Document:

pbsv_ex101.htm

Exhibit 10.1

 

PHARMA-BIO SERV, INC.

 

2005 Long-Term Incentive Plan, as amended

 

	
1.

	
Purpose; Definitions.

 

The purpose of the Pharma-Bio Serv, Inc. 2005 Long-Term Incentive Plan (the “Plan”) is to enable Pharma-Bio Serv, Inc. (the “Company”) to attract, retain and reward key employees of the Company and its Subsidiaries and Affiliates, and others who provide services to the Company and its Subsidiaries and Affiliates, and strengthen the mutuality of interests between such key employees and such other persons and the Company’s stockholders, by offering such key employees and such other persons incentives and/or other equity interests or equity-based incentives in the Company, as well as performance-based incentives payable in cash.

 

For purposes of the Plan, the following terms shall be defined as set forth below:

 

(a)“Affiliate” means any corporation, partnership, limited liability company, joint venture or other entity, other than the Company and its Subsidiaries, that is designated by the Board as a participating employer under the Plan, provided that the Company directly or indirectly owns at least 20% of the combined voting power of all classes of stock of such entity or at least 20% of the ownership interests in such entity.

 

(b)“Board” means the Board of Directors of the Company.

 

(c)“Book Value” means, as of any given date, on a per share basis (i) the stockholders’ equity in the Company as of the last day of the immediately preceding fiscal year as reflected in the Company’s consolidated balance sheet, subject to such adjustments as the Committee shall specify at or after grant, divided by (ii) the number of then outstanding shares of Stock as of such year-end date, as adjusted by the Committee for subsequent events.

 

(d)“Cause” means a felony conviction of a participant, or the failure of a participant to contest prosecution for a felony, or a participant’s willful misconduct or dishonesty, or breach of trust or other action by which the participant obtains personal gain at the expense of or to the detriment of the Company or conduct which results in civil or criminal liability or penalties, including penalties pursuant to a consent decree, order or agreement, on the part of the Company; provided, however, that if the participant has an Employment Agreement with the Company, a Subsidiary or Affiliate which includes a definition of “cause,” then “cause” shall have the meaning as defined in such Employment Agreement.

 

(e)“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.

 

(f)“Commission” means the Securities and Exchange Commission or any successor thereto.

 

(g)“Committee” means the Committee referred to in Section 2 of the Plan. If at any time no Committee shall be in office, then the functions of the Committee specified in the Plan shall be exercised by the Board.

 

(h)“Company” means Pharma-Bio Serv, Inc., a Delaware corporation, or any successor corporation.

 

(i)“Deferred Stock” means an award made pursuant to Section 8 of the Plan of the right to receive Stock at the end of a specified deferral period.

 

(j)“Disability” means disability as determined under procedures established by the Committee for purposes of the Plan; provided that if the participant has an Employment Agreement with the Company, a Subsidiary or Affiliate which includes a definition of “disability,” then “disability” shall have the meaning as defined in such Employment Agreement.

 

(k)“Early Retirement” means retirement, with the express consent for purposes of the Plan of the Company at or before the time of such retirement, from active employment with the Company and any Subsidiary or Affiliate pursuant to the early retirement provisions of the applicable pension plan of such entity.

 

(l)“Employment Agreement” shall mean an employment or consulting agreement or other agreement pursuant to which the participant performs services for the Company or a Subsidiary or Affiliate.

 

(m)“Exchange Act” means the Securities Exchange Act of 1934, as amended, from time to time, and any successor thereto.

 

  

  

  

 

(n)“Fair Market Value” means, as of any given date, the market price of the Stock as determined by or in accordance with the policies established by the Committee in good faith; provided, that, in the case of an Incentive Stock Option, the Fair Market Value shall be determined in accordance with the Code and the Treasury regulations under the Code.

 

(o)“Incentive Stock Option” means any Stock Option intended to be and designated as an “Incentive Stock Option” within the meaning of Section 422 of the Code.

 

(p)“Independent Director” shall mean a “non-employee director” as set forth in Rule 16b-3 of the Commission pursuant to the Exchange Act or any successor definition adopted by the Commission; provided that in the event that said rule (or successor rule) shall not have such a definition, the term Independent Director shall mean a director of the Company who is not otherwise employed by the Company or any Subsidiary or Affiliate; provided, however, an Independent Director shall also be an independent director as determined by the rules or regulations of the principal stock exchange or market on which the Stock is traded or, if the Stock is not listed or traded on such exchange, as defined under the rules of the Nasdaq Stock Market.

 

(q)“Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.

 

(r)“Normal Retirement” means retirement from active employment with the Company and any Subsidiary or Affiliate on or after age 65 or such other age as is designated by the Company, Subsidiary or Affiliate as the normal retirement age.

 

(s)“Other Stock-Based Award” means an award under Section 10 of the Plan that is valued in whole or in part by reference to, or is otherwise based on, Stock.

 

(t)“Plan” means this Pharma-Bio Serv, Inc. 2005 Long-Term Incentive Plan, as hereinafter amended from time to time.

 

(u)“Restricted Stock” means an award of shares of Stock that is subject to restrictions under Section 7 of the Plan.

 

(v)“Retirement” means Normal Retirement or Early Retirement.

 

(w)“Stock” means the common stock, par value $.0001 per share, of the Company or any class of common stock into which such common stock may hereafter be converted or for which such common stock may be exchanged pursuant to the Company’s certificate of incorporation or as part of a recapitalization, reorganization or similar transaction.

 

(x)“Stock Appreciation Right” means the right pursuant to an award granted under Section 6 of the Plan to surrender to the Company all (or a portion) of a Stock Option in exchange for an amount equal to the difference between (i) the Fair Market Value, as of the date such award or Stock Option (or such portion thereof) is surrendered, of the shares of Stock covered by such Stock Option (or such portion thereof), subject, where applicable, to the pricing provisions in Section 6(b)(ii) of the Plan and (ii) the aggregate exercise price of such Stock Option or base price with respect to such award (or the portion thereof which is surrendered).

 

(y)“Stock Option” or “Option” means any option to purchase shares of Stock (including Restricted Stock and Deferred Stock, if the Committee so determines) granted pursuant to Section 5 of the Plan.

 

(z)“Stock Purchase Right” means the right to purchase Stock pursuant to Section 9 of the Plan.

 

(aa)“Subsidiary” means any corporation or other business association, including a partnership (other than the Company) in an unbroken chain of corporations or other business associations beginning with the Company if each of the corporations or other business associations (other than the last corporation in the unbroken chain) owns equity interests (including stock or partnership interests) possessing 50% or more of the total combined voting power of all classes of equity in one of the other corporations or other business associations in the chain. The Board may elect to treat as a Subsidiary an entity in which the Company possesses less than 50% of the total combined voting power of all classes of equity if, under generally accepted accounting principles, the Company may include the financial statements of such entity as part of the Company’s consolidated financial statements (other than as a minority interest or other single line item).

 

In addition, the terms “Change in Control,” “Potential Change in Control” and “Change in Control Price” shall have meanings set forth, respectively, in Sections 11(b), (c) and (d) of the Plan.

	
2.

	
Administration.

 

(a)The Plan shall be administered by a Committee of not less than two directors all of whom shall be Independent Directors, who shall be appointed by the Board and who shall serve at the pleasure of the Board. If and to the extent that no Committee exists which has the authority to administer the Plan, the functions of the Committee specified in the Plan shall be exercised by the Board.

 

  

  

  

 

(b)The Committee shall have full authority to grant, pursuant to the terms of the Plan, to officers and other persons eligible under Section 4 of the Plan, provided that Independent Directors shall not be eligible for options or other benefits pursuant to the Plan other than as provided in Sections 4(b) and 4(c) of the Plan: Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock Purchase Rights and/or Other Stock-Based Awards. In particular, the Committee shall have the authority:

 

(i) to select the officers and other eligible persons to whom Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock Purchase Rights and/or Other Stock-Based Awards may from time to time be granted pursuant to the Plan;

 

(ii) to determine whether and to what extent Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock Purchase Rights and/or Other Stock-Based Awards, or any combination thereof, are to be granted pursuant to the Plan, to one or more eligible persons;

 

(iii) to determine the number of shares to be covered by each such award granted pursuant to the Plan;

 

(iv) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted under the Plan, including, but not limited to, the share price or exercise price and any restriction or limitation, or any vesting, acceleration or waiver of forfeiture restrictions regarding any Stock Option or other award and/or the shares of Stock relating thereto, based in each case on such factors as the Committee shall, in its sole discretion, determine;

 

(v) to determine whether, to what extent and under what circumstances a Stock Option may be settled in cash, Restricted Stock and/or Deferred Stock under Section 5(b)(x) or (xi) of the Plan, as applicable, instead of Stock;

 

(vi) to determine whether, to what extent and under what circumstances Option grants and/or other awards under the Plan and/or other cash awards made by the Company are to be made, and operate, on a tandem basis with other awards under the Plan and/or cash awards made outside of the Plan in a manner whereby the exercise of one award precludes, in whole or in part, the exercise of another award, or on an additive basis;

 

(vii) to determine whether, to what extent and under what circumstances Stock and other amounts payable with respect to an award under this Plan shall be deferred either automatically or at the election of the participant, including any provision for any determination or method of determination of the amount (if any) deemed be earned on any deferred amount during any deferral period;

 

(viii) to determine the terms and restrictions applicable to Stock Purchase Rights and the Stock purchased by exercising such Rights; and

 

(ix) to determine an aggregate number of awards and the type of awards to be granted to eligible persons employed or engaged by the Company and/or any specific Subsidiary, Affiliate or division and grant to management the authority to grant such awards, provided that no awards to any person subject to the reporting and short-swing profit provisions of Section 16 of the Exchange Act may be granted awards except by the Committee.

 

(c)In the event that any officers or other participants have Employment Agreements with the Company which provide for the grant of options to such participants, unless the Committee or the Board otherwise determines, the options shall be treated for all purposes as if they were granted pursuant to this Plan as long as there is a sufficient number of shares available for grant pursuant to this Plan.

 

(d)The Committee shall have the authority to adopt, alter and repeal such rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of the Plan and any award issued under the Plan and any agreements relating thereto, and otherwise to supervise the administration of the Plan.

 

(e)All decisions made by the Committee pursuant to the provisions of the Plan shall be made in the Committee’s sole discretion and shall be final and binding on all persons, including the Company and Plan participants.

 

	
3.

	
Stock Subject to Plan.

 

(a)The total number of shares of Stock reserved and available for distribution under the Plan shall be two million five hundred thousand (2,500,000) shares of Stock. In the event that awards are granted in tandem such that the exercise of one award precludes the exercise of another award then, for the purpose of determining the number of shares of Stock as to which awards shall have been granted, the maximum number of shares of Stock issuable pursuant to such tandem awards shall be used.

 

(b)Subject to Section 6(b)(v) of the Plan, if any shares of Stock that have been optioned cease to be subject to a Stock Option, or if any such shares of Stock that are subject to any Restricted Stock or Deferred Stock award, Stock Purchase Right or Other Stock-Based Award granted under the Plan are forfeited or any such award otherwise terminates without a payment being made to the participant in the form of Stock, such shares shall again be available for distribution in connection with future awards under the Plan.

 

  

  

  

 

(c)In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, stock distribution, reverse split, combination of shares or other change in corporate structure affecting the Stock, such substitution or adjustment shall be made in the aggregate number of shares reserved for issuance under the Plan, in the base number of shares, in the number and option price of shares subject to outstanding Options granted under the Plan, in the number and purchase price of shares subject to outstanding Stock Purchase Rights under the Plan, and in the number of shares subject to other outstanding awards granted under the Plan as may be determined to be appropriate by the Committee, in its sole discretion, provided that the number of shares subject to any award shall always be a whole number, and provided that the treatment of such options and rights shall be consistent with the nature of the event. Such adjusted option price shall also be used to determine the amount payable by the Company upon the exercise of any Stock Appreciation Right associated with any Stock Option.

 

	
4.

	
Eligibility.

 

(a)Officers and other key employees and directors of, and consultants and independent contractors to, the Company and its Subsidiaries and Affiliates (but excluding, except as to Sections 4(b) and 4(c) of the Plan, Independent Directors) who are responsible for or contribute to the management, growth and/or profitability of the business of the Company and/or its Subsidiaries and Affiliates are eligible to be granted awards under the Plan.

 

(b)On each the first trading day in January of each year, commencing in 2007, each person who is a Independent Director on such date shall automatically be granted a Non-Qualified Stock Option to purchase five thousand (5,000) shares of Stock (or such lesser number of shares of Stock as remain available for grant at such date under the Plan, divided by the number of Independent Directors at such date). Such Stock Options shall be exercisable at a price per share equal to the greater of the Fair Market Value on the date of grant or the par value of one share of Stock; provided, however, that commencing January 1, 2008, the number of shares issuable to each Independent Director pursuant to this Section 4(b) shall be increased to ten thousand (10,000) shares and provided, further, that each person who is an Independent Director on the date that the amendment which increases the annual grant to directors to ten thousand (10,000) shares is approved by the Company’s stockholders, shall receive the automatic grant of an option to purchase five thousand (5,000) shares of Stock on such date. The Non-Qualified Stock Options granted pursuant to this Section 4(b) and pursuant to Sections 4(c) and 4(d) of the Plan shall become exercisable cumulatively as to fifty percent (50%) of the shares subject thereto six months from the date of grant and as to the remaining fifty percent (50%), eighteen months from the date of grant, and shall expire on the earlier of (i) five years from the date of grant, or (ii) seven (7) months from the date such Independent Director ceases to be a director if such Independent Director ceases to be a director other than as a result of his death or Disability. The provisions of this Section 4(b) and said Section 4(c) may not be amended more than one (1) time in any six (6) month period other than to comply with changes in the Code or the Employee Retirement Income Security Act (“ERISA”) or the rules thereunder.

 

(c)At the time an Independent Director is first elected to the Board, such person shall automatically be granted a Non-Qualified Stock Option to purchase twenty five thousand (25,000) shares of Stock (or such lesser number of shares of Stock as remain available for grant at such date under the Plan, divided by the number of Independent Directors who are elected as directors at such date). Such Stock Options shall be exercisable at a price per share equal to the greater of the Fair Market Value on the date of grant or the par value of one share of Stock.

 

(d)If the Company has an advisory board, (i) at the time each person is appointed to the advisory board, such person shall automatically be granted a Non-Qualified Stock Option to purchase five thousand (5,000) shares of Stock (or such lesser number of shares of Stock as remain available for grant at such date under the Plan, divided by the number of members of the advisory board who are appointed at such date) and (ii) on each January 1, following his or her appointment to the advisory board, each person who is a member of the advisory board on such date shall automatically be granted a Non-Qualified Stock Option to purchase five thousand (5,000) shares of Stock (or such lesser number of shares of Stock as remain available for grant at such date under the Plan, divided by the number of advisory board members at such date, after giving effect to the automatic grant of options to Independent Directors pursuant to Section 4(b) of the Plan). Such Stock Options shall be exercisable at a price per share equal to the greater of the Fair Market Value on the date of grant or the par value of one share of Stock.

 

	
5.

	
Stock Options.

 

(a)Administration. Stock Options may be granted alone, in addition to or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. Any Stock Option granted under the Plan shall be in such form as the Committee may from time to time approve. Stock Options granted under the Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified Stock Options. The Committee shall have the authority to grant to any optionee Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options (in each case with or without Stock Appreciation Rights).

 

(b)Option Grants. Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee, in its sole discretion, shall deem desirable:

 

(i) Option Price. The option price per share of Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant.

 

  

  

  

 

(ii) Option Term. The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten (10) years after the date the Option is granted.

 

(iii) Exercisability. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at or after grant. If the Committee provides, in its sole discretion, that any Stock Option is exercisable only in installments, the Committee may waive such installment exercise provisions at any time at or after grant in whole or in part, based on such factors as the Committee shall, in its sole discretion, determine.

 

(iv) Method of Exercise.

 

(A)Subject to whatever installment exercise provisions apply under Section 5(b)(iii) of the Plan, Stock Options may be exercised in whole or in part at any time during the option period, by giving written notice of exercise to the Company specifying the number of shares to be purchased. Such notice shall be accompanied by payment in full of the purchase price, either by check, note or such other instrument, securities or property as the Committee may accept. As and to the extent determined by the Committee, in its sole discretion, at or after grant, payments in full or in part may also be made in the form of Stock already owned by the optionee or, in the case of the exercise of a Non-Qualified Stock Option, Restricted Stock or Deferred Stock subject to an award hereunder (based, in each case, on the Fair Market Value of the Stock on the date the option is exercised, as determined by the Committee).

 

(B)If payment of the option exercise price of a Non-Qualified Stock Option is made in whole or in part in the form of Restricted Stock or Deferred Stock, the Stock issuable upon such exercise (and any replacement shares relating thereto) shall remain (or be) restricted or deferred, as the case may be, in accordance with the original terms of the Restricted Stock award or Deferred Stock award in question, and any additional Stock received upon the exercise shall be subject to the same forfeiture restrictions or deferral limitations, unless otherwise determined by the Committee, in its sole discretion, at or after grant.

 

(C)No shares of Stock shall be issued until full payment therefor has been received by the Company. In the event of any exercise by note or other instrument, the shares of Stock shall not be issued until such note or other instrument shall have been paid in full, and the exercising optionee shall have no rights as a stockholder until such payment is made.

 

(D)Subject to Section 5(b)(iv)(C) of the Plan, an optionee shall generally have the rights to dividends or other rights of a stockholder with respect to shares subject to the Option when the optionee has given written notice of exercise, has paid in full for such shares, and, if requested, has given the representation described in Section 14(a) of the Plan.

 

(v) Non-Transferability of Options. No Stock Option shall be transferable by the optionee otherwise than by will or by the laws of descent and distribution, and all Stock Options shall be exercisable, during the optionee’s lifetime, only by the optionee.

 

(vi) Termination by Death. Subject to Section 5(b)(ix) of the Plan with respect to Incentive Stock Options, if an optionee’s employment by the Company and any Subsidiary or Affiliate terminates by reason of death, any Stock Option held by such optionee may thereafter be exercised, to the extent such option was exercisable at the time of death or on such accelerated basis as the Committee may determine at or after grant (or as may be determined in accordance with procedures established by the Committee), by the legal representative of the estate or by the legatee of the optionee under the will of the optionee, for a period of one year (or such other period as the Committee may specify at grant) from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter.

 

(vii) Termination by Reason of Disability or Retirement. Subject to Section 5(b)(ix) of the Plan with respect to Incentive Stock Options, if an optionee’s employment by the Company and any Subsidiary or Affiliate terminates by reason of a Disability or Normal or Early Retirement, any Stock Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of termination or on such accelerated basis as the Committee may determine at or after grant (or as may be determined in accordance with procedures established by the Committee), for a period of one year (or such other period as the Committee may specify at grant) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is the shorter; provided, however, that, if the optionee dies within such one-year period (or such other period as the Committee shall specify at grant), any unexercised Stock Option held by such optionee shall thereafter be exercisable to the extent to which it was exercisable at the time of death for a period of one year from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. In the event of termination of employment by reason of Disability or Normal or Early Retirement, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option.

 

(viii) Other Termination. Unless otherwise determined by the Committee (or pursuant to procedures established by the Committee) at or after grant, if an optionee’s employment by the Company and any Subsidiary or Affiliate terminates for any reason other than death, Disability or Normal or Early Retirement, the Stock Option shall thereupon terminate; provided, however, that if the optionee is involuntarily terminated by the Company or any Subsidiary or Affiliate without Cause, including a termination resulting from the Subsidiary, Affiliate or division in which the optionee is employed or engaged, ceasing, for any reason, to be a Subsidiary, Affiliate or division of the Company, such Stock Option may be exercised, to the extent otherwise exercisable on the date of termination, for a period of three months (or seven months in the case of a person subject to the reporting and short-swing profit provisions of Section 16 of the Exchange Act) from the date of such termination or until the expiration of the stated term of such Stock Option, whichever is shorter.

 

  

  

  

 

(ix) Incentive Stock Options.

 

(A)Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the optionee(s) affected, to disqualify any Incentive Stock Option under such Section 422.

 

(B)To the extent required for “incentive stock option” status under Section 422(d) of the Code (taking into account applicable Treasury regulations and pronouncements), the Plan shall be deemed to provide that the aggregate Fair Market Value (determined as of the time of grant) of the Stock with respect to which Incentive Stock Options are exercisable for the first time by the optionee during any calendar year under the Plan and/or any other stock option plan of the Company or any Subsidiary or parent corporation (within the meaning of Section 425 of the Code) shall not exceed $100,000. If Section 422 is hereafter amended to delete the requirement now in Section 422(d) that the plan text expressly provide for the $100,000 limitation set forth in Section 422(d), then this Section 5(b)(ix)(B) shall no longer be operative and the Committee may accelerate the dates on which the incentive stock option may be exercised.

 

(C)To the extent permitted under Section 422 of the Code or the applicable regulations thereunder or any applicable Internal Revenue Service pronouncement:

 

(I) If (x) a participant’s employment is terminated by reason of death, Disability or Retirement and (y) the portion of any Incentive Stock Option that is otherwise exercisable during the post-termination period specified under Sections 5(b)(vi) and (vii) of the Plan, applied without regard to the $100,000 limitation contained in Section 422(d) of the Code, is greater than the portion of such option that is immediately exercisable as an “incentive stock option” during such post-termination period under Section 422, such excess shall be treated as a Non-Qualified Stock Option; and

 

(II) if the exercise of an Incentive Stock Option is accelerated by reason of a Change in Control, any portion of such option that is not exercisable as an Incentive Stock Option by reason of the $100,000 limitation contained in Section 422(d) of the Code shall be treated as a Non-Qualified Stock Option.

 

(x) Buyout Provisions. The Committee may at any time offer to buy out for a payment in cash, Stock, Deferred Stock or Restricted Stock an option previously granted, based on such terms and conditions as the Committee shall establish and communicate to the optionee at the time that such offer is made.

 

(xi) Settlement Provisions. If the option agreement so provides at grant or is amended after grant and prior to exercise to so provide (with the optionee’s consent), the Committee may require that all or part of the shares to be issued with respect to the spread value of an exercised Option take the form of Deferred or Restricted Stock which shall be valued on the date of exercise on the basis of the Fair Market Value (as determined by the Committee) of such Deferred or Restricted Stock determined without regard to the deferral limitations and/or forfeiture restrictions involved.

 

	
6.

	
Stock Appreciation Rights.

 

(a)Grant and Exercise.

 

(i) Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option granted under the Plan. In the case of a Non-Qualified Stock Option, such rights may be granted either at or after the time of the grant of such Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the time of the grant of such Stock Option.

 

(ii) A Stock Appreciation Right or applicable portion thereof granted with respect to a given Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option, subject to such provisions as the Committee may specify at grant where a Stock Appreciation Right is granted with respect to less than the full number of shares covered by a related Stock Option.

 

(iii) A Stock Appreciation Right may be exercised by an optionee, subject to Section 6(b) of the Plan, in accordance with the procedures established by the Committee for such purpose. Upon such exercise, the optionee shall be entitled to receive an amount determined in the manner prescribed in said Section 6(b). Stock Options relating to exercised Stock Appreciation Rights shall no longer be exercisable to the extent that the related Stock Appreciation Rights have been exercised.

 

  

  

  

 

(b)Terms and Conditions. Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following:

 

(i) Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Stock Options to which they relate shall be exercisable in accordance with the provisions of this Section 6 and Section 5 of the Plan; provided, however, that any Stock Appreciation Right granted to an optionee subject to Section 16(b) of the Exchange Act subsequent to the grant of the related Stock Option shall not be exercisable during the first six months of its term, except that this special limitation shall not apply in the event of death or Disability of the optionee prior to the expiration of the six-month period. The exercise of Stock Appreciation Rights held by optionees who are subject to Section 16(b) of the Exchange Act shall comply with Rule 16b-3 thereunder to the extent applicable.

 

(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall be entitled to receive an amount in cash and/or shares of Stock equal in value to the excess of the Fair Market Value of one share of Stock over the option price per share specified in the related Stock Option multiplied by the number of shares in respect of which the Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment. When payment is to be made in shares of Stock, the number of shares to be paid shall be calculated on the basis of the Fair Market Value of the shares on the date of exercise. When payment is to be made in cash, such amount shall be based upon the Fair Market Value of the Stock on the date of exercise, determined in a manner not inconsistent with Section 16(b) of the Exchange Act and the rules of the Commission thereunder.

 

(iii) Stock Appreciation Rights shall be transferable only when and to the extent that the underlying Stock Option would be transferable under Section 5(b)(v) of the Plan.

 

(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or part thereof to which such Stock Appreciation Right is related shall be deemed to have been exercised only to the extent of the number of shares issued under the Stock Appreciation Right at the time of exercise based on the value of the Stock Appreciation Right at such time.

 

(v) In its sole discretion, the Committee may grant Stock Appreciation Rights that become exercisable only in the event of a Change in Control and/or a Potential Change in Control, subject to such terms and conditions as the Committee may specify at grant; provided that any such Stock Appreciation Rights shall be settled solely in cash.

 

(vi) The Committee, in its sole discretion, may also provide that, in the event of a Change in Control and/or a Potential Change in Control, the amount to be paid upon the exercise of a Stock Appreciation Right shall be based on the Change in Control Price, subject to such terms and conditions as the Committee may specify at grant.

 

	
7.

	
Restricted Stock.

 

(a)Administration. Shares of Restricted Stock may be issued either alone, in addition to or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. The Committee shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock will be made, the number of shares to be awarded, the price (if any) to be paid by the recipient of Restricted Stock, subject to Section 7(b) of the Plan, the time or times within which such awards may be subject to forfeiture, and all other terms and conditions of the awards. The Committee may condition the grant of Restricted Stock upon the attainment of specified performance goals or such other factors as the Committee may, in its sole discretion, determine. The provisions of Restricted Stock awards need not be the same with respect to each recipient.

 

(b)Awards and Certificates.

 

(i) The prospective recipient of a Restricted Stock award shall not have any rights with respect to such award unless and until such recipient has executed an agreement evidencing the award and has delivered a fully executed copy thereof to the Company, and has otherwise complied with the applicable terms and conditions of such award.

 

(ii) The purchase price for shares of Restricted Stock may be equal to or less than their par value and may be zero.

 

(iii) Awards of Restricted Stock must be accepted within a period of 60 days (or such shorter period as the Committee may specify at grant) after the award date, by executing a Restricted Stock Award Agreement and paying the price, if any, required under Section 7(b)(ii).

 

(iv) Each participant receiving a Restricted Stock award shall be issued a stock certificate in respect of such shares of Restricted Stock. Such certificate shall be registered in the name of such participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such award.

 

  

  

  

 

(v) The Committee shall require that (A) the stock certificates evidencing shares of Restricted Stock be held in the custody of the Company until the restrictions thereon shall have lapsed, and (B) as a condition of any Restricted Stock award, the participant shall have delivered a stock power, endorsed in blank, relating to the Restricted Stock covered by such award.

 

(c) Restrictions and Conditions. The shares of Restricted Stock awarded pursuant to this Section 7 shall be subject to the following restrictions and conditions:

 

(i) Subject to the provisions of the Plan and the award agreement, during a period set by the Committee commencing with the date of such award (the “Restriction Period”), the participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock awarded under the Plan. Within these limits, the Committee, in its sole discretion, may provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part, based on service, performance and/or such other factors or criteria as the Committee may determine, in its sole discretion.

 

(ii) Except as provided in this Section 7(c)(ii) and Section 7(c)(i) of the Plan, the participant shall have, with respect to the shares of Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the shares and the right to receive any regular cash dividends paid out of current earnings. The Committee, in its sole discretion, as determined at the time of award, may permit or require the payment of cash dividends to be deferred and, if the Committee so determines, reinvested, subject to Section 14(e) of the Plan, in additional Restricted Stock to the extent shares are available under Section 3 of the Plan, or otherwise reinvested. Stock dividends, splits and distributions issued with respect to Restricted Stock shall be treated as additional shares of Restricted Stock that are subject to the same restrictions and other terms and conditions that apply to the shares with respect to which such dividends are issued, and the Committee may require the participant to deliver an additional stock power covering the shares issuable pursuant to such stock dividend, split or distribution. Any other dividends or property distributed with regard to Restricted Stock, other than regular dividends payable and paid out of current earnings, shall be held by the Company subject to the same restrictions as the Restricted Stock.

 

(iii) Subject to the applicable provisions of the award agreement and this Section 7, upon termination of a participant’s employment or other services with the Company and any Subsidiary or Affiliate for any reason during the Restriction Period, all shares still subject to restriction will vest, or be forfeited, in accordance with the terms and conditions established by the Committee at or after grant.

 

(iv) If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, certificates for an appropriate number of unrestricted shares, and other property held by the Company with respect to such Restricted Shares, shall be delivered to the participant promptly.

 

(d)Minimum Value Provisions. In order to better ensure that award payments actually reflect the performance of the Company and service of the participant, the Committee may provide, in its sole discretion, for a tandem Stock Option or performance-based or other award designed to guarantee a minimum value, payable in cash or Stock to the recipient of a Restricted Stock award, subject to such performance, future service, deferral and other terms and conditions as may be specified by the Committee.

 

	
8.

	
Deferred Stock.

 

(a)Administration. Deferred Stock may be awarded either alone, in addition to or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. The Committee shall determine the eligible persons to whom and the time or times at which Deferred Stock shall be awarded, the number of shares of Deferred Stock to be awarded to any person, the duration of the period (the “Deferral Period”) during which, and the conditions under which, receipt of the Stock will be deferred, and the other terms and conditions of the award in addition to those set forth in Section 8(b). The Committee may condition the grant of Deferred Stock upon the attainment of specified performance goals or such other factors or criteria as the Committee shall, in its sole discretion, determine. The provisions of Deferred Stock awards need not be the same with respect to each recipient.

 

(b)Terms and Conditions. The shares of Deferred Stock awarded pursuant to this Section 8 shall be subject to the following terms and conditions:

 

(i) Subject to the provisions of the Plan and the award agreement referred to in Section 8(b)(vi) of the Plan, Deferred Stock awards may not be sold, assigned, transferred, pledged or otherwise encumbered during the Deferral Period. At the expiration of the Deferral Period (or the Elective Deferral Period referred to in Section 8(b)(v) of the Plan, where applicable), share certificates representing the shares covered by the Deferred Stock award shall be delivered to the participant or his legal representative.

 

(ii) Unless otherwise determined by the Committee at grant, amounts equal to any dividends declared during the Deferral Period with respect to the number of shares covered by a Deferred Stock award will be paid to the participant currently, or deferred and deemed to be reinvested in additional Deferred Stock, or otherwise reinvested, all as determined at or after the time of the award by the Committee, in its sole discretion.

 

  

  

  

 

(iii) Subject to the provisions of the award agreement and this Section 8, upon termination of a participant’s employment with the Company and any Subsidiary or Affiliate for any reason during the Deferral Period for a given award, the Deferred Stock in question will vest, or be forfeited, in accordance with the terms and conditions established by the Committee at or after grant.

 

(iv) Based on service, performance and/or such other factors or criteria as the Committee may determine, the Committee may, at or after grant, accelerate the vesting of all or any part of any Deferred Stock award and/or waive the deferral limitations for all or any part of such award.

 

(v) A participant may elect to further defer receipt of an award (or an installment of an award) for a specified period or until a specified event (the “Elective Deferral Period”), subject in each case to the Committee’s approval and to such terms as are determined by the Committee, all in its sole discretion. Subject to any exceptions adopted by the Committee, such election must generally be made at least twelve months prior to completion of the Deferral Period for such Deferred Stock award (or such installment).

 

(vi) Each award shall be confirmed by, and subject to the terms of, a Deferred Stock agreement executed by the Company and the participant.

 

(c)Minimum Value Provisions. In order to better ensure that award payments actually reflect the performance of the Company and service of the participant, the Committee may provide, in its sole discretion, for a tandem Stock Option or performance-based or other award designed to guarantee a minimum value, payable in cash or Stock to the recipient of a deferred stock award, subject to such performance, future service, deferral and other terms and conditions as may be specified by the Committee.

 

	
9.

	
Stock Purchase Rights.

 

(a)Awards and Administration. The Committee may grant eligible participants Stock Purchase Rights which shall enable such participants to purchase Stock (including Deferred Stock and Restricted Stock):

 

(i) at its Fair Market Value on the date of grant;

 

(ii) at a percentage of such Fair Market Value on such date, such percentage to be determined by the Committee in its sole discretion;

 

(iii) at an amount equal to Book Value on such date; or

 

(iv) at an amount equal to the par value of such Stock on such date.

 

The Committee shall also impose such deferral, forfeiture and/or other terms and conditions as it shall determine, in its sole discretion, on such Stock Purchase Rights or the exercise thereof. The terms of Stock Purchase Rights awards need not be the same with respect to each participant. Each Stock Purchase Right award shall be confirmed by, and be subject to the terms of, a Stock Purchase Rights Agreement.

 

(b)Exercisability. Stock Purchase Rights shall generally be exercisable for such period after grant as is determined by the Committee not to exceed sixty (60) days. However, the Committee may provide, in its sole discretion, that the Stock Purchase Rights of persons potentially subject to Section 16(b) of the Exchange Act shall not become exercisable until six months and one day after the grant date, and shall then be exercisable for ten trading days at the purchase price specified by the Committee in accordance with Section 9(a) of the Plan.

 

	
10.

	
Other Stock-Based Awards.

 

(a)Administration.

 

(i) Other awards of Stock and other awards that are valued in whole or in part by reference to, or are otherwise based on, Stock (“Other Stock-Based Awards”), including, without limitation, performance shares, convertible preferred stock (to the extent a series of preferred stock has been or may be created by, or in accordance with a procedure set forth in, the Company’s certificate of incorporation), convertible debentures, warrants, exchangeable securities and Stock awards or options valued by reference to Fair Market Value, Book Value or performance of the Company or any Subsidiary, Affiliate or division, may be granted either alone or in addition to or in tandem with Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock or Stock Purchase Rights granted under the Plan and/or cash awards made outside of the Plan.

 

(ii) Subject to the provisions of the Plan, the Committee shall have authority to determine the persons to whom and the time or times at which such award shall be made, the number of shares of Stock to be awarded pursuant to such awards, and all other conditions of the awards. The Committee may also provide for the grant of Stock upon the completion of a specified performance period. The provisions of Other Stock-Based Awards need not be the same with respect to each recipient.

 

  

  

  

 

(b)Terms and Conditions. Other Stock-Based Awards made pursuant to this Section 10 shall be subject to the following terms and conditions:

 

(i) Subject to the provisions of the Plan and the award agreement referred to in Section 10(b)(v) of the Plan, shares of Stock subject to awards made under this Section 10 may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses.

 

(ii) Subject to the provisions of the Plan and the award agreement and unless otherwise determined by the Committee at grant, the recipient of an award under this Section 10 shall be entitled to receive, currently or on a deferred basis, interest or dividends or interest or dividend equivalents with respect to the number of shares covered by the award, as determined at the time of the award by the Committee, in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Stock or otherwise reinvested.

 

(iii) Any award under Section 10 and any Stock covered by any such award shall vest or be forfeited to the extent so provided in the award agreement, as determined by the Committee, in its sole discretion.

 

(iv) In the event of the participant’s Retirement, Disability or death, or in cases of special circumstances, the Committee may, in its sole discretion, waive in whole or in part any or all of the remaining limitations (if any) imposed with respect to any or all of an award pursuant to this Section 10.

 

(v) Each award under this Section 10 shall be confirmed by, and subject to the terms of, an agreement or other instrument by the Company and by the participant.

 

(vi) Stock (including securities convertible into Stock) issued on a bonus basis under this Section 10 may be issued for no cash consideration.

 

	
11.

	
Change in Control Provisions.

 

(a)Impact of Event. In the event of a “Change in Control,” as defined in Section 11(b) of the Plan, or a “Potential Change in Control,” as defined in Section 11(c) of the Plan, except to the extent otherwise determined by the Committee or the Board at or after grant (subject to any right of approval expressly reserved by the Committee or the Board at the time of such determination), the following acceleration and valuation provisions shall apply:

 

(i) Any Stock Appreciation Rights outstanding for at least six months and any Stock Options awarded under the Plan not previously exercisable and vested shall become fully exercisable and vested and any Incentive Stock Options may, with the consent of the holders thereof, be treated as Non-Qualified Stock Options.

 

(ii) The restrictions and deferral limitations applicable to any Restricted Stock, Deferred Stock, Stock Purchase rights and Other Stock-Based Awards, in each case to the extent not already vested under the Plan, shall lapse and such shares and awards shall be deemed fully vested.

 

(iii) The value of all outstanding Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock Purchase Rights and Other Stock-Based Awards, in each case to the extent vested (including such rights which shall have become vested pursuant to Sections 11(a)(i) and (ii) of the Plan), shall be purchased by the Company (“cashout”) in a manner determined by the Committee, in its sole discretion, on the basis of the “Change in Control Price” as defined in Section 11(d) of the Plan as of the date such Change in Control or such Potential Change in Control is determined to have occurred or such other date as the Committee may determine prior to the Change in Control, unless the Committee shall, contemporaneously with or prior to any particular Change of Control or Potential Change of Control, determine that this Section 11(a)(iii) shall not be applicable to such Change in Control or Potential Change in Control.

 

(b)Definition of “Change in Control.” For purposes of Section 11(a) of the Plan, a “Change in Control” means the happening of any of the following after the completion of the acquisition of Plaza Consulting Group, Inc., a Puerto Rico corporation (the “Acquisition Effective Date”):

 

(i) When any “person” (as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) of the Exchange Act, including a “group” as defined in Section 13(d) of the Exchange Act, but excluding the Company and any Subsidiary and any employee benefit plan sponsored or maintained by the Company or any Subsidiary and any trustee of such plan acting as trustee) directly or indirectly becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company’s then outstanding securities; provided, however, that a Change of Control shall not arise if such acquisition is approved by the board of directors or if the board of directors or the Committee determines that such acquisition is not a Change of Control or if the board of directors authorizes the issuance of the shares of Stock (or securities convertible into Stock or upon the exercise of which shares of Stock may be issued) to such persons; or

 

  

  

  

 

(ii) When, during any period of twenty-four consecutive months during the existence of the Plan, the individuals who, at the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason other than death, Disability or Retirement to constitute at least a majority thereof, provided, however, that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of, or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24-month period) or by prior operation of this Section 11(b)(ii); provided, however, that all directors who are elected to the board not later than six months after the Acquisition Effective Date shall be deemed to be an Incumbent Director and shall be deemed to have satisfied the 24-month requirement set forth in this Section 11(b)(ii); or

 

(iii) The occurrence of a transaction requiring stockholder approval for the acquisition of the Company by an entity other than the Company or a Subsidiary through purchase of assets, or by merger, or otherwise unless approved by a majority of Incumbent Directors.

 

(c)Definition of Potential Change in Control. For purposes of Section 11(a) of the Plan, a “Potential Change in Control” means the happening of any one of the following:

 

(i) The approval by stockholders of an agreement by the Company, the consummation of which would result in a Change in Control of the Company as defined in Section 11(b) of the Plan; or

 

(ii) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than the Company or a Subsidiary or any Company employee benefit plan or any trustee of such plan acting as such trustee) of securities of the Company representing five percent or more of the combined voting power of the Company’s outstanding securities and the adoption by the Board of Directors of a resolution to the effect that a Potential Change in Control of the Company has occurred for purposes of the Plan.

 

(d)Change in Control Price. For purposes of this Section 11, “Change in Control Price” means the highest price per share paid in any transaction reported on the principal stock exchange on which the Stock is traded or the average of the highest bid and asked prices as reported by the principal stock exchange or market on which the Stock is traded, or paid or offered in any bona fide transaction related to a Potential or actual Change in Control of the Company at any time during the sixty-day period immediately preceding the occurrence of the Change in Control (or, where applicable, the occurrence of the Potential Change in Control event), in each case as determined by the Committee except that, in the case of Incentive Stock Options and Stock Appreciation Rights relating to Incentive Stock Options, such price shall be based only on transactions reported for the date on which the optionee exercises such Stock Appreciation Rights, Incentive Stock Options or, where applicable, the date on which a cashout occurs under Section 11(a)(iii).

 

	
12.

	
Amendments and Termination.

 

(a)The Board may amend, alter, or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made which would impair the rights of an optionee or participant under a Stock Option, Stock Appreciation Right, Restricted or Deferred Stock award, Stock Purchase Right or Other Stock-Based Award theretofore granted, without the optionee’s or participant’s consent, and no amendment will be made without approval of the stockholders if such amendment requires stockholder approval under state law or if stockholder approval is necessary in order that the Plan comply with Rule 16b-3 of the Commission under the Exchange Act or any substitute or successor rule or if stockholder approval is necessary in order to enable the grant pursuant to the Plan of options or other awards intended to confer tax benefits upon the recipients thereof.

 

(b)The Committee may amend the terms of any Stock Option or other award theretofore granted, prospectively or retroactively, but no such amendment shall impair the rights or any holder without the holder’s consent. The Committee may also substitute new Stock Options for previously granted Stock Options (on a one for one or other basis), including previously granted Stock Options having higher option exercise prices.

 

(c)Subject to the provisions of Sections 12(a) and (b) of the Plan, the Board shall have broad authority to amend the Plan to take into account changes in applicable securities and tax laws and accounting rules, as well as other developments, and, in particular, without limiting in any way the generality of the foregoing, to eliminate any provisions which are not required to included as a result of any amendment to Rule 16b-3 of the Commission pursuant to the Exchange Act.

 

  

  

  

 

	
13.

	
Unfunded Status of Plan.

 

The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a participant or optionee by the Company, nothing contained in this Plan shall give any such participant or optionee any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or payments in lieu of or with respect to awards under this Plan; provided, however, that, unless the Committee otherwise determines with the consent of the affected participant, the existence of such trusts or other arrangements shall be consistent with the “unfunded” status of the Plan.

	
14.

	
General Provisions.

 

(a)The Committee may require each person purchasing shares pursuant to a Stock Option or other award under the Plan to represent to and agree with the Company in writing that the optionee or participant is acquiring the shares without a view to distribution thereof. The certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer. All certificates or shares of Stock or other securities delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Commission, any stock exchange upon which the Stock is then listed, and any applicable Federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

(b)Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.

 

(c)Neither the adoption of the Plan nor the grant of any award pursuant to the Plan shall confer upon any employee of the Company or any Subsidiary or Affiliate any right to continued employment with the Company or a Subsidiary or Affiliate, as the case may be, nor shall it interfere in any way with the right of the Company or a Subsidiary or Affiliate to terminate the employment of any of its employees at any time.

 

(d)No later than the date as of which an amount first becomes includible in the gross income of the participant for Federal income tax purposes with respect to any award under the Plan, the participant shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any Federal, state, or local taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Committee, withholding obligations may be settled with Stock, including Stock that is part of the award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements and the Company and its Subsidiaries or Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the participant.

 

(e)The actual or deemed reinvestment of dividends or dividend equivalents in additional Restricted Stock (or in Deferred Stock or other types of Plan awards) at the time of any dividend payment shall only be permissible if sufficient shares of Stock are available under Section 3 of the Plan for such reinvestment (taking into account then outstanding Stock Options, Stock Purchase Rights and other Plan awards).

	
15.

	
Effective Date of Plan.

 

he Plan shall be effective as of the date the Plan is approved by the Board, subject to the approval of the Plan by a majority of the votes cast by the holders of the Company’s Stock at the next annual or special meeting of stockholders. Any grants made under the Plan prior to such approval shall be effective when made (unless otherwise specified by the Committee at the time of grant), but shall be conditioned on, and subject to, such approval of the Plan by such stockholders.

 

	
16.

	
Term of Plan.

 

Stock Option, Stock Appreciation Right, Restricted Stock award, Deferred Stock award, Stock Purchase Right or Other Stock-Based Award may be granted pursuant to the Plan, until ten (10) years from the date the Plan was approved by the Board, unless the Plan shall be terminated by the Board, in its discretion, prior to such date, but awards granted prior to such termination may extend beyond that date.Exhibit 4.2

 

Form of Representative’s
Warrant Agreement

THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY
ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE
REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE
WARRANT FOR A PERIOD OF ONE HUNDRED EIGHTY DAYS FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW) TO ANYONE OTHER THAN (I) CRT
CAPITAL GROUP LLC OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER
OF CRT CAPITAL GROUP LLC OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER.

THIS PURCHASE WARRANT IS VOID AFTER 5:00 P.M., EASTERN
TIME, [            ] [DATE THAT IS FIVE YEARS FROM THE DATE OF EFFECTIVENESS
OF THE REGISTRATION STATEMENT].

COMMON STOCK PURCHASE WARRANT

For the Purchase of [            ]
Shares of Common Stock

of

Adamis Pharmaceuticals Corporation

1. Purchase Warrant. THIS CERTIFIES THAT,
for value received, CRT Capital Group LLC or its assigns (“Holder”), as registered owner of this Purchase Warrant,
is entitled, at any time or from time to time from [            ] (the
“Commencement Date”), and until at or before 5:00 p.m., Eastern time, [            ]
(the “Expiration Date”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up
to [            ] shares of common stock of Adamis Pharmaceuticals
Corporation, a Delaware corporation (the “Company”), par value $0.0001 per share (the “Shares”),
subject to adjustment as provided in Section 5 hereof. If the Expiration Date is a day on which banking institutions are authorized
by law to close, then this Purchase Warrant may be exercised on the next succeeding day which is not such a day in accordance with
the terms herein. During the period ending on the Expiration Date, the Company agrees not to take any action that would terminate
this Purchase Warrant. This Purchase Warrant is initially exercisable at $[            ]
per Share; provided, however , that upon the occurrence of any of the events specified in Section 5 hereof,
the rights granted by this Purchase Warrant, including the exercise price per Share and the number of Shares to be received upon
such exercise, shall be adjusted as therein specified. The term “Exercise Price” shall mean the initial exercise
price or the adjusted exercise price, depending on the context. The term “Effective Date” shall mean November
__, 2013, the date on which the Registration Statement on Form S-1 (File No. 333-192372) of the Company was declared effective
by the Securities and Exchange Commission.

2. Exercise.

2.1 Exercise Form. In
order to exercise this Purchase Warrant, the exercise form attached hereto must be duly executed and completed and delivered to
the Company, together with this Purchase Warrant and payment of the Exercise Price for the Shares being purchased payable in cash
by wire transfer of immediately available funds to an account designated by the Company or by certified check or official bank
check. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration
Date, this Purchase Warrant shall become and be void without further force or effect, and all rights represented hereby shall cease
and expire.

2.2 Cashless Exercise.
If at any time after the Commencement Date in lieu of exercising this Purchase Warrant by payment of cash or check payable to the
order of the Company pursuant to Section 2.1 above, Holder may elect to receive the number of Shares equal to the value of
this Purchase Warrant (or the portion thereof being exercised), by surrender of this Purchase Warrant to the Company, together
with the exercise form attached hereto, in which event the Company shall issue to Holder, Shares in accordance with the following
formula:

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	Y(A-B)
	    X	 	=	 	    A	 	 
	 	 	 	 
	    Where,	 	 	 	 	 	 
	 	 	X	 	=	 	The number of Shares to be issued to Holder;
	 	 	Y	 	=	 	The number of Shares for which the Purchase Warrant is being exercised;
	 	 	A	 	=	 	The fair market value of one Share; and
	 	 	B	 	=	 	The Exercise Price.

For purposes of this Section 2.2,
the fair market value of a Share is defined as follows:

 

	 	(i)	if the Company’s common stock is traded on a securities exchange, the value shall be the closing price on such exchange the trading day prior to the exercise form being submitted in connection with the exercise of the Purchase Warrant; or

 

	 	(ii)	if the Company’s common stock is actively traded over-the-counter, the value shall be deemed to be the closing bid price the trading day prior to the exercise form being submitted in connection with the exercise of the Purchase Warrant; if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Company’s Board of Directors.

2.3 Legend. Each certificate
representing Shares shall bear a legend as follows unless such securities have been registered under the Securities Act of 1933,
as amended (the “ Securities Act ”):

“The securities represented
by this certificate have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”),
or applicable state law. Neither the securities nor any interest therein may be offered for sale, sold or otherwise transferred
except pursuant to an effective registration statement under the Securities Act, or pursuant to an exemption from registration
under the Securities Act and applicable state law which, in the opinion of counsel to the Company, is available.”

3. Transfer.

3.1 General Restrictions
on Transfer of Purchase Warrant. The Holder of this Purchase Warrant agrees by his, her or its acceptance hereof, that such
Holder will not: (a) sell, transfer, assign, pledge or hypothecate this Purchase Warrant for a period of one hundred eighty
(180) days following the Effective Date to anyone other than: (i) CRT Capital Group LLC. (“CRT”) or
an underwriter or a selected dealer participating in the offering, or (ii) a bona fide officer or partner of CRT or of any
such underwriter or selected dealer, in each case in accordance with FINRA Rule 5110(g)(1), or (b) cause this Purchase Warrant
or the Shares to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective
economic disposition of this Purchase Warrant or the Shares, except as provided for in FINRA Rule 5110(g)(2). On and after 180
days after the Effective Date, transfers of this Purchase Warrant to others may be made subject to compliance with or exemptions
from applicable securities laws. In order to make any permitted assignment of this Purchase Warrant, the Holder must deliver to
the Company the assignment form attached hereto duly executed and completed, together with the Purchase Warrant and payment of
all transfer taxes, if any, payable in connection therewith. The Company shall within five (5) business days transfer this
Purchase Warrant on the books of the Company and shall execute and deliver a new Purchase Warrant or Purchase Warrants of like
tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Shares purchasable hereunder
or such portion of such number as shall be contemplated by any such assignment.

3.2 Restrictions Imposed
by the Securities Act. The Holder shall not be transfer the Shares unless and until: (i) the Company has received the
opinion of counsel for the Holder that the Shares may be transferred pursuant to an exemption from registration under the Securities
Act and applicable state securities laws, the availability of which is established to the reasonable satisfaction of the Company,
or (ii) a registration statement or a post-effective amendment to the Registration Statement relating to the offer and sale
of the Shares has been filed by the Company and declared effective by the U.S. Securities and Exchange Commission (the “Commission”)
and compliance with applicable state securities law has been established.

4. New Purchase Warrants to be Issued.

4.1 Partial Exercise or
Transfer. Subject to the restrictions in Section 3 hereof, this Purchase Warrant may be exercised or assigned in whole
or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Warrant for cancellation,
together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax
if exercised pursuant to Section 2.1 hereto, the Company shall cause to be delivered to the Holder without charge a new Purchase
Warrant of like tenor to this Purchase Warrant in the name of the Holder evidencing the right of the Holder to purchase the number
of Shares purchasable hereunder as to which this Purchase Warrant has not been exercised or assigned.

4.2 Lost Certificate.
Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Warrant
and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase Warrant
of like tenor and date. Any such new Purchase Warrant executed and delivered as a result of such loss, theft, mutilation or destruction
shall constitute a substitute contractual obligation on the part of the Company.

5. Adjustments.

5.1 Adjustments to Exercise
Price and Number of Securities. The Exercise Price and the number of Shares underlying the Purchase Warrant shall be subject
to adjustment from time to time as hereinafter set forth:

5.1.1 Share Dividends; Split
Ups. If, after the date hereof, and subject to the provisions of Section 5.3 below, the number of outstanding shares of the
Company’s common stock is increased by a stock dividend payable in shares of the Company’s common stock or by a split
up of shares of the Company’s common stock or other similar event, then, on the effective day thereof, the number of Shares
purchasable hereunder shall be increased in proportion to such increase in outstanding shares of the Company’s common stock,
and the Exercise Price shall be proportionately decreased.

5.1.2 Aggregation of Shares.
If, after the date hereof, and subject to the provisions of Section 5.3 below, the number of outstanding shares of the Company’s
common stock is decreased by a consolidation, combination or reclassification of shares of the Company’s common stock or
other similar event, then, on the effective date thereof, the number of shares of the Company’s common stock purchasable
hereunder shall be decreased in proportion to such decrease in outstanding shares of the Company’s common stock, and the
Exercise Price shall be proportionately increased.

5.1.3 Replacement of Securities
upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding shares of the Company’s common
stock other than a change covered by Section 5.1.1 or 5.1.2 hereof or that solely affects the par value of such shares, or
in the case of any share reconstruction or amalgamation or consolidation of the Company with or into another corporation (other
than a consolidation or share reconstruction or amalgamation in which the Company is the continuing corporation and that does not
result in any reclassification or reorganization of the outstanding shares of the Company’s common stock), or in the case
of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an
entirety in connection with which the Company is dissolved, the Holder of this Purchase Warrant shall have the right thereafter
(until the expiration of the right of exercise of this Purchase Warrant) to receive upon the exercise hereof, for the same aggregate
Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or
property (including cash) receivable upon such reclassification, reorganization, share reconstruction or amalgamation, or consolidation,
or upon a dissolution following any such sale or transfer, by a Holder of the number of shares of the Company’s common stock
obtainable upon exercise of this Purchase Warrant immediately prior to such event; and if any reclassification also results in
a change in shares of the Company’s common stock covered by Section 5.1.1 or 5.1.2, then such adjustment shall be made
pursuant to Sections 5.1.1, 5.1.2 and this Section 5.1.3. The provisions of this Section 5.1.3 shall similarly apply
to successive reclassifications, reorganizations, share reconstructions or amalgamations, or consolidations, sales or other transfers.

5.1.4 Changes in Form of Purchase
Warrant. This form of Purchase Warrant need not be changed because of any change pursuant to this Section 5.1, and Purchase
Warrants issued after such change may state the same Exercise Price and the same number of Shares as are stated in this Purchase
Warrants. The acceptance by any Holder of the issuance of new Purchase Warrants reflecting a required or permissive change shall
not be deemed to waive any rights to an adjustment occurring after the Commencement Date or the computation thereof.

5.2 Substitute Purchase
Warrant. In case of any consolidation of the Company with, or share reconstruction or amalgamation of the Company with or into,
another corporation (other than a consolidation or share reconstruction or amalgamation which does not result in any reclassification
or change of the outstanding shares of the Company’s common stock), the corporation formed by such consolidation or share
reconstruction or amalgamation shall execute and deliver to the Holder a supplemental Purchase Warrant providing that the holder
of each Purchase Warrant then outstanding or to be outstanding shall have the right thereafter (until the stated expiration of
such Purchase Warrant) to receive, upon exercise of such Purchase Warrant, the kind and amount of shares of stock and other securities
and property receivable upon such consolidation or share reconstruction or amalgamation, by a holder of the number of shares of
the Company’s common stock for which such Purchase Warrant might have been exercised immediately prior to such consolidation,
share reconstruction or amalgamation, sale or transfer. Such supplemental Purchase Warrant shall provide for adjustments which
shall be identical to the adjustments provided for in this Section 5. The above provision of this Section shall similarly
apply to successive consolidations or share reconstructions or amalgamations.

5.3 Elimination of Fractional
Interests. The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the
Purchase Warrant, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent
of the parties that all fractional interests shall be eliminated by rounding any fraction up or down, as the case may be, to the
nearest whole number of Shares or other securities, properties or rights.

6. Reservation and Listing. The Company shall
at all times reserve and keep available out of its shares of authorized capital stock, solely for the purpose of issuance upon
exercise of the Purchase Warrants, such number of Shares or other securities, properties or rights as shall be issuable upon the
exercise thereof. The Company covenants and agrees that, upon exercise of the Purchase Warrants and payment of the Exercise Price
therefor, in accordance with the terms hereby, all Shares and other securities issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable and not subject to preemptive rights of any shareholder. The Company further covenants and
agrees that upon exercise of the Purchase Warrants and payment of the exercise price therefor, all Shares and other securities
issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights
of any shareholder. As long as the Purchase Warrants shall be outstanding, the Company shall use its commercially reasonable efforts
to cause all shares of the Company’s common stock to be listed (subject to official notice of issuance) on all national securities
exchanges (or, if applicable, on the OTC Bulletin Board or any successor trading market) on which the shares of common stock may
then be listed and/or quoted.

7. Certain Notice Requirements.

7.1 Holder’s Right
to Receive Notice. Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to receive
notice as a shareholder for the election of directors or any other matter, or as having any rights whatsoever as a shareholder
of the Company. If, however, at any time prior to the expiration of the Purchase Warrants and their exercise, any of the events
described in Section 7.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event
at least fifteen days prior to the date fixed as a record date or the date of closing the transfer books for the determination
of the shareholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled
to vote on such proposed dissolution, liquidation, winding

 up or sale. Such notice shall specify
such record date or the date of the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company
shall deliver to each Holder a copy of each notice given to the other shareholders of the Company at the same time and in the same
manner that such notice is given to the shareholders.

7.2 Events Requiring Notice.
The Company shall be required to give the notice described in this Section 7 upon one or more of the following events: (i) if
the Company shall take a record of the holders of shares of the Company’s common stock for the purpose of entitling them
to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than
out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company,
(ii) the Company shall offer to all the holders of shares of the Company’s common stock any additional shares of capital
stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in connection
with a consolidation or share reconstruction or amalgamation) or a sale of all or substantially all of its property, assets and
business shall be proposed.

7.3 Notice of Change in
Exercise Price. The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 5
hereof, send notice to the Holder of such event and change (“Price Notice”). The Price Notice shall describe
the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company’s
Chief Financial Officer.

7.4 Transmittal of Notices.
All notices, requests, consents and other communications under this Purchase Warrant shall be in writing and shall be deemed to
have been duly made when hand delivered, or mailed by express mail or private courier service: (i) if to the registered Holder
of the Purchase Warrant, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, to
the following address or to such other address as the Company may designate by notice to the Holders:

If to the Holder:

CRT Capital Group LLC

262 Harbor Drive

Stamford, CT 06902

Attention: Legal

Fax No.: (203) 569-4387

If to the Company:

Adamis Pharmaceuticals Corporation

11455 El Camino Real, Suite 310,

San Diego, California 92130

Attention: Chief Executive Officer

8. Miscellaneous.

8.1 Amendments. This
Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

8.2 Headings. The headings
contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or
interpretation of any of the terms or provisions of this Purchase Warrant.

8.3. Entire Agreement.
This Purchase Warrant (together with the other agreements and documents being delivered pursuant to or in connection with this
Purchase Warrant) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes
all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.

8.4 Binding Effect.
This Purchase Warrant shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their permitted
assignees, respective successors, legal representative and assigns, and no other person shall have or be construed to have any
legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Warrant or any provisions herein
contained.

8.5 Governing Law; Submission
to Jurisdiction; Trial by Jury. This Purchase Warrant shall be governed by and construed and enforced in accordance with the
laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any
action, proceeding or claim against it arising out of, or relating in any way to this Purchase Warrant shall be brought and enforced
in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York,
and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to
such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the
Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address set forth in Section 7 hereof. Such mailing shall be deemed personal service and shall be legal
and binding upon the Company in any action, proceeding or claim. The Company and the Holder agree that the prevailing party(ies)
in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses
relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and,
to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and the Holder hereby irrevocably waive,
to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.

8.6 Waiver, etc. The
failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Warrant shall not be deemed
or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Warrant or any provision
hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Warrant. No waiver
of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Warrant shall be effective unless set
forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and
no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent
breach, non-compliance or non-fulfillment.

8.7 Execution in Counterparts.
This Purchase Warrant may be executed in one or more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and
shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the
other parties hereto. Such counterparts may be delivered by facsimile transmission or other electronic transmission.

[Signature Page Follows]

 

    	 

    	 

    

 

IN WITNESS WHEREOF, the Company
has caused this Purchase Warrant to be signed by its duly authorized officer as of the             day
of             , 2013.

 

	 	 	 	 	 
	 	 	ADAMIS PHARMACEUTICALS CORPORATION
	 	 	 
	 	 	By:	 	
 

	 	 	 	 	Name:
	 	 	 	 	Title:

 

    	 

    	 

    

 

[Form to be used
to exercise Purchase Warrant]

Date:             ,
20    

The undersigned hereby elects
irrevocably to exercise the Purchase Warrant for             shares
of common stock, par value $0.0001 per share (the “Shares”), of Adamis Pharmaceuticals Corporation, a Delaware
corporation (the “Company”), and hereby makes payment of $            (at
the rate of $             per Share) in payment of the Exercise Price
pursuant thereto. Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given
below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been
exercised.

or

The undersigned hereby elects
irrevocably to convert its right to purchase             Shares of
the Company under the Purchase Warrant for             Shares, as determined
in accordance with the following formula:

 

	 	 	 	 	Y(A-B)
	    X	 	=	 	    A	 	 
	 	 	 	 
	    Where,	 	 	 	 	 	 
	 	 	X	 	=	 	The number of Shares to be issued to Holder;
	 	 	Y	 	=	 	The number of Shares for which the Purchase Warrant is being exercised;
	 	 	A	 	=	 	The fair market value of one Share, which is equal to $            ; and
	 	 	B	 	=	 	The Exercise Price, which is equal to $             per share.
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

The undersigned agrees and
acknowledges that the calculation set forth above is subject to confirmation by the Company and any disagreement with respect to
the calculation shall be resolved by the Company in its sole discretion.

Please issue the Shares as
to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase
Warrant representing the number of Shares for which this Purchase Warrant has not been converted.

 

	 
	Signature                                                  
	 
	Signature Guaranteed                                              

 

    	 

    	 

    

 

	 	 	 
	INSTRUCTIONS FOR REGISTRATION OF SECURITIES
	 	 
	Name: __________________________	 	
 

	                 (Print in Block Letters)	 	
	 	 
	Address: _________________________	 	
 

	                  _________________________	 	
 

	                 _________________________	 	
 

	 	 	 	 

NOTICE: The signature to this
form must correspond with the name as written upon the face of the Purchase Warrant without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on
a registered national securities exchange.

 

    	 

    	 

    

 

[Form to be used
to assign Purchase Warrant]

ASSIGNMENT

(To be executed by the registered Holder to effect
a transfer of the within Purchase Warrant):

FOR VALUE RECEIVED,             does
hereby sell, assign and transfer unto the right to purchase shares of common stock, par value $0.0001 per share, of Adamis Pharmaceuticals
Corporation, a Delaware corporation (the “ Company ”), evidenced by the Purchase Warrant and does hereby authorize
the Company to transfer such right on the books of the Company.

 

	 
	Dated:             , 20    
	 
	Signature                                                  
	 
	Signature Guaranteed                                              

NOTICE: The signature to this form must correspond
with the name as written upon the face of the within Purchase Warrant without alteration or enlargement or any change whatsoever,
and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered
national securities exchange.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00224-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00224-of-00352.parquet"}]]