NOTE

— STOCK-BASED COMPENSATION

The

2012

Incentive Compensation Plan

May 2012,

the Company’s shareholders adopted the

2012

Incentive Plan, which provides for the grant of the following types of awards: incentive stock options, non-qualified stock options, restricted stock, stock appreciation rights “(SARs”), stock units, performance awards, phantom stock, incentive bonuses, and other possible related dividend equivalents to employees of the Company, directors and independent contractors. Under the

2012

Incentive Plan, a total of

4,000,000

shares of the Company’s common stock were reserved for issuance, all of which could be issued as options or as other forms of awards. Options and SARs granted to employees under the

2012

Incentive Plan typically vest and become exercisable as follows:

25%

vest

months after the grant date, an additional

25%

vest

months after the grant date, and the remaining

50%

vest

months after the grant date. Options granted to non-employee directors under the

2012

Incentive Plan will vest and become exercisable

one

year after the grant date. Restricted stock units granted to directors and members of senior management vest according to a vesting schedule as follows: for the directors,

100%

on the

first

anniversary of the grant date and for members of senior management,

25%

on each of the first, second,

third

and

fourth

anniversaries of the grant date. The term of stock-based awards typically ranges from

six

ten

years from the grant date. The shares of common stock issued in respect of awards under the

2012

Incentive Plan are issued from the Company’s authorized share capital upon exercise of options or SARs. The

2012

Incentive Plan expired in

May 2018

upon adoption of the

2018

Incentive Compensation Plan (

“2018

Incentive Plan”), except as to stock-based awards outstanding under the

2012

Incentive Plan on that date.

The

201

Incentive Compensation Plan

May

2018,

the Company held its

2018

Annual Meeting of Stockholders at which the Company's stockholders approved the

2018

Incentive Plan. The

2018

Incentive Plan provides for the grant of the following types of awards: incentive stock options, restricted stock units (“RSUs”), SARs, stock units, performance awards, phantom stock, incentive bonuses and other possible related dividend equivalents to employees of the Company, directors and independent contractors. Under the

2018

Incentive Plan, a total of

5,000,000

shares of the Company’s common stock were authorized and reserved for issuance, all of which could be issued as options or as other forms of awards. SARs and RSUs granted to employees under the

2018

Incentive Plan typically vest and become exercisable as follows:

50%

on the

second

anniversary of the grant date and

25%

on each of the

third

and

fourth

anniversaries of the grant date. SARs and Restricted stock units granted to directors under the

2018

Incentive Plan typically vest and become exercisable (

100%

) on the

first

anniversary of the grant date. The term of stock-based awards typically ranges from

six

ten

years from the grant date. The shares of common stock issued in respect of awards under the

2018

Incentive Plan are issued from the Company’s authorized share capital upon exercise of options or SARs.

May 8, 2018,

the Company granted an aggregate of

295,671

SARs and

40,489

RSUs to the CEO and

one

of the directors under the Company’s

2018

Incentive Plan. The exercise price of each SAR is

$55.16,

which represented the fair market value of the Company’s common stock on the grant date. The SARs and RSUs will expire in

five

and a half years from the date of grant and will vest according to a vesting schedule as follows: for the directors,

100%

after a half year from the grant date and for the CEO,

22%

on each of the

first

and

second

anniversaries of the grant date and

28%

on the

third

and

fourth

anniversaries of the grant date.

The fair value of each SAR for the director and the CEO on the grant date was

$14.56

and

$14.57,

respectively. The fair value of each RSU for the director and the CEO on the grant date was

$54.92

and

$54.23,

respectively. The Company calculated the fair value of each SAR and RSU on the grant date using the Exercise Multiple-Based Lattice Pricing model based on the following assumptions:

Risk-free interest rate	2.84	%
Expected life (in years)	5.5
Dividend yield	0.79	%
Expected volatility	25.24	%
Forfeiture rate	0.0	%
Sub-Optimal Exercise Factor	2.5

June 25, 2018,

the Company granted its employees and members of its senior management an aggregate of

838,117

SARs and

19,848

RSUs under the Company’s

2018

Incentive Plan. The exercise price of each SAR is

$53.44,

which represented the fair market value of the Company’s common stock on the grant date. The SARs and RSUs will expire in

six

years from the date of grant and will vest according to a vesting schedule as follows:

50%

on the

second

anniversary of the grant date and

25%

on each of the

third

and

fourth

anniversaries of the grant date.

The fair value of each SAR for the employees and members of senior management on the grant date was

$13.82

and

$14.64,

respectively. The fair value of each RSU for the employees and members of senior management on the grant date was

$52.03

and

$52.09,

respectively. The Company calculated the fair value of each SAR and RSU on the grant date using the Exercise Multiple-Based Lattice Pricing model based on the following assumptions:

Risk-free interest rate	2.79	%
Expected life (in years)	6
Dividend yield	0.92	%
Expected volatility	25.64	%
Forfeiture rate for employees	2.78	%
Forfeiture rate for members of the senior management	0.0	%
Sub-Optimal Exercise Factor for employees	2.0
Sub-Optimal Exercise Factor for members of the senior management	2.8