Exhibit 10.7
COREL CORPORATION
SHARE OPTION AND PHANTOM SHARE UNIT PLAN
DECEMBER 1, 2003
(AS AMENDED JUNE 29, 2005)
TABLE OF CONTENTS
SECTION 1.
INTERPRETATION AND ADMINISTRATIVE PROVISIONS............................ 1
1.01 Purpose.......................................................... 1
1.02 Definitions...................................................... 1
1.03 Administration................................................... 3
1.04 Governing Law.................................................... 3
1.05 Common Shares Reserved for Issuance.............................. 3
SECTION 2.
UNITS................................................................... 4
2.01 Grant of Units................................................... 4
2.02 Vesting of Units................................................. 4
2.03 Exercise Price................................................... 4
2.04 Prohibition on Transfer or Assignment of Units................... 4
2.05 Termination, Retirement, Death or Resignation.................... 5
2.06 End of Participation............................................. 5
2.07 Acceleration of Exercise of Units................................ 5
2.08 Agreements....................................................... 6
SECTION 3.
EXERCISE OF UNITS....................................................... 6
3.01 Exercise of Options.............................................. 6
3.02 Exercise of Phantom Share Units.................................. 6
3.03 Phantom Share Unit Payment....................................... 6
3.04 Discretionary Issuance of Shares................................. 6
3.05 No Exercise of Options Prior to IPO.............................. 7
3.06 No Exercise of Phantom Share Units Outside of Window............. 7
3.07 Termination of Options and Phantom Share Units................... 7
SECTION 4.
GENERAL................................................................. 7
4.01 Capital Adjustments.............................................. 7
4.02 Non-Exclusivity.................................................. 8
4.03 Unfunded Plan.................................................... 8
4.04 Successors and Assigns........................................... 8
4.05 Amendment and Termination........................................ 8
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4.06 No Special Rights................................................ 9
4.07 Other Employee Benefits.......................................... 9
4.08 Rights Prior to Exercise......................................... 9
4.09 Compliance with Legislation...................................... 9
4.10 Tax Consequences................................................. 9
4.11 No Liability..................................................... 10
4.12 Effective Date................................................... 10
COREL CORPORATION
SHARE OPTION AND PHANTOM SHARE UNIT PLAN
SECTION 1.
INTERPRETATION AND ADMINISTRATIVE PROVISIONS
1.01 PURPOSE
The purposes of this Plan are to (i) support the achievement of the
Corporation's performance objectives, (ii) ensure that interests of key
persons are aligned with the success of the Corporation, and (iii) provide
compensation opportunities to attract, retain and motivate employees to
promote the long-term success of the Corporation and its subsidiaries.
1.02 DEFINITIONS
For the purposes of this Plan, the following terms have the following
meanings:
"BOARD" means the board of directors of the Corporation;
"COMMITTEE" means any committee of the Board appointed by the Board from
time to time to administer this Plan;
"COMMON SHARE" means a common share in the capital of the Corporation;
"CORPORATION" means Corel Corporation;
"DISABILITY" means the mental or physical state of the Participant such
that:
(i) the Board determines that the Participant is unable, due to
illness, disease, mental or physical disability or similar cause,
to substantially perform his or her duties with the Corporation
or a Participating Company for any consecutive 3 month period or
for any period of 6 months (whether or not consecutive) in any
consecutive 12 month period and that there is no reasonable
prospect of the Participant returning to active employment at the
end of such period;
(ii) a court of competent jurisdiction has declared the Participant to
be mentally incompetent or incapable of managing his or her
affairs or has appointed a guardian of the property of the
Participant; or
(iii) an attorney pursuant to a continuing power of attorney for
property or similar instrument manages the affairs of the
Participant due to the Participant's mental incapacity.
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"ELIGIBLE PERSON" means any employee, officer or consultant of a
Participating Company (and includes any such person who is on a leave of
absence authorized by a Participating Company) or any trust settlement or
other arrangement under which such an employee, officer or consultant can
or may benefit; provided however that such trust settlement or other
arrangement shall cease to be an Eligible Person contemporaneously with the
employee, officer or consultant ceasing to be an Eligible Person;
"EXERCISE DATE" means the date on which an Eligible Person gives notice to
the Corporation that the Eligible Person wishes to exercise an Option or a
Phantom Share Unit;
"EXERCISE PRICE" means the exercise price of an Option or Phantom Share
Unit as determined by the Committee at the date of grant and as modified
pursuant to the terms of this Plan;
"FAIR MARKET VALUE" means, prior to an IPO, fair market value of a Common
Share as determined by the Board in its absolute discretion at the relevant
time and, following an IPO, means the weighted average trading price of a
Common Share on the principal stock exchange on which the Common Shares are
traded for the 5 trading days immediately preceding the applicable day;
"IPO" means an initial public offering of the Common Shares;
"JUST CAUSE" mean "Cause" or "Just Cause" as defined in any agreement
between the Participant and the Participating Employer and, in the absence
of such definition, has the meaning given to it by the courts of Ontario
from time to time;
"OPTION" means a right granted to an Eligible Person to purchase a Common
Share of the Corporation pursuant to the terms of this Plan;
"PARTICIPANT" means any person to whom a Unit has been granted;
"PARTICIPATING COMPANY" means Corel Corporation and such of its
subsidiaries as are designated by the Board from time to time;
"PHANTOM SHARE UNIT" means a right granted to an Eligible Person to
receive, on the terms set out in this Plan, a payment equal to the Fair
Market Value of a Common Share as at the Exercise Date minus the Exercise
Price of the Phantom Share Unit;
"PHANTOM SHARE UNIT PAYMENT" has the meaning set out in section 3.02;
"PLAN" means the Share Option and Phantom Share Unit Plan of the
Corporation dated as of the date hereof;
"RETIREMENT" means the retirement of a Participant at or after the earlier
of the date the Participant is entitled to an undeferred pension under the
registered pension plan of a Participating Company, or the date the
Participant attains the age of 65;
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"TERMINATION DATE" means the date a Participant ceases to be an Eligible
Person; and
"UNIT" means an Option together with a Phantom Share Unit.
Where the context so requires, words importing the singular number include
the plural and vice versa, and words importing the masculine gender also
include the feminine and neuter genders.
1.03 ADMINISTRATION
Subject to the Committee reporting to the Board on all matters relating to
this Plan and obtaining approval of the Board for those matters required by
the Committee's mandate, this Plan will be administered by the Committee
which has the sole and absolute discretion to: (i) grant Units to Eligible
Persons; (ii) determine the exercise price, vesting, terms, limitations,
restrictions and conditions upon such grants; (iii) interpret and
administer this Plan; (iv) establish, amend and rescind any rules and
regulations relating to this Plan (subject to obtaining any required
regulatory approval); and (iv) make any other determinations that the
Committee deems necessary or desirable for the administration of this Plan.
The Committee may correct any defect or supply any omission or reconcile
any inconsistency in this Plan, in the manner and to the extent the
Committee deems, in its sole and absolute discretion, necessary or
desirable (subject to obtaining any required regulatory approval). Any
decision of the Committee with respect to the administration and
interpretation of this Plan shall be conclusive and binding on the
Participants. At any time during which the Board has not appointed a
Committee, the Board shall perform all the responsibilities and have all of
the powers and duties of the Committee.
1.04 GOVERNING LAW
This Plan is to be governed by and interpreted in accordance with the laws
of the Province of Ontario.
1.05 COMMON SHARES RESERVED FOR ISSUANCE
The Corporation hereby reserves 14,800,000 Common Shares for issuance under
this Plan. Any Common Share subject to an Option that, for any reason, has
been cancelled or terminated without having been exercised, will again be
available for issuance under this Plan.
Under no circumstances may this Plan, together with all of the
Corporation's other previously established or proposed share compensation
arrangements, result, at any time, in the number of shares reserved for
issuance pursuant to Options to any one person exceeding 5% of the
outstanding issue.
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SECTION 2.
UNITS
2.01 GRANT OF UNITS
The Committee may grant Units only to Eligible Persons.
2.02 VESTING OF UNITS
(a) Units granted must be exercised no later than 10 years after the date
of grant or such shorter period as the Committee may require.
(b) The Committee may determine when any Unit will become exercisable and
may determine that the Unit will be exercisable in installments. In
the absence of any other determination (including, without limitation,
in a Participant's employment agreement), Units will become
exercisable as follows:
(i) as to 25% on the first anniversary of the date of grant; and
(ii) as to an additional 25%, at the end of the second, third and
fourth anniversaries of the date of grant,
provided that unless the Committee expressly provides to the contrary,
Units which are not exercisable prior to a Participant's Termination
Date shall not become exercisable thereafter. Any period of statutory
or common law notice of termination of employment or any period of
deemed employment following a Participant's last day of active
employment shall not be recognized for vesting or any other purpose
under this Plan.
2.03 EXERCISE PRICE
The Exercise Price of a Unit granted pursuant to this Plan shall be
determined by the Committee at the date of grant, shall not be less than
the Fair Market Value per Common Share calculated with reference to the
date of grant and shall be the same for both the Option component and the
Phantom Share Unit component of the Unit.
2.04 PROHIBITION ON TRANSFER OR ASSIGNMENT OF UNITS WITHOUT CONSENT
No Participant may deal with any Unit or any interest in it or transfer or
assign any Unit now or hereafter held by the Participant without the
express written consent of the Committee. A purported transfer or
assignment of any Unit without the express written consent of the Committee
will not be valid and the Corporation will not issue any Common Share upon
the attempted exercise of a transferred or assigned Unit. If express
written consent of the Committee is given to the transfer or assignment of
any Unit and such transfer or assignment takes place consequent upon such
written consent the Unit will continue in full force and effect.
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2.05 TERMINATION, RETIREMENT, DEATH OR RESIGNATION
(a) If a Participant ceases to be an Eligible Person as a result of a
resignation of employment, each Unit held by the Participant which is
exercisable as at the Termination Date may be exercised during the
period ending 30 days after the Termination Date after which all
unexercised Units held by the Participant will expire.
(b) If a Participant ceases to be an Eligible Person as a result of a
termination of employment without Just Cause, each Unit held by the
Participant which is exercisable as at the Termination Date may be
exercised during the period ending 90 days after the Termination Date
after which all unexercised Units held by the Participant will expire.
This provision will apply with effect as at the Participant's last day
of active employment. Any period of statutory or common law notice of
termination of employment or any period of deemed employment following
a Participant's last day of active employment shall not be recognized
for exercise or any other purposes under this Plan.
(c) If a Participant ceases to be an Eligible Person as a result of a
termination of employment for Just Cause, each Unit held by the
Participant (whether exercisable or not) will cease to be exercisable
on the Termination Date.
(d) If a Participant ceases to be an Eligible Person as a result of a
Retirement or a Disability, each Unit held by the Participant which is
exercisable as at the Termination Date may be exercised during the
period ending 36 months after the Termination Date after which all
unexercised Units held by the Participant will expire.
(e) If a Participant ceases to be an Eligible Person as a result of a
death, each Unit held by the Participant as at the date of death which
is exercisable as at the date of death may be exercised by the
Participant's legal representatives during the period ending 12 months
after the date of death after which all unexercised Units held by the
Participant will expire.
(f) Notwithstanding the foregoing, no Unit may be exercised after its
stated expiration.
2.06 END OF PARTICIPATION
At the time a Participant ceases to hold Units which are or may become
exercisable, the Participant ceases to be a Participant.
2.07 ACCELERATION OF EXERCISE OF UNITS
Notwithstanding any other provisions of this Plan, the Committee may at any
time give written notice to all Participants advising that their respective
Units are all immediately exercisable and may be exercised only within 30
days of such written notice or such other period as determined by the
Committee and not thereafter and that all rights of the
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Participants under any Units not exercised within such period will
terminate at the expiration of such period.
2.08 AGREEMENTS
Each grant of Units must be confirmed by an agreement in the form attached
as Schedule A signed by the Corporation and by the Participant
acknowledging that the Participant agrees to be bound by the terms of this
Plan.
SECTION 3.
EXERCISE OF UNITS
3.01 EXERCISE OF OPTIONS
In order to exercise an Option, the Participant must file with the
Secretary of the Corporation a completed Notice of Exercise in the form
attached as Schedule B. The Exercise Price of each Common Share purchased
under an Option must be paid in full by bank draft or certified cheque at
the time of exercise. Upon receipt of a Notice of Exercise and payment in
full and subject to the terms of this Plan, the Common Share in respect of
which the Option is exercised will be duly issued as fully paid and
non-assessable.
3.02 EXERCISE OF PHANTOM SHARE UNITS
In order to exercise a Phantom Share Unit, the Participant must file with
the Secretary of the Corporation a completed Notice of Exercise in the form
attached as Schedule B. Upon receipt of the Notice of Exercise and subject
to the terms of this Plan, the Corporation shall make a payment to the
Participant equal to the Fair Market Value of a Common Share, minus the
Exercise Price multiplied by the number of Phantom Share Units exercised (a
"Phantom Share Unit Payment").
3.03 PHANTOM SHARE UNIT PAYMENT
The Committee may, in its absolute discretion, elect to pay all or any
portion of a Phantom Share Unit Payment in four equal installments over the
12-month period following receipt of the completed Notice of Exercise.
3.04 DISCRETIONARY ISSUANCE OF SHARES
(a) The Committee may, in its absolute discretion, elect to satisfy the
exercise of a Phantom Share Unit by issuing Common Shares as if the
Participant had elected to exercise the Option Component of a Unit
rather than the Phantom Share Unit Component of the Unit. Prior to an
IPO, the Committee may, in its absolute discretion, elect to
repurchase Common Shares by payment to the Participant equal to the
Fair Market Value of the Common Shares.
(b) If any Common Shares are issued pursuant to section 3.04(a) prior to
an IPO, as a condition to such issuance, each Participant eligible to
receive Common Shares
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may be required, at the sole discretion of the Corporation, to enter into
an agreement in the form prescribed by the Corporation which provides for,
among other things, (i) restrictions on transfers of Common Shares held by
the Participant; (ii) obligations of the Participant to dispose of Common
Shares held by the Participant in connection with certain specified
transactions; and (iii) the exercise by designated persons of voting rights
attached to the Common Shares held by the Participant. The Corporation may
require the Participant, at the sole discretion of the Corporation, to
enter into the agreement described above prior to the issuance of Common
Shares, or at any time subsequent. If the Participant fails to duly enter
into such agreement at the request of the Corporation, the Corporation
shall not be obligated to issue to the Participant any securities of the
Corporation issuable under this Plan, or pay any amounts payable to the
Participant under this Plan.
3.05 NO EXERCISE OF OPTIONS PRIOR TO IPO
Notwithstanding any other provision of this Plan, the Option component of a
Unit does not vest and may not be exercised prior to an IPO.
3.06 NO EXERCISE OF PHANTOM SHARE UNITS OUTSIDE OF WINDOW
Notwithstanding any other provision of this Plan, Phantom Share Units may
only be exercised during such times as may be specified by the Committee,
in its absolute discretion.
3.07 TERMINATION OF OPTIONS AND PHANTOM SHARE UNITS
When the Option component of a Unit is exercised, the Phantom Share Unit
component of the Unit will be terminated and may not be exercised. When the
Phantom Share Unit component of a Unit is exercised, the Option component
of the Unit will be terminated and may not be exercised.
SECTION 4.
GENERAL
4.01 CAPITAL ADJUSTMENTS
In the event of any stock dividend, stock split, combination or exchange of
shares, merger, consolidation, spin-off or other distribution (other than
normal cash dividends) of the Corporation's assets to shareholders, or any
other change in the capital of the Corporation affecting Common Shares, the
Committee may make such proportionate adjustments, if any, as the Committee
in its discretion may deem appropriate to reflect such change, with respect
to (i) the number or kind of shares, other securities or other property
reserved for issuance pursuant to this Plan; (ii) the number or kind of
shares, other securities or other property subject to or in respect of
which unexercised Units previously granted are exercisable and the Exercise
Price of those Units; provided, however, that no substitution or adjustment
will obligate the Corporation to issue or sell fractional shares. Provided
that, for greater certainty, this section authorizes the
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Corporation if it were to divest a business or division and distribute
proceeds of the divestiture to the shareholders of the Corporation, to make
reasonable accommodation or financial provision to the holders of Units.
4.02 NON-EXCLUSIVITY
Nothing contained herein will prevent the Board from adopting other or
additional compensation arrangements for the benefit of any Participant,
subject to any required regulatory or shareholder approval.
4.03 UNFUNDED PLAN
To the extent any individual holds any rights under this Plan, such rights
(unless otherwise determined by the Committee) shall be no greater than the
rights of a general unsecured creditor of the Corporation.
4.04 SUCCESSORS AND ASSIGNS
This Plan shall be binding on all successors and assigns of the Corporation
and a Participant, including without limitation, the legal representative
of a Participant, or any receiver or trustee in bankruptcy or
representative of the Corporation's or Participant's creditors.
4.05 AMENDMENT AND TERMINATION
(a) The Committee may amend, suspend or terminate this Plan or any portion
thereof at any time in accordance with applicable legislation, and
subject to any required regulatory or shareholder approval. Except as
specifically provided for in this Plan, no amendment, suspension or
termination may materially adversely affect any Units, or any rights
pursuant thereto, granted previously to any Participant without the
consent of that Participant.
(b) If this Plan is terminated, the provisions of this Plan and any
administrative guidelines, and other rules adopted by the Committee
and in force at the time of this Plan, will continue in effect as long
as a Unit or any rights pursuant thereto remain outstanding. However,
notwithstanding the termination of this Plan, the Committee may make
any amendments to this Plan or the Units it would be entitled to make
if this Plan were still in effect.
(c) With the consent of the Participant affected thereby, the Committee
may amend or modify any outstanding Unit and, with the consent of a
majority of the Participants affected, the Committee may amend or
modify the Units held by any group of Participants, in any manner to
the extent that the Committee would have had the authority to
initially grant the award as so modified or amended, including without
limitation, to change the date or dates as of which, or the price at
which, a Unit becomes exercisable, subject to the prior approval of
the relevant stock exchanges, if any.
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4.06 NO SPECIAL RIGHTS
Nothing contained in this Plan or in any Units will confer upon any
Participant any right to the continuation of the Participant's employment
by a Participating Company or interfere in any way with the right of any
Participating Company at any time to terminate that employment or to
increase or decrease the compensation of the Participant.
4.07 OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a Participant as a
result of the exercise of Unit or the sale of Common Shares received upon
an exercise of an Option will not constitute compensation with respect to
which any other employee benefits of that Participant are determined,
including, without limitation, benefits under any bonus, pension,
profit-sharing, insurance or salary continuation plan, except as otherwise
specifically determined by the Committee.
4.08 RIGHTS PRIOR TO EXERCISE
The holder of a Unit is not entitled to be treated as a Shareholder of the
Corporation and, in particular, has no right to receive dividends or to
vote until the Participant becomes an actual shareholder of the Corporation
following exercise of an Option in accordance with the terms of this Plan.
4.09 COMPLIANCE WITH LEGISLATION
The Committee may postpone any exercise of any Unit or the issue of any
Common Shares pursuant to this Plan for as long as the Committee in its
discretion may deem necessary in order to permit the Corporation to effect
or maintain qualification of the Common Shares issuable pursuant thereto
under the securities laws of any applicable jurisdiction, or to determine
that the Common Shares are exempt from that qualification. The Corporation
is not obligated by any provision of this Plan or grant hereunder to sell
or issue Common Shares in violation of the law of any government having
jurisdiction therein. In addition, if the Common Shares are listed on a
stock exchange, the Corporation will have no obligation to issue any Common
Shares pursuant to this Plan until such Common Shares have been duly
listed.
4.10 TAX CONSEQUENCES
It is the responsibility of the Participant to complete and file any tax
returns which may be required under applicable tax laws within the periods
specified in those laws as a result of the Participant's participation in
this Plan. Neither the Corporation nor any Participating Company shall be
held responsible for any tax or other liabilities or consequences which
result from the Participant's participation in this Plan, including any
employment related taxes or benefit costs, whether or not such costs are
the primary responsibility of the Corporation or any Participating Company.
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4.11 NO LIABILITY
The Corporation shall not be liable to any Participant for any loss
resulting from a decline in the market value of any Common Shares.
4.12 EFFECTIVE DATE
This Plan will become effective December 1, 2003.
COREL CORPORATION
SHARE OPTION AND PHANTOM SHARE UNIT PLAN
SCHEDULE A
OPTION AND PHANTOM SHARE UNIT AGREEMENT AND CONFIRMATION
[NAME OF EMPLOYEE]
(the "Participant")
Pursuant to the Corel Corporation Share Option and Phantom Share Unit
Plan (the "Plan") effective December 1, 2003 and in consideration of services
provided to any Participating Company by the Participant, Corel Corporation
hereby grants to the Participant _________ Units comprised of ____________
Options to acquire Common Shares of Corel Corporation at an Exercise Price of
$_________ per Common Share and __________ Phantom Share Units with an Exercise
Price of $_________.
All capitalized terms not defined in this agreement have the meaning
set out in this Plan.
Subject to earlier expiry in accordance with this Plan, the Units
shall cease to be exercisable and shall expire on ________________, _______. The
Units will vest and become exercisable as follows:
(a) as to 25%, at any time during the term of such Unit from and after the
first anniversary of the date of grant of the Units; and
(b) as to an additional 25%, at any time during the term of such Unit from
and after the second, third and fourth anniversaries of the date of
grant of the Units,
provided that the Option component of a Unit does not vest and may not
be exercised prior to an IPO.
Corel Corporation and the Participant understand and agree that the
granting and exercise of this Unit and the issue of Common Shares are subject to
the terms and conditions of this Plan, all of which are incorporated into and
form a part of this agreement.
Each time the Participant exercises the Option component of a Unit,
the Phantom Share Unit component of the Unit will be terminated and may not be
exercised. Each time the Participant exercises the Phantom Share Unit component
of a Unit, the Option component of the Unit will be terminated and may not be
exercised.
DATED ______________________, _______.
COREL CORPORATION
Per:
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I agree to the terms and conditions set out herein and confirm and
acknowledge that I have not been induced to enter into this agreement or acquire
any Unit by expectation of employment or continued employment with any
Participating Company.
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Signature
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Name (please print)
COREL CORPORATION
SHARE OPTION AND PHANTOM SHARE UNIT PLAN
SCHEDULE B
NOTICE OF EXERCISE
TO: COREL CORPORATION
Attention: The Secretary
Pursuant to the Corel Corporation Share Option and Phantom Share Unit
Plan (the "Plan"), the undersigned elects:
[ ] to exercise _______ Options to purchase Common Shares and
encloses cash or a certified cheque payable to Corel Corporation
in the aggregate amount of $______________, being the Exercise
Price of $_________ per Common Share.
The undersigned requests that the Common Shares be issued in his or
her name as follows in accordance with the terms of this Plan:
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(Print Name)
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(Address)
OR
[ ] to exercise _______ Phantom Share Units to receive a payment
equal to the Fair Market Value of a Common Share as at the date
hereof minus the Exercise Price of $_________ per Common Share
for each Phantom Share Unit exercised.
DATED _________________, _______.
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Signature
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Name (please print)