Document:

Document

Exhibit 4.3
Natural Gas Services Group, Inc.

2019 Equity Incentive Plan
(As Amended June 16, 2022)

{JK01481167.1 }

TABLE OF CONTENTS

						
	Purpose; Eligibility
	2
	Definitions	2
	Administration.
	9
	Shares Subject to the Plan.	11
	Eligibility.	12
	Option Provisions.
	13
	Provisions of Awards Other Than Options.	16
	Securities Law Compliance	21
	Use of Proceeds from Stock.	21
	Miscellaneous.	21
	Adjustments Upon Changes in Stock	22
	Effect of Change in Control.
	23
	Amendment of the Plan and Awards.	24
	General Provisions.	24
	Effective Date of Plan	27
	Termination or Suspension of the Plan.	27
	Choice of Law.	27

1.Purpose; Eligibility.
 
1.1    General Purpose. The name of this plan is the Natural Gas Services Group, Inc. 2019 Equity Incentive Plan (the “Plan”). The purposes of the Plan are to (a) enable Natural Gas Services Group, Inc., a Colorado corporation (the “Company”), and any Affiliate to attract and retain the types of Employees, Consultants and Directors who will contribute to the Company’s long range success; (b) provide incentives that align the interests of Employees, Consultants and Directors with those of the shareholders of the Company; and (c) promote the success of the Company’s business.
 
1.2    Eligible Award Recipients. The persons eligible to receive Awards are the Employees, Consultants and Directors of the Company and its Affiliates and such other individuals designated by the Committee who are reasonably expected to become Employees, Consultants and Directors provided that such Award shall only become binding and valid upon such individual becoming an Employee, Consultant or Director.
 
1.3    Available Awards. Awards that may be granted under the Plan include: (a) Incentive Stock Options, (b) Non-qualified Stock Options, (c) Stock Appreciation Rights, (d) Restricted Awards, (e) Performance Share Awards, and (f) Other Equity-Based Awards.
 

2.    Definitions.
 
“Affiliate” means a corporation or other entity that, directly or through one or more intermediaries, controls, is controlled by or is under common control with, the Company.
 
“Applicable Laws” means the requirements related to or implicated by the administration of the Plan under applicable state corporate law, United States federal and state securities laws, the Code, any stock exchange or quotation system on which the shares of Common Stock are listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are granted under the Plan.

“Award” means any right granted under the Plan, including an Incentive Stock Option, a Non-qualified Stock Option, a Stock Appreciation Right, a Restricted Award, a Performance Share Award, or an Other Equity-Based Award.
 
“Award Agreement” means a written agreement, contract, certificate or other instrument or document evidencing the terms and conditions of an individual Award granted under the Plan which may, in the discretion of the Company, be transmitted electronically to any Participant. Each Award Agreement shall be subject to the terms and conditions of the Plan.
 
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular Person, such Person shall be deemed to have beneficial ownership of all securities that such Person 

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has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.
 
“Board” means the Board of Directors of the Company, as constituted at any time.
 
“Cause” means:

With respect to any Employee or Consultant, unless the applicable Award Agreement states otherwise:
(a)    If the Employee or Consultant is a party to an employment or service agreement with the Company or its Affiliates and such agreement provides for a definition of Cause, the definition contained therein; or
(b)    If no such agreement exists, or if such agreement does not define Cause: (i) the conviction of, or plea of guilty or no contest to, a felony or a crime involving moral turpitude or the commission of any other act involving willful malfeasance or material fiduciary breach with respect to the Company or an Affiliate; (ii) conduct that results in or is reasonably likely to result in harm to the reputation or business of the Company or any of its Affiliates; (iii) gross negligence or willful misconduct with respect to the Company or an Affiliate; or (iv) material violation of state or federal securities laws.
With respect to any Director, unless the applicable Award Agreement states otherwise, a determination by a majority of the disinterested Board members that the Director has engaged in any of the following:
(a)    malfeasance in office;
(b)    gross misconduct or neglect;
(c)    false or fraudulent misrepresentation inducing the director’s appointment;
(d)    willful conversion of corporate funds; or
(e)    repeated failure to participate in Board meetings on a regular basis despite having received proper notice of the meetings in advance.

The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to whether a Participant has been discharged for Cause.  For purposes of this definition, a “disinterested Board member” means a director of the Company who does not have any material direct or indirect financial interest in or with respect to whether a Cause event has occurred.
“Change in Control”
(a)     The direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its subsidiaries, taken as a whole, to any Person that is not a subsidiary of the Company;

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(b)     The Incumbent Directors cease for any reason to constitute at least a majority of the Board;
(c)    The date which is 10 business days prior to the consummation of a complete liquidation or dissolution of the Company;
(d)    The acquisition by any Person of Beneficial Ownership of fifty percent 50% or more (on a fully diluted basis) of either (i) the then outstanding shares of Common Stock of the Company, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common Stock (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this Plan, the following acquisitions shall not constitute a Change in Control: (A) any acquisition by the Company or any Affiliate, (B) any acquisition by any employee benefit plan sponsored or maintained by the Company or any subsidiary, (C) any acquisition which complies with clauses, (i), (ii) and (iii) of subsection (e) of this definition or (D) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of persons including the Participant (or any entity controlled by the Participant or any group of persons including the Participant); or 
(e)    The consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company that requires the approval of the Company’s shareholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (i) more than 50% of the total voting power of (A) the entity resulting from such Business Combination (the “Surviving Company”), or (B) if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the members of the board of directors (or the analogous governing body) of the Surviving Company (the “Parent Company”), is represented by the Outstanding Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the Outstanding Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of the Outstanding Company Voting Securities among the holders thereof immediately prior to the Business Combination; (ii) no Person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company) is or becomes the Beneficial Owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect members of the board of directors of the Parent Company (or the analogous governing body) (or, if there is no Parent Company, the Surviving Company); and (iii) at least a majority of the members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination.

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“Code” means the Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code shall be deemed to include a reference to any regulations promulgated thereunder.
 
“Committee” means a committee of one or more members of the Board appointed by the Board to administer the Plan in accordance with Section 3.3 and Section 3.4.
 
“Common Stock” means the common stock of the Company, or such other securities of the Company as may be designated by the Committee from time to time in substitution thereof.
 
“Company” means Natural Gas Services Group, Inc. a Colorado corporation, and any successor thereto.
 
“Consultant” means any individual or entity which performs bona fide services to the Company or an Affiliate, other than as an Employee or Director, and who may be offered securities registerable pursuant to a registration statement on Form S-8 under the Securities Act.
 
“Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Consultant or Director, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s Continuous Service; provided further that if any Award is subject to Section 409A of the Code, this sentence shall only be given effect to the extent consistent with Section 409A of the Code. For example, a change in status from an Employee of the Company to a Director of an Affiliate will not constitute an interruption of Continuous Service. The Committee or its delegate, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal or family leave of absence. The Committee or its delegate, in its sole discretion, may determine whether a Company transaction, such as a sale or spin-off of a division or subsidiary that employs a Participant, shall be deemed to result in a termination of Continuous Service for purposes of affected Awards, and such decision shall be final, conclusive and binding. 
 
“Deferred Stock Units (DSUs)” has the meaning set forth in Section 7.2 hereof.
 
“Director” means a member of the Board.

“Disability” means unless the applicable Award Agreement says otherwise, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment; provided, however, for purposes of determining the term of an Incentive Stock Option pursuant to Section 6.10 hereof, the term Disability shall have the meaning ascribed to it under Section 22(e)(3) of the Code. The determination of 

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whether an individual has a Disability shall be determined under procedures established by the Committee. Except in situations where the Committee is determining Disability for purposes of the term of an Incentive Stock Option pursuant to Section 6.10 hereof within the meaning of Section 22(e)(3) of the Code, the Committee may rely on any determination that a Participant is disabled for purposes of benefits under any long-term disability plan maintained by the Company or any Affiliate in which a Participant participates.
 
“Disqualifying Disposition” has the meaning set forth in Section 14.11.
 
“Effective Date” shall mean the date that the Company’s shareholders approve this Plan if such shareholder approval occurs before the first anniversary of the date the Plan is adopted by the Board.
 
“Employee” means any person, including an Officer or Director, employed by the Company or an Affiliate; provided, that, for purposes of determining eligibility to receive Incentive Stock Options, an Employee shall mean an employee of the Company or a parent or subsidiary corporation within the meaning of Section 424 of the Code. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Fair Market Value” means, as of any date, the value of the Common Stock as determined below. If the Common Stock is listed on any established stock exchange or a national market system, the Fair Market Value shall be the closing price of a share of Common Stock (or if no sales were reported the closing price on the date immediately preceding such date) as quoted on such exchange or system on the day of determination, as reported in the Wall Street Journal, or such other sources as the Committee deems reliable. In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Committee and such determination shall be conclusive and binding on all persons.

“Fiscal Year” means the Company’s fiscal year.
 
“Free Standing Rights” has the meaning set forth in Section 7.1(a).
 
“Good Reason” means, unless the applicable Award Agreement states otherwise:
 
(a)    If an Employee or Consultant is a party to an employment or service agreement with the Company or its Affiliates and such agreement provides for a definition of Good Reason, the definition contained therein; or
(b)    If no such agreement exists or if such agreement does not define Good Reason, the occurrence of one or more of the following without the Participant’s express written consent, which circumstances are not remedied by the Company within thirty (30) days of its receipt of a written notice from the Participant describing the applicable circumstances (which notice must be provided by the Participant within ninety (90) days 

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of the Participant’s knowledge of the applicable circumstances): (i) any material, adverse change in the Participant’s duties, responsibilities, authority, title, status or reporting structure; (ii) a material reduction in the Participant’s base salary or bonus opportunity; or (iii) a geographical relocation of the Participant’s principal office location by more than fifty (50) miles.

“Grant Date” means the date on which the Committee adopts a resolution, or takes other appropriate action, expressly granting an Award to a Participant that specifies the key terms and conditions of the Award or, if a later date is set forth in such resolution, then such date as is set forth in such resolution.
 
“Incentive Stock Option” means an Option that is designated by the Committee as an incentive stock option within the meaning of Section 422 of the Code and that meets the requirements set out in the Plan.
 
“Incumbent Directors” means individuals who, on the Effective Date, constitute the Board, provided that any individual becoming a Director subsequent to the Effective Date whose election or nomination for election to the Board was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for Director without objection to such nomination) shall be an Incumbent Director. No individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to Directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be an Incumbent Director.
 
“Non-Employee Director” means a Director who is a “non-employee director” within the meaning of Rule 16b-3.

“Non-qualified Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.

“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
 
“Option” means an Incentive Stock Option or a Non-qualified Stock Option granted pursuant to the Plan.
 
“Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
 
“Option Exercise Price” means the price at which a share of Common Stock may be purchased upon the exercise of an Option.
 
“Other Equity-Based Award” means an Award that is not an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, or Performance Share Award that is granted 

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under Section 7.3 and is payable by delivery of Common Stock and/or which is measured by reference to the value of Common Stock.
 
“Participant” means an eligible person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.
 
“Performance Goals” means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon business criteria or other performance measures determined by the Committee in its discretion.
 
“Performance Period” means the one or more periods of time not less than one fiscal quarter in duration, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance Share Award.
 
“Performance Share Award” means any Award granted pursuant to Section 7.3 hereof.
 
“Performance Share” means the grant of a right to receive a number of actual shares of Common Stock or share units based upon the performance of the Company during a Performance Period, as determined by the Committee.
 
“Permitted Transferee” means: (a) a member of the Optionholder’s immediate family (child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships), any person sharing the Optionholder’s household (other than a tenant or employee), a trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons (or the Optionholder) control the management of assets, and any other entity in which these persons (or the Optionholder) own more than 50% of the voting interests; (b) third parties designated by the Committee in connection with a program established and approved by the Committee pursuant to which Participants may receive a cash payment or other consideration in consideration for the transfer of a Non-qualified Stock Option; and (c) such other transferees as may be permitted by the Committee in its sole discretion.
 
“Person” means a person as defined in Section 13(d)(3) of the Exchange Act.
 
“Plan” means this Natural Gas Services Group, Inc. 2019 Equity Incentive Plan, as amended and/or amended and restated from time to time.
 
“Related Rights” has the meaning set forth in Section 7.1(a).
 
“Restricted Award” means any Award granted pursuant to Section 7.2(a).
 
“Restricted Period” has the meaning set forth in Section 7.2(a).
 
“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to 

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Rule 16b-3, as in effect from time to time.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“Stock Appreciation Right” means the right pursuant to an Award granted under Section 7.1 to receive, upon exercise, an amount payable in cash or shares equal to the number of shares subject to the Stock Appreciation Right that is being exercised multiplied by the excess of (a) the Fair Market Value of a share of Common Stock on the date the Award is exercised, over (b) the exercise price specified in the Stock Appreciation Right Award Agreement.
 
“Stock for Stock Exchange” has the meaning set forth in Section 6.4.
 
“Substitute Award” has the meaning set forth in Section 4.6.
 
“Ten Percent Shareholder” means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.
 
“Total Share Reserve” has the meaning set forth in Section 4.1.
 

3.    Administration.
 
3.1    Authority of Committee. The Plan shall be administered by the Committee or, in the Board’s sole discretion, by the Board. Subject to the terms of the Plan, the Committee’s charter and Applicable Laws, and in addition to other express powers and authorization conferred by the Plan, the Committee shall have the authority:
 
(a)to construe and interpret the Plan and apply its provisions;
 
(b)    to promulgate, amend, and rescind rules and regulations relating to the administration of the Plan;
 
(c)    to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;
 
(d)    to delegate its authority to one or more Officers of the Company with respect to Awards that do not involve “insiders” within the meaning of Section 16 of the Exchange Act;
 
(e)    to determine when Awards are to be granted under the Plan and the applicable Grant Date;
 
(f)    from time to time to select, subject to the limitations set forth in this Plan, those eligible Award recipients to whom Awards shall be granted; 
 
(g)    to determine the number of shares of Common Stock to be made subject to 

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each Award;
 
(h)    to determine whether each Option is to be an Incentive Stock Option or a Non-qualified Stock Option;
 
(i)to prescribe the terms and conditions of each Award, including, without limitation, the exercise price and medium of payment and vesting provisions, and to specify the provisions of the Award Agreement relating to such grant;
 
(j)    to determine the target number of Performance Shares to be granted pursuant to a Performance Share Award, the performance measures that will be used to establish the Performance Goals, the Performance Period(s) and the number of Performance Shares earned by a Participant;
 
(l)    to amend any outstanding Awards, including for the purpose of modifying the time or manner of vesting, or the term of any outstanding Award; provided, however, that if any such amendment impairs a Participant’s rights or increases a Participant’s obligations under his or her Award or creates or increases a Participant’s federal income tax liability with respect to an Award, such amendment shall also be subject to the Participant’s consent;
 
(m)    to determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination of their employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to Employees under the Company’s employment policies;
 
(n)    to make decisions with respect to outstanding Awards that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments;
 
(o)    to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; and
 
(p)    to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of the Plan.
 
3.2    Committee Decisions Final. All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on the Company and the Participants, unless such decisions are determined by a court having jurisdiction to be arbitrary and capricious.
 
3.3    Delegation. The Committee or, if no Committee has been appointed, the Board may delegate administration of the Plan to a committee or committees of one or more members of the Board, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated. The Committee shall have the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the 

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Board or the Committee shall thereafter be to the committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. The members of the Committee shall be appointed by and serve at the pleasure of the Board. From time to time, the Board may increase or decrease the size of the Committee, add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Committee. The Committee shall act pursuant to a vote of the majority of its members or, in the case of a Committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the limitations prescribed by the Plan and the Board, the Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable. 
 
3.4    Committee Composition. Except as otherwise determined by the Board, the Committee shall consist solely of two or more Non-Employee Directors. The Board shall have discretion to determine whether or not it intends to comply with the exemption requirements of Rule 16b-3. However, if the Board intends to satisfy such exemption requirements, with respect to any insider subject to Section 16 of the Exchange Act, the Committee shall be a compensation committee of the Board that at all times consists solely of two or more Non-Employee Directors. Within the scope of such authority, the Board or the Committee may delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Awards to eligible persons who are not then subject to Section 16 of the Exchange Act. Nothing herein shall create an inference that an Award is not validly granted under the Plan in the event Awards are granted under the Plan by a compensation committee of the Board that does not at all times consist solely of two or more Non-Employee Directors.
 
3.5    Indemnification. In addition to such other rights of indemnification as they may have as Directors or members of the Committee, and to the extent allowed by Applicable Laws, the Committee shall be indemnified by the Company against the reasonable expenses, including attorney’s fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which the Committee may be party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted under the Plan, and against all amounts paid by the Committee in settlement thereof (provided, however, that the settlement has been approved by the Company, which approval shall not be unreasonably withheld) or paid by the Committee in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee did not act in good faith and in a manner which such person reasonably believed to be in the best interests of the Company, or in the case of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful; provided, however, that within 60 days after the institution of any such action, suit or proceeding, such Committee shall, in writing, offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding.
 

4.    Shares Subject to the Plan.
 

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4.1    Subject to adjustment in accordance with Section 11, no more than 1,150,000 shares of Common Stock shall be available for the grant of Awards under the Plan (the “Total Share Reserve”). During the terms of the Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards.
 
4.2    Shares of Common Stock available for distribution under the Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner.
 
4.3    Subject to adjustment in accordance with Section 11, no more than 250,000 shares of Common Stock may be issued in the aggregate pursuant to the exercise of Incentive Stock Options (the “ISO Limit”).
 
4.4    The maximum number of shares of Common Stock subject to Awards granted during a single Fiscal Year to any Director, together with any cash fees paid to such Director during the Fiscal Year shall not exceed a total value of $250,000 (calculating the value of any Awards based on the grant date fair value for financial reporting purposes).
 
4.5    Any shares of Common Stock subject to an Award that expires or is canceled, forfeited, or terminated without issuance of the full number of shares of Common Stock to which the Award related will again be available for issuance under the Plan. Notwithstanding anything to the contrary contained herein: shares subject to an Award under the Plan shall not again be made available for issuance or delivery under the Plan if such shares are (a) shares tendered in payment of an Option, (b) shares delivered or withheld by the Company to satisfy any tax withholding obligation, or (c) shares covered by a stock-settled Stock Appreciation Right or other Awards that were not issued upon the settlement of the Award.

4.6    Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired by the Company or with which the Company combines (”Substitute Awards”). Substitute Awards shall not be counted against the Total Share Reserve; provided, that, Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as Incentive Stock Options shall be counted against the ISO limit. Subject to applicable stock exchange requirements, available shares under a shareholder-approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect such acquisition or transaction) may be used for Awards under the Plan and shall not count toward the Total Share Limit.
 

5.    Eligibility.
 
5.1    Eligibility for Specific Awards. Incentive Stock Options may be granted only to Employees. Awards other than Incentive Stock Options may be granted to Employees, Consultants and Directors and those individuals whom the Committee determines are reasonably expected to become Employees, Consultants and Directors following the Grant Date provided that such Award shall only become valid and binding upon such individual becoming an Employee, 

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Consultant or Director.
 
5.2    Ten Percent Shareholders. A Ten Percent Shareholder shall not be granted an Incentive Stock Option unless the Option Exercise Price is at least 110% of the Fair Market Value of the Common Stock on the Grant Date and the Option is not exercisable after the expiration of five years from the Grant Date.

6.    Option Provisions. Each Option granted under the Plan shall be evidenced by an Award Agreement. Each Option so granted shall be subject to the conditions set forth in this Section 6, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options shall be separately designated Incentive Stock Options or Non-qualified Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. Notwithstanding the foregoing, the Company shall have no liability to any Participant or any other person if an Option designated as an Incentive Stock Option fails to qualify as such at any time or if an Option is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the terms of such Option do not satisfy the requirements of Section 409A of the Code. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions: 
 
6.1    Term. Subject to the provisions of Section 5.2 regarding Ten Percent Shareholders, no Incentive Stock Option shall be exercisable after the expiration of 10 years from the Grant Date. The term of a Non-qualified Stock Option granted under the Plan shall be determined by the Committee; provided, however, no Non-qualified Stock Option shall be exercisable after the expiration of 10 years from the Grant Date.
 
6.2    Exercise Price of an Incentive Stock Option. Subject to the provisions of Section 5.2 regarding Ten Percent Shareholders, the Option Exercise Price of each Incentive Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.
 
6.3    Exercise Price of a Non-qualified Stock Option. The Option Exercise Price of each Non-qualified Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing, a Non-qualified Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 409A of the Code.
 
6.4    Consideration. The Option Exercise Price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (a) in cash or by certified or bank check at the time the Option is exercised or (b) in the discretion of the Committee, upon such terms as the Committee shall approve, the Option Exercise Price may be 

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paid: (i) by delivery to the Company of other Company Common Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the Option Exercise Price (or portion thereof) due for the number of shares being acquired, or by means of attestation whereby the Participant identifies for delivery specific shares of Common Stock that have an aggregate Fair Market Value on the date of attestation equal to the Option Exercise Price (or portion thereof) and receives a number of shares of Common Stock equal to the difference between the number of shares thereby purchased and the number of identified attestation shares of Common Stock (a “Stock for Stock Exchange”); (ii) a “cashless” exercise program established with a broker; (iii) by reduction in the number of shares of Common Stock otherwise deliverable upon exercise of such Option with a Fair Market Value equal to the aggregate Option Exercise Price at the time of exercise; (iv) by any combination of the foregoing methods; or (v) in any other form of legal consideration that may be acceptable to the Committee. Unless otherwise specifically provided in the Option, the exercise price of Common Stock acquired pursuant to an Option that is paid by delivery (or attestation) to the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for more than six months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). Notwithstanding the foregoing, during any period for which the Common Stock is publicly traded (i.e., the Common Stock is listed on any established stock exchange or a national market system) an exercise by a Director or Officer that involves or may involve a direct or indirect extension of credit or arrangement of an extension of credit by the Company, directly or indirectly, in violation of Section 402(a) of the Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any Award under this Plan.

6.5    Transferability of an Incentive Stock Option. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.

6.6    Transferability of a Non-qualified Stock Option. A Non-qualified Stock Option may, in the sole discretion of the Committee, be transferable to a Permitted Transferee, upon written approval by the Committee to the extent provided in the Award Agreement. If the Non-qualified Stock Option does not provide for transferability, then the Non-qualified Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option. 

6.7    Vesting of Options. Each Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal; provided, however that any such Option shall not vest less than 12 months following the grant date. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Committee may deem appropriate. The vesting 

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provisions of individual Options may vary. No Option may be exercised for a fraction of a share of Common Stock. The Committee may, but shall not be required to, provide for an acceleration of vesting and exercisability in the terms of any Award Agreement upon the occurrence of a specified event.

6.8    Termination of Continuous Service. Unless otherwise provided in an Award Agreement or in an employment agreement the terms of which have been approved by the Committee, in the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (a) the date three months following the termination of the Optionholder’s Continuous Service or (b) the expiration of the term of the Option as set forth in the Award Agreement; provided that, if the termination of Continuous Service is by the Company for Cause, all outstanding Options (whether or not vested) shall immediately terminate and cease to be exercisable. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Award Agreement, the Option shall terminate.
 
6.9    Extension of Termination Date. An Optionholder’s Award Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service for any reason would be prohibited at any time because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act or any other state or federal securities law or the rules of any securities exchange or interdealer quotation system, then the Option shall terminate on the earlier of (a) the expiration of the term of the Option in accordance with Section 6.1 or (b) the expiration of a period after termination of the Participant’s Continuous Service that is three months after the end of the period during which the exercise of the Option would be in violation of such registration or other securities law requirements.
 
6.10    Disability of Optionholder. Unless otherwise provided in an Award Agreement, in the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (a) the date 12 months following such termination or (b) the expiration of the term of the Option as set forth in the Award Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein or in the Award Agreement, the Option shall terminate.
 
6.11    Death of Optionholder. Unless otherwise provided in an Award Agreement, in the event an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder’s death, but only within the period ending on the earlier of (a) the date 12 months following the date of death or (b) the expiration of the term of such Option as set forth in the Award Agreement. If, after the Optionholder’s death, the Option is not exercised within the 

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time specified herein or in the Award Agreement, the Option shall terminate.
 
6.12    Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Non-qualified Stock Options.
 

7.    Provisions of Awards Other Than Options.
 
7.1    Stock Appreciation Rights.
 
(a)General
 
Each Stock Appreciation Right granted under the Plan shall be evidenced by an Award Agreement. Each Stock Appreciation Right so granted shall be subject to the conditions set forth in this Section 7.1, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. Stock Appreciation Rights may be granted alone (”Free Standing Rights”) or in tandem with an Option granted under the Plan (”Related Rights”).
 
(b)Grant Requirements
 
Any Related Right that relates to a Non-qualified Stock Option may be granted at the same time the Option is granted or at any time thereafter but before the exercise or expiration of the Option. Any Related Right that relates to an Incentive Stock Option must be granted at the same time the Incentive Stock Option is granted.
 
(c)Term of Stock Appreciation Rights
 
The term of a Stock Appreciation Right granted under the Plan shall be determined by the Committee; provided, however, no Stock Appreciation Right shall be exercisable later than the tenth anniversary of the Grant Date.
 
(d)    Vesting of Stock Appreciation Rights
 
Each Stock Appreciation Right may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal; provided, however, that no Stock Appreciation Right may vest prior to 12 months following the Grant Date. The Stock Appreciation Right may be subject to such other terms and conditions on the time or times when it may be exercised as the Committee may deem appropriate. The vesting provisions of individual Stock Appreciation Rights may vary. No Stock Appreciation Right may be exercised for a fraction of a share of Common Stock. The Committee may, but shall not be 

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required to, provide for an acceleration of vesting and exercisability in the terms of any Stock Appreciation Right upon the occurrence of a specified event.

(e)    Exercise and Payment

Upon exercise of a Stock Appreciation Right, the holder shall be entitled to receive from the Company an amount equal to the number of shares of Common Stock subject to the Stock Appreciation Right that is being exercised multiplied by the excess of (i) the Fair Market Value of a share of Common Stock on the date the Award is exercised, over (ii) the exercise price specified in the Stock Appreciation Right or related Option. Payment with respect to the exercise of a Stock Appreciation Right shall be made on the date of exercise. Payment shall be made in the form of shares of Common Stock (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Committee in its sole discretion), cash or a combination thereof, as determined by the Committee.
 
(f)    Exercise Price
 
The exercise price of a Free Standing Right shall be determined by the Committee, but shall not be less than 100% of the Fair Market Value of one share of Common Stock on the Grant Date of such Stock Appreciation Right. A Related Right granted simultaneously with or subsequent to the grant of an Option and in conjunction therewith or in the alternative thereto shall have the same exercise price as the related Option, shall be transferable only upon the same terms and conditions as the related Option, and shall be exercisable only to the same extent as the related Option; provided, however, that a Stock Appreciation Right, by its terms, shall be exercisable only when the Fair Market Value per share of Common Stock subject to the Stock Appreciation Right and related Option exceeds the exercise price per share thereof and no Stock Appreciation Rights may be granted in tandem with an Option unless the Committee determines that the requirements of Section 7.1(b) are satisfied.

(g)    Reduction in the Underlying Option Shares
 
Upon any exercise of a Related Right, the number of shares of Common Stock for which any related Option shall be exercisable shall be reduced by the number of shares for which the Stock Appreciation Right has been exercised. The number of shares of Common Stock for which a Related Right shall be exercisable shall be reduced upon any exercise of any related Option by the number of shares of Common Stock for which such Option has been exercised. 
 
7.2    Restricted Awards.
 
(a)    General
 
A Restricted Award is an Award of actual shares of Common Stock (”Restricted Stock”) 

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or hypothetical Common Stock units (”Restricted Stock Units”) having a value equal to the Fair Market Value of an identical number of shares of Common Stock, which may, but need not, provide that such Restricted Award may not be sold, assigned, transferred or otherwise disposed of, pledged or hypothecated as collateral for a loan or as security for the performance of any obligation or for any other purpose for such period (the “Restricted Period”) as the Committee shall determine, subject to Section 7.2(d) below. Each Restricted Award granted under the Plan shall be evidenced by an Award Agreement. Each Restricted Award so granted shall be subject to the conditions set forth in this Section 7.2, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement or Employment Agreement.
 
(b)    Restricted Stock and Restricted Stock Units
 
(i)Each Participant granted Restricted Stock shall execute and deliver to the Company an Award Agreement with respect to the Restricted Stock setting forth the restrictions and other terms and conditions applicable to such Restricted Stock. If the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (A) an escrow agreement satisfactory to the Committee, if applicable and (B) the appropriate blank stock power with respect to the Restricted Stock covered by such agreement. If a Participant fails to execute an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and stock power, the Award shall be null and void. Subject to the restrictions set forth in the Award, the Participant generally shall have the rights and privileges of a shareholder as to such Restricted Stock, including the right to vote such Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld by the Company for the Participant’s account, and interest may be credited on the amount of the cash dividends withheld at a rate and subject to such terms as determined by the Committee. The cash dividends or stock dividends so withheld by the Committee and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the Participant in cash or, at the discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends, if applicable, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.
 
(ii)The terms and conditions of a grant of Restricted Stock Units shall be reflected in an Award Agreement, except as may be modified by an Employment Agreement. No shares of Common Stock shall be issued at the time a Restricted Stock Unit is granted, and the Company will not be required to set aside funds for the payment of any such Award. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder. The Committee may also grant Restricted Stock Units with a deferral feature, whereby settlement is deferred beyond the vesting date until the occurrence of a future payment date or event set forth in an Award Agreement (”Deferred Stock Units”). At the discretion of the Committee, each Restricted Stock Unit or Deferred Stock Unit (representing one share of Common Stock) 

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may be credited with an amount equal to the cash and stock dividends paid by the Company in respect of one share of Common Stock (”Dividend Equivalents”). In the discretion of the Committee, Dividend Equivalents (A) may be paid currently (and in no case later than the end of the calendar year in which the dividend is paid to the holders of the Common Stock or, if later, the 15th day of the third month following the date the dividend is paid to holders of the Common Stock); (B) may be withheld by the Company and credited to the Participant’s account, and interest may be credited on the amount of cash Dividend Equivalents credited to the Participant’s account at a rate and subject to such terms as determined by the Committee. Dividend Equivalents credited to a Participant’s account and attributable to any particular Restricted Stock Unit or Deferred Stock Unit (and earnings thereon, if applicable) shall be distributed in cash or, at the discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such Dividend Equivalents and earnings, if applicable, to the Participant upon settlement of such Restricted Stock Unit or Deferred Stock Unit and, if such Restricted Stock Unit or Deferred Stock Unit is forfeited, the Participant shall have no right to such Dividend Equivalents; or (C) may be deemed re-invested in additional Restricted Stock Units or Deferred Stock Units based on the Fair Market Value of a share of Common Stock on the applicable dividend payment date and rounded up to the nearest whole share.

(c)    Restrictions
 
(i)    Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in the applicable Award Agreement: (A) if an escrow arrangement is used, the Participant shall not be entitled to delivery of the stock certificate; (B) the shares shall be subject to the restrictions on transferability set forth in the Award Agreement; (C) the shares shall be subject to forfeiture to the extent provided in the applicable Award Agreement; and (D) to the extent such shares are forfeited, the stock certificates shall be returned to the Company, and all rights of the Participant to such shares and as a shareholder with respect to such shares shall terminate without further obligation on the part of the Company.
 
(ii)    Restricted Stock Units and Deferred Stock Units awarded to any Participant shall be subject to (A) forfeiture until the expiration of the Restricted Period, and satisfaction of any applicable Performance Goals during such period, to the extent provided in the applicable Award Agreement, and to the extent such Restricted Stock Units or Deferred Stock Units are forfeited, all rights of the Participant to such Restricted Stock Units or Deferred Stock Units shall terminate without further obligation on the part of the Company and (B) such other terms and conditions as may be set forth in the applicable Award Agreement. 
 
(iii)The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock, Restricted Stock Units and Deferred Stock Units whenever it may determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date the Restricted Stock or Restricted Stock Units or Deferred Stock Units are granted, such action is appropriate.
 

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(d)    Restricted Period
 
With respect to Restricted Awards, the Restricted Period shall commence on the Grant Date and end at the time or times set forth on a schedule established by the Committee in the applicable Award Agreement; provided, however, that no Restricted Award may vest prior to 12 months following the Grant Date. 

No Restricted Award may be granted or settled for a fraction of a share of Common Stock. The Committee may, but shall not be required to, provide for an acceleration of vesting in the terms of any Award Agreement upon the occurrence of a specified event.

(e)    Delivery of Restricted Stock and Settlement of Restricted Stock Units
 
Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in Section 7.2(c) and the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his or her beneficiary, without charge, the stock certificate evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share) and any cash dividends or stock dividends credited to the Participant’s account with respect to such Restricted Stock and the interest thereon, if any. Upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, or at the expiration of the deferral period with respect to any outstanding Deferred Stock Units, the Company shall deliver to the Participant, or his or her beneficiary, without charge, one share of Common Stock for each such outstanding vested Restricted Stock Unit or Deferred Stock Unit (”Vested Unit”) and cash equal to any Dividend Equivalents credited with respect to each such Vested Unit in accordance with Section 7.2(b)(ii) hereof and the interest thereon or, at the discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to such Dividend Equivalents and the interest thereon, if any; provided, however, that, if explicitly provided in the applicable Award Agreement, the Committee may, in its sole discretion, elect to pay cash or part cash and part Common Stock in lieu of delivering only shares of Common Stock for Vested Units. If a cash payment is made in lieu of delivering shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the date on which the Restricted Period lapsed in the case of Restricted Stock Units, or the delivery date in the case of Deferred Stock Units, with respect to each Vested Unit.
 
(f)    Stock Restrictions
 
Each certificate representing Restricted Stock awarded under the Plan shall bear a legend in such form as the Company deems appropriate.
 

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7.3    Performance Share Awards.
 
(a)    Grant of Performance Share Awards
 
Each Performance Share Award granted under the Plan shall be evidenced by an Award Agreement. Each Performance Share Award so granted shall be subject to the conditions set forth in this Section 7.3, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. The Committee shall have the discretion to determine: (i) the number of shares of Common Stock or stock-denominated units subject to a Performance Share Award granted to any Participant; (ii) the Performance Period applicable to any Award; (iii) the conditions that must be satisfied for a Participant to earn an Award; and (iv) the other terms, conditions and restrictions of the Award.
 
(b)    Earning Performance Share Awards
 
The number of Performance Shares earned by a Participant will depend on the extent to which the performance goals established by the Committee are attained within the applicable Performance Period, as determined by the Committee.

7.4    Other Equity-Based Awards. The Committee may grant Other Equity-Based Awards, either alone or in tandem with other Awards, in such amounts and subject to such conditions as the Committee shall determine in its sole discretion. Each Equity-Based Award shall be evidenced by an Award Agreement and shall be subject to such conditions, not inconsistent with the Plan, as may be reflected in the applicable Award Agreement.  

8.    Securities Law Compliance. Each Award Agreement shall provide that no shares of Common Stock shall be purchased or sold thereunder unless and until (a) any then applicable requirements of state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel and (b) if required to do so by the Company, the Participant has executed and delivered to the Company a letter of investment intent in such form and containing such provisions as the Committee may require. The Company shall use reasonable efforts to seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of Common Stock upon exercise of the Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Award or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Awards unless and until such authority is obtained.
 

9.    Use of Proceeds from Stock. Proceeds from the sale of Common Stock pursuant to Awards, or upon exercise thereof, shall be considered as general funds of the Company.
 

10.    Miscellaneous.
 

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10.1    Acceleration of Exercisability and Vesting. The Committee shall have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.
 
10.2    Shareholder Rights. Except as provided in the Plan or an Award Agreement, no Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Award unless and until such Participant has satisfied all requirements for exercise of the Award pursuant to its terms and no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions of other rights for which the record date is prior to the date such Common Stock certificate is issued, except as provided in Section 11 hereof.
 
10.3    No Employment or Other Service Rights. Nothing in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or shall affect the right of the Company or an Affiliate to terminate (a) the employment of an Employee with or without notice and with or without Cause or (b) the service of a Director pursuant to the By-laws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
 
10.4    Transfer; Approved Leave of Absence. For purposes of the Plan, no termination of employment by an Employee shall be deemed to result from either (a) a transfer of employment to the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another, or (b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the Employee’s right to reemployment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing, in either case, except to the extent inconsistent with Section 409A of the Code if the applicable Award is subject thereto.
 
10.5    Withholding Obligations. To the extent provided by the terms of an Award Agreement and subject to the discretion of the Committee, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Award, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (c) delivering to the Company previously owned and unencumbered shares of Common Stock of the Company.
 

11.    Adjustments Upon Changes in Stock. In the event of changes in the outstanding Common Stock or in the capital structure of the Company by reason of any stock or extraordinary cash 

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dividend, stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the Grant Date of any Award, Awards granted under the Plan and any Award Agreements, the exercise price of Options and Stock Appreciation Rights, the Performance Goals to which Performance Share Awards are subject, the maximum number of shares of Common Stock subject to all Awards stated in Section 4 will be equitably adjusted or substituted, as to the number, price or kind of a share of Common Stock or other consideration subject to such Awards to the extent necessary to preserve the economic intent of such Award. In the case of adjustments made pursuant to this Section 11, unless the Committee specifically determines that such adjustment is in the best interests of the Company or its Affiliates, the Committee shall, in the case of Incentive Stock Options, ensure that any adjustments under this Section 11 will not constitute a modification, extension or renewal of the Incentive Stock Options within the meaning of Section 424(h)(3) of the Code and in the case of Non-qualified Stock Options, ensure that any adjustments under this Section 11 will not constitute a modification of such Non-qualified Stock Options within the meaning of Section 409A of the Code. Any adjustments made under this Section 11 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.
 

12.    Effect of Change in Control.
 
12.1    Unless otherwise provided in an Award Agreement, notwithstanding any provision of the Plan to the contrary:
 
(a)    In the event of a Participant’s termination of Continuous Service without Cause or for Good Reason during the 18-month period following a Change in Control, notwithstanding any provision of the Plan or any applicable Award Agreement to the contrary, all outstanding Options and Stock Appreciation Rights shall become immediately exercisable with respect to 100% of the shares subject to such Options or Stock Appreciation Rights, and/or the Restricted Period shall expire immediately with respect to 100% of the outstanding shares of Restricted Stock or Restricted Stock Units as of the date of the Participant’s termination of Continuous Service.
 
(b)    With respect to Performance Share Awards, in the event of a Participant’s termination of Continuous Service without Cause or for Good Reason, in either case, within 18 months following a Change in Control, all Performance Goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions will be deemed met as of the date of the Participant’s termination of Continuous Service.
 
To the extent practicable, any actions taken by the Committee under the immediately preceding clauses (a) and (b) shall occur in a manner and at a time which allows affected Participants the ability to participate in the Change in Control with respect to the shares of Common Stock subject to their Awards.
 
12.2    In addition, in the event of a Change in Control, the Committee may in its 

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discretion and upon at least 10 days’ advance notice to the affected persons, cancel any outstanding Awards and pay to the holders thereof, in cash or stock, or any combination thereof, the value of such Awards based upon the price per share of Common Stock received or to be received by other shareholders of the Company in the event. In the case of any Option or Stock Appreciation Right with an exercise price (or SAR Exercise Price in the case of a Stock Appreciation Right) that equals or exceeds the price paid for a share of Common Stock in connection with the Change in Control, the Committee may cancel the Option or Stock Appreciation Right without the payment of consideration therefor.

12.3    The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to all or substantially all of the assets and business of the Company and its Affiliates, taken as a whole.
 

13.    Amendment of the Plan and Awards.
 
13.1    Amendment of Plan. The Board at any time, and from time to time, may amend or terminate the Plan. However, except as provided in Section 11 relating to adjustments upon changes in Common Stock and Section 13.3, no amendment shall be effective unless approved by the shareholders of the Company to the extent shareholder approval is necessary to satisfy any Applicable Laws. At the time of such amendment, the Board shall determine, upon advice from counsel, whether such amendment will be contingent on shareholder approval.
 
13.2    Shareholder Approval. The Board may, in its sole discretion, submit any other amendment to the Plan for shareholder approval.
 
13.3    Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees, Consultants and Directors with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options or to the nonqualified deferred compensation provisions of Section 409A of the Code and/or to bring the Plan and/or Awards granted under it into compliance therewith.
 
13.4    No Impairment of Rights. Rights under any Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
 
13.5    Amendment of Awards. The Committee at any time, and from time to time, may amend the terms of any one or more Awards; provided, however, that the Committee may not affect any amendment which would otherwise constitute an impairment of the rights under any Award unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
 

14.    General Provisions.
 

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14.1    Forfeiture Events. The Committee may specify in an Award Agreement that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain events, in addition to applicable vesting conditions of an Award. Such events may include, without limitation, breach of non-competition, non-solicitation, confidentiality, or other restrictive covenants that are contained in the Award Agreement or otherwise applicable to the Participant, a termination of the Participant’s Continuous Service for Cause, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Affiliates.

14.2    Clawback. Notwithstanding any other provisions in this Plan, the Company may cancel any Award, require reimbursement of any Award by a Participant, and effect any other right of recoupment of equity or other compensation provided under the Plan in accordance with any Company policies that may be adopted and/or modified from time to time (”Clawback Policy”). In addition, a Participant may be required to repay to the Company previously paid compensation, whether provided pursuant to the Plan or an Award Agreement, in accordance with the Clawback Policy. By accepting an Award, the Participant is agreeing to be bound by the Clawback Policy, as in effect or as may be adopted and/or modified from time to time by the Company in its discretion (including, without limitation, to comply with applicable law or stock exchange listing requirements).
 
14.3    Other Compensation Arrangements. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.
 
14.4    Deferral of Awards. The Committee may establish one or more programs under the Plan to permit selected Participants the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Participant to payment or receipt of shares of Common Stock or other consideration under an Award. The Committee may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Committee deems advisable for the administration of any such deferral program.

14.5    Unfunded Plan. The Plan shall be unfunded.  None of the Company, the Board or the Committee shall be required to establish any special or separate fund or to segregate any assets to assure the performance of its obligations under the Plan.
 
14.6    Recapitalizations. Each Award Agreement shall contain provisions required to reflect the provisions of Section 11.
 
14.7    Delivery. Upon exercise of a right granted under this Plan, the Company shall issue Common Stock or pay any amounts due within a reasonable period of time thereafter. Subject to any statutory or regulatory obligations the Company may otherwise have, for purposes of this Plan, 30 days shall be considered a reasonable period of time.
 

25

14.8    No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan. The Committee shall determine whether cash, additional Awards or other securities or property shall be issued or paid in lieu of fractional shares of Common Stock or whether any fractional shares should be rounded, forfeited or otherwise eliminated.
 
14.9    Other Provisions. The Award Agreements authorized under the Plan may contain such other provisions not inconsistent with this Plan, including, without limitation, restrictions upon the exercise of Awards, as the Committee may deem advisable.
 
14.10    Section 409A. The Plan is intended to comply with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless Applicable Laws require otherwise. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following the Participant’s termination of Continuous Service shall instead be paid on the first payroll date after the six-month anniversary of the Participant’s separation from service (or the Participant’s death, if earlier). Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of any additional tax or penalty on any Participant under Section 409A of the Code and neither the Company nor the Committee will have any liability to any Participant for such tax or penalty.
 
14.11    Disqualifying Dispositions. Any Participant who shall make a “disposition” (as defined in Section 424 of the Code) of all or any portion of shares of Common Stock acquired upon exercise of an Incentive Stock Option within two years from the Grant Date of such Incentive Stock Option or within one year after the issuance of the shares of Common Stock acquired upon exercise of such Incentive Stock Option (a “Disqualifying Disposition”) shall be required to immediately advise the Company in writing as to the occurrence of the sale and the price realized upon the sale of such shares of Common Stock.
 
14.12    Section 16. It is the intent of the Company that the Plan satisfy, and be interpreted in a manner that satisfies, the applicable requirements of Rule 16b-3 as promulgated under Section 16 of the Exchange Act so that Participants will be entitled to the benefit of Rule 16b-3, or any other rule promulgated under Section 16 of the Exchange Act, and will not be subject to short-swing liability under Section 16 of the Exchange Act. Accordingly, if the operation of any provision of the Plan would conflict with the intent expressed in this Section 14.12, such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid such conflict.
 
14.13    Beneficiary Designation. Each Participant under the Plan may from time to time name any beneficiary or beneficiaries by whom any right under the Plan is to be exercised in case of such Participant’s death. Each designation will revoke all prior designations by the same Participant, shall be in a form reasonably prescribed by the Committee and shall be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime.
 

26

14.14    Expenses. The costs of administering the Plan shall be paid by the Company.
 
14.15    Severability. If any of the provisions of the Plan or any Award Agreement is held to be invalid, illegal or unenforceable, whether in whole or in part, such provision shall be deemed modified to the extent, bu3t only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions shall not be affected thereby.
 
14.16    Plan Headings. The headings in the Plan are for purposes of convenience only and are not intended to define or limit the construction of the provisions hereof.
 
14.17    Non-Uniform Treatment. The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among persons who are eligible to receive, or actually receive, Awards. Without limiting the generality of the foregoing, the Committee shall be entitled to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform and selective Award Agreements.
 

15.    Effective Date of Plan. The Plan shall become effective as of the Effective Date, but no Award shall be exercised (or, in the case of a stock Award, shall be granted) unless and until the Plan has been approved by the shareholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.
 

16.    Termination or Suspension of the Plan. The Plan shall terminate automatically on June 20, 2029. No Award shall be granted pursuant to the Plan after such date, but Awards theretofore granted may extend beyond that date. The Board may suspend or terminate the Plan at any earlier date pursuant to Section 13.1 hereof. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

17.    Choice of Law. The law of the State of Colorado shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of law rules.
 
As adopted by the Board of Directors of Natural Gas Services Group, Inc. on March 28, 2019 and amended May 18, 2022.

As approved by the shareholders of Natural Gas Services Group, Inc. on June 20, 2019 and June 16, 2022.

27Exhibit 10.4

 

Beamr Imaging Ltd.

(hereinafter: “the
Company”)

 

COMPENSATION POLICY

 

FOR OFFICE HOLDERS

 

Date of approval of General
Meeting: ________ 2022

 

     

     

    

 

Contents

 

	Item	 	Subject	 	Page
	1	 	Definitions	 	1
	2	 	Object of the compensation policy and its implementation	 	1
	3	 	Guiding principles for examining and determining the tenure and employment of Officers	 	
    2

	4	 	Structure of the compensation package	 	4
	5	 	Fixed compensation	 	6
	6	 	Benefits and related conditions in fixed compensation	 	8
	7	 	Performance dependent compensation (bonus)	 	9
	8	 	Capital compensation	 	12
	9	 	Signing bonus	 	13
	10	 	Conditions for terminating employment	 	13
	11	 	Exemption, indemnity and insurance	 	13

 

    i

     

    

 

		1.	Definitions

 

	 	“The Stock Exchange”	NASDAQ Stock Exchange Ltd.;
	 	 	 
	 	“The Companies Law”	The Companies Law, 5759 – 1999;
	 	 	 
	 	“Officer”	Chief Executive Officer, Chief Operating Officer, Deputy Chief Executive Officer, Assistant Chief Executive Officer, everyone fulfilling such a position in the Company even with a different title, and a Director or Manager reporting directly to the Chief Executive Officer;
	 	 	 
	 	“Amendment 20”	The Companies Law (Amendment No. 20), 5773-2012;
	 	 	 
	 	“Tenure and Employment”	Tenure and employment of an Officer, including giving exemption, insurance, indemnity undertaking or indemnity according to an indemnity permit, retirement grant, and every benefit, other payment or undertaking for such a payment, given due to such service or employment;
	 	 	 
	 	“Compensation Regulations”	The Companies Regulations (Rules Regarding Compensation and Expenses to an External Director), 5760-2000;

 

		2.	Object of the Compensation Policy and its implementation

 

		2.1	Pursuant to the provisions of
Amendment 20, the Company is required to determine a compensation policy for its present and future serving Officers (hereinafter:
“the Policy” or “the Compensation Policy”). The Company’s board of directors (the: “Board”)
approved the Policy on meeting dated on March 14, 2021.

 

		2.2	This document is intended to define and detail the Company’s
Policy relating to the compensation of present and future serving Officers. Determining the Policy, its publication and presentation
for approval of the General Meeting, in accordance with the provisions of the Companies Law, is intended to increase the level of transparency
regarding everything connected with the compensation of the Company’s Officers and improve the ability of the Company’s shareholders
to express their opinions and influence the Compensation Policy of Officers serving the Company or any of its subsidiaries.

 

    -1-

     

    

 

		2.3	In addition, the Policy has been adapted to the Company’s
targets and its long-term work plan and is intended to assist with the following goals:

 

		2.3.1	The Company’s ability to retain and recruit senior executives
and able people to lead the Company to significant achievements and to cope with the challenges facing it;

 

		2.3.2	The creation of a work environment with incentives which
will encourage, among its Officers, motivation to realize the Company’s targets in both the short and long terms, all in accordance with
the Company’s business plan, and all this while taking reasonable risks according to the risks policy decided, from time to time, by
the Company’s Board of Directors;

 

		2.3.3	Creating a suitable balance between the various compensation
components when determining the tenure and employment of Officers in the Company.

 

		2.3.4	Maintaining and strengthening the trust of shareholders and
potential investors in the Company.

 

		2.4	Implementation of the Policy is as from the date of its approval
by the General Meeting of the Company’s shareholders, with the required majority in accordance with the Provisions of Section 267a(b)
of the Companies Law, until the end of (3) three years from the said date of approval by the General Meeting. The aforesaid does not
derogate from the obligation of the Compensation Committee and Board to examine the need to update the Compensation Policy from time
to time, in accordance with the Company’s needs.

 

		2.5	The Compensation Policy will apply to Officers presently serving
in the Company and Officers who will serve the Company or any if its subsidiaries in the future.

 

		3.	Guiding principles for examining and determining the terms
of tenure and employment of Officers

 

		3.1	When examining the terms tenure and employment of Officers
in the Company, the Compensation Committee and Board will examine their education, abilities, expertise, professional experience and
achievements of the Officer or the candidate to be an Officer in the Company, whichever relevant. In addition, the Compensation Committee
and Board will examine the knowledge and understanding of the Officer (or the candidate to serve as an Officer in the Company) with the
Company and his knowledge and understanding of the market and environment in which it operates.

 

		3.2	Without derogating from the aforesaid, the following parameters
will be examined:

 

		3.2.1 	The position he serves in the Company or the position that he
will serve in the Company, the fields of responsibility and extent of his position;

 

    -2-

     

    

 

		3.2.2 	The expected contribution of the Officer to promote the Company’s
targets and business in the long-term;

 

		3.2.3 	Previous payroll agreements signed with the Officer;

 

		3.2.4 	The mix of compensation taking into account considerations of managing risks in the Company and the Company’s
long-term targets;

 

		3.2.5 	The Company’s financial position and results of its operations;

 

		3.2.6 	The relationship between the Officer’s compensation and the average salary and median salaries of the
other employees in the Company (including contractor employees employed by the Company, should there be any, as defined in Section 3 of
Part A of the First Addendum A of the Companies Law). In order to maintain good working relationships within the Company it is important
to maintain reasonable and fair salary differences between the Company’s management level (from the level of Vice President and above)
and the other employees in it. However, it is important to compensate and encourage the Company’s management in order to increase the
Company’s profits, its success and achieve its business targets. As required by law, the Board examined that the ratio between the service
and employment conditions of each one of the officers and the mean and median cost of employing the rest of the Company’s employees.
At the time of formulating this policy and its approval, taking into consideration the Company size and staff of employees, the ratio
between the employment cost of Officers and the average and median compensation cost in the Company is: at the VP level 1.2 times the
average salary cost in the Company; and at the Company’s CEO level 1.4 times the average salary in the Company.

 

		3.3	The comparison to the average market salary – if necessary,
at the discretion of the Compensation Committee, a comparison will be made to the average salary in the relevant market for similar roles
in similar companies when determining the officers’ compensation, as applicable. For the purpose of the comparison, if made, companies
will be selected based on whether it is possible to collect reliable and complete information regarding the officers’ salary, and
which meet the maximum possible number of the following criteria:

 

		3.3.1 	Companies which are engaged in the Company’s fields of operations
or in fields as similar as possible;

 

		3.3.2 	Companies traded on the Stock Exchange which have a similar
market value to that of the Company;

 

		3.3.3 	Companies traded in the same index on the Stock Exchange
in which the Company is traded on the date of making the comparison;

 

    -3-

     

    

 

		3.3.4 	Companies with similar financial data to the Company’s financial
data, such as annual profit/loss, annual gross profits, shareholders’ equity, the level of research and development expenses;

 

		3.3.5 	Companies which employ a similar number of employees to those
of the Company.

 

Regarding this clause: “Similar”
a deviation of 50%, above or below, in all the comparative criteria for the relevant data of the Company will also be taken into account.

 

		3.4	Pursuant to legal easements, an immaterial change in the terms
of an officer’s tenure in the Company who is not serving as a director or CEO will be approved by the Company CEO and will not
require the Compensation Committee’s approval. For the purposes of this paragraph, “material” means over 5% of the
fixed components of the compensation per annum in terms of the employer’s cost.

 

		3.4	Pursuant to legal easements, an immaterial change in the terms
of the CEO will be approved by the Compensation Committee and the Board and will not require the General Meeting. For the purposes of
this paragraph, “material” means over 5% of the fixed components of the compensation per annum in terms of the employer’s
cost.

 

		3.5	An officer in the Company can be employed as an employee or
alternatively provide the Company with services via a company they own, provided that the total expenses of the Company for the said
employment or service provision do not exceed the sum approved by the Company’s Compensation Committee and Board of Directors.

 

		4.	Structure of the compensation package

 

		4.1	The terms of tenure and employment of an Officer include the
following:

 

		4.1.1	Fixed compensation;

 

		4.1.2 	Benefits and conditions related to the fixed compensation;

 

		4.1.3 	Performance dependent compensation (bonus);
	 	 	 

		4.1.4 	Capital compensation (compensation through options or other
securities of the Company);

 

		4.15 	Terms of retirement;

 

		4.16 	Exemption, insurance and indemnity.

 

    -4-

     

    

 

		4.2	The compensation package will be determined and adjusted to
the Officer according to the function that he fulfills / will fulfill and will include the following components:

  

	Position/Group	 	Fixed
 compensation	 	 	Benefits and
 related terms	 	 	 	Bonus	 	 	Capital
 compensation	 	 	Retirement
 Conditions	 	 	Exemption,
 Insurance
 and
 indemnity
	Active Chairman of the Board of Directors	 	+	 	 	-	 	 	 	+	 	 	+	 	 	-	 	 	+
	Member of the Board of
    Directors	 	+	 	 	-	 	 	 	-	 	 	+	 	 	-	 	 	+
	CEO	 	+	 	 	+	 	 	 	+	 	 	+	 	 	+	 	 	+
	VP or anyone reporting directly to the CEO	 	+	 	 	+	 	 	 	+	 	 	+	 	 	+	 	 	+

 

		4.3	To ensure congruence between all the compensation components,
the maximum ratio range between the total compensation package components for a given year for Company officers is presented in the following
table:

 

	Grade	 	Basic Salary	 	 	Social Benefits
 and Related
 Terms1	 	 	Variable
 Compensation
 Performance
 Related1	 	 	Variable
 Compensation
 Equity1	 
	Active Chairman of the Board of Directors	 	 	100	%	 	 	50	%	 	 	35	%	 	 	150	%
	Member of the Board of Directors	 	 	100	%	 	 	0	%	 	 	25	%	 	 	150	%
	CEO	 	 	100	%	 	 	50	%	 	 	50	%	 	 	150	%
	VP**	 	 	100	%	 	 	50	%	 	 	45	%	 	 	150	%

 

 

	1	 The rates are in relation to the basic salary.

 

    -5-

     

    

 

		5.	Fixed compensation

 

		5.1	Fixed compensation summary table for officers

 

	Grade	 	Maximum
    Gross Fixed Compensation
	Active
    Chairman of the Board *	 	Up
    to a maximum of US$ 15,000 per month
	Member
    of the Board	 	Up
    to the maximum, the maximum fixed amounts are stipulated in the Companies Regulations (Rules Regarding Compensation and Expenses
    for an External Director), 2000.
	CEO**	 	Up
    to a maximum of US$ 30,000 per month
	VP**	 	Up
    to a maximum of US$ 25,000 per month

 

		*	An Active Chairman is the chairman of the Board whose FTE is
no less than 20% of a full-time position (100%). The maximum fixed compensation for an active chairman as stated in the table shall not
be subject to his actual FTE in the Company.

 

		**	The amounts stipulated are for a full-time position (100%).

 

		5.2	Active
                                            Chairman of the Board of Directors

 

An Active Chairman of the Board will
be entitled to fixed compensation as specified in paragraph 5.1 above. If necessary, at the Compensation Committee’s discretion,
a comparison will be made to the average salary in the relevant market for a similar role in similar companies when determining the compensation
for the Chairman of the Board of Directors, as applicable. It should be clarified, however, that the Chairman of the Board will be entitled
to different fixed compensation from other Board of Director members serving in the Company only when he is serving as an ‘Active
Chairman of the Board of Directors’, i.e. where his areas of responsibility and role are also in ongoing work in the Company, such
as meetings with investors, active involvement in the daily life of the Company etc. and all in accordance with an employment / services
agreement that the Company signed/will sign therewith.

 

    -6-

     

    

 

		5.3	Members
                                            of the Board of Directors

 

		5.3.1	Members of the Board will be entitled to fixed compensation
in accordance with that set forth in the Compensation Regulations and in accordance with the level of shareholders’ equity of the
Company, as defined in the Compensation Regulations (as will be in force from time to time). To avoid doubt, the Company will be entitled
to pay higher compensation to an expert director (as defined in the Compensation Regulations).

 

		5.3.2 	It should be mentioned that should a Director in the Company also be an employee in it, or provide
                                                                                           services to it, in any position whatsoever, whatever his title, he will not be entitled to compensation for participating in
                                                                                           meetings of the Company’s Board of Directors. For the purposes of this paragraph, a director for whom there is doubt regarding
                                                                                           whether he is a service provider for the Company or not, he will declare before the Compensation Committee members, as per their
                                                                                           request, that he is not a service provider in a personal capacity and also does not provide services via a company that he controls
                                                                                           or holds more than 25% of the issued capital. For the purposes of this paragraph “service provider” shall be defined as
                                                                                           a provider of services in a personal capacity or via a company (or other corporation) in which the director holds more than 25% of
                                                                                           the controlling interest or is a part of the controlling core in that company (or other corporation).

 

		5.3.3 	The Directors who are related or connected to a controlling
shareholder in the Company will not be entitled to any compensation whatsoever for serving as directors in the Company.

 

		5.4	The CEO, VP or anyone reporting directly to the CEO

 

		5.4.1 	For the purpose of this clause “CEO”, “VP”
or “a manager reporting directly to the CEO”, jointly will hereinafter be called: “Manager” or “Managers”,
whichever relevant.

 

		5.4.2 	The amount of fixed compensation of Managers will be determined,
inter alia, in accordance with the provisions of clauses 3.1 and 3.2 above, and it shall not exceed the sum specified in the table in
paragraph 5.1 above.

 

		5.4.3 	In addition, if required, at the Compensation Committee’s
discretion, a comparison will be made to the average salary, as specified in paragraph 3.2.6 above.

 

    -7-

     

    

 

		6.	Benefits and related terms to fixed compensation

 

All the benefits and related terms
detailed below are the maximum benefits and terms.

 

	Benefit / related terms	 	CEO	 	VP or a manager reporting

directly to the CEO
	 	 	 	 	 
	Mobile telephone	 	Yes	 	Yes
	 	 	 	 	 
	Grossing up the value of mobile telephone	 	Yes	 	Yes
	 	 	 	 	 
	Vacation days	 	22	 	22
	 	 	 	 	 
	Accumulating vacation days	 	Yes, for 2 years	 	Yes, for 2 years
	 	 	 	 
	Vacation allowance days	 	As per the law
	 	 	 
	Further
    study  fund (employer 7.5% provision); employee 2.5%)	 	Yes
	 	 	 
	Pensionary insurance in accordance with the law	 	Yes
	Reimbursement of expenses in the role	 	Yes, against receipts	 	Yes, against receipts
	 	 	 	 	 
	Other (newspapers, internet at home, etc.)	 	Internet + newspaper	 	Internet + newspaper
	 	 	 	 	 
	Period of non-competition	 	Up to 12 months	 	Up to 12 months

 

    -8-

     

    

 

		7.	Performance dependent compensation (bonus)

 

Granting bonuses to officers and an
Active Chairman of the Board is intended to provide officers and the Active Chairman of the Board with incentives to achieve targets and
objects which contribute in the long-term to achieve the Company’s business targets and strategic plans, as determined from time to time
by the Company’s Board of Directors. The Company’s success creates an identity of interests with the officers serving in it, as its success
is also their success.

 

The Company’s Board of Directors,
after receiving recommendations from the Compensation Committee may determine, every year, a bonus plan for the Company’s officers and
Active Chairman of the Board of directors, which will be based on the annual budget approved by the Board and all as set forth below:

 

		7.1	Every payment to be paid to an officer in accordance with the
bonus plan will not be considered as part of the fixed compensation and will not be a basis for calculating entitlement or accumulation
of any right/ rights.

 

		7.2	The bonus plan will be approved specifically for every officer
or Active Chairman of the Board of directors, and the Company’s management may decide not include this or that officer or the Active
Chairman of the Board in the bonus plan.

 

		7.3	An officer/ Active Chairman of the Board will be entitled
to a bonus provided that he worked in the Company (or for an Active Chairman of the Board that he has served in his role) for a minimum
period of 12 months prior to the date of granting the bonus.

 

		7.4	The maximum bonus for meeting all the targets set forth below
will be calculated according to the salary of December of the year for which the bonus is given, when:

 

		7.4.1	CEO – up to 3 monthly salaries;

 

		7.4.2 	An Active Chairman of the Board– up to 3 monthly salaries;

 

		7.4.3 	Vice President – up to 3 monthly salaries.

 

		7.5	The bonus plan for officers (excluding CEO and the active
chairman of the board of directors) will based on targets which will be determined by the Compensation Committee and Board in advance
each year, as detailed below:

 

		7.5.1 	All-inclusive Company target: The bonus is based on an index, i.e.: meeting the Company’s expenses target, raising capital, meeting the development plan, business development, achieving regulatory milestones, launching new products. The all-inclusive Company financial target will include at least one and not more than three of the criteria detailed above.

                                                                                                                            

                                                                                The
weight given to the all-inclusive Company target will be between 30% - 50% of the total bonus.

 

    -9-

     

    

 

		7.5.2 	Personal measured targets: These targets will be determined for each officer personally by the CEO (for officers at the level of vice president) and will be based on measurable parameters in the field of the professional responsibility of every officer in the Company. The personal measurable targets will include up to three personal targets.

                                                                                                                        

                                                                                The weight given to the all-inclusive Company target will be between 30% - 50% of the total bonus.

 

		7.5.3 	Discretion of the Manager: The evaluation of the performance of officers at the level of vice president will be done by the Company’s CEO. The evaluation of performance of every officer, will relate to his contribution to the Company during the year for which the bonus is paid, separately from the financial bonuses and the personal bonuses.

                                                                                                                            

                                                                                The weight given to the discretion of the manager will not exceed 20% of the total bonus.

 

Notwithstanding paragraph 7.5 above,
the Compensation Committee and the Company Board may authorize the granting of a grant that shall not exceed the maximum grant as specified
in paragraph 7.4.3 above to an officer who is subordinate to the CEO, according to criteria which are not measurable pursuant to the provisions
of the First Appendix A of the Companies Law.

 

		7.6	The grants plan for the CEO shall be target-based, to be determined
by the Compensation Committee and Board every year, as outlined below:

 

		7.6.1 	All-inclusive company target as specified in paragraph 7.5.1
above. The weight given to the all-inclusive company target will be between 0% - 100% of the grant amount.

 

		7.6.2 	Manager discretion (according to unmeasurable criteria):
CEO performance evaluation will be done by the Compensation Committee and the Board of Directors. The weight given to manager discretion
shall not exceed 3 monthly salaries.

 

		7.7	The grants plan for an Active Chairman of the Board shall
be based on personal targets and measurable company targets, which will be determined by the Compensation Committee and Board in advance
every year, and will depend on compliance with the aforementioned targets. The grant will be presented for the approval by a regular
majority in a meeting.

 

		7.8	The Company’s Compensation Committee and Board will determine
the weight of each of the criteria in the total Company target and the personal measurable targets (as applicable), at their discretion,
and will be entitled to set a minimum threshold for meeting the targets in order to receive the grant.

 

		7.9	The Company’s Compensation Committee and Board have the full
authority to reduce payment of the bonus, or not to pay it at all, if they found that the financial position of the Company will be significantly
harmed or it is not able to make such a payment.

 

    -10-

     

    

 

		7.10	One-time bonus

 

The Company’s Board of Directors, with
the recommendation of the Compensation Committee will be entitled to grant a one-time bonus to an officer for a significant event or events
in the Company which are not included in the targets as specified in paragraph 7.5 above. The amount of the one-time bonus will not exceed
(3) times the amount of the fixed compensation (monthly). In the event of a change in control in the Company, directors in the Company
will be entitled to receive a one-time bonus up to the fixed annual compensation amount of the directors.

 

		7.11 	Should it become clear that after payment of the annual bonus
or the one-time bonus, whichever relevant, that the calculation of the bonus is carried out based on data in which it became clear were
incorrect as a result of an error in good faith and were restated in the Company’s financial statements during a period of three periodic
consecutive financial statements after the date of payment of the grant, the officers will reimburse the Company the part of the bonus
paid to them, which was based, as mentioned, on incorrect data, and this within six (6) months from the date of publication of the restated
financial statements. The amount to be repaid by the officers will be linked to the consumer price index as from the date of publication
of the restated statements until the date of actual repayment.

 

		7.12 	The Board may, after approval is received from the Compensation
Committee, convert the annual bonus to which an officer is entitled into shares or options, provided that their financial value is the
same as the value of the annual bonus.

 

    -11-

     

    

 

		8.	Capital compensation

 

As part of the terms of tenure
and employment of officers in the Company, the Company may combine in its compensation package a capital compensation component. A
component of this type is an incentive for the officers, by their participation in the profits and economic success of the Company.
In addition, this compensation contributes to increasing the officer’s identification with the Company, so that the officer will
remain in it and see it as his future. The capital compensation creates a certain inspiration among the officers, who aspire to be
part of the Company’s success and receive part of its profits. The capital compensation component also enables the Company to employ
skilled people while spreading the salary burden so that it limits the cash flow burden on the Company. The capital compensation
component, while reducing the burden of expenses, enables the Company to free investments and take risks, which are defined by the
Company’s Board by entering into additional and new projects. From recognizing the advantages of the capital compensation component
as part of the total salary package to officers in the Company, the Company may combine in the compensation package of officers in
it with a capital compensation component, all in accordance with the following:

 

		8.1	The options allotted to officers will be allotted in accordance
with the Company’s current options plan, or according to an option plan which will be approved by the Company’s Board from time to time,
in accordance with, as far as possible the provisions of Section 102 of the Income Tax Ordinance (New Version) 5721-1961, and will not
be listed for trading on the Stock Exchange.

 

		8.2	The value of the options, on their issue date, according to
the Black & Scholes formula or according to the binomial model will not exceed 75% of the total fixed annual compensation of an officer
(at the level of VP or CEO). Regarding directors, the value of the options, according to the Black & Scholes formula or according
to the binomial model, will not exceed 2 average salaries of officers in the Company, who are not directors.

 

		8.3	The exercise price of the options will be determined in accordance
with the average price of the Company’s share during the period between three (3) to thirty (30) days of trading prior to the date of
approval of granting the options by the Board of Directors or such respective average price plus up to 50%, as decided by the Board of
Directors.

 

		8.4	The vesting periods of the options to be granted to the officers
will not be less than three years, where the vesting will be a quarterly vesting so that at the end of every quarter, and in the event
as stated of a three year vesting period 1/12 of the options allotted to the officers will vest. It is hereby clarified that the vesting
period will apply as long as the officer works for the Company. The options’ vesting period will be identical for all officers.

 

		8.5	In the event that the employee/employer relations will end
or the engagement between the officer and Company has ended, the date of expiry of the options that vested will not exceed a period between
three months and six months from the date of the end of the employee/employer relations or the end of the engagement, whichever relevant.
The Company’s Board of Directors, after receiving the recommendation of the Compensation Committee, will have the discretion whether
to extend this period, provided that this extended period will not exceed one year.

 

		8.6	The Company’s Board will have the discretion whether to accelerate
the vesting of the options allotted to officers in the Company, on the occurrence of the following events:

 

		8.6.1	Acquisition of control in the Company by a third party;

 

		8.6.2 	The merger of the Company, within the meaning of this term
in the Companies Law.

 

		8.6.3 	Sale or providing an exclusive license on most of the Company’s
intellectual property.

 

    -12-

     

    

 

		9.	Signing Bonus

 

		9.1	The Company may, in circumstances to be approved by the Compensation
Committee and the Company Board as exceptional circumstances, offer a signing bonus to a new officer in the Company.

 

		9.2	The
total signing bonus shall not exceed a sum of 3 monthly salaries gross as to be determined for the relevant officer. The Company may
determine that the officer will be required to repay all or part of the signing bonus allotted thereto to the Company if the officer
does not complete the minimum term of service in the Company.

 

		10.	Conditions for terminating employment

 

In the event of dismissal of an officer
by the Company (not due to “grounds” as defined in the employment/services agreement signed / which will be signed with the
officer) or in the event of resignation of the officer in the Company in circumstances which require severance pay in accordance with
the Law, in addition to the severance pay that the Company is obligated to pay to the officer by Law, the Company may, with the approval
of the Compensation Committee and the Board of Directors, also pay the officer the following payments:

 

		10.1	Prior notice

 

		10.1.1	The period of prior notice for every officer will be determined
by the Compensation Committee and the Company’s Board of Directors, prior to signing the employment agreement with the officer.

 

		10.1.2 	During the prior notice period the officer will be required
to continue to fulfill his function unless the Company’s Board decides to release him from that obligation. In such a case the officer
will be entitled to continue to receive all the terms of tenure and employment without any change.

 

		10.1.3 	Payment for the prior notice period will not exceed the following:

 

	 	CEO	Up to 3 salaries	 
	 	Vice President	Up to 3 salaries	 

 

		10.1.4 	The salary to be paid during the period of prior notice will
be calculated according to the last salary (and according to the fixed compensation only, i.e., not including bonuses paid to the officer)
but including related social benefits paid to the officer prior to the date of dismissal / resignation, in such a situation that entitles
payment of severance pay.

 

		10.3 	The Board may, after receiving confirmation from the Compensation
Committee, convert the grants as specified in paragraphs 10.2 and 10.3 into Company shares, provided their financial value is equal to
the value of the converted grants.

 

		11.	Exemption, indemnity and insurance

 

		11.1 	Directors and Office Holders will be covered by a directors
and officers liability insurance policy that will be maintained by the Company according to applicable law. The terms of such policy
shall provide for coverage of up to US$ 5,000,000 (per claim and in the aggregate), provided that the annual premium shall not exceed
the higher of US$1,000,000 or 1% of the maximum coverage amount. Such insurance coverage may include Directors’ and officers’ liability
insurance with respect to specific events, such as public offerings, or with respect to periods to time following which the then existing
insurance coverage ceases to apply, such as, by way of example only, “run-off” coverage following a termination of service
or employment or in other circumstances.

 

		11.2 	The Company may provide release and indemnification letters
to the directors and Office Holders according to the version approved from time to time by the authorized bodies of the Company.

 

    -13-

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