Document:

Document

[CEO/CFO Form]

PREFERRED APARTMENT COMMUNITIES, INC. 
EXECUTIVE SEVERANCE AND CHANGE-IN-CONTROL PLAN
PARTICIPATION AGREEMENT
This Participation Agreement (the “Participation Agreement” or this “Agreement”) is entered into effective as of __________________________, 2020 (the “Participation Date”), by and between Preferred Apartment Advisors, LLC. (the “Employer”) and you (the “Participant”), pursuant to the Preferred Apartment Communities, Inc. Executive Severance and Change in Control Plan (the “Plan”).  The Participant agrees that the terms and conditions of this Agreement and the Plan will govern the Participant’s rights with respect to the severance and change-in-control benefits provided under Sections 5(b) and 5(c) of the Plan (the “Benefits”).  The Employer agrees to be bound by all the terms of the Plan that apply to it as the employing Affiliate of the Company. The Participant and the Employer agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Participation Agreement. Except as defined in this Participation Agreement (including Exhibit A attached hereto), capitalized terms have the same meanings ascribed to them in the Plan.
The Participant and the Employer have entered into this Participation Agreement and have agreed to the terms and conditions included in Exhibit A as an express incentive for the Participant and the Employer to enter into the Participation Agreement and in consideration for the Employer or any of its Affiliates providing the consideration set forth in the Participation Agreement and Confidential Information to the Participant, to further protect the trade secrets and Confidential Information disclosed or entrusted to the Participant, to protect the business goodwill of the Company Group and its Affiliates, to protect the business opportunities disclosed or entrusted to the Participant, and to protect the other legitimate business interests of the Company Group and its Affiliates. In executing this Participation Agreement, the Participant expressly acknowledges and agrees that (a) the Participation Agreement aligns the Participant’s interests with the Company Group’s and its Affiliates’ long-term business interests and creates a further incentive for the Participant to build the Company Group’s and its Affiliates’ goodwill, and (b) the provisions contained in Exhibit A are reasonably related to the Company Group’s and its Affiliates’ legitimate interests in protecting their goodwill.
The terms and conditions of this Participation Agreement as offered herein must be accepted by the Participant within five business days of the date this Agreement is signed by the Employer below. Failure to timely accept the terms by such time will result in immediate and irrevocable cancellation of the participation offered.
1. Participation.  In accordance with, and subject to, the terms and conditions of the Plan, the Employer hereby allows the Participant to participate in the Plan and to be treated as an Eligible Individual under the Plan.
2. Applicable Severance Multiplier.  The Participant is hereby designated as eligible to receive severance benefits pursuant to Section 5(b) of the Plan.  Pursuant to the Participant’s participation as an Eligible Individual under the Plan, upon a qualifying termination of 

employment as provided in Section 5(b) or Section 5(c) of the Plan, the Participant will be entitled to receive certain severance benefits that are based upon the Participant’s Applicable Severance Multiple.  The Participant’s Applicable Severance Multiple is 2.0, for purposes of Section 5(b) of the Plan and 3.0 for purposes of Section 5(c) of the Plan.  
3. “Cause” Definition.  The following clause shall be added to the end of the definition of “Cause” under the Plan:
“No termination of employment shall be for Cause as set forth in clause (i), (ii), (vi), or (vii) above until there shall have been delivered to the Eligible Individual a copy of a written notice setting forth that the Eligible Individual has engaged in the conduct described in clause (i), (ii), (vi), or (vii), as applicable, and specifying the particulars thereof in detail. No act, nor failure to act, on the Eligible Individual’s part shall be considered “willful” unless he has acted, or failed to act, with an absence of good faith and without reasonable belief that his action or failure to act was in the best interest of the Company and its Affiliates. Notwithstanding anything contained in this Plan to the contrary, no failure to perform by the Eligible Individual after Notice of Termination is given by the Eligible Individual shall constitute Cause.”
4. “Good Reason” Definition.  The following clause (v) shall be added to the end of the first sentence included in the definition of “Good Reason” under the Plan: 
“, or (v)  following a Change in Control, (A) the Eligible Individual ceasing to serve as the [Chief Executive Officer] [Chief Financial Officer] of the acquiring or successor company, reporting directly to the Board of Directors of such entity, or (B) the acquiring or successor company not existing as a publicly traded corporation.”
In addition, the reference to “clauses (i) through (iv) above” in the penultimate sentence of the “Good Reason” definition under the Plan shall be substituted with a reference to “clauses (i) through (v) above.” 
5. Restrictive Covenants; Recovery of Payments.  In exchange for the Employer’s entry into this Agreement, the Participant agrees to the obligations set forth in Exhibit A. If the Committee determines that the Participant has committed a breach of any such obligations, upon notice from the Employer, the Participant shall forfeit and/or reimburse to the Employer all or a portion of the Benefits subject to this Participation Agreement and the Plan, as the Committee deems appropriate under the circumstances.

[Signature Page Follows]

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PREFERRED APARTMENT ADVISORS, LLC

By: __________________________________ 
Name:   _______________________________
Title:     _______________________________

PREFERRED APARTMENT COMMUNITIES, INC.

By:      ___________________________________  
Name:   ______________________________
Title:     _______________________________

PARTICIPANT
____________________________________________ 
Date: ________________________
[Insert Name]

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EXHIBIT A
TO PREFERRED APARTMENT COMMUNITIES, INC.
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN 
PARTICIPATION AGREEMENT

1. Defined Terms; Employment Relationship; Application of Exhibit A.  Capitalized terms used in this Exhibit A that are not defined in this Exhibit A shall have the meanings assigned to such terms in the Preferred Apartment Communities Severance and Change in Control Plan (the “Plan”) or in the Participation Agreement to which this Exhibit A is attached (the “Agreement”), as applicable.  This Exhibit A supersedes any other similar restrictive covenants contained in any other agreement between the Participant and any member of the Company Group and any of their Affiliates.
As used in this Exhibit A, the following terms shall have the following meanings:  
1.(a) “Business” means the Company Group’s business at the time of the Participant’s termination of employment, as described in the filings of Preferred Apartment Communities, Inc. with the Securities and Exchange Commission; provided, however, that if the Participant’s termination of employment occurs within 60 days following the occurrence of a Change in Control, “Business” shall mean the business described in this Section 1(a) as in existence immediately prior to the Change in Control.
2.(b) the “Company Group” means and includes, by virtue of existing agreements to control and safeguard the intellectual property developed, licensed, used, maintained and owned by each of, Preferred Apartment Communities, Inc., which is domiciled in Atlanta, Georgia, and all other companies in which Preferred Apartment Communities, Inc. owns a direct or indirect controlling interest or is the controlling shareholder, together with all direct and indirect subsidiaries and successors of all such companies.
3.(c)  “Confidential Information” means any of the following: (i) non-public information, (ii) knowledge, (iii) data, (iv) Trade Secrets and any other information that provides any member of the Company Group with a competitive advantage by virtue of not being publicly known, (v) proprietary information, (vi) confidential information, or (vii) non-public information provided to any member of the Company Group by its tenants, lenders, borrowers, or any other customers, suppliers, contractors, subcontractors, agents or representatives with an expectation of confidentiality that is obtained by or disclosed to the Participant as a result of the Participant’s employment or affiliation with the Company Group.
4.(d) “Competing Business” means any business, individual, partnership, firm, corporation, or other entity which engages in the Business in the Restricted Area.  In no event will any member of the Company Group be deemed a Competing Business. 
5.(e) “Developments” means any invention, modification, discovery, design, development, improvement, process, software program, work of authorship, documentation, 
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formula, data, technique, know-how, secret or intellectual property right whatsoever or any interest therein, whether or not patentable or registrable under copyright or similar statutes or subject to analogous protection.
6.(f) “Fund” means any investment fund, pooling vehicle or separate account managed or established by any member of the Company Group or any of such members’ Affiliates (regardless of sector or geographic focus).
7.(g) “Governmental Authority” means any governmental, quasi-governmental, state, county, city, or other political subdivision of the United States or any other country, or any agency, court or instrumentality, foreign or domestic, or statutory or regulatory body thereof. 
8.(h) “Legal Requirement” means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization, or other directional requirement (including, without limitation, any of the foregoing that relates to environmental standards or controls, energy regulations, and occupational, safety, and health standards or controls, including those arising under environmental laws) of any Governmental Authority. 
9.(i) “Noncompetition Prohibited Period” means the period during which the Participant is employed by any member of the Company Group and ending twelve (12)  months following the date on which the Participant is no longer employed by any member of the Company Group. 
10.(j) “Nonsolicitation Prohibited Period” means the period during which the Participant is employed by any member of the Company Group and ending twenty-four (24) months following the date on which the Participant is no longer employed by any member of the Company Group. 
11.(k) “Prohibited Period” means the Noncompetition Prohibited Period and/or the Nonsolicitation Prohibited Period, as applicable.
12.(l) “Portfolio Company” means any individual or corporation, association, partnership, limited liability company, joint venture, joint stock or other company, business trust, trust, organization, or other entity of any kind in which any Fund has an investment (or such equivalent term as defined in the applicable fund or separate account governing documents).
13.(m) “Records” means all files, records, documents, memoranda, books, papers, plans, information, letters, drawings, specifications, equipment and similar items, and copies thereof or therefrom, in any physical or electronic form (e.g., printed copies, electronically stored files, computer hard drive, microfilm, etc.), relating to the business of any member of the Company Group, whether prepared by the Participant or otherwise coming into the Participant’s presence.
14.(n) “Restricted Area” means any geographical area within 25 miles of any location in which any member of the Company Group engages in the Business, which, for the 
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sake of clarity,  includes any property site managed, operated, financed, or otherwise utilized in the Business by any member of the Company Group.
15.(o) “Trade Secrets” means the trade secrets of the Company Group as defined under applicable law. 
2. Confidential Information
i.The Participant acknowledges that all Confidential Information is the property of the Company Group.
ii.The Participant will not disclose or use for the Participant’s own benefit or purposes or the benefit or purposes of any other person, entity or enterprise, other than the Company Group, any Confidential Information; provided that the foregoing shall not apply to the disclosure of information which (i) has become public other than as a result of the Participant’s breach of this covenant or a third party’s breach of obligations owed to the Company Group, (ii) is acquired by the Participant from others who have no direct or indirect confidential commitment to the any member of the Company Group with respect to same, (iii) is independently developed by the Participant, (iv) is required by law to be disclosed, so long as the Participant has provided the Employer with at least five (5) days’ written notice prior to any disclosure required by law. The Participant understands that the covenant contained in the foregoing sentence shall apply (A) with respect to Confidential Information other than Trade Secrets, at all times during employment with the Employer or any other member of the Company Group and for three (3) years thereafter, and (B) with respect to Trade Secrets, at all times such data or information constitutes a “trade secret” under applicable law. 
For purposes of clarity, the Participant acknowledges that as used in this Agreement, the meaning of Confidential Information shall also include, without limitation, proprietary or confidential information relating to: any information (whether oral or written) with respect to, or any matter relating to any member of the Company Group, any Portfolio Company or any Fund, or any Affiliate of any of the foregoing, including any and all reports, data, interpretations, forecasts, records, analyses, compilations, studies or other documents prepared by or provided to the Participant in connection with the Participant’s provision of services to any member of the Company Group or an Affiliate or in connection with any existing or contemplated transaction or investment related activities of any member of the Company Group, any Fund, any Portfolio Company, or any Affiliate of any of the foregoing (whether or not such information was prepared by or provided to the Participant in his or her capacity as an employee or in connection with the Participant’s provision of services).
iii.The Participant agrees that even if information in the Participant’s possession is not within or covered by the description set forth in Section 2(b), if the information in the Participant’s possession gives any member of the Company Group a competitive advantage over its competitors by virtue of it not being publicly known, then it is still deemed to constitute Confidential Information for purposes of this Agreement.
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iv.The Participant acknowledges that if Confidential Information were disclosed to third parties or used by third parties and/or the Participant without written permission of the Employer, that the disclosure or use would seriously and irreparably damage the Company Group and would cause the Company Group to lose certain competitive advantages.
v.The Participant agrees that all Records shall remain the exclusive property of the applicable member of the Company Group and shall not be removed from the premises of the applicable member of the Company Group unless in accordance with a written policy of the Employer or upon the written consent of the General Counsel of the Employer.
vi.The Participant agrees that upon the effective date of the termination of the Participant’s employment with the Employer for any reason, the Participant will immediately return to the Employer all Records and not retain any copies thereof.
vii.Notwithstanding the foregoing, nothing in this Agreement shall prohibit or restrict Participant from lawfully: (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental authority regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to Participant from any such governmental authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any such governmental authority relating to a possible violation of law; or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law.  Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law; (B) is made to the individual’s attorney in relation to a lawsuit for retaliation against the individual for reporting a suspected violation of law; or (C) is made in a complaint or other document filed in a lawsuit or proceeding, if such filing is made under seal.  Nothing in this Agreement requires Participant to obtain prior authorization before engaging in any conduct described in this paragraph, or to notify the Employer that Participant has engaged in any such conduct. 
3. Non-Disparagement:  The Participant shall refrain, both during and for a period of  thirty-six (36) months after the termination of the employment relationship, from publishing any oral or written statements about any member of the Company Group or any of their affiliates, or any member of the Company Group’s or such affiliates’ directors, officers, employees, consultants, agents, representatives, customers, or suppliers that are disparaging, slanderous, libelous, or defamatory or that place any member of the Company Group or any of their affiliates, or any member of the Company Group’s or any such affiliates’ directors, officers, employees, consultants, agents, or representatives in a false light before the public.
4. Non-Competition; Non-Solicitation.  The Participant and the Employer agree to the non-competition and non-solicitation provisions of this Exhibit A in consideration for the Confidential Information provided by the Company Group and its Affiliates to the Participant 
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pursuant to the Participant’s employment with the Employer, to further protect the Trade Secrets and Confidential Information disclosed or entrusted to the Participant or created or developed by the Participant for the Company Group or its Affiliates, to protect the business goodwill of the Company Group and its Affiliates developed through the efforts of the Participant and the business opportunities disclosed or entrusted to the Participant and the other legitimate business interests of the Company Group and its Affiliates, and as an express incentive for the Employer to enter into the Agreement.
1.Subject to the exceptions set forth in Section 4(b) below, the Participant expressly covenants and agrees that during the Noncompetition Prohibited Period, the Participant will refrain from carrying on or engaging in, directly or indirectly, any Competing Business.  Accordingly, the Participant will not, directly or indirectly, own, manage, operate, join, become an employee of, partner in, owner, or member of, control or participate in, be connected with or loan money to, sell or lease equipment or property to, serve as a consultant to, or as a member of the board of directors of, or otherwise be affiliated with any Competing Business in the Restricted Area.
2.Notwithstanding the restrictions contained in Section 4(a), the Participant or any of the Participant’s affiliates may, without violating the provisions of Section 4(a) maintain as a passive investment an ownership interest in any entity or investment vehicle, whether public or private; provided, that neither the Participant nor any of the Participant’s affiliates has the power, directly or indirectly, to control or direct the management or affairs of any such entity and is not involved in the management of such entity . 
3.The Participant further expressly covenants and agrees that during the Nonsolicitation Prohibited Period, the Participant will not, and the Participant will cause the Participant’s affiliates not, to  engage or employ, or solicit or contact with a view to the engagement or employment of, any person who is an officer or employee of any member of the Company or any of their Affiliates,  canvass, solicit, approach, divert or entice away, or cause to be canvassed, solicited, approached, diverted or enticed away, from any member of the Company Group or any of their Affiliates any person who or which is a retail or office tenant of any of such entities during the period during which the Participant was employed by any member of the Company Group or any such members’ Affiliates, to the extent such activity is to the detriment of the Company Group, or (iii) canvass, solicit, approach, divert or entice away, or cause to be canvassed, solicited, approached, diverted, or enticed away, from any member of the Company Group or any of their Affiliates any person who or which is a borrower of any of such entities during the period during which the Participant was employed by any member of the Company Group or any such members’ Affiliates.  Notwithstanding the foregoing, the restrictions of Section 4(c)(i) shall not apply with respect to an officer or employee who responds to a general solicitation that is not specifically directed at officers and employees of any member of the Company Group or any of their Affiliates.
4.Before accepting employment, engaging in service, or otherwise becoming affiliated with any other person or entity during any Prohibited Period, the Participant will inform such person or entity of the restrictions contained in this Exhibit A.
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5. Relief.  The Participant and the Employer agree and acknowledge that the limitations as to time, geographical area, and scope of activity to be restrained as set forth in Section 4 are reasonable and do not impose any greater restraint than is necessary to protect the legitimate business interests of the Company Group and its Affiliates.  The Participant and the Employer also acknowledge that money damages would not be a sufficient remedy for any breach of this Exhibit A by the Participant, and the Employer shall be entitled to enforce the provisions of this Exhibit A by terminating payments then owing to the Participant under the Plan (or to recoup payments previously made thereunder) or otherwise, and any member of the Company Group or its Affiliates shall be entitled to specific performance and injunctive relief as remedies for such breach or any threatened breach.  Such remedies shall not be deemed the exclusive remedies for a breach of this Exhibit A but shall be in addition to all remedies available at law or in equity, including the recovery of damages from the Participant and the Participant’s agents. 
6. Reasonableness; Enforcement.  The Participant hereby represents that the Participant has read and understands, and agrees to be bound by, the terms of this Exhibit A.  The Participant acknowledges that the geographic scope and duration of the covenants contained in this Exhibit A are the result of arm’s-length bargaining and are fair and reasonable in light of (a) the nature and wide geographic scope of the Company Group’s operations of the Business, (b) the Participant’s contact with the Company Group’s business in all jurisdictions in which it is conducted, which includes the entire Restricted Area, and (c) the amount of confidential information that the Participant is receiving in connection with the performance of the Participant’s duties on behalf of the Company Group and/or its Affiliates and the amount of goodwill with which the Participant is and/or will be connected and will help build on behalf of the Company Group and its Affiliates.  It is the desire and intent of the parties that the provisions of this Exhibit A be enforced to the fullest extent permitted under applicable Legal Requirements, whether now or hereafter in effect; therefore, to the extent permitted by applicable Legal Requirements, the Participant and the Employer hereby waive any provision of applicable Legal Requirements that would render any provision of this Exhibit A invalid or unenforceable. 
7. Reformation; Severability.  The Employer and the Participant agree that the foregoing restrictions are reasonable under the circumstances and that any breach of the covenants contained in this Exhibit A would cause irreparable injury to the Company Group and its Affiliates.  The Participant understands that the foregoing restrictions may limit the Participant’s ability to engage in certain businesses anywhere in the Restricted Area during the Noncompetition Prohibited Period, but acknowledges that the Participant will receive sufficient consideration from the Employer and its Affiliates to justify such restriction.  Further, the Participant acknowledges that the Participant’s skills are such that the Participant can be gainfully employed in non-competitive employment and that the agreement  to not compete will not prevent the Participant from earning a living.  Nevertheless, if any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced.  If, due to applicable law, a court is not permitted to modify a restriction within this Exhibit A that it deems overly broad, then the court 
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shall have the power to, and shall, sever such overly broad restriction (or any portion thereof) so that the restrictions after such severance are enforceable and shall be fully enforced.  By agreeing to this contractual modification prospectively at this time, the Employer and the Participant intend to make this Exhibit A enforceable under the law or laws of all applicable states and other jurisdictions so that the entire agreement not to compete and this Agreement as prospectively modified shall remain in full force and effect and shall not be rendered void or illegal.  Such modification shall not affect the payments made to the Participant under the Plan. 
8. Applicable Law; Venue.  This Participation Agreement is governed by Georgia law, without giving effect to its conflicts of law principles.  The Participant consents to the jurisdiction of the Fulton County District State Court in Atlanta, Georgia although the Company Group may choose to seek enforcement of the Restrictive Covenants in any jurisdiction where the Participant may be found.
9. Third Party Beneficiary. The Participant and Employer agree that any member of the Company Group who is not a party to this agreement shall be a third-party beneficiary and is entitled to enforce the obligations set forth in this Exhibit A as if a party hereto.

 

A-7spro-ex101_83.htm

Exhibit 10.1

SPERO THERAPEUTICS, INC.

2019 Inducement Equity Incentive Plan

(As Amended on June 23, 2020)

	
1.
	
DEFINITIONS.

Unless otherwise specified or unless the context otherwise requires, the following terms, as used in this Spero Therapeutics, Inc. 2019 Inducement Equity Incentive Plan, have the following meanings: 

Administrator means the Board of Directors, unless it has delegated power to act on its behalf to the Committee, in which case the term Administrator means the Committee. 

Affiliate means a corporation or other entity which, for purposes of Section 424 of the Code, is a parent or subsidiary of the Company, direct or indirect. 

Agreement means an agreement between the Company and a Participant delivered pursuant to the Plan and pertaining to a Stock Right, in such form as the Administrator shall approve. 

Board of Directors means the Board of Directors of the Company. 

Cause means, with respect to a Participant (a) dishonesty with respect to the Company or any Affiliate, (b) insubordination, substantial malfeasance or non-feasance of duty, (c) unauthorized disclosure of confidential information, (d) breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or similar agreement between the Participant and the Company or any Affiliate, and (e) conduct substantially prejudicial to the business of the Company or any Affiliate; provided, however, that any provision in an agreement between the Participant and the Company or an Affiliate, which contains a conflicting definition of Cause for termination and which is in effect at the time of such termination, shall supersede this definition with respect to that Participant.  The determination of the Administrator as to the existence of Cause will be conclusive on the Participant and the Company. 

Code means the United States Internal Revenue Code of 1986, as amended including any successor statute, regulation and guidance thereto. 

Committee means the Company’s compensation committee (as constituted in compliance with Rule 5605(d)(2) of the Nasdaq Listing Rules) in order to comply with the exemption from the stockholder approval requirement for “inducement grants” provided under Rule 5635(c)(4) of the Nasdaq Listing Rules. 

Common Stock means shares of the Company’s common stock, $0.001 par value per share. 

Company means Spero Therapeutics, Inc., a Delaware corporation. 

 

 

Consultant means any natural person who is an advisor or consultant who provides bona fide services to the Company or its Affiliates, provided that such services are not in connection with the offer or sale of securities in a capital raising transaction, and do not directly or indirectly promote or maintain a market for the Company’s or its Affiliates’ securities. 

Disability or Disabled means permanent and total disability as defined in Section 22(e)(3) of the Code. 

Employee means any employee of the Company or of an Affiliate, designated by the Administrator to be eligible to be granted one or more Stock Rights under the Plan. 

Exchange Act means the United States Securities Exchange Act of 1934, as amended. 

Fair Market Value of a Share of Common Stock means: 

(1)If the Common Stock is listed on a national securities exchange or traded in the over-the-counter market and sales prices are regularly reported for the Common Stock, the closing or, if not applicable, the last price of the Common Stock on the composite tape or other comparable reporting system for the trading day on the applicable date and if such applicable date is not a trading day, the last market trading day prior to such date; 

(2)If the Common Stock is not traded on a national securities exchange but is traded on the over-the-counter market, if sales prices are not regularly reported for the Common Stock for the trading day referred to in clause (1), and if bid and asked prices for the Common Stock are regularly reported, the mean between the bid and the asked price for the Common Stock at the close of trading in the over-the-counter market for the most recent trading day on which Common Stock was traded on the applicable date and if such applicable date is not a trading day, the last market trading day prior to such date; and 

(3)If the Common Stock is neither listed on a national securities exchange nor traded in the over-the-counter market, such value as the Administrator, in good faith, shall determine in compliance with applicable laws. 

ISO means an option intended to qualify as an incentive stock option under Section 422 of the Code. 

Non-Qualified Option means an option which is not intended to qualify as an ISO. 

Option means a Non-Qualified Option granted under the Plan. 

Participant means an Employee of the Company or an Affiliate to whom one or more Stock Rights are granted under the Plan.  As used herein, “Participant” shall include “Participant’s Survivors” where the context requires. 

Plan means the Spero Therapeutics, Inc. 2019 Inducement Equity Incentive Plan. 

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Securities Act means the Securities Act of 1933, as amended. 

Shares means shares of the Common Stock as to which Stock Rights have been or may be granted under the Plan or any shares of capital stock into which the Shares are changed or for which they are exchanged within the provisions of Paragraph 3 of the Plan.  The Shares issued under the Plan may be authorized and unissued shares or shares held by the Company in its treasury, or both. 

Stock-Based Award means a grant by the Company under the Plan of an equity award or an equity based award which is not an Option or a Stock Grant. 

Stock Grant means a grant by the Company of Shares under the Plan. 

Stock Right means a right to Shares or the value of Shares of the Company granted pursuant to the Plan – a Non-Qualified Option, a Stock Grant or a Stock-Based Award. 

Survivor means a deceased Participant’s legal representatives and/or any person or persons who acquired the Participant’s rights to a Stock Right by will or by the laws of descent and distribution. 

	
2.
	
PURPOSES OF THE PLAN.

The Plan is intended to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract new Employees who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities that are intended to better align the interests of such persons with those of the Company’s stockholders. The Company intends that the Plan be reserved for persons to whom the Company may issue securities without stockholder approval as an inducement pursuant to Listing Rule 5635(c)(4) of the corporate governance rules of the Nasdaq Stock Market.

	
3.
	
SHARES SUBJECT TO THE PLAN.

(a)The number of Shares which may be issued from time to time pursuant to this Plan shall be 751,700 of shares of Common Stock, or the equivalent of such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any stock split, stock dividend, combination, recapitalization or similar transaction in accordance with Paragraph 24 of the Plan. 

(b)If an Option ceases to be “outstanding”, in whole or in part (other than by exercise), or if the Company shall reacquire at not more than its original issuance price any Shares issued pursuant to a Stock Grant or Stock-Based Award, or if any Stock Right expires or is forfeited, cancelled, or otherwise terminated or results in any Shares not being issued, the unissued or reacquired Shares which were subject to such Stock Right shall again be available for issuance from time to time pursuant to this Plan.  Notwithstanding the foregoing, if a Stock Right is exercised, in whole or in part, by tender of Shares or if the Company or an Affiliate’s tax withholding obligation is satisfied by withholding Shares, the number of Shares deemed to have been issued under the Plan for purposes of the limitation set forth in Paragraph 3(a) above shall 

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be the number of Shares that were subject to the Stock Right or portion thereof, and not the net number of Shares actually issued.  

	
4.
	
ADMINISTRATION OF THE PLAN.

The Administrator of the Plan will be the Board of Directors, except to the extent the Board of Directors delegates its authority to the Committee, in which case the Committee shall be the Administrator.  Subject to the provisions of the Plan, the Administrator is authorized to: 

(a)Interpret the provisions of the Plan and all Stock Rights and to make all rules and determinations which it deems necessary or advisable for the administration of the Plan; 

(b)Determine which Employees shall be granted Stock Rights; 

(c)Determine the number of Shares for which a Stock Right or Stock Rights shall be granted and specify the terms and conditions upon which Stock Rights may be granted; 

(d)Amend any term or condition of any outstanding Stock Right, including, without limitation, to reduce or increase the exercise price or purchase price, accelerate the vesting schedule or extend the expiration date, provided that (i) such term or condition as amended is permitted by the Plan; (ii) any such amendment shall not impair the rights of a Participant under any Stock Right previously granted without such Participant’s consent or in the event of death of the Participant the Participant’s Survivors; and (iii) any such amendment shall be made only after the Administrator determines whether such amendment would cause any adverse tax consequences to the Participant; 

(e)Buy out for a payment in cash or Shares, a Stock Right previously granted and/or cancel any such Stock Right and grant in substitution therefor other Stock Rights, covering the same or a different number of Shares and having an exercise price or purchase price per share which may be lower or higher than the exercise price or purchase price of the cancelled Stock Right, based on such terms and conditions as the Administrator shall establish and the Participant shall accept; and 

(f)Adopt any sub-plans applicable to residents of any specified jurisdiction as it deems necessary or appropriate in order to comply with or take advantage of any tax or other laws applicable to the Company, any Affiliate or to Participants or to otherwise facilitate the administration of the Plan, which sub-plans may include additional restrictions or conditions applicable to Stock Rights or Shares issuable pursuant to a Stock Right; 

provided, however, that all such interpretations, rules, determinations, terms and conditions shall be made and prescribed in the context of not causing any adverse tax consequences under Section 409A of the Code. Subject to the foregoing, the interpretation and construction by the Administrator of any provisions of the Plan or of any Stock Right granted under it shall be final, unless otherwise determined by the Board of Directors, if the Administrator is the Committee. In addition, if the Administrator is the Committee, the Board of Directors may take any action under the Plan that would otherwise be the responsibility of the Committee. 

4

 

Notwithstanding the foregoing, any grants of Stock Rights under the Plan made by the Board of Directors must be approved by the majority of the Company’s independent directors (as defined in Rule 5605(a)(2) of the Nasdaq Listing Rules) in order to comply with Nasdaq Listing Rule 5635(c)(4).  

	
5.
	
ELIGIBILITY FOR PARTICIPATION.

The Administrator will, in its sole discretion, name the Participants in the Plan; provided, however, that each Participant must be an Employee of the Company or of an Affiliate at the time a Stock Right is granted.  Notwithstanding the foregoing, the Administrator may authorize the grant of a Stock Right to a person not then an Employee of the Company or of an Affiliate; provided, however, that the actual grant of such Stock Right shall be conditioned upon such person becoming eligible to become a Participant at or prior to the time of the execution of the Agreement evidencing such Stock Right.  Non-Qualified Options, Stock Grants and Stock-Based Awards may be granted to any Employee of the Company or an Affiliate.  The granting of any Stock Right to any individual shall neither entitle that individual to, nor disqualify him or her from, participation in any other grant of Stock Rights or any grant under any other benefit plan established by the Company or any Affiliate for Employees. 

	
6.
	
TERMS AND CONDITIONS OF OPTIONS.

Each Option shall be set forth in writing in an Option Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant.  The Administrator may provide that Options be granted subject to such terms and conditions, consistent with the terms and conditions specifically required under this Plan, as the Administrator may deem appropriate.  The Option Agreements shall be subject to at least the following terms and conditions: 

(a)Non-Qualified Options: Each Option shall be a Non-Qualified Option and shall be subject to the terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards for any such Non-Qualified Option: 

(i)Exercise Price:  Each Option Agreement shall state the exercise price (per share) of the Shares covered by each Option, which exercise price shall be determined by the Administrator and shall be at least equal to the Fair Market Value per share of the Common Stock on the date of grant of the Option. 

(ii)Number of Shares:  Each Option Agreement shall state the number of Shares to which it pertains. 

(iii)Vesting Periods:  Each Option Agreement shall state the date or dates on which it first is exercisable and the date after which it may no longer be exercised, and may provide that the Option rights accrue or become exercisable in installments over a period of months or years, or upon the occurrence of certain conditions or the attainment of stated performance goals or events. 

5

 

(iv)Additional Conditions:  Exercise of any Option may be conditioned upon the Participant’s execution of a Share purchase agreement in a form satisfactory to the Administrator providing for certain protections for the Company and its other shareholders, including requirements that: 

	
 
	
A.
	
The Participant’s or the Participant’s Survivors’ right to sell or transfer the Shares may be restricted; and 

	
 
	
B.
	
The Participant or the Participant’s Survivors may be required to execute letters of investment intent and must also acknowledge that the Shares will bear legends noting any applicable restrictions. 

(v)Term of Option:  Each Option shall terminate not more than ten years from the date of the grant or at such earlier time as the Option Agreement may provide. 

	
7.
	
TERMS AND CONDITIONS OF STOCK GRANTS.

Each Stock Grant to a Participant shall state the principal terms in an Agreement duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant.  The Agreement shall be in a form approved by the Administrator and shall contain terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards: 

(a)Each Agreement shall state the purchase price per share, if any, of the Shares covered by each Stock Grant, which purchase price shall be determined by the Administrator but shall not be less than the minimum consideration required by the Delaware General Corporation Law, if any, on the date of the grant of the Stock Grant; 

(b)Each Agreement shall state the number of Shares to which the Stock Grant pertains; and 

(c)Each Agreement shall include the terms of any right of the Company to restrict or reacquire the Shares subject to the Stock Grant, including the time and events upon which such rights shall accrue and the purchase price therefor, if any. 

(d)Dividends (other than stock dividends to be issued pursuant to Section 24 of the Plan) may accrue but shall not be paid prior to the time, and only to the extent that, the restrictions or rights to reacquire the Shares subject to the Stock Grant lapse. 

	
8.
	
TERMS AND CONDITIONS OF OTHER STOCK-BASED AWARDS. 

The Administrator shall have the right to grant other Stock-Based Awards based upon the Common Stock having such terms and conditions as the Administrator may determine, including, without limitation, the grant of Shares based upon certain conditions, the grant of securities convertible into Shares and the grant of stock appreciation rights, phantom stock awards or stock units.  The principal terms of each Stock-Based Award shall be set forth in an Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant.  The Agreement shall be in a form approved by the Administrator 

6

 

and shall contain terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company.  Each Agreement shall include the terms of any right of the Company including the right to terminate the Stock-Based Award without the issuance of Shares, the terms of any vesting conditions or events upon which Shares shall be issued; provided that dividends (other than stock dividends to be issued pursuant to Section 24 of the Plan) or dividend equivalents may accrue but shall not be paid prior to and only to the extent that, the Shares subject to the Stock-Based Award vest.  Under no circumstances may the Agreement covering stock appreciation rights (a) have an exercise price (per share) that is less than the Fair Market Value per share of Common Stock on the date of grant or (b) expire more than ten years following the date of grant.  The Company intends that the Plan and any Stock-Based Awards granted hereunder be exempt from the application of Section 409A of the Code or meet the requirements of paragraphs (2), (3) and (4) of subsection (a) of Section 409A of the Code, to the extent applicable, and be operated in accordance with Section 409A so that any compensation deferred under any Stock-Based Award (and applicable investment earnings) shall not be included in income under Section 409A of the Code.  Any ambiguities in the Plan shall be construed to effect the intent as described in this Paragraph 8. 

	
9.
	
EXERCISE OF OPTIONS AND ISSUE OF SHARES.

An Option (or any part or installment thereof) shall be exercised by giving written notice to the Company or its designee (in a form acceptable to the Administrator, which may include electronic notice), together with provision for payment of the aggregate exercise price in accordance with this Paragraph for the Shares as to which the Option is being exercised, and upon compliance with any other condition(s) set forth in the Option Agreement.  Such notice shall be signed by the person exercising the Option (which signature may be provided electronically in a form acceptable to the Administrator), shall state the number of Shares with respect to which the Option is being exercised and shall contain any representation required by the Plan or the Option Agreement.  Payment of the exercise price for the Shares as to which such Option is being exercised shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator, through delivery of shares of Common Stock held for at least six months (if required to avoid negative accounting treatment) having a Fair Market Value equal as of the date of the exercise to the aggregate cash exercise price for the number of Shares as to which the Option is being exercised, or (c) at the discretion of the Administrator, by having the Company retain from the Shares otherwise issuable upon exercise of the Option, a number of Shares having a Fair Market Value equal as of the date of exercise to the aggregate exercise price for the number of Shares as to which the Option is being exercised, or (d) at the discretion of the Administrator, in accordance with a cashless exercise program established with a securities brokerage firm, and approved by the Administrator, or (e) at the discretion of the Administrator, by any combination of (a), (b), (c) and (d) above or (f) at the discretion of the Administrator, by payment of such other lawful consideration as the Administrator may determine.  

The Company shall then reasonably promptly deliver the Shares as to which such Option was exercised to the Participant (or to the Participant’s Survivors, as the case may be). In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery of the Shares may be delayed by the Company in order to comply with any law or regulation (including, without limitation, state securities or “blue sky” laws) which requires the 

7

 

Company to take any action with respect to the Shares prior to their issuance.  The Shares shall, upon delivery, be fully paid, non-assessable Shares. 

	
10.
	
PAYMENT IN CONNECTION WITH THE ISSUANCE OF STOCK GRANTS AND STOCK-BASED AWARDS AND ISSUE OF SHARES.

Any Stock Grant or Stock-Based Award requiring payment of a purchase price for the Shares as to which such Stock Grant or Stock-Based Award is being granted shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator, through delivery of shares of Common Stock held for at least six months (if required to avoid negative accounting treatment)and having a Fair Market Value equal as of the date of payment to the purchase price of the Stock Grant or Stock-Based Award, or (c) at the discretion of the Administrator, by any combination of (a) and (b) above; or (d) at the discretion of the Administrator, by payment of such other lawful consideration as the Administrator may determine. 

The Company shall, when required by the applicable Agreement, reasonably promptly deliver the Shares as to which such Stock Grant or Stock-Based Award was made to the Participant (or to the Participant’s Survivors, as the case may be), subject to any escrow provision set forth in the applicable Agreement.  In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery of the Shares may be delayed by the Company in order to comply with any law or regulation (including, without limitation, state securities or “blue sky” laws) which requires the Company to take any action with respect to the Shares prior to their issuance. 

	
11.
	
RIGHTS AS A SHAREHOLDER.

No Participant to whom a Stock Right has been granted shall have rights as a shareholder with respect to any Shares covered by such Stock Right except after due exercise of an Option or issuance of Shares as set forth in any Agreement, tender of the aggregate exercise or purchase price, if any, for the Shares being purchased and registration of the Shares in the Company’s share register in the name of the Participant. 

	
12.
	
ASSIGNABILITY AND TRANSFERABILITY OF STOCK RIGHTS.

By its terms, a Stock Right granted to a Participant shall not be transferable by the Participant other than (i) by will or by the laws of descent and distribution, or (ii) as approved by the Administrator in its discretion and set forth in the applicable Agreement provided that no Stock Right may be transferred by a Participant for value. The designation of a beneficiary of a Stock Right by a Participant, with the prior approval of the Administrator and in such form as the Administrator shall prescribe, shall not be deemed a transfer prohibited by this Paragraph.  Except as provided above during the Participant’s lifetime a Stock Right shall only be exercisable by or issued to such Participant (or his or her legal representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process.  Any attempted transfer, assignment, pledge, hypothecation or other disposition of any Stock Right or of any rights 

8

 

granted thereunder contrary to the provisions of this Plan, or the levy of any attachment or similar process upon a Stock Right, shall be null and void. 

	
13.
	
EFFECT ON OPTIONS OF TERMINATION OF SERVICE OTHER THAN FOR CAUSE OR DEATH OR DISABILITY.

Except as otherwise provided in a Participant’s Option Agreement, in the event of a termination of service with the Company or an Affiliate before the Participant has exercised an Option, the following rules apply: 

(a)A Participant who ceases to provide services to the Company or an Affiliate (for any reason other than termination for Cause, Disability, or death for which events there are special rules in Paragraphs 14, 15, and 16, respectively), may exercise any Option granted to him or her to the extent that the Option is exercisable on the date of such termination of service, but only within such term as the Administrator has designated in a Participant’s Option Agreement. 

(b)The provisions of this Paragraph, and not the provisions of Paragraph 15 or 16, shall apply to a Participant who subsequently becomes Disabled or dies after the termination of service; provided, however, in the case of a Participant’s Disability or death within three months after the termination of service, the Participant or the Participant’s Survivors may exercise the Option within one year after the date of the Participant’s termination of service, but in no event after the date of expiration of the term of the Option. 

(c)Notwithstanding anything herein to the contrary, if subsequent to a Participant’s termination of service, but prior to the exercise of an Option, the Administrator or the Board of Directors determines that, either prior or subsequent to the Participant’s termination, the Participant engaged in conduct which would constitute Cause, then such Participant shall forthwith cease to have any right to exercise any Option. 

(d)A Participant to whom an Option has been granted under the Plan who is absent from the Company or an Affiliate because of temporary disability (any disability other than a Disability as defined in Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s service with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide. 

(e)Except as required by law or as set forth in a Participant’s Option Agreement, Options granted under the Plan shall not be affected by any change of a Participant’s status within or among the Company and any Affiliates, so long as the Participant continues to be an Employee or Consultant of the Company or any Affiliate. 

	
14.
	
EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR CAUSE.

Except as otherwise provided in a Participant’s Option Agreement, the following rules apply if the Participant’s service with the Company or an Affiliate is terminated for Cause prior to the time that all of his or her outstanding Options have been exercised: 

9

 

(a)All outstanding and unexercised Options as of the time the Participant is notified his or her service is terminated for Cause will immediately be forfeited. 

(b)Cause is not limited to events which have occurred prior to a Participant’s termination of service, nor is it necessary that the Administrator’s finding of Cause occur prior to termination.  If the Administrator determines, subsequent to a Participant’s termination of service but prior to the exercise of an Option, that either prior or subsequent to the Participant’s termination the Participant engaged in conduct which would constitute Cause, then the right to exercise any Option is forfeited. 

	
15.
	
EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR DISABILITY.

Except as otherwise provided in a Participant’s Option Agreement, 

(a)A Participant who ceases to be an Employee of the Company or of an Affiliate by reason of Disability may exercise any Option granted to such Participant: 

(i)To the extent that the Option has become exercisable but has not been exercised on the date of the Participant’s termination of service due to Disability; and 

(ii)In the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of the Participant’s termination of service due to Disability of any additional vesting rights that would have accrued on the next vesting date had the Participant not become Disabled.  The proration shall be based upon the number of days accrued in the current vesting period prior to the date of the Participant’s termination of service due to Disability. 

(b)A Disabled Participant may exercise the Option only within the period ending one year after the date of the Participant’s termination of service due to Disability, notwithstanding that the Participant might have been able to exercise the Option as to some or all of the Shares on a later date if the Participant had not been terminated due to Disability and had continued to be an Employee or, if earlier, within the originally prescribed term of the Option.  The Administrator shall make the determination both of whether Disability has occurred and the date of its occurrence (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination).  If requested, the Participant shall be examined by a physician selected or approved by the Administrator, the cost of which examination shall be paid for by the Company. 

	
16.
	
EFFECT ON OPTIONS OF DEATH WHILE AN EMPLOYEE.

Except as otherwise provided in a Participant’s Option Agreement, 

(a)In the event of the death of a Participant while the Participant is an Employee of the Company or of an Affiliate, such Option may be exercised by the Participant’s Survivors: 

(i)To the extent that the Option has become exercisable but has not been exercised on the date of death; and 

10

 

(ii)In the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of death of any additional vesting rights that would have accrued on the next vesting date had the Participant not died.  The proration shall be based upon the number of days accrued in the current vesting period prior to the Participant’s date of death. 

(b)If the Participant’s Survivors wish to exercise the Option, they must take all necessary steps to exercise the Option within one year after the date of death of such Participant, notwithstanding that the decedent might have been able to exercise the Option as to some or all of the Shares on a later date if he or she had not died and had continued to be an Employee or, if earlier, within the originally prescribed term of the Option. 

	
17.
	
EFFECT OF TERMINATION OF SERVICE ON STOCK GRANTS AND STOCK-BASED AWARDS.

In the event of a termination of service as an Employee with the Company or an Affiliate for any reason before the Participant has accepted a Stock Grant or a Stock-Based Award and paid the purchase price, if required at the time, such grant shall terminate. 

For purposes of this Paragraph 17 and Paragraph 18 below, a Participant to whom a Stock Grant or a Stock-Based Award has been issued under the Plan who is absent from work with the Company or with an Affiliate because of temporary disability (any disability other than a Disability as defined in Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s employment with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide. 

In addition, for purposes of this Paragraph 17 and Paragraph 18 below, any change of employment or other service within or among the Company and any Affiliates shall not be treated as a termination of employment, so long as the Participant continues to be an Employee or Consultant of the Company or any Affiliate. 

	
18.
	
EFFECT ON STOCK GRANTS AND STOCK-BASED AWARDS OF TERMINATION OF SERVICE OTHER THAN FOR CAUSE OR DEATH OR DISABILITY.

Except as otherwise provided in a Participant’s Agreement, in the event of a termination of service, other than termination for Cause, death or Disability for which events there are special rules in Paragraphs 19, 20, and 21, respectively, before all forfeiture provisions or Company rights of repurchase (other than rights to repurchase at then fair market value following termination of service) shall have lapsed, then the Company shall have the right to cancel or repurchase that number of Shares subject to a Stock Grant or Stock-Based Award as to which the Company’s forfeiture or repurchase rights have not lapsed. 

	
19.
	
EFFECT ON STOCK GRANTS AND STOCK-BASED AWARDS OF TERMINATION OF SERVICE FOR CAUSE.

Except as otherwise provided in a Participant’s Agreement, the following rules apply if the Participant’s service with the Company or an Affiliate is terminated for Cause: 

11

 

(a)All Shares subject to any Stock Grant or Stock-Based Award that remain subject to forfeiture provisions or as to which the Company shall have a repurchase right shall be immediately forfeited to the Company as of the time the Participant is notified his or her service is terminated for Cause. 

(b)Cause is not limited to events which have occurred prior to a Participant’s termination of service, nor is it necessary that the Administrator’s finding of Cause occur prior to termination.  If the Administrator determines, subsequent to a Participant’s termination of service, that either prior or subsequent to the Participant’s termination the Participant engaged in conduct which would constitute Cause, then all Shares subject to any Stock Grant or Stock-Based Award that remained subject to forfeiture provisions or as to which the Company had a repurchase right on the date of termination shall be immediately forfeited to the Company. 

	
20.
	
EFFECT ON STOCK GRANTS AND STOCK-BASED AWARDS OF TERMINATION OF SERVICE FOR DISABILITY.

Except as otherwise provided in a Participant’s Agreement, the following rules apply if a Participant ceases to be an Employee of the Company or of an Affiliate by reason of Disability:  to the extent the forfeiture provisions or the Company’s rights of repurchase have not lapsed on the date of Disability, they shall be exercisable; provided, however, that in the event such forfeiture provisions or rights of repurchase lapse periodically, such provisions or rights shall lapse to the extent of a pro rata portion of the Shares subject to such Stock Grant or Stock-Based Award through the date of Disability as would have lapsed had the Participant not become Disabled.  The proration shall be based upon the number of days accrued prior to the date of Disability. 

The Administrator shall make the determination both as to whether Disability has occurred and the date of its occurrence (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination).  If requested, the Participant shall be examined by a physician selected or approved by the Administrator, the cost of which examination shall be paid for by the Company. 

	
21.
	
EFFECT ON STOCK GRANTS AND STOCK-BASED AWARDS OF DEATH WHILE AN EMPLOYEE.

Except as otherwise provided in a Participant’s Agreement, the following rules apply in the event of the death of a Participant while the Participant is an Employee of the Company or of an Affiliate: to the extent the forfeiture provisions or the Company’s rights of repurchase have not lapsed on the date of death, they shall be exercisable; provided, however, that in the event such forfeiture provisions or rights of repurchase lapse periodically, such provisions or rights shall lapse to the extent of a pro rata portion of the Shares subject to such Stock Grant or Stock-Based Award through the date of death as would have lapsed had the Participant not died.  The proration shall be based upon the number of days accrued prior to the Participant’s date of death. 

12

 

	
22.
	
PURCHASE FOR INVESTMENT.

Unless the offering and sale of the Shares shall have been effectively registered under the Securities Act, the Company shall be under no obligation to issue Shares under the Plan unless and until the following conditions have been fulfilled: 

(a)The person who receives a Stock Right shall warrant to the Company, prior to the receipt of Shares, that such person is acquiring such Shares for his or her own account, for investment, and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person acquiring such Shares shall be bound by the provisions of the following legend (or a legend in substantially similar form) which shall be endorsed upon the certificate evidencing the Shares issued pursuant to such exercise or such grant: 

“The shares represented by this certificate have been taken for investment and they may not be sold or otherwise transferred by any person, including a pledgee, unless (1) either (a) a Registration Statement with respect to such shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an opinion of counsel satisfactory to it that an exemption from registration under such Act is then available, and (2) there shall have been compliance with all applicable state securities laws.” 

(b)At the discretion of the Administrator, the Company shall have received an opinion of its counsel that the Shares may be issued in compliance with the Securities Act without registration thereunder. 

	
23.
	
DISSOLUTION OR LIQUIDATION OF THE COMPANY.

Upon the dissolution or liquidation of the Company, all Options granted under this Plan which as of such date shall not have been exercised and all Stock Grants and Stock-Based Awards which have not been accepted, to the extent required under the applicable Agreement, will terminate and become null and void; provided, however, that if the rights of a Participant or a Participant’s Survivors have not otherwise terminated and expired, the Participant or the Participant’s Survivors will have the right immediately prior to such dissolution or liquidation to exercise or accept any Stock Right to the extent that the Stock Right is exercisable or subject to acceptance as of the date immediately prior to such dissolution or liquidation.  Upon the dissolution or liquidation of the Company, any outstanding Stock-Based Awards shall immediately terminate unless otherwise determined by the Administrator or specifically provided in the applicable Agreement. 

	
24.
	
ADJUSTMENTS.

Upon the occurrence of any of the following events, a Participant’s rights with respect to any Stock Right granted to him or her hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in a Participant’s Agreement: 

(a)Stock Dividends and Stock Splits.  If (i) the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, or (ii) 

13

 

additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Common Stock, each Stock Right and the number of shares of Common Stock deliverable thereunder shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made including, in the exercise or purchase price per share, to reflect such events.  The number of Shares subject to the limitations in Paragraph 3(a), 3(b) and 4(c) shall also be proportionately adjusted upon the occurrence of such events. 

(b)Corporate Transactions.  If the Company is to be consolidated with or acquired by another entity in a merger, consolidation, sale of all or substantially all of the Company’s assets or the acquisition of all of the outstanding voting stock of the Company in a single transaction or a series of related transactions other than a transaction to merely change the state of incorporation (a “Corporate Transaction”), the Administrator or the board of directors of any entity assuming the obligations of the Company hereunder (the “Successor Board”), shall, as to outstanding Options, either (i) make appropriate provision for the continuation of such Options by substituting on an equitable basis for the Shares then subject to such Options either the consideration payable with respect to the outstanding shares of Common Stock in connection with the Corporate Transaction or securities of any successor or acquiring entity; or (ii) upon written notice to the Participants, provide that such Options must be exercised (either (A) to the extent then exercisable or, (B) at the discretion of the Administrator, any such Options being made partially or fully exercisable for purposes of this Subparagraph), within a specified number of days of the date of such notice, at the end of which period such Options which have not been exercised shall terminate; or (iii) terminate such Options in exchange for payment of an amount equal to the consideration payable upon consummation of such Corporate Transaction to a holder of the number of shares of Common Stock into which such Option would have been exercisable (either (A) to the extent then exercisable or, (B) at the discretion of the Administrator, any such Options being made partially or fully exercisable for purposes of this Subparagraph) less the aggregate exercise price thereof.  For purposes of determining the payments to be made pursuant to Subclause (iii) above, in the case of a Corporate Transaction the consideration for which, in whole or in part, is other than cash, the consideration other than cash shall be valued at the fair value thereof as determined in good faith by the Board of Directors. 

With respect to outstanding Stock Grants, the Administrator or the Successor Board, shall make appropriate provision for the continuation of such Stock Grants on the same terms and conditions by substituting on an equitable basis for the Shares then subject to such Stock Grants either the consideration payable with respect to the outstanding Shares of Common Stock in connection with the Corporate Transaction or securities of any successor or acquiring entity.  In lieu of the foregoing, in connection with any Corporate Transaction, the Administrator may provide that, upon consummation of the Corporate Transaction, each outstanding Stock Grant shall be terminated in exchange for payment of an amount equal to the consideration payable upon consummation of such Corporate Transaction to a holder of the number of shares of Common Stock comprising such Stock Grant (to the extent such Stock Grant is no longer subject to any forfeiture or repurchase rights then in effect or, at the discretion of the Administrator, all forfeiture and repurchase rights being waived upon such Corporate Transaction).  For purposes of determining such payments, in the case of a Corporate Transaction the consideration for which, in whole or in part, is other than cash, the consideration other than cash shall be valued at the fair value thereof as determined in good faith by the Board of Directors. 

14

 

In taking any of the actions permitted under this Paragraph 24(b), the Administrator shall not be obligated by the Plan to treat all Stock Rights, all Stock Rights held by a Participant, or all Stock Rights of the same type, identically. 

(c)Recapitalization or Reorganization.  In the event of a recapitalization or reorganization of the Company other than a Corporate Transaction pursuant to which securities of the Company or of another corporation, limited liability company or other entity are issued with respect to the outstanding shares of Common Stock, a Participant upon exercising an Option or accepting a Stock Grant after the recapitalization or reorganization shall be entitled to receive for the price paid upon such exercise or acceptance if any, the number of replacement securities which would have been received if such Option had been exercised or Stock Grant accepted prior to such recapitalization or reorganization. 

(d)Adjustments to Stock-Based Awards.  Upon the happening of any of the events described in Subparagraphs (a), (b) or (c) above, any outstanding Stock-Based Award shall be appropriately adjusted to reflect the events described in such Subparagraphs.  The Administrator or the Successor board shall determine the specific adjustments to be made under Paragraph 24, including, but not limited to, the effect of any Corporate Transaction and, subject to Paragraph 4, its determination shall be conclusive. 

(e)Modification of Options.  Notwithstanding the foregoing, any adjustments made pursuant to Subparagraph (a), (b) or (c) above with respect to Options shall be made only after the Administrator determines whether such adjustments would cause any adverse tax consequences for the holders of Options, including, but not limited to, pursuant to Section 409A of the Code.  If the Administrator determines that such adjustments made with respect to Options would constitute a modification or other adverse tax consequence, it may in its discretion refrain from making such adjustments, unless the holder of an Option specifically agrees in writing that such adjustment be made and such writing indicates that the holder has full knowledge of the consequences of such “modification” on his or her income tax treatment with respect to the Option.  

	
25.
	
ISSUANCES OF SECURITIES.

Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Stock Rights.  Except as expressly provided herein, no adjustments shall be made for dividends paid in cash or in property (including without limitation, securities) of the Company prior to any issuance of Shares pursuant to a Stock Right. 

	
26.
	
FRACTIONAL SHARES.

No fractional shares shall be issued under the Plan and the person exercising a Stock Right shall receive from the Company cash in lieu of such fractional shares equal to the Fair Market Value thereof. 

15

 

	
27.
	
WITHHOLDING.

In the event that any federal, state, or local income taxes, employment taxes, Federal Insurance Contributions Act (“F.I.C.A.”) withholdings or other amounts are required by applicable law or governmental regulation to be withheld from the Participant’s salary, wages or other remuneration in connection with the issuance of a Stock Right or Shares under the Plan or upon the lapsing of any forfeiture provision or right of repurchase or for any other reason required by law, the Company may withhold from the Participant’s compensation, if any, or may require that the Participant advance in cash to the Company, or to any Affiliate of the Company which employs or employed the Participant, the statutory minimum amount of such withholdings unless a different withholding arrangement, including the use of shares of the Company’s Common Stock or a promissory note, is authorized by the Administrator (and permitted by law).  For purposes hereof, the fair market value of the shares withheld for purposes of payroll withholding shall be determined in the manner set forth under the definition of Fair Market Value provided in Paragraph 1 above, as of the most recent practicable date prior to the date of exercise.  If the Fair Market Value of the shares withheld is less than the amount of payroll withholdings required, the Participant may be required to advance the difference in cash to the Company or the Affiliate employer. 

	
28.
	
TERMINATION OF THE PLAN.

The Plan will terminate on March 11, 2029, the date which is ten years from the date of its adoption by the Board of Directors.  The Plan may be terminated at an earlier date by vote of the Board of Directors of the Company; provided, however, that any such earlier termination shall not affect any Agreements executed prior to the effective date of such termination.  Termination of the Plan shall not affect any Stock Rights theretofore granted. 

	
29.
	
AMENDMENT OF THE PLAN AND AGREEMENTS.

The Plan may be amended by the Board of Directors of the Company.  The Plan may also be amended by the Administrator, including, without limitation, to the extent necessary to qualify the Shares issuable under the Plan for listing on any national securities exchange or quotation in any national automated quotation system of securities dealers.  Any amendment approved by the Administrator which the Administrator determines is of a scope that requires shareholder approval shall be subject to obtaining such shareholder approval.  Any modification or amendment of the Plan shall not, without the consent of a Participant, adversely affect his or her rights under a Stock Right previously granted to him or her. With the consent of the Participant affected, the Administrator may amend outstanding Agreements in a manner which may be adverse to the Participant but which is not inconsistent with the Plan.  In the discretion of the Administrator, outstanding Agreements may be amended by the Administrator in a manner which is not adverse to the Participant.  Nothing in this Paragraph 29 shall limit the Administrator’s authority to take any action permitted pursuant to Paragraph 24. 

	
30.
	
EMPLOYMENT OR OTHER RELATIONSHIP.

Nothing in this Plan or any Agreement shall be deemed to prevent the Company or an Affiliate from terminating the employment of a Participant, nor to prevent a Participant from 

16

 

terminating his or her own employment, or to give any Participant a right to be retained in employment or other service by the Company or any Affiliate for any period of time. 

	
31.
	
SECTION 409A.

If a Participant is a “specified employee” as defined in Section 409A of the Code (and as applied according to procedures of the Company and its Affiliates) as of his separation from service, to the extent any payment under this Plan or pursuant to the grant of a Stock-Based Award constitutes deferred compensation (after taking into account any applicable exemptions from Section 409A of the Code), and to the extent required by Section 409A of the Code, no payments due under this Plan or pursuant to a Stock-Based Award may be made until the earlier of:  (i) the first day of the seventh month following the Participant’s separation from service, or (ii) the Participant’s date of death; provided, however, that any payments delayed during this six-month period shall be paid in the aggregate in a lump sum, without interest, on the first day of the seventh month following the Participant’s separation from service. 

The Administrator shall administer the Plan with a view toward ensuring that Stock Rights under the Plan that are subject to Section 409A of the Code comply with the requirements thereof and that Options under the Plan be exempt from the requirements of Section 409A of the Code, but neither the Administrator nor any member of the Board, nor the Company nor any of its Affiliates, nor any other person acting hereunder on behalf of the Company, the Administrator or the Board shall be liable to a Participant or any Survivor by reason of the acceleration of any income, or the imposition of any additional tax or penalty, with respect to a Stock Right, whether by reason of a failure to satisfy the requirements of Section 409A of the Code or otherwise. 

	
32.
	
INDEMNITY.

Neither the Board nor the Administrator, nor any members of either, nor any employees of the Company or any parent, subsidiary, or other Affiliate, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with their responsibilities with respect to this Plan, and the Company hereby agrees to indemnify the members of the Board, the members of the Committee, and the employees of the Company and its parent or subsidiaries in respect of any claim, loss, damage, or expense (including reasonable counsel fees) arising from any such act, omission, interpretation, construction or determination to the full extent permitted by law. 

	
33.
	
CLAWBACK.

Notwithstanding anything to the contrary contained in this Plan, the Company may recover from a Participant any compensation received from any Stock Right (whether or not settled) or cause a Participant to forfeit any Stock Right (whether or not vested) in the event that the Company’s Clawback Policy then in effect is triggered. 

	
34.
	
GOVERNING LAW.

This Plan shall be construed and enforced in accordance with the law of the State of Delaware. 

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