(Amendment No. )
PROPOSAL
NO. 4
AMENDMENT
OF OUR 2018 EQUITY INCENTIVE PLAN TO INCREASE THE
NUMBER
OF SHARES AVAILABLE THEREUNDER BY 250,000 SHARES
General
Our
Board of Directors is requesting that our stockholders approve the adoption of an amendment to our 2018 Equity Incentive Plan
(the “Plan”), which amendment was approved by our Board of Directors on August 19, 2019 effective upon approval by
our stockholders at the annual meeting. If this proposal is approved, the number of shares authorized for issuance of awards under
the Plan will be increased by 250,000 shares of Common Stock.
The
Plan was originally approved by our Board of Directors on July 2, 2018 and our stockholders on September 12, 2018. By its terms,
the Plan may be amended by the Board provided that certain amendments are subject to receiving stockholder approval. Approval
by our stockholders is required by the NYSE American. In addition, stockholder approval is required in order to ensure favorable
federal income tax treatment for grants of incentive stock options under Section 422 of the IRC Code.
As
of August 19, 2019, 121,653 shares of our Common Stock remain available for issuance under the Plan.
Reasons
for Amendment of the Plan
Our
Board believes that the Plan provides us with flexibility in designing equity incentives, including stock appreciation rights,
restricted stock awards, restricted stock unit awards and performance stock awards. Further, the Plan allows us, if deemed appropriate
by the Board, to implement an annual cash incentive program as a plan that qualifies under Section 162(m) of the IRC Code. Accordingly,
the Plan allows us to utilize multiple types of equity incentives and performance cash incentives to secure and retain the services
of our employees, consultants and directors, and to provide long-term incentives that align the interests of our employees, consultants
and directors with the interests of our stockholders. Our Board believes that the number of shares currently remaining available
for issuance pursuant to future awards under the Plan (as of August 19, 2019) is not sufficient for future granting needs. Our
Board currently believes that if the amendment to the Plan is approved by stockholders, the 371,653 shares available for issuance
under the Plan will result in a more appropriate number of shares of Common Stock being available for future awards under the
Plan.
The
following is a brief summary of the Plan, as amended. This summary is qualified in its entirety by reference to the text of the
Amended and Restated Plan, a copy of which is attached as Appendix A to this Proxy Statement.
Summary
of Material Features of our Plan.
General
The
Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock
unit awards, stock appreciation rights, performance stock awards and other forms of equity compensation, which we refer to collectively
in this proxy statement as “stock awards.” Additionally, the Plan provides for the grant of performance cash awards.
Incentive stock options granted under the Plan are intended to qualify as “incentive stock options” within the meaning
of Section 422 of the IRC Code. Nonstatutory stock options granted under the Plan are not intended to qualify as incentive stock
options under the IRC Code. Incentive stock options may be granted only to our employees. All other awards may be granted to our
employees, including officers, non-employee directors, and consultants. See “Federal Income Tax Information” below
for a discussion of the tax treatment of awards.
Purpose
The
Board adopted the Plan to provide a means by which employees, directors and consultants of ours may be given an opportunity to
purchase our stock, to assist us in retaining the services of such persons, to secure and retain the services of persons capable
of filling such positions and to provide incentives for such persons to exert maximum efforts for our success and for the success
of our affiliates.
Shares
Available for Awards Under the Plan
If
this Proposal 4 is approved, the total number of shares of our common stock reserved for issuance under the Plan will initially
be 453,390 shares of common stock (81,737 of which have already been issued or reserved for issuance under stock options already
issued under the Plan), with the number of shares of common stock being reserved under the plan increased annually on July 1 of
each calendar year starting on July 1, 2020 by an amount equal to 2% of the then outstanding shares of common stock.
If
a stock award granted under the Plan expires or otherwise terminates without being exercised in full, or is settled in cash, the
shares of our common stock not acquired pursuant to the stock award will again become available for issuance under the Plan. Additionally,
the following types of shares will be available for the grant of new stock awards under the Plan: (i) shares that are forfeited
to or repurchased by us prior to becoming fully vested; (ii) shares withheld to satisfy income and employment withholding taxes;
and (iii) shares tendered to us to pay the exercise price of an option.
Eligibility
All
of our employees, directors and consultants, and those of our affiliates, are eligible to participate in the Plan and may receive
all types of awards other than incentive stock options. Incentive stock options may be granted only to our employees.
Administration
The
Board administers the Plan. Subject to the provisions of the Plan, the Board has the power to construe and interpret the Plan
and to determine the persons to whom and the dates on which awards will be granted, the number of shares of our common stock subject
to each award, the time or times during the term of each award within which all or a portion of such award may be exercised, the
exercise price, the type of consideration and other terms of the award.
The
Board has the power to delegate its authority to administer the Plan to a committee consisting solely of two or more “non-employee
directors” within the meaning of Rule 16b-3 of the Exchange Act, and solely of two or more “outside directors”
within the meaning of Section 162(m) of the IRC Code. The Board has delegated administration of the Plan to the Compensation Committee.
As used in this proxy statement, except as explicitly stated otherwise, with respect to the Plan, the “Board” refers
to any committee the Board appoints (including the Compensation Committee) as well as to the Board itself.
Repricing;
Cancellation and Re-Grant of Stock Awards
Under
the Plan, the Board does not have the authority to reprice any outstanding equity awards by reducing the exercise price of the
stock award or to cancel any outstanding stock awards in exchange for cash or other stock awards without obtaining the approval
of our stockholders within 12 months prior to the repricing or cancellation and re-grant event.
Options
Options
may be granted pursuant to stock option agreements. The Plan permits the grant of options that qualify as incentive stock options
and nonstatutory stock options. Individual stock option agreements may be more restrictive as to any or all of the permissible
terms described in this section.
Exercise
Price; Consideration.
The exercise price of incentive stock options may not be less than 100% of the fair market value of
the stock subject to the option on the date of the grant and, in some cases (see “Limitations” below), may not be
less than 110% of such fair market value. The exercise price of nonstatutory stock options may not be less than 100% of the fair
market value of the stock on the date of grant. As of August 19, 2019, the closing price of the Company’s common stock was
$1.93 per share.
The
Board will determine the acceptable forms of consideration for the purchase of common stock issued upon the exercise of a stock
option, which may include cash or check, a broker-assisted cashless exercise, the tender of common stock previously owned by the
participant, a net exercise of the option if it is a nonstatutory stock option, and other legal consideration approved by the
Board.
Option
Exercise.
Options granted under the Plan may become exercisable in cumulative increments, or “vest,” at the rate
specified in the option agreement as determined by the Board. Shares covered by different options granted under the Plan may be
subject to different vesting schedules as the Board may determine. Vesting can be time-based or performance-based or can be a
hybrid of performance-based and time-based vesting. The Board also has flexibility to provide for accelerated vesting of options
and other equity awards as it deems appropriate.
Term.
The maximum term of options granted under the Plan is ten years, except that in certain cases (see “Limitations”
below) the maximum term is five years. Unless the terms of a participant’s stock option agreement provide otherwise, if
a participant’s service relationship with us, or any of our affiliates, ceases for any reason other than a termination for
cause or a termination because of disability or death, the participant may exercise the vested portion of any option for a period
of three months following termination of service. Unless the terms of a participant’s stock option agreement provide otherwise,
if a participant’s service relationship with us, or any of our affiliates, ceases due to disability or death or a participant
dies within a specified period following termination of service, the participant or a beneficiary may exercise the vested portion
of any option for a period of 12 months in the event of disability and 18 months in the event of death. Under the Plan, the option
term may be further extended in the event that exercise of the option following termination of service is prohibited by applicable
securities laws, or the sale of any common stock received upon exercise of the option would violate our insider trading policy.
Unless the terms of a participant’s stock option agreement provide otherwise, in no event, however, may an option be exercised
beyond the expiration of its term. In the event of a termination of a participant’s service for “cause,” as
defined in the Plan, the option will terminate on the termination date and the participant may not exercise the option following
such termination.
Limitations
.
The aggregate fair market value, determined at the time of grant, of shares of our common stock with respect to incentive options
that are exercisable for the first time by a participant during any calendar year under all of our stock plans may not exceed
$100,000. The options or portions of options that exceed this limit are treated as nonstatutory stock options. No incentive stock
option may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of
our total combined voting power or that of any affiliate unless:
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the
option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant; and
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the
term of the incentive stock option does not exceed five years from the date of grant.
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Restricted
Stock Awards
A
restricted stock award is the grant of shares of our common stock to a participant that may, but need not, be subject to forfeiture
or to a share repurchase option in our favor in accordance with a vesting scheduled determined by the Board. For example, some
or all of the shares of common stock granted pursuant to a restricted stock award may be repurchased by us if a participant’s
service with us or with any of our affiliates terminates before a specified date (that is, before the restricted stock award is
fully vested). Restricted stock awards are granted pursuant to restricted stock award agreements. Restricted stock awards may
be granted in consideration for cash, past or future services rendered to us or an affiliate or any other form of legal consideration.
Restricted
Stock Unit Awards
A
restricted stock unit award is a promise by us to issue shares of our common stock, or to pay cash equal to the value of shares
of our common stock, equivalent to the number of units covered by the award at the time of vesting of the units or thereafter.
Restricted stock unit awards are granted pursuant to restricted stock unit award agreements. Restricted stock unit awards may
be granted in consideration for any form of legal consideration. A restricted stock unit award entitles the recipient to receive
cash, stock, a combination of cash and stock as deemed appropriate by the Board or any other form of consideration set forth in
the restricted stock unit award agreement at a specified date (typically, upon vesting of the restricted stock units). Additionally,
dividend equivalents may be credited in respect of shares covered by a restricted stock unit award. Except as otherwise provided
in the applicable award agreement, restricted stock units that have not vested will be forfeited upon the termination of the participant’s
service for any reason.
Stock
Appreciation Rights
A
stock appreciation right entitles the participant to a payment equal in value to the appreciation in the value of the underlying
shares of our common stock for a predetermined number of shares over a specified period. Stock appreciation rights are granted
pursuant to stock appreciation right agreements. Each stock appreciation right is denominated in common stock share equivalents.
The board determines the strike price of each stock appreciation right, which may not be less than 100% of the fair market value
of our common stock on the date of grant. A stock appreciation right entitles the recipient to receive cash, stock, a combination
of cash and stock as determined by the Board or any other form of consideration set forth in the stock appreciation right agreement
upon exercise. Upon the exercise of a stock appreciation right, we will pay the participant an amount equal to the product of
(a) the excess of the per share fair market value of our common stock on the date of exercise over the strike price, multiplied
by (b) the number of shares of common stock with respect to which the stock appreciation right is exercised. A stock appreciation
right vests at the rate specified in the stock appreciation right agreement as determined by the Board. Stock appreciation rights
are subject to the same conditions upon termination of a participant’s service and the same restrictions on transfer as
stock options under the Plan.
Performance
Awards
The
Plan permits the grant of performance-based stock and cash awards that may qualify as performance-based compensation that is not
subject to the $1,000,000 limitation on the income tax deductibility of compensation paid per covered executive officer imposed
by Section 162(m) of the IRC Code. To assure that the compensation attributable to performance-based awards will so qualify, the
Compensation Committee can structure such awards so that the stock or cash will be issued or paid pursuant to such award only
following the achievement of certain pre-established performance goals during a performance period designed by the Compensation
Committee. The maximum amount covered by a performance award that may be granted to any individual in a calendar year (whether
the grant, vesting or exercise is contingent upon the attainment during a performance period of the performance goals) may not
exceed $1,000,000.
In
granting a performance award, the Compensation Committee will set a period of time (a “performance period”) over which
the attainment of one or more goals (“performance goals”) will be measured for the purpose of determining whether
the award recipient has a vested right in or to such award. Within the time period prescribed by Section 162(m) of the IRC Code,
at a time when the achievement of the performance goals remains substantially uncertain (typically before the 90th day of a performance
period or the date on which 25% percent of the performance period has elapsed), the Compensation Committee will establish the
performance goals, based upon one or more criteria (“performance criteria”) enumerated in the Plan and described below.
As soon as administratively practicable following the end of the performance period, the Compensation Committee will certify in
writing whether the performance goals have been satisfied.
The
Compensation Committee may establish performance goals by selecting from one or more of the following performance criteria: (1)
earnings (including earnings per share and net earnings); (2) earnings before interest, taxes and depreciation; (3) earnings before
interest, taxes, depreciation and amortization; (4) total stockholder return; (5) return on equity or average stockholder’s
equity; (6) return on assets, investment, or capital employed; (7) stock price; (8) margin (including gross margin); (9) income
(before or after taxes); (10) operating income; (11) operating income after taxes; (12) pre-tax profit; (13) operating cash flow;
(14) sales or revenue targets; (15) increases in revenue or product revenue; (16) expenses and cost reduction goals; (17) improvement
in or attainment of working capital levels; (18) economic value added (or an equivalent metric); (19) market share; (20) cash
flow; (21) cash flow per share; (22) share price performance; (23) debt reduction; (24) implementation or completion of projects
or processes; (25) customer satisfaction; (26) stockholders’ equity; (27) capital expenditures; (28) debt levels; (29) operating
profit or net operating profit; (30) workforce diversity; (31) growth of net income or operating income; (32) billings; (33) achievement
of clinical trial milestones, such as patient enrollment or successful completion of the trial; (34) execution of a new license
agreement; (35) receipt of a milestone payment under a license agreement; or (36) to the extent that an award is not intended
to comply with Section 162(m) of the IRC Code, other measures of performance selected by the Board or the Compensation Committee.
The
Compensation Committee may establish performance goals on a company-wide basis, with respect to one or more business units, divisions,
affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies
or the performance of one or more relevant indices. Unless specified otherwise (a) in the award agreement at the time the award
is granted or (b) in such other document setting forth the performance goals at the time the goals are established, the Compensation
Committee will appropriately make adjustments in the method of calculating the attainment of the performance goals as follows:
(1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects, as applicable, for non-U.S.
dollar denominated goals; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the
effects of any statutory adjustments to corporate tax rates; and (5) to exclude the effects of any “extraordinary items”
as determined under generally accepted accounting principles.
Compensation
attributable to performance-based awards under the Plan will qualify as performance-based compensation, provided that: (i) the
award is granted by a compensation committee comprised solely of “outside directors,” (ii) the award is granted (or
exercisable) only upon the achievement of an objective performance goal established in writing by the compensation committee while
the outcome is substantially uncertain, and (iii) the compensation committee certifies in writing prior to the granting, payment
or exercisability of the award that the performance goal has been satisfied.
Withholding
Obligations
Unless
prohibited in an individual award agreement, we may satisfy any federal, state or local tax withholding obligation relating to
an award by causing the recipient to tender a cash payment, by withholding shares of common stock from the shares otherwise issuable,
by withholding cash from an award settled in cash, by withholding payment from amounts otherwise payable, or by such other method
as specified in the award agreement or by a combination of these means.
Changes
to Capital Structure
In
the event that there is a specified type of change in our capital structure, such as a stock split, the Board will make appropriate
adjustments to (a) the class and maximum number of shares reserved under the Plan, (b) the class and maximum number of shares
of our common stock that may be issued upon the exercise of incentive stock options, (c) the class and maximum number of shares
of our common stock subject to equity awards that can be granted in a calendar year (as established under the Plan pursuant to
Section 162(m) of the IRC Code), and (d) the class, number of securities and the exercise price or strike price, if applicable,
of all outstanding equity awards.
Corporate
Transactions
In
the event of certain significant corporate transactions, the following will occur with respect to outstanding stock awards under
the Plan:
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The
Board will arrange for assumption, continuation, or substitution of a stock award by a surviving or acquiring entity (or its
parent company) and assign any reacquisition or repurchase rights held by us in respect of common stock issued pursuant to
awards to our successor (or its parent).
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With
respect to stock awards that have not been assumed, continued or substituted, the vesting of such stock awards will be accelerated
in full to a date prior to the effective date of the corporate transaction and any reacquisition or repurchase right held
by us in respect of common stock issuable pursuant to such stock awards will lapse, and such stock awards will terminate if
not exercised (if applicable) at or prior to the time of the corporate transaction.
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With
respect to stock awards that have not been assumed, continued or substituted, such outstanding stock awards will terminate
if not exercised at or prior to the time of the corporate transaction, and the Board may, in its discretion, make a payment,
in such form as the Board may determine, equal in value to the excess, if any, of (a) the value of the property the holder
would have received upon the exercise of the stock award, over (b) any exercise price payable by such holder in connection
with such exercise.
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The
Board need not take the same action with respect to all stock awards or portions of stock awards or with respect to all participants.
The Board may take different actions with respect to the vested and unvested portions of a stock award.
For
purposes of the Plan, a corporate transaction includes the consummation of any one or more of the following events: (i) a sale
of all or substantially all of our consolidated assets; (ii) a sale of at least 50% of our outstanding securities; (iii) a merger
or consolidation in which we are not the surviving corporation; or (iv) a merger or consolidation in which we are the surviving
corporation but shares of our outstanding common stock are converted into other property by virtue of the transaction.
Change
in Control
As
of the effective time of a change in control, the vesting of all outstanding stock awards (and the exercisability of options and
stock appreciation rights) will be accelerated in full and any reacquisition or repurchase rights held by us with respect to outstanding
stock awards will lapse.
For
purposes of the Plan, a change in control includes any one or more of the following events: (a) a person or group becomes the
owner of more than 50% of the combined voting power of our outstanding securities; (b) a consummated merger or consolidation in
which our stockholders immediately prior to the transaction do not own more than 50% of the combined voting power of the surviving
entity or its parent company in substantially the same proportions as their ownership in us immediately prior to the transaction;
(c) a consummated sale, lease, exclusive license or disposition of all or substantially all of our consolidated assets to an entity
more than 50% of the combined voting power of which is not owned by our stockholders in substantially the same proportions as
their ownership in us immediately prior to the transaction; or (d) certain changes in the composition of the Board. A change in
control excludes: (i) the sale of securities to an investor or group for the primary purpose of obtaining financing through our
issuance of securities (including offering stock to the general public through a registration statement filed with the SEC); (ii)
a change in the level of ownership held by a person or group beyond the designated threshold in section (a) above as a result
of our repurchase or other acquisition of our voting securities; and (iii) a transaction for the purpose of changing our domicile.
Plan
Amendments
The
Board will have the authority to amend or terminate the Plan. However, no amendment or termination of the plan will adversely
affect any rights under awards already granted to a participant unless agreed to by the affected participant. We will obtain stockholder
approval of any amendment to the Plan as required by applicable law or National Securities Exchange.
Plan
Termination
If
the Plan is approved by our stockholders at the annual meeting, then unless sooner terminated by the Board, the Plan will automatically
terminate on September 12, 2028, the day before the tenth anniversary of the date the Plan is adopted by our stockholders.
U.S.
Federal Income Tax Consequences
The
information set forth below is only a summary and does not purport to be complete. The information is based upon current federal
income tax rules and therefore is subject to change when those rules change. Because the tax consequences to any participant may
depend on his or her particular situation, each participant should consult the participant’s tax adviser regarding the federal,
state, local, and other tax consequences of the grant or exercise of an award or the disposition of stock acquired as a result
of an award. The Plan is not qualified under the provisions of Section 401(a) of the IRC Code, and is not subject to any of the
provisions of the Employee Retirement Income Security Act of 1974. Our ability to realize the benefit of any tax deductions described
below depends on our generation of taxable income as well as the requirement of reasonableness, the provisions of Section 162(m)
of the IRC Code, and the satisfaction of our tax reporting obligations.
Nonstatutory
Stock Options
Generally,
there is no taxation upon the grant of a nonstatutory stock option where the option is granted with an exercise price equal to
the fair market value of the underlying stock on the grant date. On exercise, a participant will recognize ordinary income equal
to the excess, if any, of the fair market value on the date of exercise of the option over the exercise price. If the participant
is employed by us, that income will be subject to withholding tax. The participant’s tax basis in those shares will be equal
to their fair market value on the date of exercise of the option, and the participant’s capital gain holding period for
those shares will begin on that date.
Subject
to the requirement of reasonableness, the provisions of Section 162(m) of the IRC Code and the satisfaction of a tax reporting
obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the participant.
Incentive
Stock Options
The
Plan provides for the grant of stock options that qualify as “incentive stock options,” as defined in Section 422
of the IRC Code. Under the IRC Code, a participant generally is not subject to ordinary income tax upon the grant or exercise
of an incentive stock option. If the participant holds a share of our common stock received on exercise of an incentive stock
option for more than two years from the date the stock option was granted and more than one year from the date the stock option
was exercised, which is referred to as the required holding period, the difference, if any, between the amount realized on a sale
or other taxable disposition of that share and the participant’s tax basis in that share will be long-term capital gain
or loss.
If,
however, a participant disposes of a share acquired on exercise of an incentive stock option before the end of the required holding
period, which is referred to as a disqualifying disposition, the participant generally will recognize ordinary income in the year
of the disqualifying disposition equal to the excess, if any, of the fair market value of the share on the date the incentive
stock option was exercised over the exercise price. However, if the sales proceeds are less than the fair market value of the
share on the date of exercise of the stock option, the amount of ordinary income recognized by the participant will not exceed
the gain, if any, realized on the sale. If the amount realized on a disqualifying disposition exceeds the fair market value of
the share on the date of exercise of the stock option, that excess will be short-term or long-term capital gain, depending on
whether the holding period for the share exceeds one year.
For
purposes of the alternative minimum tax, the amount by which the fair market value of a share of stock acquired on exercise of
an incentive stock option exceeds the exercise price of that stock option generally will be an adjustment included in the participant’s
alternative minimum taxable income for the year in which the stock option is exercised. If, however, there is a disqualifying
disposition of the share in the year in which the stock option is exercised, there will be no adjustment for alternative minimum
tax purposes with respect to that share. In computing alternative minimum taxable income, the tax basis of a share acquired on
exercise of an incentive stock option is increased by the amount of the adjustment taken into account with respect to that share
for alternative minimum tax purposes in the year the stock option is exercised.
We
are not allowed an income tax deduction with respect to the grant or exercise of an incentive stock option or the disposition
of a share acquired on exercise of an incentive stock option after the required holding period. If there is a disqualifying disposition
of a share, however, we are allowed a deduction in an amount equal to the ordinary income includible in income by the participant,
subject to Section 162(m) of the IRC Code, and provided that amount constitutes an ordinary and necessary business expense for
us and is reasonable in amount, and either the employee includes that amount in income or we timely satisfy our reporting requirements
with respect to that amount.
Restricted
Stock Awards
Generally,
the recipient of a restricted stock award will recognize ordinary compensation income at the time the stock is received equal
to the excess, if any, of the fair market value of the stock received over any amount paid by the recipient in exchange for the
stock. If, however, the stock is not vested when it is received (for example, if the employee is required to work for a period
of time in order to have the right to sell the stock), the recipient generally will not recognize income until the stock becomes
vested, at which time the recipient will recognize ordinary compensation income equal to the excess, if any, of the fair market
value of the stock on the date it vests over any amount paid by the recipient in exchange for the stock. A recipient may, however,
file an election with the Internal Revenue Service, within 30 days of his or her receipt of the stock award, to recognize ordinary
compensation income as of the date the recipient receives the award equal to the excess, if any, of the fair market value of the
stock on the date the award is granted over any amount paid by the recipient in exchange for the stock.
The
recipient’s tax basis for the determination of gain or loss upon the subsequent disposition of shares acquired from stock
awards will be the amount paid for such shares plus any ordinary income recognized either when the stock is received or when the
stock becomes vested.
Subject
to the requirement of reasonableness, the provisions of Section 162(m) of the IRC Code and the satisfaction of a tax reporting
obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of
the stock award.
Stock
Appreciation Rights
If
a stock appreciation right is granted under the Plan with a strike price equal to the fair market value of the underlying stock
on the date of grant and the recipient may receive only the appreciation inherent in the stock appreciation right in shares of
our common stock, the recipient will recognize ordinary compensation income equal to the fair market value of the stock received
upon exercise of the stock appreciation right. If the recipient may receive the appreciation inherent in the stock appreciation
right in cash or other property and the stock appreciation right has been structured to conform with the requirements of Section
409A of the IRC Code, then the cash will be taxable as ordinary compensation income to the recipient at the time that the cash
is received.
Subject
to the requirement of reasonableness, the provisions of Section 162(m) of the IRC Code, and the satisfaction of a tax reporting
obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of
the stock appreciation right.
Restricted
Stock Units
Generally,
the recipient of a restricted stock unit that is structured to conform to the requirements of Section 409A of the IRC Code or
an exception to Section 409A of the IRC Code will recognize ordinary compensation income at the time the stock is received equal
to the excess, if any, of the fair market value of the shares of our common stock received over any amount paid by the recipient
in exchange for such shares. To conform to the requirements of Section 409A of the IRC Code, the shares of our common stock subject
to a restricted stock unit award may generally be delivered only upon one of the following events: a fixed calendar date (or dates),
separation from service, death, disability or a change in control. If delivery occurs on another date, unless the restricted stock
units otherwise comply with or qualify for an exception to the requirements of Section 409A of the IRC Code, in addition to the
tax treatment described above, the recipient will owe an additional 20% federal tax plus interest on any taxes owed.
The
recipient’s tax basis for the determination of gain or loss upon the subsequent disposition of shares acquired from restricted
stock units, will be the amount paid for such shares plus any ordinary income recognized when the stock is received.
Subject
to the requirement of reasonableness, the provisions of Section 162(m) of the IRC Code and the satisfaction of a tax reporting
obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of
the stock award.
Section
162 Limitations
Compensation
of persons who are our “covered employees” is subject to the tax deduction limits of Section 162(m) of the IRC Code.
Awards that qualify as “performance-based compensation” are exempt from Section 162(m), thereby permitting us to claim
the full federal tax deduction otherwise allowed for such compensation. The Plan is intended to enable the Board or the Compensation
Committee to make awards, including cash performance awards, that will be exempt from the deduction limits of Section 162(m).
Under Section 162(m), compensation attributable to stock options and stock appreciation rights will qualify as performance-based
compensation if (a) such awards are approved by a compensation committee composed solely of “outside directors,” (b)
the plan contains a per-employee limitation on the number of shares for which such awards may be granted during a specified period,
(c) the per-employee limitation is approved by the shareholders, and (d) the exercise or strike price of the award is no less
than the fair market value of the stock on the date of grant. Compensation attributable to restricted stock awards, restricted
stock unit awards, performance awards and other stock-based awards will qualify as performance-based compensation, provided that
(i) the award is approved by a compensation committee composed solely of “outside directors,” (ii) the award is granted,
becomes vested or is settled, as applicable, only upon the achievement of an objective performance goal established in writing
by the compensation committee while the outcome is substantially uncertain, (iii) a committee of outside directors certifies in
writing prior to the granting (or vesting or settlement) of the award that the performance goal has been satisfied, and (iv) prior
to the granting (or vesting or settlement) of the award, the shareholders have approved the material terms of the award (including
the class of employees eligible for such award, the business criteria on which the performance goal is based, and the maximum
amount, or formula used to calculate the maximum amount, payable upon attainment of the performance goal).
Interest
of Certain Persons in the Plan
Stockholders
should understand that our directors, executive officers and other employees may be considered as having an interest in the approval
of the Plan because they may, in the future, receive awards under the Plan. Nevertheless, the Board believes that it is important
to our growth and long-term success to be able to continue to offer these incentives.
Awards
to be Granted
Since
the Plan was adopted by stockholders in September 2018, we have issued Shares and Share Options under the Plan for an aggregate
of 81,737 Shares.
On
August 16, 2019, the Board determined that employees of the Company earning over $150,000 per year would be required to either
take a 25% reduction in pay or receive 25% of their salary in restricted stock (the “Executive Plan”). At the present
time, no specific determination has been made as to the grant or allocation of awards in the future under the Plan other than
issuances of shares pursuant to the Executive Plan, issuance of shares to Directors as 50% of their Directors’ fees and
issuances of annual options to our CEO in accordance with the terms of his employment contract. Pursuant his employment contract,
our CEO is entitled to annual options for 300,000 shares. He waived these options for 2019 and he and the Company are in discussions
related to reducing the annual number of options.
GENERAL
Unless
contrary instructions are indicated on the Proxy Statement, all shares of common stock represented by valid proxies received pursuant
to this solicitation (and not revoked before they are voted) will be voted FOR the election of all Directors nominated, FOR Proposal
No. 2, FOR Proposal No. 3 and FOR Proposal No. 4.
The
Board of Directors knows of no business other than that set forth above to be transacted at the meeting, but if other matters
requiring a vote of the stockholders arise, the persons designated as proxies will vote the shares of common stock represented
by the proxies in accordance with their judgment on such matters. If a stockholder specifies a different choice on the proxy,
his or her shares of common stock will be voted in accordance with the specification so made.
IT
IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE URGE YOU TO FILL IN, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE
PREPAID ENVELOPE PROVIDED, NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
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By
Order of the Board of Directors,
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Peter
W. Rodino, III, Secretary
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Ocala,
Fla.
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August
20, 2019
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Appendix
A
Hemispherx
Biopharma, Inc.
Amended
and Restated 2018 Equity Incentive Plan
Adopted
by the Board of Directors Effective as of July 2, 2018 &
Approved by the Stockholders: September 12, 2018
as
amended by the Board of Directors effective as of August 19, 2019
Approved
by the Stockholders: October _, 2019
Termination
Date: September 12, 2028
1.
General.
(a)
Eligible Award Recipients.
The persons eligible to receive Awards are Employees, Directors and Consultants.
(b)
Available Awards.
The Plan provides for the grant of the following Awards: (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock Awards, (v) Restricted Stock Unit Awards, (vi) Performance
Stock Awards, (vii) Performance Cash Awards, and (viii) Other Stock Awards.
(c)
Purpose.
The Company, by means of the Plan, seeks to secure and retain the services of the group of persons eligible to receive
Awards as set forth in Section 1(a), to provide incentives for such persons to exert maximum efforts for the success of the Company
and any Affiliate and to provide a means by which such eligible recipients may be given an opportunity to benefit from increases
in value of the Common Stock through the granting of Awards.
2.
Administration.
(a)
Administration by Board.
The Board shall administer the Plan unless and until the Board delegates administration of the Plan
to a Committee or Committees, as provided in Section 2(c).
(b)
Powers of Board.
The Board shall have the power, subject to, and within the limitations of, the express provisions of the
Plan:
(i)
To determine from time to time (A) which of the persons eligible under the Plan shall be granted Awards; (B) when and how
each Award shall be granted; (C) what type or combination of types of Award shall be granted; (D) the provisions of each Award
granted (which need not be identical), including the time or times when a person shall be permitted to receive cash or Common
Stock pursuant to a Stock Award; (E) the number of shares of Common Stock with respect to which a Stock Award shall be granted
to each such person; and (F) the Fair Market Value applicable to a Stock Award.
(ii)
To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or
in any Stock Award Agreement or in the written terms of a Performance Cash Award, in a manner and to the extent it shall deem
necessary or expedient to make the Plan or Award fully effective.
(iii)
To settle all controversies regarding the Plan and Awards granted under it.
(iv)
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.
(v)
To suspend or terminate the Plan at any time. Suspension or termination of the Plan shall not impair rights and obligations
under any Award granted while the Plan is in effect except with the written consent of the affected Participant.
(vi)
To amend the Plan in any respect the Board deems necessary or advisable. However, except as provided in Section 9(a) relating
to Capitalization Adjustments, to the extent required by applicable law or listing requirements, stockholder approval shall be
required for any amendment of the Plan that either (A) materially increases the number of shares of Common Stock available for
issuance under the Plan, (B) materially expands the class of individuals eligible to receive Awards under the Plan, (C) materially
increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock
may be issued or purchased under the Plan, (D) materially extends the term of the Plan, or (E) expands the types of Awards available
for issuance under the Plan. Except as provided above, rights under any Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (1) the Company requests the consent of the affected Participant, and (2) such Participant
consents in writing.
(vii)
To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended
to satisfy the requirements of (A) Section 162(m) of the Code regarding the exclusion of performance-based compensation from the
limit on corporate deductibility of compensation paid to Covered Employees, (B) Section 422 of the Code regarding incentive stock
options or (C) Rule 16b-3.
(viii)
To approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more Awards, including, but
not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Award Agreement,
subject to any specified limits in the Plan that are not subject to Board discretion;
provided however
, that except with
respect to amendments that disqualify or impair the status of an Incentive Stock Option, a Participant’s rights under any
Award shall not be impaired by any such amendment unless (A) the Company requests the consent of the affected Participant, and
(B) such Participant consents in writing. Notwithstanding the foregoing, subject to the limitations of applicable law, if any,
the Board may amend the terms of any one or more Awards without the affected Participant’s consent if necessary to maintain
the qualified status of the Award as an Incentive Stock Option or to bring the Award into compliance with Section 409A of the
Code.
(ix)
Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best
interests of the Company and that are not in conflict with the provisions of the Plan or Awards.
(x)
To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors
or Consultants who are foreign nationals or employed outside the United States.
(c)
Delegation to Committee.
(i)
General.
The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration
of the Plan is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee
of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the
Board 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 Committee may, at any time, abolish the subcommittee
and/or revest in the Committee any powers delegated to the subcommittee. The Board may retain the authority to concurrently administer
the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.
(ii)
Section 162(m) and Rule 16b-3 Compliance.
The Committee may consist solely of two or more Outside Directors, in accordance
with Section 162(m) of the Code, and solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.
(d)
Delegation to an Officer.
The Board may delegate to one (1) or more Officers the authority to do one or both of the following
(i) designate Employees who are providing Continuous Service to the Company or any of its Subsidiaries who are not Officers to
be recipients of Options and Stock Appreciation Rights (and, to the extent permitted by applicable law, other Stock Awards) and
the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such
Employees;
provided, however
, that the Board resolutions regarding such delegation shall specify the total number of shares
of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award
to himself or herself. Notwithstanding the foregoing, the Board may not delegate authority to an Officer to determine the Fair
Market Value pursuant to Section 13(w)(iii) below.
(e)
Effect of Board’s Decision.
All determinations, interpretations and constructions made by the Board in good faith shall
not be subject to review by any person and shall be final, binding and conclusive on all persons.
(f)
Cancellation and Re-Grant of Stock Awards
. Neither the Board nor any Committee shall have the authority to: (i) reduce the
exercise price of any outstanding Options or Stock Appreciation Rights under the Plan, or (ii) cancel any outstanding Options
or Stock Appreciation Rights that have an exercise price or strike price greater than the current Fair Market Value of the Common
Stock in exchange for cash or other Stock Awards under the Plan, unless the stockholders of the Company have approved such an
action within twelve (12) months prior to such an event.
3.
Shares Subject to the Plan.
(a) Share
Reserve.
Subject to Section 9(a) relating to Capitalization Adjustments, the aggregate number of shares of Common Stock that
may be issued pursuant to Stock Awards from and after the Effective Date shall initially be four hundred fifty three
thousand three hundred ninty (453,390) shares and shall increase annually on July 1 for each year the Plan is in effect
starting on July 1, 2020 by the number of shares equal to two percent (2%) of the then issued and outstanding shares of Common
Stock of the Company. For clarity, the Share Reserve in this Section 3(a) is a limitation on the number of shares of the Common
Stock that may be issued pursuant to the Plan and does not limit the granting of Stock Awards except as provided in Section 7(a).
Shares may be issued in connection with a merger or acquisition as permitted by, as applicable, NYSE American Company Guide Section 711
or, if applicable, NYSE Listed Company Manual Section 303A.08, NASDAQ Listing Rule 5635(c) or other applicable rule, and such
issuance shall not reduce the number of shares available for issuance under the Plan. Furthermore, if a Stock Award or any portion
thereof (i) expires or otherwise terminates without all of the shares covered by such Stock Award having been issued or (ii) is
settled in cash (
i.e.
, the Participant receives cash rather than stock), such expiration, termination or settlement shall
not reduce (or otherwise offset) the number of shares of Common Stock that may be available for issuance under the Plan.
(b)
Reversion of Shares to the Share Reserve.
If any shares of Common Stock issued pursuant to a Stock Award are forfeited back
to the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then
the shares that are forfeited shall revert to and again become available for issuance under the Plan. Any shares reacquired by
the Company pursuant to Section 8(g) or as consideration for the exercise of an Option shall again become available for issuance
under the Plan.
(c) Incentive
Stock Option Limit.
Notwithstanding anything to the contrary in this Section 3 and, subject to the provisions of Section
9(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued pursuant
to the exercise of Incentive Stock Options shall initially be four hundred fifty three thousand three hundred ninty (453,390)
shares of Common Stock and then shall be the number of shares of Common Stock reserved for issuance under the Plan pursuant
to Section 3(a) for subsequent years that the Plan is in effect.
(d)
Section 162(m) Limitation on Annual Grants
. Subject to the provisions of Section 9(a) relating to Capitalization Adjustments,
at such time as the Company may be subject to the applicable provisions of Section 162(m) of the Code, a maximum of one million
(1,000,000) shares of Common Stock subject to Options, Stock Appreciation Rights and Other Stock Awards whose value is determined
by reference to an increase over an exercise or strike price of at least one hundred percent (100%) of the Fair Market Value on
the date any such Stock Award is granted may be granted to any Participant during any calendar year. Notwithstanding the foregoing,
if any additional Options, Stock Appreciation Rights or Other Stock Awards whose value is determined by reference to an increase
over an exercise or strike price of at least one hundred percent (100%) of the Fair Market Value on the date the Stock Award are
granted to any Participant during any calendar year, compensation attributable to the exercise of such additional Stock Awards
shall not satisfy the requirements to be considered “qualified performance-based compensation” under Section 162(m)
of the Code unless such additional Stock Award is approved by the Company’s stockholders.
(e)
Source of Shares.
The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock,
including shares repurchased by the Company on the open market or otherwise.
4.
Eligibility.
(a)
Eligibility for Specific Stock Awards
. Incentive Stock Options may be granted only to employees of the Company or a “parent
corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and (f) of the
Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants;
provided, however
,
Nonstatutory Stock Options and SARs may not be granted to Employees, Directors and Consultants who are providing Continuous Service
only to any “parent” of the Company, as such term is defined in Rule 405 promulgated under the Securities Act, unless
the stock underlying such Stock Awards is treated as “service recipient stock” under Section 409A of the Code because
the Stock Awards are granted pursuant to a corporate transaction (such as a spin off transaction) or unless such Stock Awards
comply with the distribution requirements of Section 409A of the Code.
(b)
Ten Percent Stockholders.
A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price
of such Option is at least one hundred ten percent (110%) of the Fair Market Value on the date of grant and the Option is not
exercisable after the expiration of five (5) years from the date of grant.
5.
Provisions Relating to Options and Stock Appreciation Rights.
Each Option or
SAR shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued,
a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of each type of Option.
If an Option is not specifically designated as an Incentive Stock Option, then the Option shall be a Nonstatutory Stock Option.
The provisions of separate Options or SARs need not be identical;
provided, however
, that each Option Agreement or Stock
Appreciation Right Agreement shall conform to (through incorporation of provisions hereof by reference in the applicable Award
Agreement or otherwise) the substance of each of the following provisions:
(a)
Term.
Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option or SAR shall be exercisable
after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Award Agreement.
(b)
Exercise Price.
Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, the exercise price (or strike
price) of each Option or SAR shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject
to the Option or SAR on the date the Option or SAR is granted. Notwithstanding the foregoing, an Option or SAR may be granted
with an exercise price (or strike price) lower than one hundred percent (100%) of the Fair Market Value of the Common Stock subject
to the Option or SAR if such Option or SAR is granted pursuant to an assumption of or substitution for another option or stock
appreciation right pursuant to a Corporate Transaction and in a manner consistent with the provisions of Sections 409A and, if
applicable, 424(a) of the Code. Each SAR will be denominated in shares of Common Stock equivalents.
(c)
Purchase Price for Options.
The purchase price of Common Stock acquired pursuant to the exercise of an Option shall be paid,
to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods
of payment set forth below. The Board shall have the authority to grant Options that do not permit all of the following methods
of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company
to utilize a particular method of payment. The permitted methods of payment are as follows:
(i)
by cash, check, bank draft or money order payable to the Company;
(ii)
pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance
of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company from the sales proceeds;
(iii)
by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;
(iv)
if the option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will
reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value
that does not exceed the aggregate exercise price;
provided, however
, that the Company shall accept a cash or other payment
from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in
the number of whole shares to be issued;
provided, further,
that shares of Common Stock will no longer be subject to an
Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are reduced to pay the exercise
price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and
(C) shares are withheld to satisfy tax withholding obligations; or
(v)
in any other form of legal consideration that may be acceptable to the Board.
(d)
Exercise and Payment of a SAR.
To exercise any outstanding Stock Appreciation Right, the Participant must provide written
notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such
Stock Appreciation Right. The appreciation distribution payable on the exercise of a Stock Appreciation Right will be not greater
than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation
Right) of a number of shares of Common Stock equal to the number of Common Stock equivalents in which the Participant is vested
under such Stock Appreciation Right, and with respect to which the Participant is exercising the Stock Appreciation Right on such
date, over (B) the strike price that will be determined by the Board at the time of grant of the Stock Appreciation Right. The
appreciation distribution in respect to a Stock Appreciation Right may be paid in Common Stock, in cash, in any combination of
the two or in any other form of consideration, as determined by the Board and contained in the Stock Appreciation Right Agreement
evidencing such Stock Appreciation Right.
(e)
Transferability of Options and SARs.
The Board may, in its sole discretion, impose such limitations on the transferability
of Options and SARs as the Board shall determine. In the absence of such a determination by the Board to the contrary, the following
restrictions on the transferability of Options and SARs shall apply:
(i)
Restrictions on Transfer.
An Option or SAR shall not be transferable except by will or by the laws of descent and distribution
and shall be exercisable during the lifetime of the Participant only by the Participant;
provided, however
, that the Board
may, in its sole discretion, permit transfer of the Option or SAR in a manner that is not prohibited by applicable tax and securities
laws upon the Participant’s request. Except as explicitly provided herein, neither an Option nor a SAR may be transferred
for consideration.
(ii)
Domestic Relations Orders.
Notwithstanding the foregoing, an Option or SAR may be transferred pursuant to a domestic relations
order;
provided, however
, that if an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory
Stock Option as a result of such transfer.
(iii)
Beneficiary Designation.
Notwithstanding the foregoing, the Participant may, by delivering written notice to the Company,
in a form provided by or otherwise satisfactory to the Company, designate a third party who, in the event of the death of the
Participant, shall thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting
from such exercise. In the absence of such a designation, the executor or administrator of the Participant’s estate shall
be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise.
(f)
Vesting Generally.
The total number of shares of Common Stock subject to an Option or SAR may vest and therefore become exercisable
in periodic installments that may or may not be equal. The Option or SAR may be subject to such other terms and conditions on
the time or times when it may or may not be exercised (which may be based on the satisfaction of Performance Goals or other criteria)
as the Board may deem appropriate. The vesting provisions of individual Options or SARs may vary. The provisions of this Section
5(f) are subject to any Option or SAR provisions governing the minimum number of shares of Common Stock as to which an Option
or SAR may be exercised.
(g)
Termination of Continuous Service.
Except as otherwise provided in the applicable Award Agreement or other agreement between
the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause or upon the Participant’s
death or Disability), the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to
exercise such Award as of the date of termination of Continuous Service) but only within such period of time ending on the earlier
of (i) the date three (3) months following the termination of the Participant’s Continuous Service (or such longer or shorter
period specified in the applicable Award Agreement), or (ii) the expiration of the term of the Option or SAR as set forth in the
Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within
the time specified herein or in the Award Agreement (as applicable), the Option or SAR shall terminate.
(h)
Extension of Termination Date.
If the exercise of an Option or SAR following the termination of the Participant’s Continuous
Service (other than for Cause or upon the Participant’s death or Disability) would be prohibited at any time solely because
the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option or
SAR shall terminate on the earlier of (i) the expiration of a total period of three (3) months (that need not be consecutive)
after the termination of the Participant’s Continuous Service during which the exercise of the Option or SAR would not be
in violation of such registration requirements, or (ii) the expiration of the term of the Option or SAR as set forth in the applicable
Award Agreement. In addition, unless otherwise provided in a Participant’s Award Agreement, if the sale of any Common Stock
received upon exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than
for Cause) would violate the Company’s insider trading policy, then the Option or SAR shall terminate on the earlier of
(i) the expiration of a period equal to the applicable post-termination exercise period after the termination of the Participant’s
Continuous Service during which the sale of the Common Stock received upon exercise of the Option or SAR would not be in violation
of the Company’s insider trading policy, or (ii) the expiration of the term of the Option or SAR as set forth in the applicable
Award Agreement.
(i)
Disability of Participant.
Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant
and the Company, if a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the
Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Option or
SAR as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the
date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Award
Agreement), or (ii) the expiration of the term of the Option or SAR as set forth in the Award Agreement. If, after termination
of Continuous Service, the Participant does not exercise his or her Option or SAR within the time specified herein or in the Award
Agreement (as applicable), the Option or SAR (as applicable) shall terminate.
(j)
Death of Participant.
Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant
and the Company, if (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii)
the Participant dies within the period (if any) specified in the Award Agreement for exercisability after the termination of the
Participant’s Continuous Service (for a reason other than death), then the Option or SAR may be exercised (to the extent
the Participant was entitled to exercise such Option or SAR as of the date of death) by the Participant’s estate, by a person
who acquired the right to exercise the Option or SAR by bequest or inheritance or by a person designated to exercise the Option
or SAR upon the Participant’s death, but only within the period ending on the earlier of (i) the date eighteen (18) months
following the date of death (or such longer or shorter period specified in the Award Agreement), or (ii) the expiration of the
term of such Option or SAR as set forth in the Award Agreement. If, after the Participant’s death, the Option or SAR is
not exercised within the time specified herein or in the Award Agreement (as applicable), the Option or SAR shall terminate.
(k)
Termination for Cause.
Except as explicitly provided otherwise in a Participant’s Award Agreement or other individual
written agreement between the Company or any Affiliate and the Participant, if a Participant’s Continuous Service is terminated
for Cause, the Option or SAR shall terminate immediately upon such Participant’s termination of Continuous Service, and
the Participant shall be prohibited from exercising his or her Option or SAR from and after the time of such termination of Continuous
Service.
(l)
Non-Exempt Employees
. No Option or SAR, whether or not vested, granted to an Employee who is a non-exempt employee for purposes
of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least
six months following the date of grant of the Option or SAR. Notwithstanding the foregoing, consistent with the provisions of
the Worker Economic Opportunity Act, (i) in the event of the Participant’s death or Disability, (ii) upon a Corporate Transaction
in which such Option or SAR is not assumed, continued, or substituted, (iii) upon a Change in Control, or (iv) upon the Participant’s
retirement (as such term may be defined in the Participant’s Award Agreement or in another applicable agreement or in accordance
with the Company’s then current employment policies and guidelines), any such vested Options and SARs may be exercised earlier
than six months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt
employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay.
6.
Provisions of Stock Awards other than Options and SARs.
(a)
Restricted Stock Awards.
Each Restricted Stock Award Agreement shall be in such form and shall contain such terms and conditions
as the Board shall deem appropriate. To the extent consistent with the Company’s Bylaws, at the Board’s election,
shares of Common Stock may be (i) held in book entry form subject to the Company’s instructions until any restrictions relating
to the Restricted Stock Award lapse; or (ii) evidenced by a certificate, which certificate shall be held in such form and manner
as determined by the Board. The terms and conditions of Restricted Stock Award Agreements may change from time to time, and the
terms and conditions of separate Restricted Stock Award Agreements need not be identical;
provided, however
, that each
Restricted Stock Award Agreement shall conform to (through incorporation of the provisions hereof by reference in the agreement
or otherwise) the substance of each of the following provisions:
(i)
Consideration.
A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable
to the Company, (B) past services to the Company or an Affiliate, or (C) any other form of legal consideration (including future
services) that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.
(ii)
Vesting.
Shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject to forfeiture to the Company
in accordance with a vesting schedule to be determined by the Board.
(iii)
Termination of Participant’s Continuous Service.
If a Participant’s Continuous Service terminates, the Company
may receive through a forfeiture condition or a repurchase right any or all of the shares of Common Stock held by the Participant
that have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.
(iv)
Transferability.
Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement shall be transferable
by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board
shall determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject
to the terms of the Restricted Stock Award Agreement.
(v)
Dividends.
A Restricted Stock Award Agreement may provide that any dividends paid on Restricted Stock will be subject to the
same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Stock Award to which they relate.
(b)
Restricted Stock Unit Awards.
Each Restricted Stock Unit Award Agreement shall be in such form and shall contain such terms
and conditions as the Board shall deem appropriate. The terms and conditions of Restricted Stock Unit Award Agreements may change
from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical;
provided,
however
, that each Restricted Stock Unit Award Agreement shall conform to (through incorporation of the provisions hereof
by reference in the Agreement or otherwise) the substance of each of the following provisions:
(i)
Consideration.
At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any,
to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award. The consideration
to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in
any form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible under applicable
law.
(ii)
Vesting.
At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions on or conditions
to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.
(iii)
Payment
. A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any
combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit
Award Agreement.
(iv)
Additional Restrictions.
At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may
impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject
to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.
(v)
Dividend Equivalents.
Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock
Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of the
Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit
Award in such manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Award credited by
reason of such dividend equivalents will be subject to all of the same terms and conditions of the underlying Restricted Stock
Unit Award Agreement to which they relate.
(vi)
Termination of Participant’s Continuous Service.
Except as otherwise provided in the applicable Restricted Stock Unit
Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s
termination of Continuous Service.
(c)
Performance Awards
.
(i)
Performance Stock Awards
. A Performance Stock Award is a Stock Award that may vest or may be exercised contingent upon the
attainment during a Performance Period of certain Performance Goals. A Performance Stock Award may, but need not, require the
completion of a specified period of Continuous Service. The length of any Performance Period, the Performance Goals to be achieved
during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained shall be
conclusively determined by the Committee, in its sole discretion. The maximum number of shares covered by an Award that may be
granted to any Participant in a calendar year attributable to Stock Awards described in this Section 6(c)(i) (whether the grant,
vesting or exercise is contingent upon the attainment during a Performance Period of the Performance Goals) shall not exceed seven
million (7,000,000) shares of Common Stock. The Board may provide for or, subject to such terms and conditions as the Board may
specify, may permit a Participant to elect for, the payment of any Performance Stock Award to be deferred to a specified date
or event. In addition, to the extent permitted by applicable law and the applicable Award Agreement, the Board may determine that
cash may be used in payment of Performance Stock Awards.
(ii)
Performance Cash Awards
. A Performance Cash Award is a cash award that may be paid contingent upon the attainment during a
Performance Period of certain Performance Goals. A Performance Cash Award may also require the completion of a specified period
of Continuous Service. At the time of grant of a Performance Cash Award, the length of any Performance Period, the Performance
Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have
been attained shall be conclusively determined by the Committee, in its sole discretion. In any calendar year, the Committee may
not grant a Performance Cash Award that has a maximum value that may be paid to any Participant in excess of one million dollars
($1,000,000). The Board may provide for or, subject to such terms and conditions as the Board may specify, may permit a Participant
to elect for, the payment of any Performance Cash Award to be deferred to a specified date or event. The Committee may specify
the form of payment of Performance Cash Awards, which may be cash or other property, or may provide for a Participant to have
the option for his or her Performance Cash Award, or such portion thereof as the Board may specify, to be paid in whole or in
part in cash or other property.
(iii)
Board Discretion
. The Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment
of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for a Performance Period.
(iv)
Section 162(m) Compliance
. Unless otherwise permitted in compliance with the requirements of Section 162(m) of the Code with
respect to an Award intended to qualify as “performance-based compensation” thereunder, the Committee shall establish
the Performance Goals applicable to, and the formula for calculating the amount payable under, the Award no later than the earlier
of (a) the date ninety (90) days after the commencement of the applicable Performance Period, or (b) the date on which twenty-five
percent (25%) of the Performance Period has elapsed, and in either event at a time when the achievement of the applicable Performance
Goals remains substantially uncertain. Prior to the payment of any compensation under an Award intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, the Committee shall certify the extent to which any Performance Goals and
any other material terms under such Award have been satisfied (other than in cases where such relate solely to the increase in
the value of the Common Stock). Notwithstanding satisfaction of any completion of any Performance Goals, to the extent specified
at the time of grant of an Award to “covered employees” within the meaning of Section 162(m) of the Code, the number
of shares of Common Stock, Options, cash or other benefits granted, issued, retainable and/or vested under an Award on account
of satisfaction of such Performance Goals may be reduced by the Committee on the basis of such further considerations as the Committee,
in its sole discretion, shall determine.
(d)
Other Stock Awards
. Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common
Stock, including the appreciation in value thereof (e.g., options or stock rights with an exercise price or strike price less
than 100% of the Fair Market Value of the Common Stock at the time of grant) may be granted either alone or in addition to Stock
Awards provided for under Section 5 and the preceding provisions of this Section 6. Subject to the provisions of the Plan, the
Board shall have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock
Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other
Stock Awards and all other terms and conditions of such Other Stock Awards.
7.
Covenants of the Company.
(a)
Availability of Shares.
During the terms of the Stock Awards, the Company shall keep available at all times the number of
shares of Common Stock reasonably required to satisfy such Stock Awards.
(b)
Securities Law Compliance.
The Company shall seek to obtain from each regulatory commission or agency having jurisdiction
over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise
of the Stock Awards;
provided, however
, that this undertaking shall not require the Company to register under the Securities
Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency the authority that 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 Stock Awards unless and until such authority is obtained. A Participant
shall not be eligible for the grant of a Stock Award or the subsequent issuance of Common Stock pursuant to the Stock Award if
such grant or issuance would be in violation of any applicable securities law.
(c)
No Obligation to Notify or Minimize Taxes.
The Company shall have no duty or obligation to any Participant to advise such
holder as to the time or manner of exercising such Stock Award. Furthermore, the Company shall have no duty or obligation to warn
or otherwise advise such holder of a pending termination or expiration of a Stock Award or a possible period in which the Stock
Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder
of such Stock Award.
8.
Miscellaneous.
(a)
Use of Proceeds from Sales of Common Stock.
Proceeds from the sale of shares of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
(b)
Corporate Action Constituting Grant of Stock Awards.
Corporate action constituting a grant by the Company of a Stock Award
to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board,
regardless of when the instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually received
or accepted by, the Participant.
(c)
Stockholder Rights.
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 Stock Award unless and until (i) such Participant has satisfied all requirements
for exercise of the Stock Award pursuant to its terms, if applicable, and (ii) the issuance of the Common Stock subject to such
Stock Award has been entered into the books and records of the Company.
(d)
No Employment or Other Service Rights.
Nothing in the Plan, any Award Agreement or any other instrument executed thereunder
or in connection with any 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 (i) the employment of an Employee with or without notice and with or without cause, (ii) the service
of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service
of a Director pursuant to the Bylaws 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.
(e)
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 Option holder during
any calendar year (under all plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the Options
or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory
Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).
(f)
Investment Assurances.
The Company may require a Participant, as a condition of exercising or acquiring Common Stock under
any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience
in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable
and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company
stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and
not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances
given pursuant to such requirements, shall be inoperative if (A) the issuance of the shares upon the exercise or acquisition of
Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities
Act, or (B) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company,
place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.
(g)
Withholding Obligations.
Unless prohibited by the terms of a Stock Award Agreement, the Company may, in its sole discretion,
satisfy any federal, state or local tax withholding obligation relating to an Award by any of the following means or by a combination
of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of
Common Stock issued or otherwise issuable to the Participant in connection with 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 such lesser amount
as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding
cash from an Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by
such other method as may be set forth in the Award Agreement.
(h)
Electronic Delivery
. Any reference herein to a “written” agreement or document shall include any agreement or
document delivered electronically or posted on the Company’s intranet (or other shared electronic medium controlled by the
Company to which the Participant has access).
(i)
Deferrals.
To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of
Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred
and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be
made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions
while a Participant is still an employee or otherwise providing services to the Company. The Board is authorized to make deferrals
of Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments,
following the Participant’s termination of Continuous Service, and implement such other terms and conditions consistent
with the provisions of the Plan and in accordance with applicable law.
(j)
Compliance with Section 409A.
To the extent that the Board determines that any Award granted hereunder is subject to Section
409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions necessary to avoid the
consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Award Agreements shall be interpreted
in accordance with Section 409A of the Code. Notwithstanding anything to the contrary in this Plan (and unless the Award Agreement
specifically provides otherwise), if the shares of Common Stock are publicly traded and a Participant holding an Award that constitutes
“deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section
409A of the Code, no distribution or payment of any amount shall be made upon a “separation from service” before a
date that is six (6) months following the date of such Participant’s “separation from service” (as defined in
Section 409A of the Code without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s
death.
9.
Adjustments upon Changes in Common Stock; Other Corporate Events.
(a)
Capitalization Adjustments
. In the event of a Capitalization Adjustment, the Board shall appropriately and proportionately
adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and
maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c),
(iii) the class(es) and maximum number of securities that may be awarded to any person pursuant to Sections 3(d) and 6(c)(i),
and (iv) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards. The Board shall
make such adjustments, and its determination shall be final, binding and conclusive.
(b)
Dissolution or Liquidation
. Except as otherwise provided in the Stock Award Agreement, in the event of a dissolution or liquidation
of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock
not subject to a forfeiture condition or the Company’s right of repurchase) shall terminate immediately prior to the completion
of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject
to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Stock
Award is providing Continuous Service;
provided, however
, that the Board may, in its sole discretion, cause some or all
Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock
Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.
(c)
Corporate Transaction.
The following provisions shall apply to Stock Awards in the event of a Corporate Transaction unless
otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate
and the Participant or unless otherwise expressly provided by the Board at the time of grant of a Stock Award.
(i)
Stock Awards May Be Assumed, Continued or Substituted.
In the event of a Corporate Transaction, any surviving corporation
or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue any or all
Stock Awards outstanding under the Plan or may substitute similar stock awards for Stock Awards outstanding under the Plan (including
but not limited to, awards to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate
Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to Stock
Awards may be assigned by the Company to the successor of the Company (or the successor’s parent company, if any), in connection
with such Corporate Transaction. A surviving corporation or acquiring corporation (or its parent) may choose to assume or continue
only a portion of a Stock Award or substitute a similar stock award for only a portion of a Stock Award, or may choose to assume
or continue the Stock Awards held by some, but not all Participants. The terms of any assumption, continuation or substitution
shall be set by the Board.
(ii)
Stock Awards Not Assumed, Continued or Substituted.
In the event of a Corporate Transaction in which the surviving corporation
or acquiring corporation (or its parent company) does not assume or continue such outstanding Stock Awards or substitute similar
stock awards for such outstanding Stock Awards, then with respect to Stock Awards that have not been assumed, continued or substituted,
the vesting of such Stock Awards (and, with respect to Options and Stock Appreciation Rights, the time when such Stock Awards
may be exercised) shall be accelerated in full to a date prior to the effective time of such Corporate Transaction (contingent
upon the effectiveness of the Corporate Transaction) as the Board shall determine (or, if the Board shall not determine such a
date, to the date that is five (5) days prior to the effective time of the Corporate Transaction), and such Stock Awards shall
terminate if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction, and any reacquisition
or repurchase rights held by the Company with respect to such Stock Awards shall lapse (contingent upon the effectiveness of the
Corporate Transaction);
provided, however
, that the Board may require Participants to complete and deliver to the Company
a notice of exercise before the effective date of a Corporate Transaction, which is contingent upon the effectiveness of such
Corporate Transaction.
(iii)
Payment for Stock Awards in Lieu of Exercise.
Notwithstanding the foregoing, in the event of a Corporate Transaction in which
the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Stock
Awards or substitute similar stock awards for such outstanding Stock Awards and the Stock Award will terminate if not exercised
at or prior to the effective time of a Corporate Transaction in accordance with Section 9(c)(ii), the Board may provide, in its
sole discretion, that the holder of such Stock Award may not exercise such Stock Award but will receive a payment, in such form
as may be determined by the Board, equal in value, at the effective time, to the excess, if any, of (A) the value of the property
the Participant would have received upon the exercise of the Stock Award, over (B) any exercise price payable by such holder in
connection with such exercise. For purposes of clarity, this payment may be zero ($0) if the value of the property is equal to
or less than the exercise price. Payments under this provision may be delayed to the same extent that payment of consideration
to the holders of the Company’s Common Stock in connection with the Corporate Transaction is delayed as a result of escrows,
earn outs, holdbacks, or any other contingencies.
The
Board need not take the same action or actions with respect to all Stock Awards or portions thereof or with respect to all Participants.
The Board may take different actions with respect to the vested and unvested portions of a Stock Award.
(d)
Change in Control.
In the event of a Change in Control, then, as of the effective time of such Change in Control, the vesting
of all outstanding Stock Awards (and, with respect to Options and Stock Appreciation Rights, the time when such Stock Awards may
be exercised) shall be accelerated in full and any reacquisition or repurchase rights held by the Company with respect to such
Stock Awards shall lapse.
10.
Termination or Suspension of the Plan.
(a)
Plan Term.
The Board may suspend or terminate the Plan at any time. Unless terminated sooner by the Board, the Plan shall
automatically terminate on the day before the tenth (10th) anniversary of the Effective Date. No Awards may be granted under the
Plan while the Plan is suspended or after it is terminated.
(b)
No Impairment of Rights.
Suspension or termination of the Plan shall not impair rights and obligations under any Award granted
while the Plan is in effect except with the written consent of the affected Participant.
11.
Effective Date of Plan.
This
Plan shall become effective on the Effective Date.
12.
Choice of Law.
The
law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan,
without regard to that state’s conflict of laws rules.
13.
Definitions.
As used in the Plan, the following definitions shall apply to the
capitalized terms indicated below:
(a)
“
Affiliate
” means, at the time of determination, any “parent” or “subsidiary”
of the Company as such terms are defined in Rule 405 promulgated under the Securities Act. The Board shall have the authority
to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing
definition.
(b)
“
Award
” means a Stock Award or a Performance Cash Award.
(c)
“
Award Agreement
” means a written agreement between the Company and a Participant evidencing the
terms and conditions of an Award.
(d)
“
Board
” means the Board of Directors of the Company.
(e)
“
Capitalization Adjustment
” means any change that is made in, or other events that occur with respect
to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration
by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property
other than cash, large nonrecurring cash dividend, stock split, liquidating dividend, combination of shares, exchange of shares,
change in corporate structure or any similar equity restructuring transaction, as that term is used in Statement of Financial
Accounting Standards No. 123 (revised). Notwithstanding the foregoing, the conversion of any convertible securities of the Company
shall not be treated as a Capitalization Adjustment.
(f)
“
Cause
” shall have the meaning ascribed to such term in any written agreement between the Participant
and the Company in effect at the time of the termination of the Participant’s Continuous Service defining such term and,
in the absence of such agreement, such term shall mean, with respect to a Participant, the occurrence of any of the following
events that has a material negative impact on the business or reputation of the Company: (i) such Participant’s commission
of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof;
(ii) such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company;
(iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company
or of any statutory duty owed to the Company; (iv) such Participant’s unauthorized use or disclosure of the Company’s
confidential information or trade secrets; or (v) such Participant’s gross misconduct. The determination that a termination
of the Participant’s Continuous Service is either for Cause or without Cause shall be made by the Company in its sole discretion.
Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes
of outstanding Awards held by such Participant shall have no effect upon any determination of the rights or obligations of the
Company or such Participant for any other purpose.
(g)
“
Change in Control
” means the occurrence, in a single transaction or in a series of related transactions,
of any one or more of the following events:
(i)
any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty
percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger,
consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account
of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires
the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing
for the Company through the issuance of equity securities (which includes an offering of Common Stock to the general public through
a registration statement filed with the Securities and Exchange Commission), or (B) solely because the level of Ownership held
by any Exchange Act Person (the “
Subject Person
”) exceeds the designated percentage threshold of the
outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the
number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this subsection (B))
as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes
the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the
percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then
a Change in Control shall be deemed to occur;
(ii)
there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately
after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior
thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%)
of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more
than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation
or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities
of the Company immediately prior to such transaction;
(iii)
there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated
assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all
of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting
power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their
Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition;
or
(iv)
individuals who, on the date the Plan is adopted by the Board, are members of the Board (the “
Incumbent Board
”)
cease for any reason to constitute at least a majority of the members of the Board;
provided, however
, that if the appointment
or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members
of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the
Incumbent Board.
Notwithstanding
the foregoing or any other provision of this Plan, the term Change in Control shall not include a sale of assets, merger or other
transaction effected exclusively for the purpose of changing the domicile of the Company.
(h)
“
Code
” means the Internal Revenue Code of 1986, as amended, including any applicable regulations
and guidance thereunder.
(i)
“
Committee
” means a committee of one or more Directors to whom authority has been delegated by the
Board in accordance with Section 2(c).
(j)
“
Common Stock
”
means
the common stock of the Company.
(k)
“
Company
” means Hemispherx Biopharma, Inc., a Delaware corporation.
(l)
“
Consultant
” means any natural person, including an advisor, who is (i) engaged by the Company or
an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the
board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of
a fee for such service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan. Notwithstanding
the foregoing, a person is treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the Securities
Act is available to register either the offer or the sale of the Company’s securities to such person.
(m)
“
Continuous Service
” means that the Participant’s service with the Company or an Affiliate,
whether as an Employee, Director or Consultant, is not interrupted or terminated. 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 service with
the Company or an Affiliate, shall not terminate a Participant’s Continuous Service;
provided, however,
if the Entity
for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board, in its sole discretion,
such Participant’s Continuous Service shall be considered to have terminated on the date such Entity ceases to qualify as
an Affiliate. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole
discretion, may determine whether Continuous Service shall be considered interrupted in the case of (i) any leave of absence approved
by the Board or chief executive officer, including sick leave, military leave or any other personal leave, or (ii) transfers between
the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous
Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence
policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required
by law.
(n)
“
Corporate Transaction
” means the consummation, in a single transaction or in a series of related
transactions, of any one or more of the following events:
(i)
a sale or other disposition of all or substantially all, as determined by the Board, in its sole discretion, of the consolidated
assets of the Company and its Subsidiaries;
(ii)
a sale or other disposition of at least fifty percent (50%) of the outstanding securities of the Company;
(iii)
a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
(iv)
a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of
Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by
virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
(o)
“Covered Employee”
shall have the meaning provided in Section 162(m)(3) of the Code.
(p)
“Director”
means a member of the Board.
(q)
“
Disability
” means, with respect to a Participant, the inability of such Participant to engage in
any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months, as
provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and shall be determined by the Board on the basis of such medical
evidence as the Board deems warranted under the circumstances.
(r)
“
Effective Date
” means the effective date of this Plan document as amended and restated, which is
the date of the annual meeting of stockholders of the Company held in 2019 provided this Plan is approved by the Company’s
stockholders at such meeting.
(s)
“
Employee
” means any person employed by the Company or an Affiliate. However, service solely as
a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes
of the Plan.
(t)
“
Entity
” means a corporation, partnership, limited liability company or other entity.
(u)
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
(v)
“
Exchange Act Person
” means any natural person, Entity or “group” (within the meaning
of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (i) the Company
or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee
or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an
underwriter temporarily holding securities pursuant to a registered public offering of such securities, (iv) an Entity Owned,
directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of
the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange
Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the Company’s then outstanding securities.
(w)
“
Fair Market Value
” means, as of any date, the value of the Common Stock determined as follows:
(i)
If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value
of a share of Common Stock, unless otherwise determined by the Board, shall be the closing sales price for such stock as quoted
on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of
determination, as reported in a source the Board deems reliable.
(ii)
Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination,
then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.
(iii)
In the absence of such markets for the Common Stock, the Fair Market Value shall be determined by the Board in good faith
and in a manner that complies with Sections 409A and 422 of the Code.
(x)
“
Incentive Stock Option
” means an option granted pursuant to Section 5 of the Plan that is intended
to be, and qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code.
(y)
“
Non-Employee Director
” means a Director who either (i) is not a current employee or officer of
the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for
services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would
not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“
Regulation S-K
”)),
does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K,
and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K;
or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.
(z)
“
Nonstatutory Stock Option
” means any option granted pursuant to Section 5 of the Plan that does
not qualify as an Incentive Stock Option.
(aa)
“
Officer
” means a person who is an officer of the Company within the meaning of Section 16 of the
Exchange Act.
(bb)
“
Option
” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common
Stock granted pursuant to the Plan.
(cc)
“
Option Agreement
” means a written agreement between the Company and an Option holder evidencing
the terms and conditions of an Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.
(dd)
“
Option holder
” means a person to whom an Option is granted pursuant to the Plan or, if applicable,
such other person who holds an outstanding Option.
(ee)
“
Other Stock Award
” means an award based in whole or in part by reference to the Common Stock which
is granted pursuant to the terms and conditions of Section 6(d).
(ff)
“
Other Stock Award Agreement
” means a written agreement between the Company and a holder of an Other
Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each Other Stock Award Agreement shall be subject
to the terms and conditions of the Plan.
(gg)
“
Outside Director
” means a Director who either (i) is not a current employee of the Company or an
“affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an “affiliated corporation” who receives compensation for prior services
(other than benefits under a tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or
an “affiliated corporation,” and does not receive remuneration from the Company or an “affiliated corporation,”
either directly or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered an “outside director”
for purposes of Section 162(m) of the Code.
(hh)
“
Own,
”
“
Owned,
” “
Owner,
” “
Ownership
” A person or
Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to
have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to
direct the voting, with respect to such securities.
(ii)
“
Participant
” means a person to whom an Award is granted pursuant to the Plan or, if applicable,
such other person who holds an outstanding Stock Award.
(jj)
“
Performance Cash Award
” means an award of cash granted pursuant to the terms and conditions of
Section 6(c)(ii).
(kk)
“
Performance Criteria
” means the one or more criteria that the Committee shall select for purposes
of establishing the Performance Goals for a Performance Period. The Performance Criteria that shall be used to establish such
Performance Goals may be based on any one of, or combination of, the following as determined by the Committee: (i) earnings (including
earnings per share and net earnings); (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes,
depreciation and amortization; (iv) total stockholder return; (v) return on equity or average stockholder’s equity; (vi)
return on assets, investment, or capital employed; (vii) stock price; (viii) margin (including gross margin); (ix) income (before
or after taxes); (x) operating income; (xi) operating income after taxes; (xii) pre-tax profit; (xiii) operating cash flow; (xiv)
sales or revenue targets; (xv) increases in revenue or product revenue; (xvi) expenses and cost reduction goals; (xvii) improvement
in or attainment of working capital levels; (xviii) economic value added (or an equivalent metric); (xix) market share; (xx) cash
flow; (xxi) cash flow per share; (xxii) share price performance; (xxiii) debt reduction; (xxiv) implementation or completion of
projects or processes; (xxv) customer satisfaction; (xxvi) stockholders’ equity; (xxvii) capital expenditures; (xxviii)
debt levels; (xxix) operating profit or net operating profit; (xxx) workforce diversity; (xxxi) growth of net income or operating
income; (xxxii) billings; (xxxiii) achievement of clinical trial milestones, such as patient enrollment or successful completion
of the trial; (xxxiv) execution of a new licensor agreement; (xxxv) receipt of a milestone payment under a licensor agreement
and (xxxvi) to the extent that an Award is not intended to comply with Section 162(m) of the Code, other measures of performance
selected by the Board or the Committee.
(ll)
“
Performance Goals
” means, for a Performance Period, the one or more goals established by the committee
for the Performance Period based upon the Performance Criteria. Performance Goals may be based on a Company-wide basis, with respect
to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to the performance
of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise by the Committee
(i) in the Award Agreement at the time the Award is granted or (ii) in such other document setting forth the Performance Goals
at the time the Performance Goals are established, the Committee shall appropriately make adjustments in the method of calculating
the attainment of Performance Goals for a Performance Period as follows: (1) to exclude restructuring and/or other nonrecurring
charges; (2) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated Performance Goals; (3) to exclude
the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to
corporate tax rates; and (5) to exclude the effects of any “extraordinary items” as determined under generally accepted
accounting principles.
(mm)
“
Performance Period
” means the period of time selected by the Committee 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 Stock Award or a Performance Cash Award. Performance Periods may be of varying and overlapping duration, at the sole discretion
of the Board.
(nn)
“
Performance Stock Award
” means a Stock Award granted under the terms and conditions of Section
6(c)(i).
(oo)
“
Plan
” means this Hemispherx Biopharma, Inc. 2018 Equity Incentive Plan.
(pp)
“
Restricted Stock Award
” means an award of shares of Common Stock which is granted pursuant to the
terms and conditions of Section 6(a).
(qq)
“
Restricted Stock Award Agreement
” means a written agreement between the Company and a holder of
a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant. Each Restricted Stock Award Agreement
shall be subject to the terms and conditions of the Plan.
(rr)
“
Restricted Stock Unit Award
” means a right to receive shares of Common Stock which is granted pursuant
to the terms and conditions of Section 6(b).
(ss)
“
Restricted Stock Unit Award Agreement
” means a written agreement between the Company and a holder
of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant. Each Restricted Stock
Unit Award Agreement shall be subject to the terms and conditions of the Plan.
(tt)
“
Rule 16b-3
” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3,
as in effect from time to time.
(uu)
“
Securities Act
” means the Securities Act of 1933, as amended.
(vv)
“
Stock Appreciation Right
” or “
SAR
” means a right to receive the appreciation
on Common Stock that is granted pursuant to the terms and conditions of Section 5.
(ww)
“
Stock Appreciation Right Agreement
” means a written agreement between the Company and a holder
of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant. Each Stock Appreciation
Right Agreement shall be subject to the terms and conditions of the Plan.
(xx)
“
Stock Award
” means any right to receive Common Stock granted under the Plan, including an Incentive
Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right,
a Performance Stock Award or any Other Stock Award.
(yy)
“
Stock Award Agreement
” means a written agreement between the Company and a Participant evidencing
the terms and conditions of a Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the
Plan.
(zz)
“
Subsidiary
” means, with respect to the Company, (i) any corporation of which more than fifty percent
(50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any
partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the
form of voting or participation in profits or capital contribution) of more than fifty percent (50%).
(aaa)
“
Ten Percent Stockholder
” means a person who Owns (or is deemed to Own pursuant to Section 424(d)
of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company
or any Affiliate.