BARNWELL INDUSTRIES, INC.

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Notice of Annual Meeting of Stockholders

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To the Stockholders of BARNWELL INDUSTRIES, INC.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of BARNWELL INDUSTRIES, INC., a Delaware corporation, will be held on March 5, 2018, at 9:00 a.m., Hawaii Standard Time, in Suite 210, Alakea Corporate Tower, 1100 Alakea Street, Honolulu, Hawaii, for the following purposes:

(1) the election of a Board of Directors to serve until the next Annual Meeting of Stockholders and until their successors shall have been elected and qualified;

(2)  the approval of the 2018 Equity Incentive Plan;

(3)  the ratification of the selection of the independent auditors for 2018; and

(4)  any and all other business which may properly come before the meeting.

Only stockholders of record at the close of business on January 8, 2018, are entitled to notice of and to vote at this meeting or any adjournment thereof.  The Company's Annual Report to Stockholders for the fiscal year ended September 30, 2017, which includes consolidated financial statements, is enclosed herewith.

We will be pleased to have you attend the meeting.  However, if you are unable to do so, please sign and return the accompanying Proxy in the enclosed addressed envelope.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MARCH 5, 2018.  THE PROXY STATEMENT AND OUR 2017 ANNUAL REPORT ARE AVAILABLE AT HTTP://WWW.BRNINC.COM.

By Order of the Board of Directors,

RUSSELL M. GIFFORD

Secretary

Dated:  January 18, 2018

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BARNWELL INDUSTRIES, INC.

1100 ALAKEA STREET, SUITE 2900

HONOLULU, HAWAII 96813

PROXY STATEMENT

SOLICITATION AND REVOCATION OF PROXIES

The following information is furnished in connection with the Annual Meeting of Stockholders of Barnwell Industries, Inc., a Delaware corporation (the "Company"), to be held on March 5, 2018 at 9:00 a.m., Hawaii Standard Time, in Suite 210, Alakea Corporate Tower, 1100 Alakea Street, Honolulu, Hawaii.

The accompanying Proxy is solicited by the Board of Directors (the "Board" or the "Board of Directors") of the Company. The Company will bear the cost of such solicitation.  Solicitation of proxies will be primarily by mail.  Proxies may also be solicited by regular employees of the Company by telephone at a nominal cost.  Brokerage houses and other custodians, nominees and fiduciaries will be requested to forward soliciting material to the beneficial owners of Common Stock (as defined below) and will be reimbursed for their expenses.  All properly executed proxies will be voted as instructed.

Stockholders who execute proxies may revoke them by delivering subsequently dated proxies or by giving written notice of revocation to the Secretary of the Company at any time before such proxies are voted.  No proxy will be voted for a stockholder if the stockholder attends the meeting and elects to vote in person.

This Proxy Statement and the accompanying form of proxy are first being sent to stockholders on or about January 18, 2018.  The Company's website address is www.brninc.com.

VOTING AT THE MEETING

Only stockholders of record at the close of business on January 8, 2018 (the "Record Date") will be entitled to vote at the Annual Meeting and any adjournment thereof.  As of the Record Date, 8,277,160 shares of common stock, par value $0.50, of the Company (the "Common Stock") were issued and outstanding.  Each share of Common Stock outstanding as of the Record Date is entitled to one vote on any proposal presented at the meeting.  The presence, in person or by proxy, of holders representing a majority of all the votes entitled to be cast at the meeting will constitute a quorum at the meeting.  Abstentions and broker non-votes (described below) are counted for the purposes of determining the presence or absence of a quorum for the transaction of business.  The election of directors requires a plurality of the votes cast at the meeting.  Any other item on the agenda must receive the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote on the item at the meeting in order to pass.  Abstentions are counted in the calculation of the votes cast with respect to any of the matters submitted to a vote and have the same effect as votes against the matter except in the election of directors.  Brokers and nominees are precluded from exercising their voting discretion with respect to all matters to be acted upon at the meeting, other than the ratification of KPMG LLP as our independent auditors.  Thus, if you do not give your broker or nominee specific instructions, your shares may not be voted with respect to the election of directors and the approval of the 2018 Equity Incentive Plan.  A broker non-vote will not have any effect on any of the proposals. 

 

 

PROPOSAL NO. 1

ELECTION OF DIRECTORS

Eight directors of the Company are proposed to be elected at the meeting.  Each elected director shall hold office until the next annual meeting and until his successor is duly elected and qualified.  The persons named as proxies in the enclosed Proxy are executive officers of the Company and, unless contrary instructions are given, they will vote the shares represented by the Proxy FOR the election to the Board of Directors of the persons named below.  The Board of Directors has no reason to believe that any of the nominees for director will be unable to serve; however, in the event any of the nominees should withdraw or otherwise become unavailable for reasons not presently known, the persons named as proxies may vote for other persons in place of such nominees.

Our Board of Directors recommends a vote FOR the election of each of the following eight directors of the Company.

NOMINEES TO THE BOARD OF DIRECTORS

The Board of Directors held six meetings during the fiscal year ended September 30, 2017.  All directors attended at least 75% of the meetings of the Board of Directors and of the committees of the Board on which each director served.  The independent directors met on four occasions out of the presence of management during the fiscal year ended September 30, 2017.

The following table sets forth, as to the nominees for election as directors:  (1) such person's name; (2) the year in which such person was first elected a director of the Company; (3) such person's age; (4) all positions and offices with the Company held by such person; (5) the business experience of such person during the past five years; (6) certain other directorships, if any, held by such person; and briefly discusses the specific experience, qualifications, attributes or skills that led to the conclusion that each such person should serve as a director of Barnwell.

 

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The Board of Directors has a standing Compensation Committee, a standing Audit Committee, a standing Executive Committee and a standing Reserves Committee.  It has no standing nominating committee and there is no nominating committee charter.  The Board of Directors believes that it is appropriate for the Company not to have a nominating committee because potential nominees are recommended to the full Board by a majority vote of the independent directors.  The Board identifies nominees by first evaluating the current members of the Board willing to continue in service.  Current members of the Board with skills and experience relevant to the Company's business and willing to continue in service are considered for re-nomination.  If any member of the Board up for re-election at an upcoming annual meeting of stockholders does not wish to continue in service, the Board determines whether it is appropriate to replace the retiring member.  If deemed appropriate, the Board identifies the desired skills and experience of a new nominee.  The Board believes that potential directors should possess sound judgment, understanding of the business issues affecting the Company, integrity and the highest personal and professional ethics.  The Board seeks directors possessing a range of business, management and civic experience appropriate for the Board to discharge its responsibilities.  In the case of both incumbent and new directors, the Board seeks persons who are able to devote significant time and effort to Board and Board committee responsibilities.  Once nominees have been identified, the independent directors recommend to the Board such nominees, and the Board reviews and votes on such recommendation.

The Company does not have a specific policy regarding the diversity of the Board.  Instead, the Board considers its overall composition when considering director candidates, including whether the Board has an appropriate combination of professional experience, skills, knowledge and variety of viewpoints and backgrounds in light of the Company's current and expected future needs.  The Board also believes that it is desirable for new candidates to contribute to a variety of viewpoints on the Board, which may be enhanced by a mix of different professional and personal backgrounds and experiences.

The Board will consider potential nominees brought to its attention by any director or officer of the Company.  It will also evaluate recommendations for director nominees proposed by a stockholder who (i) has continuously held at least 1% of the outstanding shares of the Company's Common Stock entitled to vote at the annual meeting of stockholders for at least one year prior to the date the stockholder makes the recommendation and (ii) undertakes to continue to hold such number of shares through the date of the upcoming annual meeting.  For possible inclusion in next year's proxy statement, any recommendation for a director nominee submitted by a qualifying stockholder must be received by the Company no later than the date for stockholder proposals set forth herein under the heading "Stockholder Proposals."  Any stockholder recommendation for a director nominee must be submitted to the Company's Chairman of the Board in writing and must include:

The Board will evaluate recommendations for director nominees submitted by directors, management or qualifying stockholders in the same manner, using the criteria stated above.  All directors and director nominees will submit a completed form of directors' and officers' questionnaire as part of the nominating process.

Stockholders may send any communication to the Board of Directors, as a whole, or individually, by mail to the Company's address listed on page one of this Proxy Statement, to the attention of Russell M. Gifford, Secretary.  All such communications will be forwarded to the Board of Directors or individual directors as appropriate.

The Company strongly encourages each member of the Board of Directors to attend the Annual Meeting.  Eight members of the Board of Directors attended the 2017 Annual Meeting of Stockholders of the Company, of which four attended in person and four attended by telephone.

BOARD LEADERSHIP STRUCTURE; RISK OVERSIGHT

The positions of Chairman and CEO were jointly held by Mr. Morton H. Kinzler from the time of his selection as Chairman of the Board in 1980 until December 2016.  From December 31, 2016 until September 30, 2017, Mr. Morton H. Kinzler was Chairman of the Board and Mr. Alexander C. Kinzler was Chief Executive Officer.  Mr. James S. Barnwell III became Chairman of the Board on October 1, 2017.  Barnwell Industries, Inc. is a smaller reporting company and the Board has determined that the current structure is appropriate at this time in that it enables Mr. Alexander C. Kinzler to handle the complexities of his role as a CEO while allowing Mr. James S. Barnwell III to continue to provide leadership on policy at the Board level.  Although the roles of CEO and Chairman are currently held by different persons, the Board regularly considers the appropriate leadership structure for the Company and has concluded that the Company and its stockholders are best served by not having a formal policy on whether the same individual should serve as both Chief Executive Officer and Chairman of the Board, and the Board has not adopted such a policy.  The Board believes that it is important to retain the flexibility to make this determination at any given point in time based upon what it believes will provide the best leadership structure for the Company at that time.  This approach allows the Board to utilize its considerable experience and knowledge to elect the most qualified director as Chairman of the Board, while maintaining the ability to combine or separate the Chairman and Chief Executive Officer roles when necessary.  Accordingly, at different points in time in the Company's history, the Chief Executive Officer and Chairman of the Board roles have been held by the same person.  At other times, they have been held by different individuals.  In each instance, the decision on whether to combine or separate the roles was made in the best interest of the Company's stockholders, based on the circumstances at the time.

The Board's primary function with respect to risk is oversight.  The Board administers its risk oversight function both as a whole and through its committees.  The Audit Committee reviews and makes inquiry as to risk management and reports to the Board on its findings.  The Board of Directors has an active role, as a whole and also at the committee level, in overseeing management of the Company's risks.  Management is responsible for the Company's day-to-day risk management activities.  Other Board committees also consider and address risk as they perform their committee responsibilities.  For example, the Compensation Committee, comprised solely of independent directors, discusses and reviews compensation arrangements for the Company's Executive Officers to avoid incentives that would promote excessive risk-taking that is reasonably likely to have a material adverse effect on the Company.  The full Board is also apprised of particular risk management matters in connection with its general oversight and approval of corporate matters.  We believe the division of risk management responsibilities as described above is an effective approach for evaluating and addressing the risks facing the Company and that our Board leadership structure supports this approach because it allows our independent directors to exercise effective oversight of the actions of management.

 

COMPENSATION COMMITTEE

The members of the Compensation Committee are Mr. Anderson, Dr. Gardner, Mr. Takata and Mr. Barnwell, Chairman.  The Compensation Committee (i) determines the annual compensation of the Company's Executive Officers; (ii) recommends, if appropriate, new employee benefit plans to the Board of Directors; (iii) administers all employee benefit plans; and (iv) makes such other determinations regarding compensation or benefits as may be necessary or advisable.  The Compensation Committee held two meetings during the fiscal year ended September 30, 2017.  The Board of Directors has adopted a written charter for the Compensation Committee, a copy of which is available on our website.

NAMED EXECUTIVE OFFICERS OF THE COMPANY

The Company currently has two executive officers (the "Named Executive Officers") ¹ .  The following table sets forth the names and ages of all Named Executive Officers of the Company during fiscal 2017, their positions and offices with the Company and the period during which each has served.

EXECUTIVE COMPENSATION

No Named Executive Officer was granted a stock award or an option award in fiscal year 2017, 2016 or 2015. As a result, such columns have been omitted.

Our Pay for Performance Plan adopted in 2014 (the "Plan") is available to pay bonuses to our executives based on performance.  Performance measures and targeted goals for the Company's 2017 fiscal year performance period were established by the Compensation Committee in December 2016 and the Committee designated the CEO to be eligible to participate in the Plan for fiscal year 2017.  The material terms of such performance measures and targeted goals are as follows:

 

The Compensation Committee determined that the sum of the following three components shall represent the maximum bonus that may be achieved under the Plan for fiscal 2017 by the CEO (the "2017 Maximum Bonus Amount"), which is designed so that the Company will be in compliance with Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"):

 

 (c)  for an increase in the Company's market capitalization of up to 10%, determined by comparing the closing price of the Common Stock on September 30, 2016 and September 30, 2017, 10% of the amount of such increase.

The 2017 Maximum Bonus Amount for each participant shall in no case exceed 150% of such participant's base salary as of January 2017.  Additionally, a decrease in earnings before income taxes or market capitalization will not decrease the amounts of the other respective components of the 2017 Maximum Bonus Amount.  The Committee, in its sole discretion, reserves the right to eliminate or reduce the 2017 Maximum Bonus Amount payable to the CEO pursuant to the bonus formula described above and in addition or alternatively to grant ordinary bonuses.

The Compensation Committee determined that, pursuant to the adopted performance measures and targeted goals, the maximum bonus grant which could have been payable as calculated under the Plan was $235,000 as to our CEO⁵.  The Compensation Committee reviewed the performance of our CEO during fiscal 2017, analyzed the Company's results for the year, reviewed the overall performance of management for the fiscal year, reviewed with management various factors the Committee takes into account in setting compensation, including individual and corporate, financial and non-financial performance, the creation of value for our stockholders, the long-term commitment and contributions of management to the Company.

During the fiscal year ended September 30, 2017, in recognition of certain returns on the Company's land investment ventures, including the closing of a real estate transaction for a 'super lot' by an affiliated entity in which we have an interest, which resulted in the Company receiving $1,678,000, the Compensation Committee awarded a bonus of $100,000 to each of Alexander C. Kinzler and Russell M. Gifford. In considering the Company's 2017 performance, and in light of the $100,000 that had already been awarded to the CEO in respect of the return on certain land investment ventures, as discussed above, the Committee determined that it was appropriate to not pay any annual performance bonus to the CEO under the Plan.

 

    Executive Officer at that time.

 

 

No Named Executive Officer was granted a plan-based award or stock award in fiscal 2017.  As a result, such table has been omitted.

The following table sets forth grants of stock options and grants of unvested stock awards outstanding on the last day of the fiscal year ended September 30, 2017 to each of the Named Executive Officers.  No Named Executive Officer held unvested stock awards as of fiscal year end 2017.  As a result, such columns have been omitted.

 

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If a change in control occurs, then all unvested stock options will accelerate and will become exercisable in full.  Assuming a change in control occurred September 30, 2017 and using the closing price of the Company's stock on that date, the value of the accelerated vesting of these options would be $0 and $0 for Mr. A. Kinzler and Mr. Gifford, respectively.

DIRECTOR COMPENSATION

The Company's program of director compensation is intended to fairly pay directors for work required for a company of our size and scope. Directors who are not officers of the Company currently receive an annual fee of $20,000 and are reimbursed for expenses incurred in connection with meeting attendance.  The Chairmen of the Compensation Committee and the Reserves Committee currently receive an additional $12,000 annual fee and the Chairman of the Audit Committee currently receives an additional $25,000 annual fee.  The members of the Reserves Committee and Compensation Committee, other than the Chairmen, currently receive an additional $2,500 annual fee. The members of the Audit Committee, other than the Chairperson, currently receive an additional $10,000 annual fee.  The Chairman of the Board of Directors, if he or she is not an officer of the Company, receives an additional $30,000 annual fee.  The Chairman Emeritus of the Board of Directors receives an additional $25,000 annual fee.

The following Non-Employee Director Compensation table sets forth information with regard to the nominees to the Board of Directors as listed in the table under "Proposal No. 1", above, with regard to compensation paid to them during the fiscal year ended September 30, 2017.  Directors who are officers of the Company do not receive any fees for their service as directors, and their compensation as officers of the Company is disclosed in the Summary Compensation Table.

No named director was granted a stock award or option award in fiscal year 2017 nor earned any non-equity incentive plan compensation in fiscal year 2017. As a result, such columns have been omitted.

 

 

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AUDIT COMMITTEE

The members of the Audit Committee are Mr. Inglima, Chairman, Dr. Gardner, and Messrs. Anderson, Takata, and Barnwell.  All of the members of the Audit Committee are independent (as independence is defined in Section 803 (A) of the NYSE American listing standards).  The Board of Directors has determined that the Audit Committee has an audit committee financial expert, Mr. Inglima, who is a financial expert based on his degree in finance, education in accounting, his work with an accounting and consulting firm on business valuation and litigation support services, as well as his many years of legal experience advising clients on matters of business, finance and taxation.  Mr. Inglima, while not a CPA, has in-depth financial and accounting expertise and has been determined by the Board of Directors to qualify as an Audit Committee financial expert.  The Board of Directors has adopted a written charter for the Audit Committee, a copy of which is available on our website.  The Audit Committee reviews the services of the independent accountants employed by the Company to audit the consolidated financial statements of the Company. The Audit Committee periodically reviews major issues regarding accounting and auditing principles and practices, the adequacy of internal controls that could affect the consolidated financial statements as well as all related party transactions and potential conflicts of interest.  During the fiscal year ended September 30, 2017, the Audit Committee held four meetings.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee has reviewed and discussed the audited consolidated financial statements with management, and the Audit Committee has discussed with KPMG LLP, the independent registered public accounting firm, the matters required to be discussed by PCAOB Auditing Standard No. 16, "Communications with Audit Committee; Related Amendments to PCAOB Standards; and Transitional Amendments to PCAOB AU Section 380.", as such may be modified or supplemented.  KPMG LLP has provided to the Company the written disclosures and the letter required by applicable PCAOB requirements regarding their communications with the Audit Committee concerning independence, and the Audit Committee has discussed with KPMG LLP its independence. The committee also concluded that KPMG LLP's performance of tax services to us and our affiliates, as pre-approved by the committee and described in the next section, does not impair KPMG LLP's independence.  Based upon its discussions with management and with KPMG LLP, the Audit Committee has recommended to the Board of Directors that the audited consolidated financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2017.

The aggregate fees billed to the Company by KPMG LLP, the Company's independent registered public accounting firm, for professional services rendered in connection with the audit of the annual financial statements included in the Company's Annual Report on Form 10-K, review of financial statements included in the Company's Quarterly Reports on Form 10-Q and services to the Company in connection with statutory or regulatory filings or engagements for the fiscal year ended September 30, 2017 totaled $398,500.  For the comparable services provided for the fiscal year ended September 30, 2016, KPMG LLP billed the Company $387,400.

For the fiscal years ended September 30, 2017 and September 30, 2016, KPMG LLP, the Company's independent registered public accounting firm, did not bill the Company for assurance and related services that are reasonably related to the performance of the audit or review of the Company's financial statements.

For the fiscal years ended September 30, 2017 and September 30, 2016, KPMG LLP, the Company's independent registered public accounting firm, did not bill the Company for any fees other than Audit Fees and Tax Fees.

Pre-approval Policies and Procedures

 

The Audit Committee pre-approves all services provided to the Company by the independent registered public accounting firm through the following policies and procedures:  (1) the Audit Committee reviews with the Company's independent registered public accounting firm its audit plan and report thereon, including estimated Audit Fees, Audit-Related Fees, Tax Fees and Other Fees; (2) upon review of such audit plan and estimated fees, the Audit Committee may pre-approve the provision of such products and services and the payment therefor; and (3) at subsequent meetings of the Audit Committee, the Audit Committee reviews the status of the provision of all products and services from the Company's independent registered public accounting firm to the Company and payment therefor, and may pre-approve the provision of additional products and services as necessary.

Robert J. Inglima, Jr., Chairman

Murray C. Gardner

Martin Anderson

Kevin K. Takata

James S. Barnwell III

EXECUTIVE COMMITTEE

The members of the Executive Committee are Mr. James S. Barnwell III, Chairman, and Messrs. M. Kinzler, Anderson, A. Kinzler and Dr. Gardner.  The Executive Committee has and may exercise all the powers of the Board of Directors when the Board is not in session, subject to certain limitations in the Company's Bylaws.  During the fiscal year ended September 30, 2017, the Executive Committee held no meetings.

RESERVES COMMITTEE

The members of the Reserves Committee are Mr. James S. Barnwell III, Chairman, Dr. Gardner and Messrs. Inglima, Takata, M. Kinzler, Gifford and A. Kinzler.  During the fiscal year ended September 30, 2017, the Reserves Committee held one meeting.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Below are the transactions that occurred during fiscal year 2017 in which, to our knowledge, the Company was or is a party, in which the amount involved exceeded $120,000, and in which any director, director nominee, executive officer, person known by us to be a holder of more than 5% of our Common Stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.

The Estate of Dr. R. David Sudarsky (the "Sudarsky Estate") is a person known by the Company to be holders of more than 5% of the Company's Common Stock during fiscal 2017.  Mr. Morton H. Kinzler, a director of the Company, is the executor of the Sudarsky Estate.  In June 2017, the Sudarsky Estate distributed to its beneficiaries the Company's Common Stock it held.  One such beneficiary, the R. David Sudarsky testamentary Charitable Trust ("the Trust") received a distribution of 182,897 shares of the Company's Common Stock.  Morton H. Kinzler, a director of the Company and Alexander C. Kinzler, Chief Executive Officer and President of the Company, are co-trustees of the Trust and as such have voting and dispositive power over the 182,897 shares held by the Trust.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of December 28, 2017, with respect to the beneficial ownership of the Common Stock, the sole voting security of the Company, by (i) each person known to the

Company who beneficially owns more than 5% of the Common Stock, (ii) each director and nominee of the Company, (iii) the Named Executive Officers, and (iv) all directors and executive officers of the Company as a group.

 

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PROPOSAL NO. 2

APPROVAL OF THE 2018 EQUITY INCENTIVE PLAN

We are requesting that the stockholders vote in favor of approving the Company's 2018 Equity Incentive Plan (the "2018 Plan").

General

On December 8, 2017, the Board of Directors of the Company adopted the 2018 Plan, subject to the approval of the Company's stockholders.  The purpose of the 2018 Plan is to provide incentives for officers, directors, employees and other service providers and to promote the well-being of the Company and encourage ownership of the Company through the granting of stock options, restricted stock, restricted stock units, stock grants, stock appreciation rights, performance units and performance awards.  Accordingly, the Board of Directors of the Company believes that the 2018 Plan (a) will provide the Company with significant means to attract and retain talented personnel, (b) will result in saving cash, which otherwise would be required to maintain current employees and adequately attract and reward personnel and others who perform services for the Company, and (c) consequently, will prove beneficial to the Company's ability to be competitive.

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If approved by the Company's stockholders at the Annual Meeting, the 2018 Plan will become effective. The Company is recommending that its stockholders approve the material terms of the 2018 Plan as described below.  The summary is qualified in its entirety by reference to the specific language of the 2018 Plan, a copy of which is attached as Exhibit A.

Summary of the 2018 Plan

 

Awards

            The 2018 Plan provides for the grant of any or all of the following types of awards (collectively, "Awards"): (a) stock options, (b) restricted stock, (c) restricted stock units, (d) stock appreciation rights, (e) performance awards (including performance units, qualified and non-qualified performance based awards) and (f) stock grants.  Awards may be granted singly, in combination, or in tandem, as determined by Committee (as defined below). Subject to anti-dilution adjustments as provided in the 2018 Plan, (i) the 2018 Plan provides for a total of 800,000 shares of common stock of the Company to be available for distribution pursuant to the 2018 Plan, and subject to the provisions of the immediately preceding paragraph, the maximum number of shares of the Company that may be granted or measured to any participant under the 2018 Plan during any calendar year or part thereof shall not exceed (1) 120,000 shares of the Company, with respect to Options that are intended to be Incentive Stock Options, (2) 120,000 shares of the Company with respect to Options (other than Incentive Stock Options) and Stock Appreciation Rights, (3) 60,000 shares of the Company with respect to Restricted Stock and Restricted Stock Units and (4) 60,000 shares of the Company with respect other Awards. The maximum number of shares of common stock of the Company with respect to which Incentive Stock Options may be granted under the 2018 Plan shall be 120,000 shares.  Notwithstanding the foregoing, for a non-employee director who is receiving a Stock Grant in lieu of fees, the maximum number of shares of stock that such director may receive with respect to such Stock Grant shall be equal to the greater of the individual limit for Stock Grants set forth in the plan or the dollar value of such director's director fees (including any additional fees for committee or similar work) for a year.  If any outstanding Award is canceled, forfeited, delivered to the Company as payment for the exercise price or surrendered to the Company for tax withholding purposes, shares of common stock of the Company allocable to such Award may again be available for Awards under the 2018 Plan.

Administration

The 2018 Plan may be administered by the Compensation Committee (the "Committee") consisting of two or more members of the Board appointed by the Board.  The Committee will determine, among other things, the persons to whom Awards will be granted, the type of Awards to be granted, the number of shares of the Company subject to each Award and the share price. The Committee will also determine the term of each Award, the restrictions or limitations thereon, and the manner in which each such Award may be exercised or, if applicable, the extent and circumstances under which ordinary shares and other amounts payable with respect to an Award will be deferred. The Committee may delegate some of the functions referred to above. No Award shall be granted pursuant to the 2018 Plan on or after the tenth anniversary of the effective date of the 2018 Plan.

Eligibility and Participation

Officers, directors, service providers and other employees of the Company or any subsidiary are eligible to be granted Awards under the 2018 Plan.  Eligibility under the 2018 Plan shall be determined by the Committee.

A participant's right, if any, to continue to serve the Company as a director, executive officer, other  employee or service provider, or otherwise, will not be enlarged or otherwise affected by his or her designation as a participant under the 2018 Plan. Participants may receive one or more Awards under the 2018 Plan.

Forms of Awards

Stock Options. The 2018 Plan provides for the grant of Incentive Stock Options and Non-Qualified Stock Options, subject to such terms and conditions as determined by the Committee. Incentive Stock Options granted pursuant to the 2018 Plan are nontransferable by the optionee during his lifetime. Incentive Stock Options granted pursuant to the 2018 Plan will expire if not exercised within 10 years of the grant (five years in the case of Incentive Stock Options granted to an eligible employee owning stock possessing more than 10% of the total combined voting power of all shares of the Company or a parent or subsidiary of the Company immediately before the grant ("10% Stockholder"). Options may be granted to optionees in such amounts and at such prices as may be determined, from time to time, by the Committee. The exercise price of an Incentive Stock Option will not be less than the fair market value of the shares underlying the option on the date the option is granted, provided, however, that the exercise price of an Incentive Stock Option granted to a 10% Stockholder may not be less than 110% of such fair market value. The exercise price of a Non-Qualified Stock Option shall, to the extent that compliance with Section 409A of the Code is intended, not be less than such fair market value on the date of grant.

No shares of common stock of the Company may be issued upon the exercise of any option granted under the 2018 Plan until the full option price has been paid by the optionee and applicable withholding requirements have been satisfied. The Committee may grant individual options under the 2018 Plan with more stringent provisions than those specified in the 2018 Plan.

Options become exercisable in such amounts, at such intervals and upon such terms and conditions as the Committee provides.

Stock Appreciation Rights.  Stock Appreciation Rights are an award entitling the grantee, upon exercise, to receive an amount of our common stock determined by reference to appreciation, from and after the date of grant, in the fair market value of a share of the Company common stock over the exercise price of the Stock Appreciation Right.  The exercise price of a Stock Appreciation Right will be determined by the Committee at the time of grant and is not to be less than the fair market value of the shares of the Company on the date of grant.

Restricted Stock Awards. Under the 2018 Plan, the Committee may grant shares of restricted Common Stock of the Company. Restricted Stock Awards give the recipient the right to receive a specified number of shares of common stock of the Company, subject to such terms, conditions, restrictions and conditions of forfeiture as the Committee deems appropriate. Restrictions may include limitations on the right to transfer the stock until the expiration of a specified period of time and forfeiture of the stock upon the occurrence of certain events such as the termination of employment prior to expiration of a specified period of time.

Restricted Stock Units.  Restricted Stock Units are similar to restricted stock except that the award takes the form of phantom units equal to the value of shares of the Company instead of shares of the Company.  A Restricted Stock Unit award is the grant by the Committee of an unfunded, unsecured right to receive payment or common stock from the Company, upon the expiration of a vesting period or such other time periods as set forth in the award agreement, in an amount equal to the fair market value of a share of the Company common stock on such date.

Performance-Based Awards, Performance Units and Performance Goals. Certain Awards made under the 2018 Plan may be granted subject to performance conditions, (these Awards are referred to as "Performance-Based Awards").

Under the 2018 Plan, the Committee may use the following performance measures (either individually or in any combination) to set performance targets with respect to Awards intended to qualify as Performance-Based Awards: (i) cash flow (before or after dividends), (ii) earnings per share (diluted or basic), (iii) earnings (which may include earnings before interest, taxes, depreciation and amortization; earnings before interest and taxes; earnings before taxes; and net earnings, and may be determined in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") or adjusted to exclude any or all non-GAAP items), (iv) stock price, (v) return on equity, (vi) stockholder return or total stockholder return, (vii) return on capital (including, without limitation, return on total capital or return on invested capital), (viii) return on investment, (ix) return on assets or net assets, (x) market capitalization, (xi) economic value added, (xiii) debt leverage (debt to capital), (xiv) revenue, (xv) sales or net sales, (xvi) backlog, (xvii) income, pre-tax income or net income, (xviii) operating income or pre-tax profit, (xx) operating profit, net operating profit or economic profit, (xxi) gross margin, operating margin or profit margin, (xxii) return on operating revenue or return on operating assets, (xxiii) cash from operations, (xxiv) operating ratio, (xxv) operating revenue, (xxvi) recurring revenues, (xxviii) services or license revenues (xxviii) market share or market share improvement, (xxix) general and administrative expenses, (xxx) operating expenses, (xxxi) customer service, (xxxii)stock price, (xxxiii) return on equity or average stockholders' equity, (xxxiv) total stockholder return, (xxxv) growth in stockholder value relative to the moving average of the S&P 500 Index, another index or that of a peer group of companies, (xxxvi)controllable operating profit, (xxxvii) cash conversion cycle, (xxxviii) contract awards or backlog; overhead or other expense reduction, (xxxviii) credit rating, (xxxix) strategic plan development and implementation, (xl) succession plan development and implementation, (xli) improvement in workforce diversity, (xlii) customer indicators; (xlii) improvements in productivity, (xliii) attainment of objective operating goals, (xliv) employee metrics or (xlv) growth in any of the foregoing measures.

Stock Grants.   The Committee may grant awards of stock in recognition of significant prior or expected contributions to the success of the Company or its affiliates, as an inducement to employment, in lieu of compensation otherwise due, in lieu of directors fees and any other time the Committee deems appropriate.  Stock grants are made without forfeiture conditions of any kind.  It is currently anticipated that non-employee directors may receive some or all of their fees in the form of Stock grants.

Effect of a Change of Control; Acquisition

The Committee may, at the time of the grant of an Award and as set forth in an Award Agreement, provide for the effect of a "Change in Control" on an Award.  Such provisions may include any one or more of the following:  (i) the acceleration or extension of time periods for purposes of exercising, vesting in, or realizing gain from any Award, (ii) the elimination or modification of performance or other conditions related to the payment or other rights under an Award, (iii) provision for the cash settlement of an Award for an equivalent cash value, as determined by the Committee, or (iv) such other modification or adjustment to an Award as the Committee deems appropriate to maintain and protect the rights and interests of Participants upon or following a Change in Control.

If not otherwise provided in an Award Agreement, upon the occurrence of a Change of Control: (i) any and all Options and Stock Appreciation Rights not already exercisable in full shall Accelerate with respect to one hundred percent (100)% of the shares for which such Options or Stock Appreciation Rights are not then exercisable; (ii) any risk of forfeiture applicable to Restricted Stock and Restricted Stock Units which is not based on achievement of Performance Goals shall lapse with respect to one hundred percent (100%) of the Restricted Stock and Restricted Stock Units still subject to such risk of forfeiture immediately prior to the Change of Control; and (iii) all outstanding Awards of Restricted Stock and Restricted Stock Units conditioned on the achievement of Performance Goals or other business objectives and the target payout opportunities attainable under outstanding Performance Units shall be deemed to have been satisfied as of the effective date of the Change of Control as to a pro rata number of shares based on the assumed achievement of all relevant Performance Goals or other business objectives and the length of time within the Performance Period which has elapsed prior to the Change of Control. All such Awards of Performance Units and Restricted Stock Units shall be paid to the extent earned to Participants in accordance with their terms within thirty (30) days following the effective date of the Change of Control.

Notwithstanding anything else herein to the contrary the Plan provides that the foregoing provisions shall not apply, (i) in the case of a Qualified Performance-Based Award specifically designated as such by the Committee at the time of grant (except to the extent allowed by Section 162(m) of the Code) if such treatment would cause it to fail to qualify as Qualified Performance-Based Award under Section 162(m) of the Code, (ii) in the case of any Award pursuant to an Award Agreement requiring other or additional terms upon a Change of Control (or similar event), or (iii) if specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges.

In addition, subject to any provisions of then outstanding Awards granting greater rights to the holders thereof, in the event of an Acquisition, any then outstanding Awards shall Accelerate to the extent not assumed or replaced by comparable Awards referencing shares of the capital stock of the successor or acquiring entity or parent thereof, and thereafter (or after a reasonable period following the Acquisition, as determined by the Committee) terminate. As to any one or more outstanding Awards which are not otherwise Accelerated in full by reason of such Acquisition, the Committee may also, either in advance of an Acquisition or at the time thereof and upon such terms as it may deem appropriate, provide for the Acceleration of such outstanding Awards in the event that the employment of the Participants should subsequently terminate following the Acquisition. Each outstanding Award that is assumed in connection with an Acquisition, or is otherwise to continue in effect subsequent to the Acquisition, will be appropriately adjusted, immediately after the Acquisition, as to the number and class of securities and other relevant terms

Term and Amendment

The 2018 Plan will become effective as of the Effective Date and no award will be granted more than ten years after the Effective Date. The Board of Directors of the Company may at any time, and from time to time, amend any of the provisions of the 2018 Plan, and may at any time suspend or terminate the 2018 Plan; provided, however, that no such amendment shall be effective unless and until it has been duly approved by the holders of the outstanding shares of common stock of the Company if the failure to obtain such approval would adversely affect the compliance of the 2018 Plan with the requirements of applicable law or listing standards of the applicable exchange. The Board of Directors of the Company or the Committee, as the case may be, may amend the terms of any award granted under the 2018 Plan.

No amendment or modification of the Plan by the Board, or of an outstanding Award by the Committee, shall materially impair the rights of the recipient of any Award outstanding on the date of such amendment or modification or such Award, as the case may be, without the Participant's consent; provided, however, that no such consent shall be required if (i) the Board or Committee, as the case may be, determines in its sole discretion and prior to the date of any Change of Control that such amendment or alteration either is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation, including without limitation the provisions of Section 409A of the Code or to meet the requirements of or avoid adverse financial accounting consequences under any accounting standard, or (ii) the Board or Committee, as the case may be, determines in its sole discretion that such amendment or alteration is not reasonably likely to significantly diminish the benefits provided under the Award, or that any such diminution has been adequately compensated.

Summary of U.S. Federal Income Tax Consequences

The following information is not intended to be a complete discussion of the federal income tax consequences of participation in the 2018 Plan and is qualified in its entirety by references to the Code and the regulations adopted under the Code. The provisions of the Code described in this section include current tax law only and do not reflect any proposals to revise current tax law. The federal income tax consequences applicable to officers, directors, and other persons who are subject to potential liability under Section 16(b) of the Exchange Act may be different than the federal income tax consequences applicable to persons who are not subject to Section 16(b). The federal income tax consequences applicable to all persons, whether or not subject to Section 16(b), are described below.  This summary omits the tax laws of any municipality, state or foreign country in which a participant resides.

Incentive Stock Options. Generally, under the Code, an optionee will not realize taxable income by reason of the grant or exercise of an Incentive Stock Option granted pursuant to the 2018 Plan (see, however, discussion of alternative minimum tax below). If an optionee exercises an Incentive Stock Option and does not dispose of the shares until the later of (i) two years from the date the option was granted and (ii) one year from the date of exercise, the entire gain, if any, realized upon disposition of such shares will be taxable to the optionee as long-term capital gain, and the Company will not be entitled to any deduction. If an optionee disposes of the shares within the period of two years from the date of grant or one year from the date of exercise (referred to as a "disqualifying disposition"), the optionee generally will realize ordinary income in the year of disposition and the Company will receive a corresponding deduction in an amount equal to the excess of (i) the lesser of (a) the amount, if any, realized on the disposition and (b) the fair market value of the shares on the date the option was exercised over (ii) the option price. Any additional gain realized on the disposition will be short-term or long-term capital gain and any loss will be long-term or short-term capital loss. The optionee will be considered to have disposed of a share if he or she sells, exchanges, makes a gift of or transfers legal title to the share (except transfers, among others, by pledge, on death or to a spouse). If the disposition is by sale or exchange, the optionee's tax basis will equal the amount paid for the shares plus any ordinary income realized as a result of the disqualifying disposition.

The exercise of an Incentive Stock Option may subject the optionee to the so-called "alternative minimum tax" (referred to as "AMT"). The amount by which the fair market value of the shares purchased at the time of the exercise exceeds the option exercise price is an adjustment for purposes of computing the AMT. In the event of a disqualifying disposition of the shares in the same taxable year as exercise of the Incentive Stock Option, no adjustment is then required for purposes of the AMT, but regular income tax, as described above, may result from such disqualifying disposition.

An optionee who surrenders shares as payment of the exercise price of his or her Incentive Stock Option generally will not recognize gain or loss on his or her surrender of such shares. The surrender of shares previously acquired upon exercise of an Incentive Stock Option in payment of the exercise price of another Incentive Stock Option, is, however, a "disposition" of such stock. If the Incentive Stock Option holding period requirements described above have not been satisfied with respect to such stock, such disposition will be a disqualifying disposition that may cause the optionee to recognize ordinary income as discussed above.

Under the Code, all of the shares received by an optionee upon exercise of an Incentive Stock Option by surrendering shares will be subject to the Incentive Stock Option holding period requirements. Of those shares, a number of shares (referred to as the "Exchange Shares") equal to the number of shares surrendered by the optionee will have the same tax basis for capital gains purposes (increased by any ordinary income recognized as a result of a disqualifying disposition of the surrendered shares if they were Incentive Stock Option shares) and the same capital gains holding period as the shares surrendered.

For purposes of determining ordinary income upon a subsequent disqualifying disposition of the Exchange Shares, the amount paid for such shares will be deemed to be the fair market value of the shares surrendered. The balance of the shares received by the optionee will have a tax basis (and a deemed purchase price) of zero and a capital gains holding period beginning on the date of exercise. The Incentive Stock Option holding period for all shares will be the same as if the option had been exercised for cash.

Non-Qualified Stock Options. Generally, there will be no federal income tax consequences to either the optionee or the Company on the grant of Non-Qualified Stock Options pursuant to the 2018 Plan. On the exercise of a Non-Qualified Stock Option, the optionee has taxable ordinary income equal to the excess of the fair market value of the shares acquired on the exercise date over the option price of the shares. the Company will be entitled to a federal income tax deduction (subject to the limitations contained in Code Section 162(m)) in an amount equal to such excess, provided that the Company complies with applicable reporting rules.

Upon the sale of stock acquired by exercise of a Non-Qualified Stock Option, optionees will realize long-term or short-term capital gain or loss depending upon their holding period for such stock.

Stock Awards. The taxability of a Stock Award to a participant is dependent upon the extent to which the award is restricted on the date of grant. If a Stock Award is either transferable or not subject to a substantial risk of forfeiture, a participant will recognize taxable ordinary income on the date of grant. If a Stock Award is both non-transferable and subject to a substantial risk of forfeiture on the date of grant, then unless an election is made as described below, a participant will not recognize taxable ordinary income on the date of grant, but will at such time or times as the Stock Award becomes either transferable or not subject to a substantial risk of forfeiture in an amount equal to the fair market value of such shares at that time. Within thirty days of receipt of a Stock Award that is not transferable and subject to a substantial risk of forfeiture, a participant may file an election with the Internal Revenue Service to include as taxable ordinary income in the year of receipt an amount equal to the fair market value of the shares subject to the award at the time of receipt. In such event, any subsequent appreciation in the value of such shares will not be taxable as compensation to a participant upon the vesting of shares subject to the award. However, if shares subject to the award are forfeited subsequent to such election, a participant will not be entitled to a tax deduction. For purposes of determining the amount of taxable gain or loss upon a subsequent disposition of shares issued pursuant to such an award, the amount recognized as ordinary income to a participant will be treated as the cost basis for such shares. Shares which are held for more than one year after vesting (or in the event of an election as described above, the date of receipt) generally will qualify for long-term capital gain treatment. the Company will be entitled to a deduction in such amount and at such time as ordinary income becomes taxable to the participant.

Restricted Stock Units.  A participant will not realize income upon the grant of restricted stock units, but will realize ordinary income, and the Company will be entitled to a corresponding deduction (subject to the limitations of Code Section 162(m)), when the restricted stock units are settled in cash and/or shares of common stock of the Company. The amount of such ordinary income and deduction will be the amount of cash received plus the fair market value of the shares of Common Stock received on the date of issuance.

Performance Awards. The tax consequences of a performance award depend upon the nature of the underlying award and if and when the performance goals are achieved. If a performance award consists of a promise to deliver common stock at a future date based upon the satisfaction of certain targets, such awards will be subject to federal income taxation as ordinary income based upon the fair market value of the common stock on the date such performance awards are earned by a participant by satisfying the performance targets, provided such awards are not then subject to a substantial risk of forfeiture.

The Company Deduction. Generally, whenever a participant realizes ordinary income under the 2018 Plan, a corresponding deduction is available to the Company provided the Company complies with certain reporting requirements. Under Code Section 162(m), however, the Company will be denied a deduction for certain compensation exceeding $1,000,000.  Beginning January 1, 2018, with the passage and signing of the Tax Reform Act, this limitation will apply to the Company's  Chief Executive Officer, Chief Financial Officer, the Company's other named executive officers, and anyone who was such a covered person after December 31, 2016.  Prior to January 1, 2018, , certain performance-based compensation was excluded from the deduction limit.  With the passage and signing of the Tax Reform Act, beginning January 1, 2018 (with an exception for certain grandfathered arrangements), the Company will be denied a deduction for any compensation exceeding $1,000,000 for such covered individuals, regardless of whether the compensation is performance-based compensation.

Our Board of Directors recommends a vote FOR the approval of the 2018 Equity Incentive Plan.

PROPOSAL NO. 3

RATIFICATION OF THE SELECTION OF THE INDEPENDENT AUDITORS FOR 2018

The Audit Committee has appointed KPMG LLP to serve as our independent auditors for fiscal year 2018.  KPMG LLP has served as the Company's independent auditors since 1990 and is considered by management to be well qualified.  Although stockholder ratification of the Audit Committee's appointment of KPMG LLP as our independent auditors is not required, the Board of Directors is submitting the appointment of KPMG LLP to the stockholders for ratification.  If the stockholders fail to ratify the Audit Committee's appointment, the Audit Committee will reconsider whether to retain KPMG LLP as the Company's independent auditors.  In addition, even if the stockholders ratify the appointment of KPMG LLP, the Audit Committee may in its discretion appoint a different independent accounting firm at any time during the year if the Audit Committee determines that a change is in the best interests of the Company.  We are asking our stockholders to ratify the selection of KPMG LLP as our independent auditors for fiscal year 2018.

KPMG LLP expects to have a representative available at the meeting who will have an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.

Our Board of Directors recommends a vote FOR the ratification of the selection of KPMG LLP as independent auditors for fiscal year 2018.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires the Company's officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities, to file certain reports of beneficial ownership with the SEC.  Based solely on the Company's review of the copies of such forms it has received and written representations from certain reporting persons, except for Mr. Kevin K. Takata, who filed a Form 4 on May 30, 2017, one day late, to report one transaction for a purchase of the Company's stock on May 24, 2017, the Company believes that all of its officers, directors and greater than 10% beneficial owners, complied with all Section 16(a) filing requirements applicable to them during the Company's most recently completed fiscal year.

CODE OF ETHICS

The Company has adopted a code of ethics that applies to all of our executive and non-executive employees.  The code of ethics contains certain additional terms applicable to our Chief Executive Officer and Chief Financial Officer.  The Company's code of ethics may be found on the Company's website at: www.brninc.com/ethics0304.pdf.

STOCKHOLDER PROPOSALS

If you wish to submit a stockholder proposal to be included in our proxy statement for the 2019 annual meeting of stockholders pursuant to Rule 14a-8 of the Exchange Act, we must receive your written proposal on or before September 21, 2018.  Address the proposal to Barnwell's Secretary at the address shown on the cover page of this proxy statement.  The proposal must comply with Rule 14a-8, which lists the requirements for the inclusion of stockholder proposals in company-sponsored proxy materials.

If you wish to present a stockholder proposal at the 2019 annual meeting of stockholders that is not the subject of a proposal pursuant to Rule 14a-8 of the Exchange Act, or if you wish to recommend to the Board the nomination of a person for election to the Board, you must follow the procedures outlined in Article I, Section 1.13 of our bylaws.  These procedures include the requirement that your proposal must be delivered to Barnwell's Secretary at the address shown on the cover page of this proxy statement not later than the close of business on the 90th day or earlier than the close of business on the 120th day prior to the first anniversary of the preceding year's annual meeting.  If the date of the annual meeting is more than 30 days from such anniversary date, your notice must be delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day we publicly announce the date of the 2019 annual meeting of stockholders.

Our bylaws are available in our SEC filings which can be accessed on our website at www.brninc.com under the "SEC Data" tab.  Stockholders are urged to review all applicable rules and consult legal counsel before submitting a nomination or proposal to Barnwell.

The Company reserves the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.

 

 

GENERAL

No business other than those set forth in Items (1), (2), (3), and (4) of the Notice of Annual Meeting of Stockholders is expected to come before the meeting, but should any other matters requiring a vote of stockholders properly arise, including a question of adjourning the meeting, the persons named in the accompanying Proxy will vote thereon according to their best judgment in the best interests of the Company.

Insofar as any of the information in this Proxy Statement may rest peculiarly within the knowledge of persons other than the Company, the Company has relied upon information furnished by such persons.

By Order of the Board of Directors,

RUSSELL M. GIFFORD

Secretary

Dated:  January 18, 2018

Stockholders may obtain a copy, without charge, of the Company's Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, by writing to Russell M. Gifford, Barnwell Industries, Inc., 1100 Alakea Street, Suite 2900, Honolulu, Hawaii 96813 or by sending an email to barnwellinfo@brninc.com or by following the "2017 Annual Report" link at the Company's website (www.brninc.com).

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BARNWELL INDUSTRIES, INC.

EQUITY INCENTIVE PLAN

BARNWELL INDUSTRIES, INC.


2018 EQUITY INCENTIVE PLAN

1.	Purpose; Adoption

2.	Definitions

As used in this Plan, the following terms shall have the following meanings:

Notwithstanding the foregoing, for purpose of above and for "Acquisition", for any Award that is considered deferred compensation under Section 409A and where Change of Control and/or Acquisition is a payment, delivery, or issuance event or changes the time and form of payment, delivery or issuance, an event shall not constitute a Change of Control or Acquisition for purposes of such payment, delivery or issuance (or change in time and form or payment, delivery or issuance, as applicable) unless it would also be a "change in control" (whether by change in ownership, effective control or change in the ownership of a substantial portion of the assets) under Section 409A of the Code.

3.	Term of the Plan

Unless earlier terminated by the Board, the Plan shall terminate on December __, 2027, which is the date immediately preceding the tenth anniversary of the date of the Plan's adoption by the Board.  The Board may, in its sole discretion and at any earlier date, terminate the Plan.  Notwithstanding the foregoing, no termination of the Plan shall adversely affect any Award previously granted under the Plan without the consent of the Participant or the permitted transferee of the Award.  Awards of Incentive Options granted prior to stockholder approval of the Plan are expressly conditioned upon such approval, but in the event of the failure of the stockholders to approve the Plan shall thereafter and for all purposes be deemed to constitute Nonstatutory Options.

4.	Stock Subject to the Plan

5.	Administration

The Plan shall be administered by the Committee; provided, however, that at any time and on any one or more occasions the Board may itself exercise any of the powers and responsibilities assigned the Committee under the Plan and when so acting shall have the benefit of all of the provisions of the Plan pertaining to the Committee's exercise of its authorities hereunder; and provided further, however, that the Committee may delegate to an executive officer or officers the authority to grant Awards hereunder to employees who are not officers, and to consultants, in accordance with such guidelines as the Committee shall set forth at any time or from time to time. The Committee shall, subject to Section 0, have plenary authority to grant Awards pursuant to the terms of the Plan to individuals eligible for Award grants pursuant to Section 0 and such powers and authority as may be necessary or appropriate for the Committee to carry out its functions as described in the Plan.  Among other things, the Committee shall have the authority in its sole discretion, subject to the terms and conditions of the Plan:

The Committee's (or, if applicable, its delegates') determinations under the Plan need not be uniform and may be made by the Committee selectively among Participants and potential Participants, whether or not such persons are similarly situated.  The determination of the Committee on all matters relating to the Plan, any Awards granted under the Plan or any Award Agreement shall be final, binding and conclusive.  No member of the Committee shall be liable for any action or determination made by the Committee with respect to the Plan, any Award Agreement or any Award.  The Committee may employ counsel, consultants, accountants, appraisers, brokers or other persons at the expense of the Company.  The Committee, the Company and the officers and directors of the Company shall be entitled to rely upon the advice, opinions or valuations of such persons.

6.	Authorization of Grants

7.	Specific Terms of Awards

If the Stock is traded on an established market, payment of any exercise price may also be made through and under the terms and conditions of any formal cashless exercise program authorized by the Company entailing the sale of the Stock subject to an Option in a brokered transaction (other than to the Company).  Receipt by the Company of such notice and payment in any authorized or combination of authorized means shall constitute the exercise of the Option. Within thirty (30) days thereafter but subject to the remaining provisions of the Plan, the Company shall deliver or cause to be delivered to the Optionee or his agent a certificate or certificates for the number of shares then being purchased. Such shares shall be fully paid and nonassessable.

8.	Adjustment Provisions

9.	Change of Control

The Committee may, at the time of the grant of an Award and as set forth in an Award Agreement, provide for the effect of a "Change in Control" on an Award.  Such provisions may include any one or more of the following:  (i) the acceleration or extension of time periods for purposes of exercising, vesting in, or realizing gain from any Award, (ii) the elimination or modification of performance or other conditions related to the payment or other rights under an Award, (iii) provision for the cash settlement of an Award for an equivalent cash value, as determined by the Committee, or (iv) such other modification or adjustment to an Award as the Committee deems appropriate to maintain and protect the rights and interests of Participants upon or following a Change in Control.

If not otherwise provided in an Award Agreement, upon the occurrence of a Change of Control:

(i) any and all Options and Stock Appreciation Rights not already exercisable in full shall Accelerate with respect to one hundred percent (100)% of the shares for which such Options or Stock Appreciation Rights are not then exercisable;

(ii) any Risk of Forfeiture applicable to Restricted Stock and Restricted Stock Units which is not based on achievement of Performance Goals shall lapse with respect to one hundred percent (100%) of the Restricted Stock and Restricted Stock Units still subject to such Risk of Forfeiture immediately prior to the Change of Control; and

(iii) all outstanding Awards of Restricted Stock and Restricted Stock Units conditioned on the achievement of Performance Goals or other business objectives and the target payout opportunities attainable under outstanding Performance Units shall be deemed to have been satisfied as of the effective date of the Change of Control as to a pro rata number of shares based on the assumed achievement of all relevant Performance Goals or other business objectives and the length of time within the Performance Period which has elapsed prior to the Change of Control. All such Awards of Performance Units and Restricted Stock Units shall be paid to the extent earned to Participants in accordance with their terms within thirty (30) days following the effective date of the Change of Control.

Notwithstanding anything else herein to the contrary the foregoing provisions shall not apply, (i) in the case of a Qualified Performance-Based Award specifically designated as such by the Committee at the time of grant (except to the extent allowed by Section 162(m) of the Code) if such treatment would cause it to fail to qualify as Qualified Performance-Based Award under Section 162(m) of the Code, (ii) in the case of any Award pursuant to an Award Agreement requiring other or additional terms upon a Change of Control (or similar event), or (iii) if specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges.

10.	Settlement of Awards

The Company shall make all reasonable efforts to bring about the occurrence of said events.

11.	Limitation of Rights in Stock; No Special Service Rights

A Participant shall not be deemed for any purpose to be a stockholder of the Company with respect to any of the shares of Stock subject to an Award, unless and until a Participant has become the holder of record and a certificate shall have been issued therefor and delivered to the Participant or his agent.  Any Stock to be issued pursuant to Awards granted under the Plan shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the Certificate of Incorporation and the By-laws of the Company.  Nothing contained in the Plan or in any Award Agreement shall confer upon any recipient of an Award any right with respect to the continuation of his or her employment or other association with the Company (or any Affiliate), or interfere in any way with the right of the Company (or any Affiliate), subject to the terms of any separate employment or consulting agreement or provision of law or corporate articles or by-laws to the contrary, at any time to terminate such employment or consulting agreement or to increase or decrease, or otherwise adjust, the other terms and conditions of the recipient's employment or other association with the Company and its Affiliates.

12.	Unfunded Status of Plan

The Plan is intended to constitute an "unfunded" plan for incentive compensation, and the Plan is not intended to constitute a plan subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.  Solely to extent permitted under Section 409A of the Code, and pursuant to the Committee's discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or payments with respect to Awards hereunder, provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.

13.	Nonexclusivity of the Plan

Neither the adoption of the Plan by the Board nor the submission of the Plan to the stockholders of the Company shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including without limitation, the granting of stock options and restricted stock other than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

14.	Termination and Amendment of the Plan

15.	Notices and Other Communications

Any notice, demand, request or other communication hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class registered, certified or overnight mail, postage prepaid, or telecopied with a confirmation copy by regular, certified or overnight mail, addressed or telecopied, as the case may be, (i) if to the recipient of an Award, at his or her residence address last filed with the Company and (ii) if to the Company, at its principal place of business, addressed to the attention of its Treasurer, or to such other address or telecopier number, as the case may be, as the addressee may have designated by notice to the addressor. All such notices, requests, demands and other communications shall be deemed to have been received: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of mailing, when received by the addressee; and (iii) in the case of facsimile transmission, when confirmed by facsimile machine report.

16.	Governing Law and Interpretation

The Plan and all Award Agreements and actions taken thereunder shall be governed, interpreted and enforced in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof.  The captions of this Plan are not part of the provisions hereof and shall have no force or effect.  To the extent of any conflict between the Plan and any Award Agreement, the Plan will control, provided, however, that any Award Agreement may impose greater restrictions or grant lesser rights than the Plan.  Notwithstanding the provisions of the Plan or an Award Agreement to the contrary, in the event that any term of any Award Agreement conflicts with any provision of the Plan that specifically pertains to Section 409A of the Code, the provision of the Plan shall govern.

17.	Non-Uniform Determinations

The Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive or are eligible to receive Awards (whether or not similarly situated).  Without limiting the generality of the foregoing, the Committee shall be entitled, among other things, to make non-uniform and selective determinations, and to enter into non-uniform and selective Award Agreements, as to the persons to receive Awards under the Plan and the terms and provisions of such Awards.

18.	Clawback Policy

Notwithstanding any other provision of the Plan or any Award Agreement by accepting an Award, each Participant agrees to reimburse the Company with respect to any Award granted under the Plan (or any prior plan) to the extent required by any clawback, adjustment or recoupment policy of the Company now in effect or as may be adopted by the Corporation from time to time as required by Section 304 of the Sarbanes-Oxley Act of 2002, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or as otherwise required by applicable law, regulation, order or stock exchange listing requirement.  By accepting Awards under the Plan, Participants agree and acknowledge that they are obligated to cooperate with, and provide any and all assistance necessary to, the Company to recover or recoup any Award or amounts paid under the Plan subject to clawback pursuant to such law, government regulation, stock exchange listing requirement or Company policy.  Such cooperation and assistance shall include, but is not limited to, executing, completing and submitting any documentation necessary to recover or recoup any Award or amounts paid under the Plan from a Participant's accounts, or pending or future compensation or Awards.  This Section shall not limit the Company's right to revoke or cancel an Award or take other action against a recipient of an Award for any other reason, including, but not limited to, misconduct.

19.

Section 409A of the Code

It is the intention of the Company that Awards shall either be exempt from or structured to avoid taxation under Section 409A of the Code, and the Plan, any Award Agreements and the terms and conditions of all Awards shall be interpreted accordingly.  Notwithstanding anything in the Plan to the contrary, solely with respect to any Award that constitutes a "nonqualified deferred compensation plan" subject to Section 409A of the Code and where a Change in Control is a payment, delivery or issuance event, or changes the time and form of payment, delivery or issuance (including any installments or stream of payments that are accelerated on account of a Change in Control), a Change in Control shall occur only if such event also constitutes a "change in the ownership", "change in effective control", and/or a "change in the ownership of a substantial portion of assets" of the Company as those terms are defined under Treasury Regulation Sec.1.409A-3(i)(5), but only to the extent necessary to establish a time or form of payment that complies with Section 409A of the Code, without altering the definition of Change in Control for purposes of determining whether a Participant's rights to such Award become vested or otherwise unconditional upon the Change in Control.  Notwithstanding any other provision of the Plan to the contrary, with respect to any Award that constitutes a "nonqualified deferred compensation plan" subject to Section 409A of the Code, any payments (whether in cash, Shares or other property) to be made with respect to the Award upon the Participant's termination of employment shall, to the extent required under Section 409A of the Code, be delayed until the earlier of (A) the first day of the seventh month following the Participant's termination of employment if the Participant is a "specified employee" within the meaning of Section 409A of the Code, and (B) the Participant's death. Notwithstanding the foregoing, neither the Company nor any affiliate shall be liable for, and each Participant shall be solely liable and responsible for, any taxes (or interest or penalties) that may be imposed on such Participant under Section 409A with respect to such Participant's receipt of any Award and payment thereunder.

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