any property held in a deposit or other account with the Bank or any of its affiliates
or otherwise owing by the Bank or any of its affiliates in any capacity to Borrower or any guarantor or endorser of this Note. Such set-off
shall be deemed to have been exercised immediately at the time the Bank or such affiliate elects to do so.

 

Bank Records Conclusive. The Bank shall set
forth on a schedule attached to this Note or maintained on the Bank’s loan booking systems, the date and original principal amount
of each Loan and the date and amount of each payment to be applied to the Outstanding Principal Amount of this Note. The Outstanding Principal
Amount set forth on any such schedule shall be presumptive evidence of the Outstanding Principal Amount of this Note and of all Loans.
No failure by the Bank to make, and no error by the Bank in making, any annotation on any such schedule shall affect the Borrower’s
obligation to pay the principal and interest of each Loan or any other obligation of Borrower to the Bank pursuant to this Note.

 

    2 

     

    

Purpose. Borrower certifies (a) that no Loan
will be used to purchase margin stock except with the Bank’s express prior written consent for each such purchase and (b) that all
Loans shall be used for a business purpose, and not for any personal, family or household purpose.

 

Authorization. Borrower, if a corporation,
partnership, limited liability company, trust or other entity, represents that it is duly organized and in good standing or duly constituted
in the state of its organization and is duly authorized to do business in all jurisdictions material to the conduct of its business; that
the execution, delivery and performance of this Note have been duly authorized by all necessary regulatory and corporate or partnership
action or by its governing instrument; that this Note has been duly executed by an authorized officer, member, partner or trustee and
constitutes a binding obligation enforceable against Borrower and not in violation of any law, court order or agreement by which Borrower
is bound; and that Borrower’s performance is not threatened by any pending or threatened litigation.

 

USA PATRIOT Act Notice. Bank hereby notifies
the Borrower that pursuant to the requirements of the USA PATRIOT Act (“Patriot Act”), it is required to obtain, verify and
record information that identifies the Borrower, which information includes the name and address of the Borrower and other information
that will allow Bank to identify the Borrower in accordance with the Patriot Act.  The Borrower agrees to, promptly following a request
by Bank, provide all such other documentation and information that Bank requests in order to comply with its ongoing obligations under
applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.

 

Miscellaneous. This Note, together with any
related loan and security agreements, contains the entire agreement between the Bank and Borrower with respect to each Loan, and supersedes
every course of dealing, other conduct, oral agreement and representation previously made by the Bank. All rights and remedies of the
Bank under applicable law and this Note are cumulative and not exclusive. No single, partial or delayed exercise by the Bank of any right
or remedy shall preclude the subsequent exercise by the Bank at any time of any right or remedy of the Bank without notice. No waiver
or amendment of any provision of this Note shall be effective unless made specifically in writing by the Bank. No course of dealing or
other conduct, no oral agreement or representation made by the Bank, and no usage of trade, shall operate as a waiver of any right or
remedy of the Bank. No waiver of any right or remedy of the Bank shall be effective unless made specifically in writing by the Bank. Borrower
agrees that in any legal proceeding, a copy of this Note kept in the Bank’s course of business may be admitted into evidence as
an original. This Note is a binding obligation enforceable against Borrower and its successors and assigns and shall inure to the benefit
of the Bank and its successors and assigns. If a court deems any provision of this Note invalid, the remainder of the Note shall remain
in effect. Section headings are for convenience only. Singular number includes plural and neuter gender includes masculine and feminine
as appropriate.

 

Notices. Any demand or notice hereunder or
under any applicable law pertaining hereto shall be in writing and duly given if delivered to Borrower (at its address on the Bank’s
records) or to the Bank (at the address on page one and separately to the Bank officer responsible for Borrower’s relationship with
the Bank). Such notice or demand shall be deemed sufficiently given for all purposes when delivered (i) by personal delivery and shall
be deemed effective when delivered, or (ii) by mail or courier and shall be deemed effective three (3) business days after deposit in
an official depository maintained by the United States Post Office for the collection of mail or one (1) business day after delivery to
a nationally recognized overnight courier service (e.g., Federal Express). Notice by e-mail is not valid notice under this or any other
agreement between Borrower and the Bank.

 

Joint and Several. If there is more than one
Borrower, each of them shall be jointly and severally liable for all amounts which become due under this Note and the term “Borrower”
shall include each as well as all of them.

 

Governing Law; Jurisdiction. This Note has
been delivered to and accepted by the Bank and will be deemed to be made in the State of New York. Except as otherwise provided under
federal law, this Note will be interpreted in accordance with the laws of the State of New York excluding its conflict of laws rules.
BORROWER HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE STATE OF NEW YORK IN A COUNTY
OR JUDICIAL DISTRICT WHERE THE BANK MAINTAINS A BRANCH AND CONSENTS THAT THE BANK MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND
AT BORROWER’S ADDRESS SET FORTH ABOVE FOR PROVIDING NOTICE OR DEMAND; PROVIDED THAT NOTHING CONTAINED IN THIS NOTE WILL PREVENT
THE BANK FROM BRINGING ANY ACTION, ENFORCING ANY AWARD OR JUDGMENT OR EXERCISING ANY RIGHTS AGAINST BORROWER INDIVIDUALLY, AGAINST ANY
SECURITY OR AGAINST ANY PROPERTY OF BORROWER WITHIN ANY OTHER COUNTY, STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION. Borrower acknowledges
and agrees that the venue provided above is the most convenient forum for both the Bank and Borrower. Borrower waives any objection to
venue and any objection based on a more convenient forum in any action instituted under this Note.

 

Waiver of Jury Trial. Borrower
and the Bank hereby knowingly, voluntarily, and intentionally waive any right to trial by jury Borrower and the Bank may have in any action
or proceeding, in law or in equity, in connection with this note or the transactions related hereto. Borrower represents and warrants
that no representative or agent of the Bank has represented, expressly or otherwise, that the Bank will not, in the event of litigation,
seek to enforce this jury trial waiver. Borrower Acknowledges that the Bank has been induced to enter into this note by, among other things,
the provisions of this Section.

 

x       Amended
and Restated Note. The Borrower acknowledges, agrees and understands
that this Note is given in replacement of and in substitution for, but not in payment of, a note dated on or about June 25, 2021 in
the original principal amount of $8,000,000.00 issued by Corning Natural Gas Corporation to the Bank (or its predecessor
in interest), as the same may have been amended or modified from time to time (“Prior Note”), and further, that: (a) the obligations
of the Borrower as evidenced by the Prior Note shall continue in full force and effect, as amended and restated by this Note, all of such
obligations being hereby ratified and confirmed by the Borrower; (b) any and all liens, pledges, assignments and security interests securing
the Borrower’s obligations under the Prior Note shall continue in full force and effect, are hereby ratified and confirmed by the
Borrower, and are hereby acknowledged by the Borrower to secure, among other things, all of the Borrower’s obligations to the Bank
under this Note, with the same priority, operation and effect as that relating to the obligations under the Prior Note; and (c) nothing
herein contained shall be construed to extinguish, release, or discharge, or constitute, create, or effect a novation of, or an agreement
to extinguish, the obligations of the Borrower with respect to the indebtedness originally described in the Prior Note or any of the liens,
pledges, assignments and security interests securing such obligations.

 

 

SIGNATURE PAGE TO FOLLOW

    3 

     

    

Acknowledgment. Borrower acknowledges that
it has read and understands all the provisions of this Note, including the Governing Law, Jurisdiction and Waiver of Jury Trial,
and has been advised by counsel as necessary or appropriate.

 

 

	 	CORNING NATURAL GAS CORPORATION
	 	 
	 	 
	 	By:/s/ Charles Lenns
	 	Name:  Charles Lenns
	 	Title:    Vice President/Chief Financial Officer 

ACKNOWLEDGMENT

 

	STATE OF NEW YORK 	 )
	 	 : SS.
	COUNTY OF 	 )

 

On the                   day of December, in the
year 2021, before me, the undersigned, a Notary Public in and for said State, personally appeared CHARLES LENNS, personally known
to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person
upon behalf of which the individual acted, executed the instrument.

 

	 	 
	 	Notary Public

 

 

 

FOR BANK USE ONLY

 

	Authorization Confirmed:  	 
		 

 

	Credit A/C	# 	 	Off Ck	# 	 	Payoff Obligation	# 
	 	 	 	 	 	 	 	 
	 	$ 	 	 	$ 	 	 	$ 

 

    4 

     

    

 

SOFR RATE RIDER

(Daily Simple SOFR)

 

 

Borrower: Corning Natural Gas Corporation

 

Promissory Note Original/Maximum Principal Amount:
$8,500,000.00

 

Promissory Note Date December 17, 2021

 

 

DEFINITIONS. The above-referenced Promissory
Note is referred to herein as the “Note” and all references to the “Note” shall be deemed to include the Note
and this Rider. As used in the Note and this Rider, each capitalized term shall have the meaning specified in the Note, and the following
terms shall have the indicated meanings:

 

		a.	“Base Rate” shall mean the rate per annum equal to the greater of (i) two (2) percentage
points above the rate of interest announced by the Bank each day as its prime rate of interest (“Prime Rate”), or (ii) 3.25%
(the “Base Rate Floor”).

		b.	“Business Day” shall mean any day other than Saturday, Sunday or other day on which
commercial banking institutions in New York, New York are authorized or required by law or other governmental action to remain closed
for business.

		c.	“Daily Simple SOFR” shall mean for any day (a “SOFR Rate Day”), a rate
per annum equal to SOFR for the day (such day “i”) that is five (5) U.S. Government Securities Business Days prior
to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day, or (ii) if such SOFR Rate Day is not a
U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, in each
case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website. If by 5:00 pm (ET) on the second
(2nd) U.S. Government Securities Business Day immediately following any day “i”, the SOFR in respect of
such day “i” has not been published on the SOFR Administrator’s Website (and a Benchmark Replacement Date with
respect to the Daily Simple SOFR has not occurred), then the SOFR for such day “i” will be the SOFR as published in
respect of the first preceding U.S. Government Securities Business Day for which such SOFR was published on the SOFR Administrator’s
Website; provided that any SOFR determined pursuant to this sentence shall be utilized for purposes of calculation of Daily Simple
SOFR for no more than three (3) consecutive SOFR Rate Days. Any change in Daily Simple SOFR due to a change in SOFR shall be effective
from and including the effective date of such change in SOFR without notice to the Borrower.

		d.	“SOFR” shall mean, with respect to any U.S. Government Securities Business Day, a rate
per annum equal to the secured overnight financing rate for such U.S. Government Securities Business Day.

		e.	“SOFR Administrator” shall mean the Federal Reserve Bank of New York (or a successor
administrator of the secured overnight financing rate).

		f.	“SOFR Administrator’s Website” shall mean the website of the Federal Reserve
Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified
as such by the SOFR Administrator from time to time.

		g.	“SOFR Loan Rate” shall mean Daily Simple SOFR.

		h.	“SOFR Rate Day” shall have the meaning specified in the definition of Daily Simple
SOFR.

		i.	“U.S. Government Securities Business Day” shall mean any day other than Saturday, Sunday
or other day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members
be closed for the entire day for purposes of trading in United States government securities.

 

ADDITIONAL PROVISIONS.

 

Timing of Requests for Advances. In addition
to and without compromising any additional requirements referenced in the Note, the Bank reserves the right to require that any Borrower
request for an advance must be delivered to the Bank a certain number of days prior to the requested date of funding that shall be equal
to the number of days in any lookback period used to determine SOFR for purposes of calculating the Daily Simple SOFR for any SOFR Rate
Day.

 

Modification to Payment Due Date. Notwithstanding
any provision to the contrary in the Note, if in any particular month the applicable payment due date is not a Business Day, the payment
due date shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar
month, in which case such payment due date shall be the immediately preceding Business Day.

    5 

     

    

Conversion to Base Rate Upon Default. Unless
the Bank shall otherwise and in its sole discretion consent in writing, if (i) an event of default (with respect to any payment obligation
or otherwise, as may be defined or described in the Note or related documents) has occurred and is continuing, or (ii) there exists a
condition or event that, with the passage of time, the giving of notice, or both, shall constitute such an event of default, the Bank,
in its sole discretion, may convert the applicable interest rate from the SOFR Loan Rate to the Base Rate, and each reference in the Note
and herein to the SOFR Loan Rate shall be deemed to be a reference to the Base Rate. Nothing herein shall be construed to be a waiver
by the Bank of its right to have the outstanding principal balance accrue interest at the Default Rate, accelerate the indebtedness and/or
exercise any other remedies available to the Bank under the terms hereof or applicable law.

 

Repayment Upon Conversion to Base Rate. Except
as otherwise provided herein, during the time of any conversion of the SOFR Loan Rate to the Base Rate, whether temporary or permanent,
and whether pursuant to an event of default or otherwise, and without compromising any other rights and remedies of the Bank, and in the
absence of the Bank exercising any such other rights or remedies as may be applicable, Borrower shall continue to repay all indebtedness
in accordance with the terms of the Note. The determination by the Bank of the foregoing amounts shall, in the absence of manifest error,
be conclusive and binding upon Borrower.

 

Illegality. If the Bank shall determine that
the introduction of any law (statutory or common), treaty, rule, regulation, guideline or determination of an arbitrator or of a governmental
authority or in the interpretation or administration thereof, has made it unlawful, or that any central bank or other governmental or
regulatory authority has asserted that it is unlawful for the Bank to make or maintain SOFR-based loans, then, on notice thereof by the
Bank to Borrower, the Bank may (i) suspend the maintaining of the loan hereunder at the SOFR Loan Rate until the Bank shall have notified
Borrower that the circumstances giving rise to such determination shall no longer exist, and/or (ii) convert the applicable interest rate
for the loan hereunder to the Base Rate, subject to the terms of the section below entitled “Inability to Determine SOFR; Effect
of Benchmark Transition Event”.

 

Inability to Determine SOFR; Effect of Benchmark
Transition Event.

 

		(a)	If the Bank shall determine (which determination shall be conclusive and binding on Borrower) that for
any reason SOFR cannot be determined, other than as a result of a Benchmark Transition Event, the Bank will give notice of such determination
to Borrower. Thereafter, the Bank may not make or maintain the loan hereunder at the SOFR Loan Rate until the Bank revokes such notice
in writing, and until such revocation, the Bank may convert the applicable interest rate to the Base Rate, subject to the provisions below.

		(b)	Benchmark Replacement. Notwithstanding anything to the contrary herein or in the Note or any related agreement,
upon the occurrence of a Benchmark Transition Event, the Bank may unilaterally amend the terms of the Note to replace the SOFR Loan Rate
(or the then-current Benchmark) with a Benchmark Replacement. Any such amendment will become effective as soon as practicable for the
Bank and upon notice to the Borrower, without any further action or consent of the Borrower. No replacement of SOFR (or the then-current
Benchmark) with a Benchmark Replacement pursuant to this Section titled “Inability to Determine SOFR; Effect of Benchmark Transition
Event” (“this Section”) will occur prior to the applicable Benchmark Transition Start Date. Borrower shall pay all out-of-pocket
costs (including reasonable attorney fees) incurred by the Bank in connection with any amendment and related actions contemplated in this
Section.

		(c)	Benchmark Replacement Conforming Changes. In connection with the implementation of a Benchmark Replacement,
the Bank will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary
in the Note or in any related document or agreement, any amendments implementing such Benchmark Replacement Conforming Changes will become
effective without any further action or consent of the Borrower or any other party hereto. The Bank shall not be liable to the Borrower
for any Benchmark Replacement Conforming Changes made by the Bank in good faith.

		(d)	Notices; Standards for Decisions and Determinations. The Bank will provide notification to the Borrower
(which may at the Bank’s discretion be electronic, part of a billing statement, a general notice to customers or other communication)
of the implementation of any Benchmark Replacement and the effectiveness of any Benchmark Replacement Conforming Changes, within a reasonable
time prior to such implementation and effectiveness, as applicable. Any determination, decision or election that may be made by the Bank
pursuant to this Section, including, without limitation, any determination with respect to a tenor, rate or adjustment or of the occurrence
or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will
be conclusive and binding upon the Borrower and any other parties hereto absent manifest error and may be made in the Bank’s sole
discretion and without consent from the Borrower, except, in each case, as expressly required pursuant to this Section, and shall not
be the basis of any claim of liability of any kind or nature against the Bank by any party hereto, all such claims being hereby waived
individually by each party hereto.

		(e)	Benchmark Unavailability Period. Upon the Borrower’s receipt of notice of the commencement of a
Benchmark Unavailability Period, the Borrower may revoke (as applicable) any request for an advance/borrowing of, conversion to, or continuation
of a loan based on the SOFR Loan Rate (or the then-current Benchmark) to be made, converted or continued during any Benchmark Unavailability
Period and, failing that, the Borrower will be deemed to have converted any such request (as applicable) into a request for an advance/borrowing
of or conversion to a loan that shall accrue interest at the Base Rate.

    6 

     

    
		(f)	The Bank does not warrant or accept responsibility for, and shall not have any liability with respect
to (a) the continuation of, administration of, submission of, calculation of or any other matter related to the Benchmark, any component
definition thereof or rates referenced in the definition thereof or any alternative, successor or replacement rate thereto (including
any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate
(including any Benchmark Replacement) will be similar to, or produce the same value or economic equivalence of, or have the same volume
or liquidity as, the Benchmark or any other Benchmark prior to its discontinuance or unavailability, or (b) the effect, implementation
or composition of any Benchmark Replacement Conforming Changes. The Bank may select information sources or services in its reasonable
discretion to ascertain the Benchmark, in each case pursuant to the terms hereof, and shall have no liability to the Borrower or any other
person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs,
losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such
rate (or component thereof) provided by any such information source or service.

		(g)	Certain Defined Terms. As used in this Section:

		1.	“Benchmark” means the SOFR Loan Rate or any subsequent Benchmark Replacement that has become
effective hereunder.

		2.	“Benchmark Replacement” means the sum of: (a) the alternate benchmark rate that has been selected
by the Bank giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such
a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a rate of interest
as a replacement to the then-current Benchmark for U.S. dollar-denominated syndicated or bilateral credit facilities and (b) the related
Benchmark Replacement Adjustment; provided that, if the Benchmark Replacement as so determined would be less than the current benchmark
rate floor with respect to the SOFR Loan Rate (if any, the “Floor”), the Benchmark Replacement will be deemed to be such Floor
for the purposes hereof.

		3.	“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current
Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment,
(which may be a positive or negative value or zero) that has been selected by the Bank giving due consideration to (i) any selection or
recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such then-current
Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (ii) any evolving or then-prevailing
market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement
of such then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated or bilateral
credit facilities at such time.

		4.	“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement,
any technical, administrative or operational changes (including, without limitation, changes to the definition of “Business Day,”
the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of
borrowing requests or prepayment, conversion or continuation notices, length of lookback periods, the applicability of breakage provisions
and other technical, administrative or operational matters) that the Bank decides may be appropriate to reflect the adoption and implementation
of such Benchmark Replacement and to permit the administration thereof by the Bank in a manner substantially consistent with market practice
(or, if the Bank decides that adoption of any portion of such market practice is not administratively feasible or if the Bank determines
that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Bank
decides is reasonably necessary in connection with the administration of the loan evidenced hereby).

		5.	“Benchmark Replacement Date” means the earlier to occur of the following events with respect
to the then-current Benchmark:

		1)	in the case of clause (a) of the definition of “Benchmark Transition Event,” the later of
(i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of
the Benchmark permanently or indefinitely ceases to provide the Benchmark; or

		2)	in the case of clause (b) of the definition of “Benchmark Transition Event,” the later of
(i) the date of the public statement or publication of information referenced therein, and (ii) the announced or stated date as of which
all applicable tenors of such Benchmark will no longer be representative.

		6.	“Benchmark Transition Event” means, with respect to any then-current Benchmark, the occurrence
of a public statement or publication of information by or on behalf of the administrator of the then-current Benchmark, the regulatory
supervisor for the administrator of such Benchmark, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of
New York, an insolvency official with jurisdiction over the administrator for such Benchmark, a resolution authority with jurisdiction
over the administrator for such Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator
for such Benchmark, announcing or stating that (a) such administrator has ceased, or will cease on a specified date, to provide such Benchmark
(or all tenors of such Benchmark applicable to the loan evidenced hereby), permanently or indefinitely, provided that, at the time
of such statement or publication, there is no successor administrator that will continue to provide any applicable tenors of such Benchmark
or (b) all applicable tenors of such Benchmark are or will no longer be representative of the underlying market and economic reality that
such Benchmark is intended to measure and indicating that representativeness will not be restored.

    7 

     

    
		7.	“Benchmark Transition Start Date” means in the case of a Benchmark Transition Event, the earlier
of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information
of a prospective event, the 180th day prior to the expected date of such event as of such public statement or publication of information
(or if the expected date of such prospective event is fewer than 180 days after such statement or publication, the date of such statement
or publication).

		8.	“Benchmark Unavailability Period” means the period (if any) (x) beginning at the time that
a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes
hereunder in accordance with this Section and (y) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark
for all purposes hereunder in accordance with this Section.

		9.	“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank
of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or
any successor thereto.

		10.	“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark
Replacement Adjustment.

 

Acknowledgment.  Borrower acknowledges that it has read and understands
all the provisions of this Rider and has been advised by counsel as necessary or appropriate.

 

IN WITNESS WHEREOF, Borrower has executed and delivered
this Rider as an instrument under seal (in jurisdictions where applicable).

 

	 	 	 	CORNING NATURAL GAS CORPORATION
	 	 	 	 
	 	 	By:	/s/ Charles Lenns
	Signature of Attesting Witness	 	 	 
	 	 	Name:	Charles Lenns
	Typed Name of Attesting Witness	 	 	 
	 	 	Title:	Vice President/Chief Financial Officer

 

    8

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