EXHIBIT 10.16
GRYPHON GOLD CORPORATION
2004 STOCK INCENTIVE PLAN
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ARTICLE 1 PURPOSE.............................................. 1
1.1 GENERAL
ARTICLE 2 EFFECTIVE and EXPIRATION DATE........................ 1
2.1 EFFECTIVE DATE
2.2 EXPIRATION DATE
ARTICLE 3 DEFINITIONS AND CONSTRUCTION......................... 1
3.1 DEFINITIONS
ARTICLE 4 ADMINISTRATION....................................... 4
4.1 COMMITTEE
4.2 ACTION BY THE COMMITTEE
4.3 AUTHORITY OF COMMITTEE
4.4 DECISIONS BINDING
ARTICLE 5 SHARES SUBJECT TO THE PLAN........................... 5
5.1 NUMBER OF SHARES
5.2 LAPSED OR ASSUMED AWARDS
5.3 STOCK DISTRIBUTED
ARTICLE 6 ELIGIBILITY AND PARTICIPATION........................ 6
6.1 ELIGIBILITY
6.2 ACTUAL PARTICIPATION
ARTICLE 7 STOCK OPTIONS........................................ 6
7.1 GENERAL
7.2 INCENTIVE STOCK OPTIONS
ARTICLE 8 PROVISIONS APPLICABLE TO AWARDS...................... 8
8.1 STAND-ALONE AND TANDEM AWARDS
8.2 EXCHANGE PROVISIONS
8.3 TERM OF AWARD
8.4 FORM OF PAYMENT FOR AWARDS
8.5 LIMITS ON TRANSFER
8.6 BENEFICIARIES
8.7 STOCK CERTIFICATES
8.8 ACCELERATION UPON A CHANGE OF CONTROL
8.9 ADDITIONAL TSX VENTURE EXCHANGE TERMS
8.10 ADDITIONAL TSX EXCHANGE TERMS
ARTICLE 9 CHANGES IN CAPITAL STRUCTURE......................... 12
9.1 SHARES AVAILABLE FOR GRANT
9.2 OUTSTANDING AWARDS - INCREASE OR DECREASE IN ISSUED
SHARES WITHOUT CONSIDERATION
9.3 OUTSTANDING AWARDS - CERTAIN MERGERS
9.4 OUTSTANDING AWARDS - OTHER CHANGES
9.5 NO OTHER RIGHTS
ARTICLE 10 AMENDMENT, MODIFICATION, AND TERMINATION............. 13
10.1 AMENDMENT, MODIFICATION, AND TERMINATION
10.2 AWARDS PREVIOUSLY GRANTED
ARTICLE 11 GENERAL PROVISIONS................................... 13
11.1 NO RIGHTS TO AWARDS
11.2 NO STOCKHOLDERS RIGHTS
11.3 WITHHOLDING
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11.4 NO RIGHT TO EMPLOYMENT OR SERVICES
11.5 UNFUNDED STATUS OF AWARDS
11.6 INDEMNIFICATION
11.7 RELATIONSHIP TO OTHER BENEFITS
11.8 EXPENSES
11.9 TITLES AND HEADINGS
11.10 FRACTIONAL SHARES
11.11 SECURITIES LAW COMPLIANCE
11.12 GOVERNMENT AND OTHER REGULATIONS
11.13 GOVERNING LAW
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GRYPHON GOLD CORPORATION
2004 STOCK INCENTIVE PLAN
ARTICLE 1
PURPOSE
1.1 GENERAL. The purpose of the Gryphon Gold Corporation 2004 Stock
Incentive Plan (the "Plan") is to promote the success and enhance the value of
Gryphon Gold Corporation (the "Issuer") by linking the personal interests of the
members of the Board, employees, officers, executives, and consultants or
independent contractors, to those of Issuer stockholders and by providing such
individuals with an incentive for outstanding performance to generate superior
returns to Issuer stockholders. The Plan is further intended to provide
flexibility to the Issuer in its ability to motivate, attract, and retain the
services of members of the Board, employees, officers, executives of, and
consultants or independent contractors providing services to, the Issuer upon
whose judgment, interest, and special effort the successful conduct of the
Issuer's operation is largely dependent.
ARTICLE 2
EFFECTIVE AND EXPIRATION DATE
2.1 EFFECTIVE DATE. The Plan is effective as of the date the Plan is
approved by the Issuer's Board of Directors (the "Effective Date").
2.2 EXPIRATION DATE. The Plan will expire on, and no Award may be granted
pursuant to the Plan after, the tenth anniversary of the Effective Date. Any
Awards that are outstanding on the tenth anniversary of the Effective Date shall
remain in force according to the terms of the Plan and the Award Agreement.
ARTICLE 3
DEFINITIONS AND CONSTRUCTION
3.1 DEFINITIONS. The following words and phrases shall have the following
meanings:
(a) "AWARD" means any Option granted to a Participant pursuant to
the Plan.
(b) "AWARD AGREEMENT" means any written agreement, contract, or
other instrument or document evidencing an Award.
(c) "BOARD" means the Board of Directors of the Issuer.
(d) "CAUSE" means (except as otherwise provided in an Award
Agreement) the occurrence of any of the following events:
(1) the Participant's willful and continued failure to
substantially perform the Participant's duties with the Issuer or its affiliates
(other than any such failure resulting from the Participant's incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Participant by the Issuer which specifically identifies the
manner in which the Issuer believes that the Participant has not substantially
performed his duties;
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(2) the conviction of the Participant of, or an entering of a
guilty plea or a plea of no contest by the Participant, to a felony or of a
misdemeanor involving moral turpitude;
(3) the willful violation by Participant of any material
provision of this Agreement or an Award Agreement; or
(4) the willful engaging by the Participant in illegal conduct
or gross misconduct which is materially and demonstrably injurious to the
Issuer.
For purposes of this definition, no act or failure to act on the part of
the Participant shall be considered "willful" unless it is done, or omitted to
be done, intentionally by the Participant in bad faith. Any act, or failure to
act, based on authority given pursuant to a resolution duly adopted by the Board
or the written advice of counsel to the Issuer or its affiliates will be
conclusively presumed to be done, or omitted to be done, by the Participant in
good faith and in the best interests of the Issuer and its affiliates.
(e) "CHANGE OF CONTROL" means the occurrence of any one of the
following events:
(1) any consolidation or merger of the Issuer (including,
without limitation, a triangular merger) where the shareholders of the Issuer,
immediately prior to the consolidation or merger, would not immediately after
the consolidation or merger, beneficially own, directly or indirectly, shares
representing in the aggregate more than fifty percent (50%) of the combined
voting power of all the outstanding securities of the corporation issuing cash
or securities in the consolidation or merger (or of its ultimate parent
corporation, if any);
(2) the Issuer sells, leases or exchanges (in one or a series
of transactions) all or substantially all of its assets to any other person or
entity;
(3) the shareholders approve a plan to dissolve and liquidate
the Issuer;
(4) any "person," as such term is used in Section 13(d) of the
Exchange Act (other than the Issuer, any employee benefit plan of the Issuer or
any entity organized, appointed or established by the Issuer for or pursuant to
the terms of any such plan), together with all "affiliates" and "associates" (as
such terms are defined in Rule 12B-2 under the Exchange Act or any successor
provision) of such person, shall become the "beneficial owner" or "beneficial
owners" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act or any
successor provision, directly or indirectly, of securities of the Issuer
representing in the aggregate (A) in the event the Issuer is not a "Reporting
Issuer" (meaning a Issuer that is subject to the reporting requirements of the
Exchange Act and has registered shares of a class of equity securities pursuant
to Section 12(g) or 12(b) of the Exchange Act) fifty percent (50%) or more or
(B) in the event the Issuer is a Reporting Issuer, twenty percent (20%) or more
of either (1) the then outstanding shares of common Stock of the Issuer or (2)
the combined voting power of all then outstanding securities of the Issuer
having the right under ordinary circumstances to vote in an election of the
Board of Directors of the Issuer including pursuant to a consolidation or merger
of the Issuer to which clause (iii) does not apply; or
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(5) individuals who, as of the date hereof, constitute the
entire Board of Directors of the Issuer (the "Incumbent Directors") cease for
any reason to constitute at least a majority of the Board of Directors
(hereinafter referred to as a "Board Change"), provided that any individual
becoming a director subsequent to the date hereof whose election or nomination
for election was approved by a vote of at least a majority of the then Incumbent
Directors shall be, for purposes of this provision, considered as though such
individual were an Incumbent Director.
Notwithstanding the foregoing, the following transactions
shall not constitute a "Change of Control": (1) the closing of the Issuer's
first public offering pursuant to an effective registration statement filed
under the Exchange Act, with the TSX Exchange or TSX Venture Exchange or (2) any
transaction the sole purpose of which is to change the state of incorporation of
the Issuer or to create a holding company that will be owned in substantially
the same proportions by the persons who held the Issuer's securities immediately
before such transaction.
In the event that the Issuer becomes listed with the TSX
Venture Exchange the following definition of "Change of Control" shall apply for
purposes of compliance therewith notwithstanding the application of the
aforementioned definition to the extent not inconsistent with TSX Venture
Exchange requirements:
"Change of Control" includes situations where after giving
effect to the contemplated transaction and as a result of such action
transaction:
(i) any one person holds a sufficient number of voting shares
of the Issuer or Resulting Issuer to affect materially the control of the Issuer
or Resulting Issuer, or
(ii) any combination of persons, acting in concern by virtue
of an agreement, arrangement, commitment of understanding, hold in total a
sufficient number of voting shares of the Issuer or Resulting Issuer to affect
materially the control of the Issuer or Resulting Issuer, where such person or
combination of persons did not previously hold a sufficient number of voting
shares to affect materially the control of the Issuer or Resulting Issuer. In
the absence of evidence to the contrary, any person or combination of persons
acting in concert by virtue of an agreement, commitment or understanding,
holding more than 20% of the voting shares of the Issuer or Resulting Issuer is
deemed to materially affect the control of the Issuer or Resulting Issuer.
(f) "CODE" means the United States Internal Revenue Code of 1986, as
amended.
(g) "COMMITTEE" means the committee of the Board described in
Article 4.
(h) "CONSULTANT" means, in relation to the Issuer, an individual or
Consultant Company, other than an employee or a Director of the Issuer, that (a)
is engaged to provide on a ongoing bona fide basis, consulting, technical,
management or other services to the Issuer or to an affiliate or Subsidiary,
other than services provided in relation to a distribution; (b) provides the
services under a written contract between the Issuer or the affiliate and the
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individual or the Consultant Company; (c) in the reasonable opinion of the
Issuer, spends or will spend a significant amount of time and attention on the
affairs and business; and (d) has a relationship with the Issuer or an affiliate
of the Issuer that enables the individual to be knowledgeable about the business
and affairs of the Issuer.
(i) "CONSULTANT COMPANY" means for an individual consultant, a
company or partnership of which the individual is an employee, shareholder or
partner.
(j) "DISABILITY" means the Participant's total and permanent
disability. The Participant shall be considered to be totally and permanently
disabled hereunder if for reasons involving mental or physical illness or
physical injury, the Participant is unable to, or fails to, perform his duties
hereunder for a period of one hundred eighty (180) consecutive calendar days or
for periods aggregating two hundred seventy (270) days or more in any twelve
(12) consecutive month period. A physician chosen by the Issuer and reasonably
satisfactory to the Participant (or his legal representative) shall make the
Disability determination. The cost of such examination shall be borne by the
Issuer. The Participant shall submit to such examination upon the Issuer's
request. Notwithstanding the foregoing, if (or when) the Issuer sponsors a
long-term disability plan for its employees, a Participant shall be considered
to be totally and permanently disabled hereunder if such Participant is eligible
for (and is receiving) benefits under such long-term disability plan.
(k) "DISCOUNTED MARKET PRICE" means the Market Price less a
discount, which shall not exceed the amount set forth below, subject to a
minimum price of CDN $0.10. Closing price discount is (i) twenty-five percent
(25%) for a closing price up to CDN $0.50, (ii) twenty percent (20%) for a
closing price between CDN $0.51 to $2.00, and (iii) fifteen percent (15%) for a
closing price above CDN $2.00.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any given date, the fair market
value of Stock on a particular date determined by such methods or procedures as
may be established from time to time by the Committee and as determined by the
Board in good faith. If at such time the Issuer is listed on the TSX Venture
Exchange then the definition of Fair Market Value shall have ascribed to it the
meaning of "Discounted Market Price" and "Market Price" as set forth in Sections
3.1(k) and 3.1(r), respectively. If at such time the Issuer is listed on the TSX
Exchange then the definition of Fair Market Value shall have ascribed to it the
meaning of the volume-weighted average trading price for five (5) days prior to
the time of Award.
(n) "INCENTIVE STOCK OPTION" means an Option that is intended to
meet the requirements of Section 422 of the Code or any successor provision
thereto.
(o) "INSIDER" if used in relation to an Issuer, means: (a) a
director or senior officer of the Issuer, (b) a director or senior officer of a
company that is an Insider or subsidiary of the Issuer, (c) a Person that
beneficially owns or controls, directly or indirectly, voting shares of Stock
carrying more than 10% of the voting rights attached to all outstanding voting
shares of Stock of the Issuer, or (d) the Issuer itself if it holds any of its
own securities.
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(p) "INVESTOR RELATIONS ACTIVITIES" means any activities, by or on
behalf of an Issuer or shareholder of the Issuer, that promote or reasonably
could be expected to promote the purchase or sale of securities of the Issuer,
but does include:
(i) the dissemination of information provided, or records
prepared, in the ordinary course of business of the Issuer (1) to promote the
sale of products or services of the Issuer, or (2) to raise public awareness of
the Issuer, that cannot reasonably be considered to promote the purchase or sale
of securities of the Issuer;
(ii) activities or communications necessary to comply with the
requirements of (1) applicable securities laws, or (2) TSX Venture Exchange or
TSX Exchange requirements or the by-laws, rules or other regulatory instruments
of any other self regulatory body or exchange having jurisdiction over the
Issuer;
(iii) communications by a publisher of, or writer for, a
newspaper, magazine or business or financial publication, that is of general and
regular paid circulation, districuted only to subscribers to it for vluae or to
purchasers of it, if (1) the communication is only through the newspaper,
magazine or publication, and (2) the publisher or writer receives no commission
or other consideration other than for acting in the capacity of publisher or
writer; or
(iv) activities or communications that may be otherwise
specified by the TSX Exchange, TSX Venture Exchange or other regulator body.
(q) "LISTED SHARE" means a share or other security that is listed on
the TSX Exchange or TSX Venture Exchange.
(r) "MARKET PRICE" subject to the exceptions noted below, means the
last closing price of the Issuer's Listed Shares before either the issuance of
the news release or the filing of the Price Reservation Form (Form 4N) required
to fix the price at which the securities are to be issued or deemed to be issued
(the "Notice of the Transaction").
(i) Consolidation Exception. The Market Price is to be
adjusted for any share consolidation or split. If the notice of the transaction
is within 5 days following a consolidation of the Issuer's share capital, the
minimum price per share will be the greater of the Market Price, adjusted for
any share consolidation or split, or CDN $0.10;
(ii) Material Information Exception. If the Issuer announces
Material Information regarding the affairs of the Issuer after providing notice
of the transaction and if the Exchange determines that a party to the
transaction should reasonably have been aware of that pending Material
Information, then the Market Price will be at least equal to the closing price
of the Listed Shares on the Trading Day after the day on which that Material
Information was announced;
(iii) Price Interference Exception. If the Exchange determines
that the closing price is not a fair reflection of the market for the Listed
Shares and the Listed Shares appear to have been high-closed or low-closed, then
the Exchange will determine the Market Price to be used;
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(iv) Suspension Exception. If the Issuer is suspended from
trading or has for any reason not traded for an extended period of time, the
Exchange may determine the deemed Market Price to be used; or
(v) Minimum Price Exception. The Exchange will not generally
permit Listed Shares to be issued from treasury at a price less than CDN $0.10
nor will the Exchange generally permit any securities convertible into Listed
Shares to be issued with an effective conversion price of less than CDN $0.10
per Listed Share.
(s) "NON-QUALIFIED STOCK OPTION" means an Option that is not
intended to be an Incentive Stock Option.
(t) "OPTION" means a right granted to a Participant pursuant to
Article 7 of the Plan to purchase Stock at a specified price during specified
time periods. An Option may be either an Incentive Stock Option or a
Non-Qualified Stock Option.
(u) "PARTICIPANT" means a person who, as a member of the Board,
employee, officer, or executive of, and consultants or independent contractors
providing services to, the Issuer or any Subsidiary, has been granted an Award
pursuant to the Plan.
(v) "PLAN" means this Gryphon Gold Corporation 2004 Stock Incentive
Plan, as it may be amended from time to time.
(w) "STOCK" means the common stock of the Issuer and such other
securities of the Issuer that may be substituted for Stock pursuant to Article
9.
(x) "SUBSIDIARY" means any corporation or other entity of which a
majority of the outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Issuer.
(y) "TSX EXCHANGE" means the Toronto Stock Exchange.
(z) "TSX VENTURE EXCHANGE" means the TSX Venture Exchange.
(aa) "VOLUME WEIGHTED AVERAGE TRADING PRICE" means the volume
weighted average trading price of one share of Stock on the TSX,
calculated by dividing the total value by the total volume of shares of
Stock traded for the relevant period.
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by the Board or a
committee of the Board. References to the Committee shall refer to the Board if
the Board does not appoint a Committee.
4.2 ACTION BY THE COMMITTEE. A majority of the Committee shall
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present, and acts approved in writing by a majority
of the Committee in lieu of a meeting, shall be deemed the acts of the
Committee. Each member of the Committee is entitled
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to, in good faith, rely or act upon any report or other information furnished to
that member by any officer or other employee of the Issuer or any Subsidiary,
the Issuer's independent certified public accountants, or any executive
compensation consultant or other professional retained by the Issuer to assist
in the administration of the Plan.
4.3 AUTHORITY OF COMMITTEE. Subject to any specific designation in the
Plan, the Committee has the exclusive power, authority and discretion to:
(a) Designate Participants to receive Awards;
(b) Determine the type or types of Awards to be granted to each
Participant;
(c) Determine the number of Awards to be granted and the number of
shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted pursuant
to the Plan, including, but not limited to, the exercise price, grant price, or
purchase price, any reload provision, any restrictions or limitations on the
Award, any schedule for lapse of forfeiture restrictions or restrictions on the
exercisability of an Award, and accelerations or waivers thereof, any provisions
related to non-competition and recapture of gain on an Award, based in each case
on such considerations as the Committee in its sole discretion determines;
(e) Determine whether, to what extent, and pursuant to what
circumstances an Award may be settled in, or the exercise price of an Award may
be paid in, cash, Stock, other Awards, or other property, or an Award may be
canceled, forfeited, or surrendered;
(f) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(g) Decide all other matters that must be determined in connection
with an Award;
(h) Establish, adopt, or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan;
(i) Interpret the terms of, and any matter arising pursuant to, the
Plan or any Award Agreement; and
(j) Make all other decisions and determinations that may be required
pursuant to the Plan or as the Committee deems necessary or advisable to
administer the Plan.
4.4 DECISIONS BINDING. The Committee's interpretation of the Plan, any
Awards granted pursuant to the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
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ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment provided in Article 9, the
aggregate number of shares of Stock reserved and available for grant pursuant to
the Plan shall be three million stock options (3,000,000).
5.2 LAPSED OR ASSUMED AWARDS. To the extent that an Award terminates,
expires, or lapses for any reason, any shares of Stock subject to the Award will
again be available for the grant of an Award pursuant to the Plan. Additionally,
any shares of stock tendered or withheld to satisfy the exercise price or tax
withholding obligation pursuant to any Award shall again be available for the
grant of an Award pursuant to the Plan. To the extent permitted by applicable
law or any exchange rule, shares of Stock issued in assumption of, or in
substitution for, any outstanding awards of any entity acquired in any form of
combination by the Issuer or any Subsidiary shall not be counted against shares
of Stock available for grant pursuant to this Plan.
5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
ARTICLE 6
ELIGIBILITY AND PARTICIPATION
6.1 ELIGIBILITY.
(a) GENERAL. Persons eligible to participate in this Plan include
all members of the Board, employees, officers, and executives of, and
consultants and independent contractors providing services to, the Issuer or a
Subsidiary, as determined by the Committee.
(b) FOREIGN PARTICIPANTS. In order to assure the viability of Awards
granted to Participants employed in or of foreign countries, the Committee may
provide for such special terms as it may consider necessary or appropriate to
accommodate differences in local law, tax policy, or custom. Moreover, the
Committee may approve such supplements to, or amendments, restatements, or
alternative versions of, the Plan as it may consider necessary or appropriate
for such purposes without thereby affecting the terms of the Plan as in effect
for any other purpose; provided, however, that no such supplements, amendments,
restatements, or alternative versions shall increase the share limitations
contained in Section 5.1 of the Plan.
6.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from among all eligible individuals,
those to whom Awards shall be granted and shall determine the nature and amount
of each Award. No individual shall have any right to be granted an Award
pursuant to this Plan.
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ARTICLE 7
STOCK OPTIONS
7.1 GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) EXERCISE PRICE. Subject to paragraph 7.2(a) the exercise price
per share of Stock pursuant to an Option shall be determined by the Committee
and set forth in the Award Agreement provided that if the Stock is listed for
trading on the TSX Venture Exchange or the TSX Exchange the exercise price for
any Option may not be less than the Fair Market Value as of the date of grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine
the time or times at which an Option may be exercised in whole or in part
provided that the term of any Option granted under the Plan shall not exceed ten
years. The Committee shall also determine the performance or other conditions,
if any, that must be satisfied before all or part of an Option may be exercised.
Unless otherwise provided in an Award Agreement, an Option will lapse
immediately if a Participant's employment or service is terminated for Cause.
(c) PAYMENT. The Committee shall determine the methods by which the
exercise price of an Option may be paid, the form of payment, including, without
limitation, cash, promissory note, shares of Stock held for longer than six
months (through actual tender or by attestation), or other property acceptable
to the Committee (including broker-assisted "cashless exercise" arrangements),
and the methods by which shares of Stock shall be delivered or deemed to be
delivered to Participants.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a written
Award Agreement between the Issuer and the Participant. The Award Agreement
shall include such additional provisions as may be specified by the Committee.
7.2 INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be granted only
to employees and the terms of any Incentive Stock Options granted pursuant to
the Plan must comply with the following additional provisions of this Section
7.2:
(a) EXERCISE PRICE. The exercise price per share of Stock shall be
set by the Committee, provided that the exercise price for any Incentive Stock
Option may not be less than the Fair Market Value as of the date of the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse pursuant
to the following circumstances.
(1) The Incentive Stock Option shall lapse ten years from the
date it is granted, unless an earlier time is set in the Award Agreement.
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(2) The Incentive Stock Option shall lapse upon termination of
employment for Cause or for any other reason other than the Participant's death
or Disability, unless otherwise provided in the Award Agreement.
(3) If the Participant terminates employment on account of
Disability or death before the Option lapses pursuant to paragraph (1) or (2)
above, the Incentive Stock Option shall lapse, unless it is previously
exercised, on the earlier of (A) the scheduled termination date of the Option;
or (B) 12 months after the date of the Participant's termination of employment
on account of Disability or death. Upon the Participant's Disability or death,
any Incentive Stock Options exercisable at the Participant's Disability or death
may be exercised by the Participant's legal representative or representatives,
by the person or persons entitled to do so pursuant to the Participant's last
will and testament, or, if the Participant fails to make testamentary
disposition of such Incentive Stock Option or dies intestate, by the person or
persons entitled to receive the Incentive Stock Option pursuant to the
applicable laws of descent and distribution.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the time an Award is made) of all shares of Stock with respect
to which Incentive Stock Options are first exercisable by a Participant in any
calendar year may not exceed $100,000.00 or such other limitation as imposed by
Section 422(d) of the Code, or any successor provision. To the extent that
Incentive Stock Options are first exercisable by a Participant in excess of such
limitation, the excess shall be considered Non-Qualified Stock Options.
(e) TEN PERCENT OWNERS. An Incentive Stock Option shall be granted
to any individual who, at the date of grant, owns stock possessing more than ten
percent of the total combined voting power of all classes of Stock of the Issuer
only if such Option is granted at a price that is not less than 110% of Fair
Market Value on the date of grant and the Option is exercisable for no more than
five years from the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an Incentive
Stock Option may be made pursuant to this Plan after the tenth anniversary of
the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an Incentive
Stock Option may be exercised only by the Participant.
ARTICLE 8
PROVISIONS APPLICABLE TO AWARDS
8.1 STAND-ALONE AND TANDEM AWARDS. Awards granted pursuant to the Plan
may, in the discretion of the Committee, be granted either alone, in addition
to, or in tandem with, any other Award granted pursuant to the Plan. Awards
granted in addition to or in tandem with other Awards may be granted either at
the same time as or at a different time from the grant of such other Awards.
8.2 EXCHANGE PROVISIONS. The Committee may at any time offer to exchange
or buy out any previously granted Award for a payment in cash, Stock, or another
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Award, based on the terms and conditions the Committee determines and
communicates to the Participant at the time the offer is made, provided that the
Committee may not reduce the exercise price of any previously-granted Option
without shareholder approval.
8.3 TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Option exceed a period of ten years from the date of its grant.
8.4 FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and any
applicable law or Award Agreement, payments or transfers to be made by the
Issuer or a Subsidiary on the grant or exercise of an Award may be made in such
forms as the Committee determines at or after the time of grant, including,
without limitation, cash, promissory note, Stock held for more than six months,
other Awards, or other property (including broker-assisted "cashless exercise"
arrangements), or any combination, and may be made in a single payment or
transfer, in installments, or on a deferred basis, in each case determined in
accordance with rules adopted by, and at the discretion of, the Committee.
8.5 LIMITS ON TRANSFER. Limitations and restrictions on transferability of
any right or interest of a Participant in any Award are set forth in that
certain Investor Rights Agreement, dated as of May 1, 2003, and such limitations
and restrictions shall expire on the terms contained therein. Subsequent to the
expiration of the Investor Rights Agreement, no right or interest of a
Participant in any Award may be pledged, encumbered, or hypothecated to or in
favor of any party other than the Issuer or a Subsidiary, or shall be subject to
any lien, obligation, or liability of such Participant to any other party other
than the Issuer or a Subsidiary. Except as otherwise provided by the Committee,
no Award shall be assigned, transferred, or otherwise disposed of by a
Participant other than by will or the laws of descent and distribution.
8.6 BENEFICIARIES. Notwithstanding Section 8.5, a Participant may, in the
manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights pursuant to the Plan is
subject to all terms and conditions of the Plan and any Award Agreement
applicable to the Participant, except to the extent the Plan and Award Agreement
otherwise provide, and to any additional restrictions deemed necessary or
appropriate by the Committee. If the Participant is married and resides in a
community property state, a designation of a person other than the Participant's
spouse as his beneficiary with respect to more than 50% of the Participant's
interest in the Award shall not be effective without the prior written consent
of the Participant's spouse. If no beneficiary has been designated or survives
the Participant, payment shall be made to the person entitled thereto pursuant
to the Participant's will or the laws of descent and distribution. Subject to
the foregoing, a beneficiary designation may be changed or revoked by a
Participant at any time provided the change or revocation is filed with the
Committee.
8.7 STOCK CERTIFICATES. Notwithstanding anything herein to the contrary,
the Issuer shall not be required to issue or deliver any certificates evidencing
shares of Stock pursuant to the exercise of any Award, unless and until the
Board has determined, with advice of counsel, that the issuance and delivery of
such certificates is in compliance with all applicable laws, regulations of
governmental authorities and, if applicable, the requirements of any
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exchange on which the shares of Stock are listed or traded. All Stock
certificates delivered pursuant to the Plan are subject to any stop-transfer
orders and other restrictions as the Committee deems necessary or advisable to
comply with Federal, state, or foreign jurisdiction, securities or other laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on which the Stock is listed, quoted, or traded. The
Committee may place legends on any Stock certificate to reference restrictions
applicable to the Stock. In addition to the terms and conditions provided
herein, the Board may require that a Participant make such reasonable covenants,
agreements, and representations as the Board, in its discretion, deems advisable
in order to comply with any such laws, regulations, or requirements.
8.8 ACCELERATION UPON A CHANGE OF CONTROL. Unless otherwise provided in a
Participant's Award Agreement, if a Change of Control occurs, the Committee
shall have the discretion to cause all outstanding Awards to become fully
exercisable and all restrictions on outstanding Awards to lapse. To the extent
that this provision causes Incentive Stock Options to exceed the dollar
limitation set forth in Section 7.2(d), the excess Options shall be deemed to be
Non-Qualified Stock Options. Upon, or in anticipation of, such an event, the
Committee may cause every Award outstanding hereunder to terminate at a specific
time in the future and shall give each Participant the right to exercise Awards
during a period of time as the Committee, in its sole and absolute discretion,
shall determine.
8.9 ADDITIONAL TSX VENTURE EXCHANGE TERMS. In the event Issuer becomes
listed on the TSX Venture Exchange then the following terms and conditions shall
apply to the grant of an Award in addition to those contained herein:
(a) No more than five percent (5%) of the issued shares of the
Issuer may be reserved in respect of Options and other compensation arrangements
granted to any one individual in any twelve (12) month period (unless Issuer is
a Tier 1 Issuer, as that term is defined by the TSX Venture Exchange, and has
obtained disinterested shareholder approval);
(b) No more than ten percent (10%) of the issued shares of the
Issuer may be reserved for issuance in respect of Options and other share
compensation arrangements of the Issuer granted to Insiders (unless the Issuer
has obtained disinterested shareholder approval in accordance with the
requirements of the TSX Venture Exchange).
(c) Options and rights granted under any other share
compensation arrangements of the Issuer representing more than ten (10%) of the
issued shares of the Issuer may not be granted to Insiders within a 12 month
period (unless the Issuer has obtained disinterested shareholder approval in
accordance with the requirements of the TSX Venture Exchange.
(d) The exercise price of options granted to Insiders may not
be reduced unless the Issuer has obtained disinterested shareholder approval in
respect thereof in accordance with the requirements of the TSX Venture Exchange
in addition to any other approvals which may be required pursuant to the terms
of the Plan.
(e) No more than two percent (2%) of the issued shares of the Issuer may
be granted to any one Consultant in any twelve (12) month period;
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(f) No more than an aggregate of two percent (2%) of the issued shares
of the Issuer may be granted to an employee conducting Investor
Relations Activities in any twelve (12) month period;
(g) For Awards granted to employees, Consultants or management level
Issuer employees, the Issuer represents that the Participant is a
bona fide employee, consultant or management level Issuer employee,
as the case may be;
(h) Awards to Consultants performing Investor Relations Activities must
vest in stages over twelve (12) months with no more than twenty-five
percent (25%) of the options vesting in any three (3) month period;
and
(i) In addition to the general requirements listed above, the following
terms and conditions apply to Awards by the Issuer as a Tier 2
Issuer, as that term is defined by the TSX Venture Exchange:
(1) Awards to a Participant who is a director, employee, Consultant or
management level Issuer employee must expire within ninety (90) days after the
Participant ceases to be in at least one of those categories; and
(2) Awards to a Participant who is engaged in Investor Relations
Activities must expire within thirty (30) days after the Participant ceases to
be employed to provide Investor Relations Activities.
8.10 ADDITIONAL TSX EXCHANGE TERMS. In the event the Issuer becomes listed
on the TSX Exchange then the following terms and conditions shall apply to an
Award in addition to those contained herein, as applicable:
a. Awards are non-assignable;
b. The exercise price must not be lower than the market price
(without discount) of the shares on the TSX Exchange at the
time of Award; and
c. The number of shares reserved for issuance to any one person
pursuant to. The number of shares of the Issuer issued to
Insiders during any twelve month period pursuant to Options or
other rights granted under share compensation arrangements of
the Issuer may not exceed ten percent (10%) of the issued
shares of Stock of the Issuer (unless the Issuer has obtained
disinterested shareholder approval in accordance with the
requirements of the TSX).
d. No more than ten percent (10%) of the issued shares of Stock
of the Issuer may be reserved for issuance in respect of
Options and other share compensation arrangements of the
Issuer granted to Insiders (unless the Issuer has obtained
disinterested shareholder approval in accordance with the
requirements of the TSX) options must not exceed 5% of the
outstanding issue.
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ARTICLE 9
CHANGES IN CAPITAL STRUCTURE
9.1 SHARES AVAILABLE FOR GRANT. In the event of any change in the number
of shares of Stock outstanding by reason of any stock dividend or split,
recapitalization, merger, consolidation, combination or exchange of shares or
similar corporate change, the maximum aggregate number of shares of Stock with
respect to which the Committee may grant Awards, the number of shares of Stock
subject to any Award, and any numeric limitation expressed in the Plan shall be
appropriately adjusted by the Committee.
9.2 OUTSTANDING AWARDS - INCREASE OR DECREASE IN ISSUED SHARES WITHOUT
CONSIDERATION. Subject to any required action by the stockholders of the Issuer,
in the event of any increase or decrease in the number of issued shares of Stock
resulting from a subdivision or consolidation of shares of Stock or the payment
of a stock dividend (but only on the shares of Stock), or any other increase or
decrease in the number of such shares effected without receipt or payment of
consideration by the Issuer, the Committee shall proportionally adjust the
number of shares of Stock subject to each outstanding Award and the exercise
price per share of Stock of each such Award.
9.3 OUTSTANDING AWARDS - CERTAIN MERGERS. Subject to any required action
by the stockholders of the Issuer, in the event that the Issuer shall be the
surviving corporation in any merger or consolidation (except a merger or
consolidation as a result of which the holders of shares of Stock receive
securities of another corporation), each Award outstanding on the date of such
merger or consolidation shall pertain to and apply to the securities that a
holder of the number of shares of Stock subject to such Award would have
received in such merger or consolidation.
9.4 OUTSTANDING AWARDS - OTHER CHANGES. In the event of any other change
in the capitalization of the Issuer or corporate change other than those
specifically referred to in Article 11, the Committee may, in its absolute
discretion, make such adjustments in the number and class of shares subject to
Awards outstanding on the date on which such change occurs and in the per share
exercise price of each Award as the Committee may consider appropriate to
prevent dilution or enlargement of rights.
9.5 NO OTHER RIGHTS. Except as expressly provided in the Plan, no
Participant shall have any rights by reason of any subdivision or consolidation
of shares of stock of any class, the payment of any dividend, any increase or
decrease in the number of shares of stock of any class or any dissolution,
liquidation, merger, or consolidation of the Issuer or any other corporation.
Except as expressly provided in the Plan, no issuance by the Issuer of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number of shares of Stock subject to an Award or the exercise price of any
Award.
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ARTICLE 10
AMENDMENT, MODIFICATION, AND TERMINATION
10.1 AMENDMENT, MODIFICATION, AND TERMINATION. With the approval of the
Board, at any time and from time to time, the Committee may terminate, amend or
modify the Plan; provided, however, that to the extent necessary and desirable
to comply with any applicable law, regulation, or stock exchange rule, the
Issuer shall obtain stockholder approval of any Plan amendment in such a manner
and to such a degree as required.
10.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted pursuant to the Plan without the prior written consent of the
Participant.
ARTICLE 11
GENERAL PROVISIONS
11.1 NO RIGHTS TO AWARDS. No Participant, employee, or other person shall
have any claim to be granted any Award pursuant to the Plan, and neither the
Issuer nor the Committee is obligated to treat Participants, employees, and
other persons uniformly.
11.2 NO STOCKHOLDERS RIGHTS. No Award gives the Participant any of the
rights of a stockholder of the Issuer unless and until shares of Stock are in
fact issued to such person in connection with such Award.
11.3 WITHHOLDING. The Issuer or any Subsidiary shall have the authority
and the right to deduct or withhold, or require a Participant to remit to the
Issuer, an amount sufficient to satisfy foreign, Federal, state, and local taxes
(including the Participant's FICA obligation) required by law to be withheld
with respect to any taxable event concerning a Participant arising as a result
of this Plan. With the Committee's consent, a Participant may elect to (a) have
the Issuer withhold from those shares of Stock that would otherwise be received
upon the exercise of any Option, a number of shares having a Fair Market Value
equal to the minimum statutory amount necessary to satisfy the Issuer's
applicable federal, state, local or foreign income and employment tax
withholding obligations with respect to such Participant, or (b) tender
previously-owned shares of Stock held by the Participant for six months or
longer to satisfy the Issuer's applicable federal, state, local, or foreign
income and employment tax withholding obligations with respect to the
Participant.
11.4 NO RIGHT TO EMPLOYMENT OR SERVICES. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Issuer or
any Subsidiary to terminate any Participant's employment or services at any
time, nor confer upon any Participant any right to continue in the employ or
service of the Issuer or any Subsidiary.
11.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an "unfunded"
plan for incentive compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or any Award
Agreement shall give the Participant any rights that are greater than those of a
general creditor of the Issuer or any Subsidiary.
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11.6 INDEMNIFICATION. To the extent allowable pursuant to applicable law,
each member of the Committee or of the Board shall be indemnified and held
harmless by the Issuer from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by such member in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure
to act pursuant to the Plan and against and from any and all amounts paid by him
or her in satisfaction of judgment in such action, suit, or proceeding against
him or her provided he or she gives the Issuer an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled pursuant to the Issuer's Articles of Incorporation or Bylaws, as
a matter of law, or otherwise, or any power that the Issuer may have to
indemnify them or hold them harmless.
11.7 RELATIONSHIP TO OTHER BENEFITS. No payment pursuant to the Plan shall
be taken into account in determining any benefits pursuant to any pension,
retirement, savings, profit sharing, group insurance, welfare or other benefit
plan of the Issuer or any Subsidiary.
11.8 EXPENSES. The expenses of administering the Plan shall be borne by
the Issuer and its Subsidiaries.
11.9 TITLES AND HEADINGS. The titles and headings of the Sections in the
Plan are for convenience of reference only and, in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
11.10 FRACTIONAL SHARES. No fractional shares of Stock shall be issued and
the Committee shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up or down as appropriate.
11.11 SECURITIES LAW COMPLIANCE. With respect to any person who is, on the
relevant date, obligated to file reports pursuant to Section 16 of the Exchange
Act, transactions pursuant to this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors pursuant to the Exchange
Act. To the extent any provision of the Plan or action by the Committee fails to
so comply, it shall be void to the extent permitted by law and voidable as
deemed advisable by the Committee.
11.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Issuer to
make payment of awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by government agencies as
may be required. The Issuer shall be under no obligation to register pursuant to
the Securities Act of 1933, as amended, any of the shares of Stock paid pursuant
to the Plan. If the shares paid pursuant to the Plan may in certain
circumstances be exempt from registration pursuant to the Securities Act of
1933, as amended, the Issuer may restrict the transfer of such shares in such
manner as it deems advisable to ensure the availability of any such exemption.
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11.13 GOVERNING LAW. To the extent not preempted by Federal law, the TSX
Exchange, the TSX Venture Exchange (if applicable), the Plan and all Award
Agreements shall be governed in all respects, whether as to validity,
construction, capacity, performance, or otherwise, by the laws of the State of
Nevada, without giving effect to choice of law rules.
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